Moneylife 2 February 2017

SUCHETA DALAL ON:
DEMONETISATION EFFORT: LEARN FROM FAILURE NSE NEEDS DEEP CLEANING
Personal Finance Magazine 20 January-2 February 2017 Rs 45
Pages 68 (SUBSCRIBER COPY NOT FOR RESALE) www.moneylife.in
BLACK
TO
TO
WHITE
While PM Narendra Modi has tried to hit at black money,
by banning 500 and 1000 rupee notes, thousands of crores
of black money is easily converted into white every year
in one of the most organised and open money laundering
operations through the stock market.
Investigation by Debashis Basu & Sucheta Dalal
Cover Page_285.indd 1 13-01-2017 17:26:19

Advertisements.indd 10 12-01-2017 20:34:12
ISSUE CONTENTS
20 Jan-2 Feb 2017
Black-ka-White
W hile the prime minister (PM) Narendra

Modi has tried to hit at black money,
by banning 500 and 1000 rupee notes, which
put the entire country through two months
BLACK
of hardship, one of the most organised and
open money laundering operation has been
happening right under our nose, in the stock
market. And that is, converting black cash into
long-term capital gains which are tax free under
TO
the current regulations. Regular readers of
Moneylife would be aware that, since February
2009, we have been highlighting such pump-
and-dump operations in every issue of the
WHITE
32 Cover Story
magazine in the Unquoted section, hoping that
the regulators would be nudged into action.
We now know what goes on behind such
price-rigging. Through an elaborate network
of dummy companies, accommodation entries Black to White
a large number of people are laundering Thousands of crores of rupees of black money are easily
thousands of crores of rupees from black to converted into white every year by rigging the prices of listed
white. Read our investigation in the Cover Story, shell companies. An official report describes the modus operandi.
Investigation by Debashis Basu & Sucheta Dalal
to know how this is done.
In her crosshairs column, Sucheta says that
it is now very clear that demonetisation was
a needless, badly planned, poorly executed
exercisebut it has thrown up important
12 Your Money
Consumer Court Slaps Rs10.5 Lakh Penalty on Tata AIG
lessons that need to be learnt. The PM, a quick Aadhaar Is Mandatory for Receiving Benefits under EPS,
learner will, hopefully, make the necessary says Ministry of Labour and Employment
Dosti Vrishti Society Residents Lock Up Builder for Poor
course corrections. In Different Strokes, she says
Water Supply
that the National Stock Exchange needs some Mobile App for Mutual Funds Trading Launched by BSE
deep cleaning before it becomes a listed entity. Mediclaim Disallowed for Surgery for Morbid Obesity
SEBI has, indeed, initiated a lot of action; but
some conflicts of interest remain!
Our next major article will be on financial
hygiene such as keeping your documents
safely, ensuring that your loved ones have your
passwords, if needed, and putting in place
14 MONEYLIFE
QUIZ
nominations and will. We are doing survey on
18
this. Please do not forget to fill it up. The link is
on our website.
On 4th February, we celebrate the 7th Demonetisation: Lessons To Be Learnt and Course-
Anniversary of Moneylife Foundation with a correction Needed
talk by Jay Panda and Rajeev Chandrashekhar,
two dynamic members of Parliament, on
Transforming India. If you are in Mumbai,
we would be delighted if you could come
and introduce yourself to us. The link for
20 Different Strokes
NSE Needs Deep Cleaning Before Its Public Listing
registration is on our website.

Disclaimer: Moneylife has a policy of not allowing its editorial staff to
buy and sell stocks that are written about in the magazine. All personal
Debashis Basu
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 20 Jan-2 Feb 2017 | 4
Content.indd 2 13-01-2017 18:25:35

CONTENTS
FUND POINTERS TAX / FIXED INCOME HEALTH
24 ELSS:
Buy?
To Buy or Not To 50 Small Savings
Schemes
ngs 56 Coronary Angiography,
the Villain of the Piece
Rates Pulse Beat:
Unchangedd Medical
developments
G-Sec Yields Down
wn from around
INSURANCE the world
32 Insurance
Trends TAX HELPLINE
Accident Insurance
52 Queries
Malaria Death Ruled as Accident
Health Insurance at Moneylife
Will Bariatric Surgery Be Covered
by Mediclaim?
Foundations Tax Helpline YOU BE THE JUDGE
Keep Emergency Funds for

Hospitalisation
Fine Print 60 Trap, Not
Tempt, a
USEFUL APPS
Criminal
FUND FACTS 54 Podcast Addict::
An App for All
Musical Tastes
46 Hot and Cold Stocks
of Mutual Funds in
TECHNOLOGY
December 2016 Lumosity: Have

Fun, Get Cerebral
61 BHIM May Need
Governments
Helping Hand
Sudoku Free: Play It
xSTOCKS on Your Mobile
22 Smartrt Moneyy Four Letters: Not a BEYOND MONEY
Stock- Dirty Game at All!

picking
in Good
and Bad
66 Athrough
Social Revolution
Classical Dance
Times
47 Stock Watch LEGALLY SPEAKING
Dish TV: Is it, at last, at the

inflection point? 55 Banks Need To Give
Notice on Loan
Recovery
SpiceJet: Low-cost Operations
Market Manipulation: Negotium

International Trade
DEPARTMENTS
Readers Response ........... 8
Market Trend: Hard Slog Ahead Book Review ....................62
Money Facts ....................64
Content.indd 4 13-01-2017 18:25:56

Volume 11, Issue 25
20 January2 February 2017
Debashis Basu
Editor & Publisher
editor@moneylife.in
Sucheta Dalal
Managing Editor
sucheta@moneylife.in
Editorial Consultant
Dr Nita Mukherjee
nitamuk@gmail.com
Editorial, Advertisement,
Circulation & Subscription Office SEARCHES AFTER
315, 3rd Floor, Hind Service Industries
Premises, Off Veer Savarkar Marg, Shivaji
DEMONETISATION
Park, Dadar (W), Mumbai - 400 028 The searches by income-tax (I-T) department
Tel: 022 49205000 and enforcement directorate (ED) after
Fax: 022 49205022
E-mail: mail@moneylife.in demonetisation have exposed the illegal activities
of some individuals, bankers and bureaucrats. It
Mutual Fund investments
is a good beginning for unearthing black money. are subject to market risks,
E-mail: However, it is doubtful whether I-T and ED have
read all scheme related
documents carefully.
sales@moneylife.in
Subscription e-mail sufficient personnel to conduct a larger number
subscribe@moneylife.in of searches to book the wrongdoers. Fortunately,
there is a large number of retired officers and staff Write to
of I-T department, Central government pensioners the Editor!
New Delhi
DDA Flats, J-3/66, Kalkaji,
New Delhi - 110 019
and retired defence personnel. Suitable and honest
personnel from this pool should be recruited
WIN
a prize
quickly to help in such searches.
Unless these searches are intensified, it will not be
Bengaluru
1st Floor, 13/1, 7th Main Road, possible to create fear in the minds of wrongdoers
1 Cross, Saibabanagar, Srirampuram,
st
without which they will not come forward to
Bengaluru - 560 021
deposit their ill-gotten money in the Prime
Ministers Garib Kalyan Yojana.
Kolkata P Sankaran, by post from Chennai
395, Lake Gardens, Kolkata - 700 045
Tel: 033 2422 1173/4064 4318
SHOULD HEALTHCARE BE IN THE
PRIVATE SECTOR?
Moneylife is printed and published by This is with regard to Ills of Healthcare in
Debashis Basu on behalf of India by Sucheta Dalal. The government has
Moneywise Media Pvt Ltd and
published at 315, 3rd Floor, its hands in too many pies. It needs to pull out of
Hind Service Industries Premises, many sectors and leave them for the private sector.
Off Veer Savarkar Marg, Shivaji Park,
Dadar (W), Mumbai - 400 028 However, healthcare is NOT to be in the private sector.
Editor: Debashis Basu
I have come across an interesting, and shocking, statistic. North
America (read USA), with 5% of the world population, is responsible
for 45% of the global spend on healthcare. Even with such high costs,
the US healthcare industry is also prone to corrupt practices.
Total no of pages - 68, Including Covers Read the story of Tenet Healthcare (THC)once the number two
hospital operator in the US. Its chairman was a very high-profile
person even on the US Presidents advisory committee. When the FBI
RNI No: MAHENG/2006/16653
Letters.indd 2 12-01-2017 20:37:17

LETTERS
Push towards Less Cash?

the
Best
letter T his is with regard to
5 Hurdles for Cashless
Digital Transactions by
d. Another major
barrier is dispelling
and allaying the Mutual Fund investments
are subject to market risks,
Dr Rakesh Goyal in Moneylife fear of technology. documents carefully.
(Issue 5 January 2017). I wish This apprehension
to supplement the authors
arguments with the following
persists even in the
metros and other cities. Congratulations
points. This barrier needs to Dr TV Ananthanarayanan
a. Generally speaking, there is no dearth of laws be dismantled by a
in our country. The acid test of new laws lies in vigorous campaign.
YOU WIN A
PERSONALISED
their effective implementation. Anecdotal evidence e. I have not been CLOCK
suggests failure at the implementation level. A very able to comprehend
thorough and comprehensive action is needed to fix the rationale for
the loopholes and lacunae. levying a convenience
b. As regards the Internet, the track-record of our charge on digital
existing service-providers has not been exceptionally transactions. The
good when it comes to delivering on their promises, convenience works
whether it pertains to the robustness of connectivity both waysfor the Dr TV Ananthanarayanan
or inter-operability. In the recent past, we had customer as also

the case a major player complaining to TRAI the merchant. This
(Telecom Regulatory Authority of India) about non- fees needs to be
cooperation by the other existing players. The largest abolished.
service-provider, with a pan-India presence even in f. The affordability
the remotest corners and the rural hinterland, is still of Smartphones and
to raise its bar, given that it should have capitalised feature phones is another factor which needs to be
on the first-mover advantage. Even now, it is only addressed.
reacting to the competition and is not proactive. The Whatever may have been the merits and demerits
efficiency of service delivery has plummeted. of demonetisation, one positive fallout has been the
c. Language will be a big barrier in last-mile delivery nudge, or the push, towards moving to a less cash
as well as for developing appropriate content in the economy.
local / regional languages. Dr TV Ananthanarayanan, by email
(Federal Bureau of Investigation) investigated THC, provide dividend yield and dividend payout ratio
the truth was exposed. THC was submitting fictitious instead?
bills to the government-funded Medicare and Medicaid. Eswar Santhosh, online comment
Whats even worse, THC was subjecting innocent
patients to unnecessary cardiac interventions including MORE MUTUAL FUND ARTICLES NEEDED
angioplasty and stents! This is with regard to What To Expect from Small-
Ralph Rau, online comment and Mid-cap Schemes by Mitul Patel. Moneylife
writers are requested to publish more stories regarding
DIVIDEND YIELD SHOULD BE MENTIONED investing in mutual funds, as not everyone is well-
This is with regard to Navneet Education: Slow versed in direct equity investing.
Learning. In most company analyses, Moneylife Pushpesh Kumar Sharma, online comment
writers keep mentioning dividend payout as a
percentage of face value which may not be relevant. STOCK EXCHANGES SHOULD PUBLISH
Dividend per share is all we need to know. When LISTS OF MANIPULATING COMPANIES
it comes to the dividend, would it not be better to This is with regard to Stock Manipulation: Mipco
MONEYLIFE |20 Jan-2 Feb 2017 | 10
Letters.indd 4 12-01-2017 20:37:41

LETTERS
Seamless Rings. The stock exchanges should ensure glitch where she is shown as the first-holder. How
that they prepare and publish lists of such companies many more such bloomers will happen is anybodys
and make them available on their web portal so that guess!
investors can have access to the data of such companies The corrupt in the I-T department would be rubbing
and take precautions before making their investments. their hands in glee. The tenor of the governments
Jayendra Pandya, online comment policies seems to be to compel people to accept its
diktats; the government is not allowing people to make
WHY AN 85% SUBSIDIARY? their own choices. Whither democracy and free choice?
This is with regard to Premco Global: Promoters This overbearing attitude to governance of herding
Helping Themselves to Loans?. It is not clear why people to adhere to government
the company in Vietnam is an 85% diktats on cash handling, Aadhaar
subsidiary and has not been made compulsions, muzzling voices on
into a 100% subsidiary. Surely, social media, ostracising NGOs (non-
funds were not a problem with the government organisations), etcis
company. The balance 15% is held hurtling the country towards a stifled
by a Sindhi non-resident Indian (not democracy. Is this a thought-out
by any local Vietnamese partner). political strategy?
Chandragupta Acharya, online SA Narayan, online comment
comment
DEMONETISATION IS
STIFLED DEMOCRACY? COINCIDENTAL?
This is with regard to From Noteban This is with regard to Strong
to GST, Brace Yourself for a Turbulent Stocks in A Weak Market by
2017 by Sucheta Dalal. Arun Shourie, Debashis Basu. This is a good
in an interview, rightly, said that the article. A few of the stocks went-
prime minister embarked on notebandi up because they were over-sold
because it was being felt that this & exhibiting dead cat bounce.
government was not doing enough on the Demonetisation just happened to be coincidental
issue of black money and that nothing was done in around the same time. One example is MindTree. How
the past few months. What a Tughlaq-ian move and at do we eliminate such stocks?
what cost to the aam janta! Kalyanarao Konda, online comment
All the sops announced as antidote would need to
be funded and, surely, the equity markets would be TURN OF SMALL-SCALE SECTOR TO PAY
tapped. Raid-raj would become the order of the day, TAXES
since it has become a prestige issue with Narendra This is with regard to Fortnightly Market View: Slow
Modi to book the tax-evaders. Realisation for the Bulls by Debashis Basu. If the
But, in the process, carpet-bombing will happen. Take unorganised small-scale sector has to now pay taxes,
the case of notice to non-filers. My wife, who is a not it may actually be good for the listed companies. But,
a taxpayer, received a notice from income-tax (I-T) I agree that it is a very complex process and only time
department for an investment made by me, where she will tell how it pans out.
is a joint-holder. Clearly, this is a case of a technical Ramesh Mehta, online comment
HOW TO REACH US
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11 | 20 Jan-2 Feb 2017 | MONEYLIFE
Letters.indd 5 12-01-2017 20:38:05

Your Money
LIFE INSURANCE REAL ESTATE
Dosti Vrishti Society

Consumer Court Slaps Rs10.5 Lakh Residents Lock Up Builder
Penalty on Tata AIG for Poor Water Supply
N iwas Manohar Joshi had secured

a housing loan of Rs10.50 lakh
from the Federal Bank branch in
company it same on 19 January
2012. The insurer suggested that
the information on pre-existing
T hane city (Maharashtra) is suffering
from a severe water crisis.
Residents get only 145 litres of water
Pune. He covered the repayment disease and previous treatment had a day, which is 45% less than what
of the total loan amount in 2008 been suppressed by the insured. The residents of Mumbai Metropolitan
under the Tata AIG life group claimants then moved a consumer Region get. Thane police have been
single premium complaint, sending teams to housing societies
mortgage alleging deficiency fearing fights over water, according to a
reducing term in service on report in Mumbai Mirror. Residents of
insurance policy the part of flats constructed by Dosti Realty have
by paying a one- the insurance been among the worst-hit by the water
time premium company for scarcity. They protested against the
of Rs57,246. wrongful builders, as they had promised them 24
The insurance repudiation of hours water supply. They said that the
company issued the claim. The builders had failed to address the water
the policy on Pune District problem, despite several pleas. The
21 November Consumer Court residents reportedly took Rajesh Shah,
2008 giving cover against life or observed, The insurance company director of Dosti Realty, to the clubhouse
total and permanent disability. has failed miserably to show any from where he was not allowed to leave
Mr Joshi died at a hospital in nexus between the previous disease until he signed on a paper that said that
Kolhapur (Maharashtra) on and the disease at the time of death the builders will ensure that the problem
16 April 2011 and the cause of of the insured. It ordered Tata AIG will be solved within 15 days. Rajesh
death was certified by medical to pay Rs10.5 lakh with 9% per Shah said these were strong-arm tactics
authorities as sudden massive annum interest since January 2012 and complained to the police. There
pulmonary embolism with cardio and Rs15,000 compensation to have been no arrests so far.
genetic shock. When his widow, widow, Sandhya and her minor son,
Sandhya, and minor son, Abhishek, for wrongfully rejecting the claim MUTUAL FUNDS
moved a death claim, the insurance against the death of her husband.
Mobile App for Mutual Funds
RETIREMENT Trading Launched by BSE
Aadhaar Is Mandatory for Receiving Benefits under A ll mutual fund investors/
distributors/ registered
EPS, says Ministry of Labour and Employment investment advisers are hereby
informed that the exchange is pleased
I n a notification dated 4 January 2017, the ministry of labour and employment has made it mandatory
to furnish proof of Aadhaar number to receive pension and benefits for members and pensioners under
the Employees Pension Scheme (EPS), 1995. Those who have enrolled for an Aadhaar number, but are
to announce launch of BSE StAR MF
mobile application, BSE said in a
circular. Users can download BSE
yet to receive it, are to provide the Aadhaar enrolment ID. A member, or a pensioner, who has not enrolled StAR MF mobile app (beta release)
for the Aadhaar number yet is required to enrol for it by 31 January 2017. Any member, or an individual, from Google Playstore now, it said.
who has not received the Aadhaar number or is yet to enrol for it can provide the following documents to The platform provides a range
continue to receive the benefits under the scheme: (a) Identity certificate issued by the employer or the of services for easy transactions
Employees Provident Fund Organisation (EPFO) with the universal account number (UAN). (b) Aadhaar and seamless order flow for asset
enrolment ID of the member/pensioner or a copy of the request made for the Aadhaar enrolment. (c) A management companies. The app is
copy of any of the following: (i) voter ID card (ii) PAN card (iii) passport (iv) driving licence, etc. available for Android mobile users.
Your Money.indd 2 12-01-2017 20:35:27

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Your Money
REAL ESTATE
Mediclaim Disallowed for Surgery for Morbid Obesity

A Pune housewife had subscribed to
a New India Insurance Companys
medical claim insurance policy for the
cosmetic surgery but had the surgery for
medical reasons. The insurance company
argued that rejection of her claim was
period between 1 March 2012 and based on a specific clause in the policy
28 February 2013, by paying a one- agreement that excluded morbid obesity
time premium of Rs17,880 for Rs5 lakh from the reimbursement list. The Consumer
insurance cover. In October 2012, she was Court accepted the insurance companys
admitted to a private hospital for hernia and argument and rejected the complaint.
obesity surgeries and incurred expenses of An insurance company cannot be held
Rs5.8 lakh. When she submitted her claim, liable for deficient service when its policy
the company sanctioned surgery expenses excluded from the cover given by the policy. agreement clearly excludes certain physical
of Rs2.07 lakh for hernia, rejecting the She complained to the Pune District conditions from the reimbursement of
claim amount for obesity reduction. It Consumer Court. The substance of her medical expenses, ruled the Consumer
informed her that morbid obesity was argument was that she had not gone in for Court.
Moneylife
MONEYLIFE
Quiz no
250
QUIZ Answer
Correctly! Win
Another quiz to tease your brain. The answers are in a personalised
sed
this very issue. The winner will be chosen by a lucky clock with an Sudesh Kumar Roy
draw from correct entries and answers published in Mutual Fund investmentnt
investments are quote!
the issue dated 2nd March. Send in your answers to subject to market risks,
quiz@moneylife.in with the Quiz no., name, address & documents carefully.
telephone number before 8 February 2017.
1. Under which Section of the Income-tax Act do taxpayers 5. Among doctors, what is meant by door to balloon time?
start evaluating savings options to reduce their tax liability, a. Time taken to assign a bed
when the financial year is nearing its end? b. Time taken to check body temperature
a. Section 80D b. Section 80G c. Time taken to check if medical insurance is available
c. Section 80C d. Section 88A d. Time taken for patient to be treated on arrival at the hospital
2. What is the minimum lock-in period from the date of 6. What was the closing value of the 10-year benchmark G-Sec
allotment, for mutual fund ELSS? yield on 6 January 2017?
a. 1 year b. 2 years a. 7.06% b. 6.39%
c. 3 years d. 5 years c. 5.58% d. 4.00%
3. For an individual in the 30% tax slab, what will be the 7. In which country is the Palance film, The Horseman, set?
maximum savings in the form of tax exemption in a year on a. Pakistan b. Bangladesh
investment in ELSS? c. Afghanistan d. Burma
a. Rs25,450 b. Rs30,550
c. Rs40,050 d. Rs46,350 8. Which organisation has developed and launched the mobile
app Bharat Interface for Money (BHIM)?
4. When did SREI Equipment Finances public issue of secured a. Securities and Exchange Board of India (SEBI)
redeemable non-convertible debentures (NCDs) open? b. National Securities Depository Limited (NSDL)
a. 3 January 2017 b. 5 January 2017 c. Bombay Stock Exchange (BSE)
c. 10 January 2017 d. 12 January 2017 d. National Payment Corp of India (NPCI)
In all, 6 readers got all the answers right last time. The answers to Moneylife Quiz-248 are: 1- a. 7.50%
The winner of Quiz-248 is Sudesh Kumar Roy from 2- b. 9 instances 3- c. Winston Churchill 4- c. Pushbullet
Hyderabad. Congrats! You win a personalised clock 5- b. A measure of calculating risk-adjusted return 6- a. Edgar
with an investment quote! Wachenheim 7- a. 7.7% 8- a. 6.44%
Your Money.indd 4 12-01-2017 20:35:44

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www.moneylife.in
News & views with a big dierence
Insurance: A widow an insurance claim of Rs15 lakh. She owes

her success to the help she received from
gets justice from the MY Patil, a former assistant commissioner
apex court after 11-year of police, who is now a consumer activist.
battle She finally received a cheque of
Rs21.08 lakh, from the consumer forums,
It took a gusty woman, and a dedicated bringing to an end a saga which shows
consumer activist, almost 11 years to that perseverence and a good activist to
fight the giant Life Insurance Corporation, support you can eventually win the day.
the largest insurance corporation, for the However, very few people have the
money due to her on the death of her courage to fight all the way to the apex
husband. The result: a Rs21-lakh award on court
InGovern questions sudden departure of Infosys chief EXCLUSIVE VIEWS

compliance ocer and his severance package
Proxy advisory and corporate governance advisory firm InGovern Research
On issues that matter to you
Services Pvt Ltd has said that the sudden departure of David Kennedy, the
general counsel and chief compliance ocer of Infosys Ltd, raises serious
questions about his departure and its consequences on the company
Chhatrapati Shivaji Maharaj Memorial: No feasibility

report, no technical estimate, reveals RTI
The project of Chhatrapati Shivaji Maharaj Memorial in the Arabian Sea is
without any feasibility report, reveals a reply received under the Right to
Information Act Is RBI responsible for creation of
black money and inflation due to
high M0? Dr Rakesh Goyal
No information on appointment of three information

commissioners
While the state government is taking credit, for appointment state
information commissioners in Maharashtra, in January 2017, their
selections violate several norms set for such appointments
Air India: SC asks CBI to probe unnecessary purchase Can fintech companies challenge
of aircraft during UPA regime banks? Ameet Roy
The Supreme Court has asked the Central Bureau of Investigation to look
into the allegation of unnecessary purchase of 111 aircrafts and lease of
some others by Air India at a cost of Rs67,000 crore between 2004 and
2008 when the Congress-led United Progressive Alliance (UPA) was in
oce
NBFCs fail to perform in FY15-16, first half FY16-17

The performance of non-banking financial companies will continue to Aerated drinks are banned in
follow a downward trend. The second half of the current year will also Parliament canteens but the public
remain aected due the governments demonetisation move can guzzle them Vinita Deshmukh
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Web Content.indd 1 13-01-2017 17:32:40

CROSSHAIRs
Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal
Demonetisation: Lessons To Be Learnt

and Course-correction Needed
T
he New Year began with a sense of relief, after sprinting away from the back door of a public function
nearly two months of uncertainty and hardship to avoid the media after such an enormous currency
that gripped India since 8 November 2016. operation, it appears that no lessons are being learnt.
The long queues at ATMs have vanished, although This is also damaging to the government.
the curbs on withdrawal of our own money from Meanwhile, we know that there is going to be a
banks continue. A New-year Eve scarethat more huge cost attached to demonetisation. The Centre
experimentation would be unleashed on the nation for Monitoring Indian Economy has estimated the
also turned out to be a damp squib, with the prime transaction cost of the demonetisation exercise was
minister (PM) merely announcing some recycled sops a massive Rs1.28 lakh crore. The is based on the
for the poor without immediate benefits. So, as we actual cost of printing and supplying new currency,
head towards an early Union Budget, and elections in destroying old currency, loss of productive manhours
several key states and municipalities, the focus is back and incomefor those at banks and those who stood
on the whether in queues to
the entire exchange or
demonetisation withdraw
exercise, and money. In
the hardship it addition, there
caused (mainly is the loss of
to the less discretionary
privileged), had spending and
any tangible its impact
benefits at all. on a host of
Two things industry sectors,
are clear. the impact of
Demonetising broken supply
currency notes has not eliminated Indias black money; chains, etc.
people have found ingenious ways to deposit it in While the government has not put out any
banks. The effort to make them pay will start now. The numbers, we learn from sources in the income-tax (I-T)
fact that the Reserve Bank of India (RBI) is dodging department that they are under enormous pressure to
answers to questions, about printing of currency and recover at least this cost of demonetisation through
the money deposited, has damaged the central banks raids on those who deposited tax-evaded money cash.
credibility so much that several of its former governors Unfortunately, the government did nothing to plug the
and deputy governors have felt constrained to speak big loopholes for laundering money before announcing
out. When you have images of the RBI governor the demonetisation exercise. Trying to account for three
MONEYLIFE | 20
27 Jan-2
November
Feb 2017
2014 | 18
14
Crosshair.indd 2 13-01-2017 16:25:35

to four lakh crore rupees, clearly laundered in six short be interesting to see how seriously SEBI pursues this
weeks, is an indicator of such gaping loopholes that investigation which was put up for discussion at its
it is futile to go into all the little tricks that laundered board meeting on 14th January.
such huge amounts. Another big chunk of the cash deposited has come
Yes, people paid advance salaries to their staff in from agricultural income which cannot be questioned
old notes and had them converted. Over Rs16,000 since it is officially tax-exempt. A Right to Information
crore was deposited in cooperative bank accounts (RTI) application, filed by a retired tax official, Vijay
since demonetisation, says an Economic Times report Sharma (who has gone on to file a public interest
quoting I-T sources; a similar amount may have been litigation in the Patna High court asking to reveal the
stashed in regional rural banks. According to one names of the top 100 assessees), has some startling
estimate, between Rs10,000 crore to Rs12,000 crore data. Data obtained by Mr Sharma showed that
was sent in suitcases and chartered flights to Nepal, agricultural income recorded an exponential increase
Bhutan and the north-east tribes who are exempted from 2004 to 2013. It touched an unbelievable Rs2,000
from I-T payments (this recovery will be almost lakh crore at the end of this period. This shameful
impossible). Over Rs25,000 crore is understood to record is entirely during the United Progressive Alliance
have been deposited in dormant bank accounts. (UPA) government and will turn out to be a hitherto
Further, data from the financial intelligence unit hidden scam of that period on the lines of 2G and
shows that 21 million new bank accounts have been Coalgate. But why hasnt this government fixed it yet?
opened between 15th November and 25 December In fact, why wasnt it done before demonetisation was
2016. Over Rs3 lakh crore was deposited in these announced, especially when Mr Sharmas findings have
accounts, of which Rs50,000 been in the public domain for a
crore was in cash, says a media year.
report. This data is rather An I-T official says, Many of PM Narendra Modi has been
shocking. At a time when bank my colleagues are just waiting assuring the faithful that nobody
unions tell us that their staff for the returns to be filed. who deposited tax-evaded cash
was stressed by the burden They know they will make a in banks will be spared. We will
of currency exchange and life-time killing on settling the go after every one of them, he
distribution, which banks were demonetisation cases thunders to applause from the
running this quiet factory of crowds. But the government simply
opening millions of new bank does not have the manpower, or
accounts? Surely, this needs a detailed investigation. machinery, to go beyond a few well-publicised raids.
I, personally, know that genuine people were being Tax-evaders know this better than honest taxpayers
shooed away even at the mention of opening an and, by the time returns are filed and assessments come
account amidst the chaos of currency exchange. up for scrutiny, it is between them and their newly
Similarly, I-T sources tell us that thousands of empowered assessing officers. Many are betting that
new companies were opened overnight and money the media, and the long-suffering public who stood in
deposited into their accounts. With automated systems queues would have forgotten about demonetisation,
in place, it easy should be easy for the registrar of by then. An I-T official says, Many of my colleagues
companies (RoC) to identify these companies and track are just waiting for the returns to be filed. They know
the deposits. Unfortunately, the ministry of corporate they will make a life-time killing on the demonetisation
affairs (MCA) under which they function and the RoCs cases.
themselves are extremely slothful, callous and corrupt. Finally, we, the people, would like to know why so
Such shell companies, which support a massive many studies and reports about black money are not
laundering operation of converting cash to cheques, in the public domain. The Indian Express reports that,
is another big loophole that ought to have been in 2011, the UPA government had asked three elite
fixed. There are innumerable reports about dodgy academic institutes in Delhi to conduct a study on the
businessmen having paid off outstanding bills and loans quantum of black money held by Indians in India and
in old currency. Those who were owed the money were abroad. The institutes apparently told an RTI applicant
dumped with the burden of converting it or writing it that they were not authorised to share the reports.
off. One media report says that the government has There is no doubt that the demonetisation exercise
already identified as much as Rs80,000 crore of loan has been the most unplanned, least thought-out and
repayments in cash. arrogant exercise of power by the State in recent
Our Cover Story this time is about the modus times. Unlike other politicians, PM Modi has often
operandi of such laundering, safely conducted under demonstrated that he is quick to learn from his
the ineffective market surveillance systems of the mistakes. Hopefully, there will be a lot of learning from
Securities & Exchange Board of India (SEBI). It will this exercise and course-correction as well.
Crosshair.indd 3 13-01-2017 16:25:54

DIFFERENT STROKES SUCHETA DALAL
NSE Needs Deep Cleaning

Before Its Public Listing
O
n 5th January, I forwarded a letter from insiders by SEBI in the multiple applications (to IPOs) scam. The
at the National Stock Exchange (NSE), raising matter was eventually buried. Is it any wonder that NSE
concerns about conflict of interest at the NSE has got away with a mere warning even in investigations
board, to UK Sinha, chairman of the Securities and like fat finger trades and the change of client codes?
Exchange Board of India (SEBI). Mr Sinha thanked me This changed in September 2015, after Justice Gautam
for drawing his attention to the letter and will, hopefully, Patels path-breaking order on the Rs100-crore defamation
act on it soon. case filed by NSE against Moneylife. We published the
This is the fourth in a series of letters that have exposed expos by a whistleblower on how NSEs algo-trading and
that the bourse had been functioning like a private fief. co-location system was being rigged, with the connivance
The top management comprised a close group that worked of insiders, to ensure substantial profits to a set of brokers.
with friends, relatives, useful The NSE management had
former employees and select allegedly papered over the
academics. NSE has never been issue by sacking those who
questioned about this. Nobody were involved. A subsidiary that
questions a very profitable provided consultancy services
entity that played a pivotal role to brokers for co-location and
in transforming Indias capital algo-trading was also quietly
market in the 1990s. sold off, at a huge valuation.
Over the years, NSEs rapid Justice Patel dismissed
growth to become the fourth NSEs attempt to gag Moneylife
largest exchange in the world, through a hard-hitting order
induced awe from those at SEBI and imposed an unprecedented
and the finance ministry. This led Rs50-lakh fine. Although NSE
to complete regulatory capture The top management at National Stock has appealed the order, SEBIs
and, probably, ensured that the technical advisory committee
Exchange comprised a close group
founding team went on to head confirmed the whistleblowers
the exchange in succession for
that worked with friends, relatives, allegations. SEBI has, since,
over two decades. The founding
useful former employees and select ensured a change in NSEs
managing director (MD), Dr academics. NSE has never been board composition and initiated
RH Patil, made way for the questioned about this clubbiness punitive action. It asked the
elevation of Ravi Narain as MD bourse to conduct a forensic
and he, in turn, passed the baton to Chitra Ramakrishna, audit to pin responsibility on the individuals responsible
without the post being advertised or going through a formal for the systems breach. The consulting firm, Deloitte,
selection process. NSEs selection committee also performed was appointed, and it confirmed SEBIs finding that a
a perfunctory and questionable role, as has been revealed few stockbrokers repeatedly got preferential access to
by documents procured by us from SEBI under the Right NSEs systems. NSE was also asked to deposit the revenue
to Information Act on Ms Ramakrishnas appointment. generated from its co-location business into a separate
SEBI officials have rarely dared to question NSEs bank account and several hundred crore rupees have been
clubby senior management or ensured that it complies with set aside for this.
the elaborate regulations imposed on listed companies and These actions led to another development. NSE insiders
intermediaries. After all, many senior SEBI and finance and employees mustered the courage to write anonymous
officials have worked on deputation at the NSE and tend to letters to the SEBI chairman and finance ministry officials. I
remain in awe of the bourse. Lets not forget how CB Bhave have been copied on at least four such letters. The internal
was appointed SEBI chairman, despite the National Share rot that they exposed is shocking and, probably, accelerated
Depository Ltd, which he founded, having been indicted the revamp at the top.
DIFFERENT STROKES.indd 2 13-01-2017 16:19:40

DIFFERENT STROKES SUCHETA DALAL
After the algo-trading scam was established, Ashok Ms Ramakrishas action. Instead, he seems to have
Chawla became the NSE chairman. Mr Chawla, unlike supported Mr Subramanians elevation to GOO and his
most of its past chairmen, is not a puppet of senior induction to the board of NSE group companies. Insiders
management. The board was also partly revamped. This say that Mr Subramanian was allotted Mr Narains former
quickly resulted in two important exitsthat of Chitra apartment in Mumbai, and that his office was the only
Ramakrishna, MD and CEO, and Anand Subramanian, one on the same floor as that of Ms Ramakrishna, with an
whom she had appointed as advisor and group operating inter-connecting door. His perks as a consultant included
officer (GOO). More on this later. As NSE readies for a first-class international travel and three days every week
public listing, investors need to ensure a clean-up of the at NSEs Chennai office which was headed by his wife
irregular appointments and dodgy governance practices that Sunitha Anand.
have crept into what was once an exemplary organisation. Ms Anand, also appointed as a NSE consultant, drew
When Dr RH Patil passed the baton to Ravi Narain a hefty compensation. But the couple was not among the
without a selection process being followed, the then finance 36 key employees listed in the annual report, nor identified
minister, Yashwant Sinha, did have some concerns, but as key persons for SEBI. Were Mr Narain and NSEs
they were quickly buried. Later, Mr Narain pushed for Ms appointment and compensation committee unaware of this?
Ramakrishnas elevation as MD saying that he did not want A former executive tells us that there was a clear
to continue in an executive role. In doing so, he ensured that strategy to appoint semi-retired professionals as consultants
he retains power at NSE without to key departments involving
accountability. Mr Narain is high security operations rather
on all board committeesthe than build teams with long-
audit committee, nominations term commitments. This is also
and remuneration committee, true of NSE group companies.
stakeholder relationship In at least two instances,
committee as well as the the Exchange skirted the
risk assessment and review requirement to advertise a post
committee. in order to appoint a favourite
Importantly, he was the or appointed a consultant to
executive head of the NSE head it. Other cases of conflict
when the algo-trading breach of interest, where spouses of
occurred. Yet, Mr Narain was those in key posts at NSE were
part of the decision to appoint Mr Ravi Narain was the executive head also consultants, or those
Deloitte as the forensic auditor related to influential academics,
of NSE when the algo-trading breach
and to decide on accountability have been exposed by internal
of employees! This conflict of
occurred. Yet, Mr Narain was part of whistleblowers in four separate
interest was flagged by the
the decision to appoint Deloitte as letters.
whistleblowers letter that I the forensic auditor and to decide on Given how scandalous this
forwarded to the SEBI chairman accountability of employees! is, shouldnt the NSE board
on 5th January. Since SEBI has ask for a full review of its HR
an elaborate policy to evaluate board members, it will be policies and appointments? NSEs DRHP reveals that it has
interesting to find out what it has to say about Mr Narains now decided to observe suitable consultants as employees
role in the ongoing upheaval at NSE. and foreclose contracts of others.
On 21st October, the NSE board, finally, questioned The SEBI chairman, Mr Sinha, is quoted by the media
Anand Subramanians appointment, following a SEBI as saying that he is not satisfied with NSEs response to
directive on the matter. He abruptly left that day, even the Deloitte report on algo-trading and wants to see action
vacating his apartment in a few hours. Mr Subramanian against brokers and employees who colluded with them.
was appointed by Ms Ramakrishna, although he had That is necessary, but not sufficient. Investors ought to
no technical or financial background for the job. His demand clear evidence of a deep cleaning of the bourse,
appointment as a consultant also bypassed the appointment before listing.
committee of the bourse.
As part of the founding team of the Exchange, who has Sucheta Dalal is the managing editor of Moneylife. She was
been with the organisation for over two decades, Mr Narain awarded the Padma Shri in 2006 for her outstanding contribution
was probably the only person capable of questioning to journalism. She can be reached at sucheta@moneylife.in
DIFFERENT STROKES.indd 3 13-01-2017 16:20:50

SMART MONEY R BALAKRISHNAN
Stock-picking in Good and

Bad Times
T
here are good businesses and great businesses. And names, like VIP, struggling. It is true that Jockey has the
there are industries that are sunrise or mature or advantage of being a global brand, but VIP had a huge
sunset. There are brands which deliver superior head-start in terms of time and market acceptance. They
returns year on year. There are new ideas which create seemed to have just not dreamt big. The key thing is to
initial hype and then run into a sea of competition, as reach the first three or four in the industry.
new entrants flood the industry. There are companies We have seen many Indian players start in a protected
that struggle for years and then find their space. There are environment and then fail to make it big. Hubris, lack
others that seem to be doing well and, suddenly, stumble. of attention to quality, inability to raise resources,
Sometimes, they brush it off and bounce back. technology and lack of business acumen are some of
As an investor, finding opportunities is the challenge. the reasons. Hindustan Motors & Premier Automobiles
The space is huge and very few winners will emerge. Limited (PAL) once enjoyed a duopoly in a closed industry.
Keeping our eyes open for opportunities is a must. Beyond Come liberalisation and they just died. Textiles industry
that, we also keep looking at young companies and choose stars went out, once licensing was abolished. The other
those, we think, will make the cut ultimately. space is technology. For every survivor, there would be
Not every idea we back will be a winner. The key is to hundreds who did not make it. Recall names like Pentafour,
recognise our mistakes and, at the same time, not give in Silverline, etc, that just came and went.
to knee-jerk reactions. No company will have a smooth What I like to see is whether any company has the
and easy ride to the top. Thus, we have to be prepared potential to keep earning consistently good return on
for speed-bumps and some fatalities in our portfolios as capital employed/return on equity (RoCE/RoE). By good,
we keep investing into ideas. I generally mean more than 20%. This is a high benchmark
Within an industry, over time, we will see three or four to sustain year on year. In a 10-year span, a good company
players dominating the scene. Challenging existing leaders will average more than this, with not more than one or two
becomes well-nigh impossible. Thus, we rarely see new years slippage. Year on year, there should be improvement
players come in and do something
mething big. in a company
companyss health rather than continuing misery. The
However, in a country like ke India, where the per capita earnings should be on a business calculation
income starts from a small base,
ase, industry characteristics are basis and not created because of
different. A new entrant can n become a significant player tax-breaks or fiscal benefits.
in five to 10 years. For instance,
ance, in FMCG (fast Mishaps do happen.
moving consumer goods), there ere was Hindustan Let me give you some
Unilever Limited (HUL), Proctor
roctor & Gamble recent examples.
(P&G) and the unorganised ed sector. Then MCX had a
came Godrej, Nirma, ITC, etc. And, now, problem which
Patanjali is challenging the leaders. led to a crash in
What we have to understand stand is that the its share price.
unorganised sector in several eral consumer- However, the
spend areas is many times es bigger than c o m p a n y
the organised corporate sector ctor players put
together.
This evolving industry y structure helps
investors pick multi-baggers in the stock markets.
What we have to understand nd is that not everyone
succeeds in building up profitable
itable brands. We have seen
brands like BPL and Maharaja raja come and go. And those
like Symphony have made the he cut. Some brands like Jockey
(Page Industries) just swampedmped the market, leaving old
column_Balakrishnan.indd 2 12-01-2017 20:55:57

SMART MONEY R BALAKRISHNAN
bounced back, with a lot of uncertain moves. If someone At the same time, there will be temporary bad news and
had used that crisis as an opportunity to invest, she would revival in many sectors like real estate, micro-finance, public
have been a winner. However, not all companies turn out sector banks, capital goods, infrastructure companies, etc.
like that. Similarly, Divis Laboratories share price has had I will be wary of these, since even on good days I am not
a steep fall. If I think that the business model is good and very comfortable owning these. The key thing is to keep
that the company will overcome its troubles, I am happy the focus on sectors and companies that will enjoy superior
to buy that share. RoCE on a steady state basis.
Unfortunately, we are not in a position to participate My normal checklist will not change. I am only looking
in the white goods segment that is at events based on temporary fall
dominated by foreign brands with
Will the cost of a power plant from glory which the markets will
no domestic listing. Or even some punish in the short term. I am not
consumption stories like Coke or
come down by 25% simply going to buy a dud share simply
Pepsi. Many MNCs (multi-national because I think that the world because it fell 50% or 90%. For
companies) listed in India are also has become more honest since example, I see lot of people again
shifting to setting up their own 8 November 2016? Will there talking about a company called
subsidiaries that will bypass the listed be an investible idea that truly Bartronics. They are saying that this
entity. Thus, we are forced to dig in gains from these events? company is now selling point-of-
the Indian company space. sale machines and, given the push
Let us take demonetisation. If people are going to to digital India, this company will do well. I am very sure
shift discretionary expenditure, there would be some hurt that this is not a sustainable or scalable business that will
to companies in that space. For instance, I may put off help the company wipe out all its problems. There will
painting my house. Which means that paints companies, be many such stories.
like Asian Paints, could see a small dip in their sales. One other issue that everyone is debating is whether
The cash crunch also means that there is a slowdown this drive against black money will permanently change
in construction-related activities. So, all building materials the fortunes of any company or sector. I prefer to remain
supplies would suffer a dip in consumption and sales. The a sceptic and wait for things to actually turn around.
impact should be felt most in the quarter ended December Human nature is such that it does not accept defeat easily.
2016. And many would also expect the tempo to be slow Will the cost of a power plant come down by 25% simply
in the January to March 2017 quarter. because I think that the world has become more honest
So, some great companies could experience a small since 8 November 2016? Will there be an investible idea
dip in performance. If the market prices of these shares that truly gains from these events?
react adversely, I will be happy to pick them up. The I will keep looking for good ideas that will translate to
important thing I am betting on is that, once things return market leadership or a niche space over the next few years.
to normal, these companies will return to the profits that Maybe, one or two out of five or more ideas will work.
are normally expected. The author can be reached at balakrishnanr@gmail.com
Whats Your Bahana for Not Subscribing?

I am not interested in honest & insightful advice on money matters
I never have any problems with banks, credit-cards or insurance companies
I always invest on the basis of tips from friends and brokers

For subscription offers
Finance bores me to tears that are a steal, look for
a form elsewhere in this
I would rather spend two years of knowledge on one evening of eating out
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column_Balakrishnan.indd 3 12-01-2017 20:56:26

MUTUAL FUNDS POINTERS
ELSS: To Buy or Not To Buy?
Y
ou will see plenty of savvy salesmen, bank messages, help in wealth accumulation and, often, yield negligible
heavy product advertisements, claims of best real returns. The least known among these, the awareness
financial service-providers and investment gurus of which is increasing, are equity linked savings schemes
pitching year-end tax-saving tips which use their products or (ELSSs). An ELSS is your best bet among the tax-saving
advice. The January-March period marks the high earning instruments available.
season for them. This is also the time when the maximum We picked the top tax-saving investment products
wealth-eroding decisions are taken! and compared how your wealth would have grown over
Investment products are carefully designed based on time in each of these investment products. A summary is
human behaviour which makes them appear attractive. presented in the graph below.
Salesmen are trained to coax you to buy into one or the It is based on the following assumptions:
other product. You would have, often, been confronted with 1. All future value adjustments are made as per 30% tax
a product which demands a higher premium followed by slab;
your acceptance of the one that is lower. This is one of the 2. 6% returns on traditional insurance policies;
many selling tricks salesmen use to influence and deceive 3. For NPS, 12% returns on the equity portion and 8%
you. The commissions earned are, at times, as high as 40%. returns on fixed-income products;
Plenty of tax-saving products are available; but 4. For others, 8.5% return on investment;
investing for the sole purpose of saving 5. The entire Rs1.50 lakh (available as
tax is dangerous. There has to be a well Section 80C deduction) was invested in
Outperformers
thought out process, based on certain the particular investment product.
HDFC Taxsaver
calculations. You are sometimes better The graph shows how your money
off paying tax than trying to save it. Do ICICI Prudential Long Term Equity would have grown year-on-year since
not get lured by the short-term nominal HDFC Long Term Advantage 2000 had you invested in various
tax savings you will make on purchasing Sundaram Taxsaver investment products. It is clear that
an investment product. The schemes are filtered on the basis of ELSS (market-linked) has outperformed
With the financial year nearing its their performance in 16, 5-year rolling every other investment productand
periods. We chose the schemes that
end, it is time when taxpayers start were present in most periods by a huge margin. The gains on other
evaluating various tax-saving options investment products (most of them are
available under Section 80C. Popular fixed-income products) are more or less
products that come to mind are: public provident fund similar.
(PPF), five-year bank fixed deposits (FDs), traditional However, remember the other aspects of ELSS; these
insurance policies and national pension system (NPS). While investments are market-linked and come with additional
these are good investments for the risk-averse, they do not risk. Hence, there are ups and downs. The advantage of
Future Value of Investment

Rs
1,40,00,000
PPF Bank FD Traditional Insurance
1,20,00,000 ELSS NPS Others
1,00,00,000
80,00,000
60,00,000
40,00,000
20,00,000
0
2000-01 2003-04 2006-07 2009-10 2012-13 2015-16
ELSS.indd 2 12-01-2017 21:02:59

3-year Rolling Returns of ELSSs

71.71%
44.30%
35.81% 34.68%
29.83% 28.00% 29.18%
23.61%
15.85%
9.97% 12.12%
5.60% 4.86% 7.15%
-13.14% -11.49%
Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16
investing in the other instruments is that they are not see erosion in the value of its portfolio. During a bull run,
volatile and grow constantly over a period, though their an ordinary ELSS will be able to generate returns; but a
growth may be slower. Market-linked products are a good bear phase will separate the best from the rest. A list of the
option for the aggressive investor while fixed-income ones top consistent performers is shown on the previous page.
are suitable for conservative investors.
Seven Points To Remember before Investing in ELSS
Aggressive ELSS 1. Risk Profile
ELSS is the best performing tax-saving instrument. The If an investors risk profile is moderately conservative,she
primary objective of ELSS is to generate medium- to long- should not invest in ELSS, as these are volatile and do not
term capital appreciation and provide tax benefit under guarantee returns. Even though most people have a low-risk
Section 80C of the Income-tax Act, 1961. The schemes, score, they invest in this product. The explanation usually
usually, seek steady growth by maintaining a diversified is that they will hold it for long term and, hence, will not
portfolio of equities across sectors and market-cap lose. While that is true, do not make investments with such
ranges. a mind-set. Though you may end up accumulating wealth,
ELSS is not for risk-averse investors. As ELSS investments you will not enjoy peace of mind. Identify your medium-
are, per se, stock market investments, all risks associated and long-term goals and invest, based on your risk profile.
with equity investments pertain to ELSS as well. Though 2. ELSS Do Not Yield Assured Returns
these schemes come with a mandatory lock-in period of By looking at the ups and downs in the total wealth
three years from the date of allotment, dont be rigid about accumulated, the volatility in the three- and five-year
it. There is a high possibility that yields over three years rolling returns, you would understand that ELSSs do not
are low to negative and the timing of investments will yield assured returns. This is the biggest disadvantage
determine your future returns. The graph above shows of ELSS. Moreover, there is no fixed period over which
the 3-year rolling returns of ELSS. dividends are paid. If you are looking for fixed income,
The simple strategy to overcome the dilemma of ELSS is not the right product for you.
balancing higher returns with the inherent risk in ELSS is 3. Returns Are Tax Free
to increase the tenure of your holdings. Over a long term ELSS comes with a three-year lock-in period and investments
of 7-10 years, it is reasonably safe to assume that you will under ELSS are eligible for tax exemptions under Section
not make a loss with equity investments. We believe that 80C of the Income-tax Act 1961. An individual in the
equity investment, in any form, should be for a horizon 30% tax slab can save up to Rs46,350 as tax exemption
of at least five years, for good results. We worked out the in a year. If you sell any of your units with gains at the
five-year rolling returns of all ELSSs; the results have been end of the lock-in period, such gains will also not attract
summarised in the graph on the next page. any tax liability.
You will notice that although the units were held for a 4. ELSS Has Mandatory Three-year Lock-in
relatively longer period, there were occasions when returns As specified earlier, ELSSs are market-linked instruments.
were negative. This is the risk with equity investing. If the Given the uncertainty, dont be under the impression that
markets go through a bear phase, even the best ELSS can you will make definite gains at the end of the lock-in
ELSS.indd 3 12-01-2017 21:03:18

5-year Rolling Returns of ELSSs

80%
No of Schemes Average
60% Minimum Maximum
40%
31 32 32
24 25
19
20% 13 13 13 13 14
11
6 7
3
0%
-20%
Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16
period. There is a high possibility that three-year returns in the scheme and the new units will come with a lock-in
may be negative. You should be flexible in your holding period of three years.
tenure. Although this is an advantage in disguise, ELSS has 7. Performance Matters
the shortest lock-in period compared to other investment Over the years, the popularity of ELSS has increased.
products. If an investor has a goal which is less than five The factor that differentiates the best from the rest is
years, she should ignore ELSS. the performance. It is a fact that the outperformers keep
5. Plan ELSS Investments in Advance outperforming and underperformers keep underperforming.
Unlike a tax-saving fixed deposit or a traditional insurance While we know, by
policy, where investors can shell out the entire money as now, which schemes
a lump-sum, this product requires a different approach.
Underperformers have consistently
An equity nvestment is exposed to market risks and its L&T Taxsaver outperformed,
performance depends, to a large extent, on the points of Kotak Taxsaver investors need to be
entry and exit. When you invest a lump-sum in an ELSS, LIC MF Tax Plan wary with the schemes
the timing of entry will have a bearing on the returns. If Escorts Tax Plan listed in the table
you invest when the market is at a peak, you could end alongside.
UTI Long Term Equity
up with erosion of capital. The loss could even offset any
The schemes are filtered on the basis
tax-saving while making the investment. Even if you spread of their performance in 16, 5-year Conservative Fixed-
your investment over the last three months of a financial rolling periods. We chose the schemes income Products
that were present in most periods
year, it will not reduce the risk greatly. If you end up buying Almost everyone today
at high market valuations, your overall return will be much would persuade you to
lower. To avoid such lump-sum risk, it is advisable to invest in equity without checking whether it is suitable
phase out your investments over the year. A good strategy for you. But, remember, there are aggressive investors
is SIP (systematic investment plan)investing a certain and conservative investors. While equity investments are
fixed amount every month. This way, you average out suitable for the former, low-risk fixed-income investments
your purchases and eliminate the risk of timing. The only are better for the latter. The best tax-saving option in the
disadvantage of this is that every subsequent instalment conservative space is PPF as it enjoys the exempt, exempt,
gets locked in for three years. However, stick to it. exempt (EEE) status, making it more attractive vis--vis
6. Say No to Dividend Re-investment Options other products like NSC, five-year bank FDs and others.
Multiple options are available, once you shortlist your While it is true that you will be persuaded by a lot of
preferred ELSS. You can opt for growth, dividend or salesmen to pick up fancy investment products, you need to
dividend re-investment option. When investing in an ELSS, be aware of your finances and opt for only those which suit
it is better to opt for the growth or dividend optionnot your investment style and risk appetite. Do not get lured by
the dividend re-investment option. The reason is simple; the figures quoted by salesmen. Make the effort to calculate
each instalment of the ELSS will be locked-in for a period the rate of returns generated by the investment. If you are
of three years. If you choose the re-investment option, still undecided where to put your money, a combination
any dividend that the scheme declares will be re-invested of ELSS and PPF could be an option. Mitul Patel
ELSS.indd 4 12-01-2017 21:03:35

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MSSN GB (Insurance 1-3 ).indd 2 16-12-2016 17:29:15

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About MAS
MAS is a SEBI-registered investment adviser and part of Moneylife, Indias most unbiased and
pro-investor research and information group. We run Indias best personal finance magazine,
Moneylife. We are not afraid to call a spade a spade. We are Indias only media company to have
set up a non-profit trust, Moneylife Foundation, which is now the largest savers and investors
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advisor.moneylife.in
MSSN GB (Insurance 1-3 ).indd 3 16-12-2016 17:29:45

clearly excludes certain physical
conditions from the reimbursement
of medical expenses.
The policyholder alleged that
New India Assurance wrongfully
INSURANCE TRENDS rejected her claim for expenses

incurred on surgery for morbid
obesity. The company had rejected
New products, regulations, features and options, the claim based on a specific
interpreted from your perspective clause in the policy agreement that
excluded morbid obesity from the
reimbursement list. The bench said
A c c i de n t I n s uranc e order can be a cause of worry that, as per the insurers clause, the
for insurance companies as it can expenses incurred for the surgery of
Malaria Death lead to a similar interpretation of
accidental death due to dengue
obesity are excluded. So, insurers
seem to find ways to not cover
Ruled as Accident and chikungunya. The reason for bariatric surgery. Bariatric surgery
the insurance companies worry is may be a life-saving procedure for
T he National Consumer
Disputes Redressal Commission
(NCDRC) has ruled that the
the large number of deaths from
malaria and dengue in recent years.
some patients but is considered
a cosmetic surgery by insurance
companies.
death of a policyholder due to Health Insurance However, in mid-2014, the
malaria from a mosquito bite is an Central Government Health
accidental death and has allowed an
insurance claim.
Will Bariatric Scheme (CGHS) approved coverage
for bariatric surgery which is
The case was National Surgery Be similar to weight-loss surgery.
Insurance vs Mosumi Bhattacharjee Covered by The new guidelines provide for
Mediclaim?
whose husband, the insured, died reimbursement of surgery charges
of malaria. The insurer had turned to patients who have body mass
down the claim on the ground that index (BMI) of more than, or
malaria is a disease and not an
accident.
The Commission, headed by
H ealth insurance companies
have done a flip-flop on
covering bariatric surgery in the
equal to, 40kg/m2. If the person
has obesity-related co-morbidities,
like hypertension, cardio-vascular
Justice VK Jain, said, Death of past few years. Some insurers have disease and diabetes, surgery can be
policyholder patient due to malaria started granting cover, but on a considered even if the BMI is
after mosquito bite is an accidental case-to-case basis, to patients with 35kg/m2.
death and, hence, insurance life-threatening risks. But a recent The government has fixed a
company is liable to pay the sum package rate of Rs2.25 lakh for
assured. It can hardly be disputed such surgery. Any expense above
that a mosquito bite is something the limit will have to be borne
which no one expects and happens by the consumer. Large private
all of a sudden. hospitals charge higher rates than
The Commission relied upon the amount approved for bariatric
the earlier judgement in the surgery under CGHS. Due to this,
Matbarsingh vs Oriental Insurance many prefer to get the surgeries
case where it was held that snake done at government hospitals.
bite, dog bite and frostbite are CGHS hospitals also have
also accidents. All three consumer stringent selection criteria and only
forums, namely, district, state district consumer courts decision those with co-morbid conditions,
and national, held the insurance says that an insurance company like uncontrolled diabetes,
companys stand to be incorrect. cannot be held liable for deficient hypertension, osteoarthritis or back
The apex consumer courts service when its policy agreement pain, are being extended the cover.
Insurance.indd 2 12-01-2017 20:43:30

INSURANCE TRENDS
Consumers with no associated Health Insurance advance to the hospital (less than
ailments are not covered. 10% of the estimated cost) which
For non-CGHS, coverage for
bariatric surgery depends on the
Keep Emergency will be adjusted after cashless
approval.
insurance company as there are no Funds for If there is denial of the cashless
clear guidelines. Those covering
it have their own evaluation and
Hospitalisation claim, for some reason, you
have to pay the hospital bill and
allow it on a case-to-case basis.
With the alarming rise in bariatric
surgeries in India, there is need for
E mergency funds are important
for financial planning. An
emergency can happen any time
claim the reimbursement later. Be
ready to pay for incidentals (that
may or may not be reimbursed).
proper guidelines that make the and money may be required Hospitalisation registration and
disease notifiable and bring it under instantly. Keep emergency cash at non-medical expenses are not
the ambit of Insurance Regulatory covered.
and Development Authority of Easy access to Rs25,000 or
India. There is a need to stop more can make the difference
misuse of the treatment which is between life and death. Cash is
possible only with clear guidelines still king. A savings or current
from government and regulatory account is your next best bet.
authorities. Bank FD and liquid mutual funds
Recently, surgeons from the offer good liquidity and minimal
Obesity and Metabolic Surgery loss for premature withdrawal/
Society of India and All India redemption. New modes of
Association for Advancing Research home as it may be needed even if payment have become popular
in Obesity have approached the you have cashless health insurance. after demonetisation; hence these
Indian Council of Medical Research For emergency situations, cashless are worth exploring. Having easy
for guidelines to make the disease mediclaim may not be approved access to money is more important
notifiable which can help mediclaim before hospitalisation; hence, you than having money which can take
policyholders. may be expected to pay some time to be accessed.
Fine Print insurance company itself, though

the percentage on this count was
the cashless claim and asked
the policyholder to apply
much less at 29%. Those who are for reimbursement. The
Insurer and Agents Not financially savvy and can better reimbursement claim was rejected
Trustworthy interpret their insurance policies on the grounds of non-disclosure
N either insurance companies

nor their agents are
trustworthy sources for a wide
find their agent and sales person
the least trustworthy in the sales
value chain.
of disorder in the past 7-8 years.
Next, the insurer also cancelled
the health insurance of the
spectrum of people, a study by couple.
ASSOCHAM has found. It says, Max Bupa Penalised for The Forum went through
Among the first set of people Rejecting Claim the evidence and found that
with no specific knowledge of
insurance and finance and those
who fall in the age group of 18 to
T he Gurgaon District
Consumer Dispute Redressal
Forum has imposed a penalty of
the customer had mediclaim
policy since 2004 from National
Insurance and then shifted to
60 years, 72% of those covered Rs25,000 on Max Bupa Health Max Bupa. So, the policy was
in the study said their agent/sales Insurance for rejecting the claim continuous since 2004. The pre-
person was the least trustworthy of a cancer patient. The insurer existing disease exclusion clause
source in the sales process of an was ordered to pay Rs3.23 lakh for 48 months should not have
insurance policy. treatment cost along with interest been applicable and, hence, the
The second least trustworthy @9%pa (per annum). rejection of the claim by Max
source in the sales process was the First, Max Bupa rejected Bupa was not justified.
Insurance.indd 3 12-01-2017 20:43:59

BLACK
TO
TO
WHITE
Thousands of crores of rupees of black money are easily converted into white
every year by rigging the prices of listed shell companies. An official report
describes the modus operandi. Investigation by Debashis Basu & Sucheta Dalal
O
n 8 November 2016, prime minister (PM) in the laundering operation select an illiquid listed
Narendra Modi demonetised the Rs500 stock traded at a very low price (sometimes, the price
and Rs1,000 currency notes in an effort to is a few paise) and then get a market-operator to rig it.
strike a body blow at black money. This After a year, the shares need to be sold on the exchange.
move inflicted enormous daily hardship However, since they are unlikely to find genuine buyers,
on almost every Indian for several weeks in, what was the sale is effected to entities that are also controlled
touted as, a nationwide purification yagna. And, yet, by the operator and funded by the beneficiary. The
this surgical strike did not even touch a wide variety operator not only rigs the price but also routes the
of strategies used by people to convert black money into money to a series of dummy companies to hide its trail,
white. for a consideration. The person laundering his cash gets
One of the cleanest ways of converting black to white an official payout from the exchange for his brilliant
is right under the nose of the income-tax (I-T) department investment and pockets tax-free LTCGall in white.
and Securities and Exchange Board of India (SEBI). What we have in our possession the first
Under the I-T rules, listed shares held for more than a comprehensive investigation into this rampant is the
year are considered a long-term holding eligible for tax- laundering operation and the exact modus operandi
free long-term capital gains (LTCG). So, those involved used to convert black-to-white using the LTCG route.
Cover Story.indd 2 13-01-2017 17:03:44

COVER STORY
The investigation report was prepared by Dhruva Purari entities are under the scanner of both, SEBI and the tax
Singh of the I-T department, Kolkata. Titled Project department, for rampant misuse of tax laws. However,
Bogus LTCG/STCL through BSE listed penny stocks far from actually acting on the issue, SEBI seemed to be
it has some explosive material on how a number of, preparing the case for not being able to act on it. Media
unscrupulous stock brokers working through scores reports note that the regulator has so far not received
of listed and unlisted shell companies are routinely any other independent, documented evidence and sources
laundering black money and also claiming bogus tax say the market regulator is not convinced testimonies
exemptions in the form of LTCG. alone will stand the test of legal scrutiny. This is simply
Moneylife has been writing about this brazen price untrue since in March 2016 itself, SBEI had banned
manipulation for over seven years. We have highlighted 240 entities, from the market for manipulation on
the rigging of at least one scrip in every in every exactly the same grounds that the I-T departments
issue of the magazine. Moneylife also published investigation establishes: connected entities,
a detailed Cover Story in 2012 (http://www. unusual rise in price, preferential allotmentall
moneylife.in/article/stock-manipulation/27957. leading to bogus LTCG.
html) that described how a close network of A Press Trust of India report said that SEBI
promoters had manipulated specific stocks right 32 plans to clamp down on those involved in stock
under the nose of SEBI. Indeed, the video of a Share manipulations and take action against all listed
Brokers
Moneylife Foundations discussion on money companies, along with their directors, found to
laundering, which went viral on social media be in cahoots with such operators. Besides, the
and WhatsApp just a few of months ago (Please market regulator will refer the findings of all the
see https://www.youtube.com/watch?v=CI2gI 25 details about the beneficiaries and facilitators of
wBg35c&feature=youtube) clearly establishes Entry such trade to the Income Tax Department for
how widely such scams about using the stock Operators further action. A proposal in this regard would
market, are known among the market players. be presented before SEBIs board this week.
We were pleasantly surprised to discover that This would be another way of passing the
the investigation team referred to Moneylife
Foundations video on price manipulation, in
84 buck, as we describe later, since the core issue
in the penny stock scam is the failure of SEBIs
BSE-listed
their report. While SEBI has, from time to time Companies expensive market surveillance system.
banned certain entities for price manipulation The Kolkata investigation report asserts
to take advantage of LTCG, such manipulation that the evasion has become much more
has continued with impunity over the years. organized and the stakes involved have
However, after the perspective of the PM's
campaign against black money, SEBI seems 5,000
Shell
become huge. The report was also sent to
the SEBI chairman. Although SEBI should
to be under pressure to do something. While Companies have been working with the I-T department
we were fi nalising this article, something to nail the scam, it didnt. But more about
interesting happened. On 6th January, well SEBIs curious role later. Here are the key
before we planned to finish this article, we findings of the I-T report:
had sent a letter to SEBI asking for their The investigation identified 64,811
views (Please see box). Till the time of beneficiaries who had claimed bogus LTCG
going to the press, SEBI had not replied. 64,811 of nearly Rs38,000 crore.
On 11th January the media was suddenly Beneficiaries The illegal business of claiming bogus
buzzing with stories of a planned board LTCG involves three different sets of entities:
meeting on 14th January, which will take the promoter of penny stock companies,
up the misuse of Long Term Capital Gains share brokers and a set of entry operators
(LTCG) and stock price manipulation. who accept cash from the tax-evader and
This would be SEBIs first board meeting route it through several paper companies
since demonetisation, announced on Rs38,000 to bank account(s). Many a time, the three
8th November.
According to the media reports, the
Crore entities perform overlapping roles.
The list of brokers mentioned in the
board will be apprised on the course Bogus LTCG investigation includes big names like
Amount
of action SEBI will take on this issue. Anand Rathi, Religare and SMC Global,
The regulator claims that nearly 32,000 who were involved in purchase/sale and
Cover Story.indd 3 13-01-2017 17:04:05

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ADVISORY
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MSSN GB Ad_invest.indd 2 15-12-2016 18:28:46

MAS Benefit #4 - 7
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Which Mid-cap Funds?
Which ELSS?
ELSS SIP Tool
Fixed Income Choices

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MSSN GB Ad_invest.indd 3 15-12-2016 18:35:28

COVER STORY
price rigging of the penny stocks, says the report. method (see box on page 39).
Many of the brokers ran a country-wide operation Next, the operator (see section The Players for
that also involved brokers from several cities. definition) identifies a shell company, listed on the
The total transaction of these brokers mentioned by the exchange, with a small capital base, where the majority
report is Rs15,970 crore, as against the total trade in shareholding is held by promoters who are also mostly
the scrips of more than Rs38,000 crore. persons of dubious reputation. The share price is low
The I-T investigation was able to establish full cash and listing is only in name. There are usually no public
trail of Rs1,575 crore. shareholders at all. These are dormant companies with
no business activities. The existing shareholders move
How It Is Done out and those who wish to procure entry of LTCG to
The game starts with the beneficiaries and operators convert their unaccounted cash into tax-free LTCG
coming together to run an operation to book bogus (beneficiaries) buy the shares, often, through preferential
LTCG. The commission to be paid to the operators allotment.
who will run the scheme is decided at this stage; but no Though the beneficiaries pay their initial investment
money is paid at this time. Once the booking (plan) is by cheque, the entire amount shown to have been
complete, the operators have a reasonably good idea of initially invested is either returned to them by the
how much LTCG is to be provided along with the break- operator in cash or adjusted against the payment to be
up of individual beneficiaries. This data is essential to received at the time of harvesting of the bogus LTCG.
decide which penny stock or companies to use for the Operators promise the beneficiaries 10-20 times the
job and which beneficiary (is) to buy how many shares. amount initially shown to have been invested, says the
Once the deal is struck, the market manipulation report.
begins. The players organise one of two ways of doing After the beneficiaries come in as shareholders, the
the transactionthe conventional method; or the merger operator starts ramping up the share prices to astronomical
O starts rigging the price

through circular trading with
the help of share brokers and
bogus clients. The prices rise to
astronomical levels.
O has a complex network of After a year, O asks the
various paper/bogus entities and beneficiary to deliver the
is also in control of listed penny unaccounted cash. The cash is
stocks. routed to paper/bogus companies
which would buy the shares from B.
O asks B to buy some specific
number of shares of a specific
Once the cash has been
penny stock at a low price either
routed O instructs B to sell the
on the exchange or through
shares, in a particular lot size on a
preferential allotment.
particular date and time.
Beneficiary "B" has

unaccounted money cash O instructs the paper/
which he wants to launder. He bogus companies maintained by
approaches operator O who him to buy the shares of B at the
manages the whole scheme. predetermined particular date
and time.
Summary of how
such shady scrips are B gets paid in white
manipulated with impunity How the LTCG from his broker. The gains are
for bogus LTCG. now tax-free.
Scam Works
Cover Story.indd 4 13-01-2017 17:04:24

COVER STORY
Brokers
All stock market trading is done through stock brokers
and so, no LTCG scam is possible without the connivance
of brokers. Brokers are supposed to comply with
stringent KYC norms before registering any entity as
their client. But alarmingly, the report that says that these
brokers perform the trading themselves on behalf of the paper/
bogus entities. Many brokers have accepted this fact in their
statements.
Syndicate Penny Stocks

Members/
Operator: A penny stock trades at very low
price and has very low market-
capitalisation. The general public
The operator manages the overall is not interested in them due to
scheme. He controls, directly or poor financials. The operator issues
indirectly, numerous paper/bogus
companies utilised for routing cash
The Players the shares of these companies to
beneficiaries through preferential
and also the listed penny stock allotment or off-market deals.
companies (usually purchased from the Shares allotted through private
shareholders of a dormant company). placement, have a lock-in period of
Beneficiaries wanting to book bogus one year. Therefore; such allotment
LTCG/STCL approach the operator. The qualifies them as exempt from
operators name seldom appears in LTCG.
the actual transactions.
Entry Operators
An entry operator gives accommodation entries or
accommodates the other party, for introducing their
unaccounted cash into their books of accounts. These
individuals control a large number of paper/shell companies
which are used for routing cash for the transactions as well as
buying and selling shares during the process of price rigging.
They are paid on a commission basis by the
syndicate members.
levels, over a one-year period. The share price is slowly, report. At this time, the operator tells the beneficiaries to
but consistently, manipulated upwards on thin volumes arrange the cash to be laundered and hand it over to his
through circuitous and prearranged transactions until contact persons. Various small players (entry operators,
the market price reaches a pre-determined level. The who create book entries) convert this cash into cheque
report says, It is here that the surveillance mechanism transactions and transfer it to the account of the dummy
of the Stock Exchange has either failed or the persons buyer of the ramped-up shares.
responsible for surveillance have consciously allowed The operator then gets the beneficiary to instruct his
the manipulations to happen. The SEBI chairman, who stock broker (who is fully in this game) to sell a specific
got a copy of this report, is completely unmoved by such quantity of shares at a specific price and time, in a very
a direct allegation. Moneylife wrote to SEBI seeking its carefully timed transaction where two sets of people
comments on the I-T report, but did not receive any have to enter data and hit the keyboard simultaneously
response. (usually to a count of three) to ensure that their entries
After a year, the operator arranges to give the match. The operator charges a commission, in cash, to
beneficiaries an exit through purely accommodative conduct this operation. All Moneylife stock manipulation
transactions without an iota of genuineness, says the reports show that the share prices of companies have all

COVER STORY
Himachal Fibres
Adjusted Closing Price in Rs Shares Traded
80 13,57,150
65 10,85,720
Shares Traded
50 Adjusted Closing Price 8,14,290
35 5,42,860
20 2,71,430
5 0
4 May-15 6 Nov-15 13 May-16
the hallmarks of a typical pump-and-dump operation. Ltd, Cressanda Solutions Ltd, etc, in order to provide
A typical chart will look like the one on Himachal entries of bogus LTCG to the interested persons, or
Fibres. Notice the heavy volumes at the initial stage, the beneficiaries.
pumping operation and the subsequent dump. In May 2014, an I-T survey was done on Sikaria
Share & Stock Broking Services Pvt Ltd which not
The Back Story of Investigation only established a money trail from cash deposit to
It was widely known that market-players are creating beneficiary, via the share broker, but various entry
bogus LTCG and STCL, for which Kolkata is the hub operators also confessed to their role in the bogus
of Jamakharchi or what is known as accommodation LTCG scam.
entry providers or simply entry operators. Another survey was conducted on 7 August 2008 in
Accommodation entries are bogus transactions through the case of Quest Financial Services Ltd and Prakash
which an entity accepts cash and issues out cheques. Jajodia. Here, too, a money trail was established from
According to the report, this city runs a very organised the deposit of cash right up to the ultimate beneficiary,
and systematic money via share broker. Again, the
laundering syndicate. The key entry operator/promoter
directorate of investigation of the listed company
(Kolkata) has unearthed confessed to his role in the
huge accommodation entry bogus LTCG scam.
rackets, from time to time. Another invaluable
Here are some examples, investigation report about
from the past, that the LTCG scam was received
report mentions: from directorate of I-T
A search and seizure (investigation), Delhi, which
action was conducted provided critical inputs
in July 2013 on Anand about the modus operandi
Sharma and Janardan and extended reach of the
Chokhani group LTCG syndicate, says the
and, subsequently, Kolkata report.
on Deepak Patwaris Describing the inputs
Destiny Security Ltd. provided by DITID, the
This unearthed market report says that these
manipulation of BSE- investigations unearthed
listed companies, namely some big syndicates involved
Pearl Electronics Ltd, in providing accommodation
Shree Shaleen Textiles entries for LTCG. But the
Cover Story.indd 6 13-01-2017 17:05:05

COVER STORY
Transaction Flows listed company and the private limited company is

so arranged that the beneficiaries, post- merger, get
Conventional Method shares of the listed company in the ratio of 1:1; thus,
Purchase of Shares by the Beneficiary: The beneficiary the investor gets an equal number of stocks in the
buys a fixed number of shares through an operator. listed company. Crucial to this is the stock exchanges
Price Rigging: After the shares have been purchased approval for listing.
by the beneficiary, the syndicate members start rigging Step3: The beneficiaries hold the shares of the listed
the price gradually through brokers who buy shares penny stocks which they got as a result of merger, for
at a fixed time and at a fixed price. These low volume one year (statutory lock-in period for exemption under
transactions are managed through paper companies of I-T Act), and then sell it to one of the shell private
entry operators. limited companies of the operator, at a rigged price
Sale by the Beneficiary: The beneficiary holds the that could be 20-25 times higher.
shares for one year or a bit longer. He then provides Such mergers require the stamp of approval of
the required cash, which is routed through some a high court. Since some of these are clearly sham
paper companies of the entry operator and, finally, mergers, the high court sometimes refers such cases to
parked in one company which will buy shares from the I-T department before passing an amalgamation
the beneficiary. Once the shares are sold, the paper order. The department, however, neither has the time
company issues a cheque to the beneficiary. The nor the wherewithal/jurisdiction to investigate. The
beneficiary, thus, converts his black money (cash) into result: the blatant tax evasion is getting stamped by the
white (sale proceeds including tax-free LTCG). Hon'ble high courts, says the report.
Interestingly, the market also has people looking to
Merger Method buy loss entries to deflate their profit and convert white
Step1: In this method, the operators first set up a earnings to black. So, the report says, Sometimes, this
private limited company and the shares are allotted at cash is even handed over to the persons interested to
low value to beneficiaries. take entry of bogus short term capital loss (STCL) in
Step2: This private limited company is then lieu of cheques of equal amount from them, ostensibly
amalgamated/merged with a listed penny stock for purchase of such shares at artificially inflated market
company by following due process and obtaining price. In the process, their white money is converted
a high court order. The capital of the penny stock into black and their taxable profit is reduced.
approach was to target the individuals and through him share brokers. Startlingly, according to the department,
identify the penny stocks and beneficiaries. This yielded the brokers readily accepted that they were actively
results on a limited scale emanating only from individual/ involved in the bogus LTCG/STCL scam. Surveys
individuals targeted, says the report. were also conducted in the office premises of many
The Kolkata I-T teams investigation decided to accommodation entry providers and their statements
reverse the process. It first identified the penny stocks recorded. All have accepted their role in the scam.
and then started targeting the individuals who dealt The department ended up with a list of more than
in them. Given the rampant nature and exponential 60,000 beneficiaries, a stunning Rs38,000 crore of
growth of this illegal business, the changed approach benefit covering more than 5,000 paper/shell companies,
allowed the department to virtually cover almost all also known as Jamakharchi companies, and 25 entry
Kolkata-based operators in one investigation itself. operators involved in providing bogus accommodation
The team identified 84 BSE-listed penny stocks used of various kinds. The department has recorded statements
for generating bogus LTCG. The number of companies of most of those involved, under oath.
used for this scam is in hundreds. It must be mentioned The department has prepared a cash trail of Rs1,570
here that the investigation refers to BSE stocks, because crore which shows how the unaccounted/undisclosed
these are legacy listings, unlike the rival National Stock cash of beneficiaries is being routed through this
Exchange (NSE) which cherry-picked the best companies modus operandi to convert black money into LTCG.
to permit trading when it began operations 22 years ago. We have followed the money trail from the point it is
Once the list of 84 stocks was identified, the being deposited to the undisclosed proprietorship bank
department conducted searches and surveys on 32 accounts to the accounts of share brokers. Then we
Cover Story.indd 7 13-01-2017 17:05:42

COVER STORY
Bogus Short-term Capital Loss
B ogus LTCG is not the only misuse the stock market

is put to. Another important way to reduce taxable
profits is to book bogus short-term capital loss (STCL).
who maintains a complex network of various paper/
bogus entities and is also in control of some companies
whose shares are listed on one stock exchange or the
How does this work? According to the report, While other. The operator asks B to buy a specific number
LTCG is booked when the share price is going up, the of shares in a specific listed company on the exchange
downward journey is used terminal at a highly ramped-
by operators for booking up price. These shares are
bogus losses. People, who illiquid and are held either
have huge profits, take the by the paper/bogus entities
STCL to set-off their profit. maintained by the operator,
The methodology used is or by the beneficiary who
the same. The beneficiary wishes to take an entry of
who wants a loss buys the bogus LTCG on its books.
share at a high rate from the Thereafter, the operator
beneficiary who is taking starts to sell the shares.
LTCG. The loss-taking The stock falls like a
beneficiary pays a cheque to stone and remains on the
the LTCG-taking beneficiary lower price circuit for
and the cash provided by days together. This is very
the LTCG beneficiary is easy for the operator to
returned to the loss-taking manage because there is no
beneficiary. As prices crash, public participation in such
the loss-taking beneficiary sells these shares bought ramped-up, illiquid stocks. Once the price has fallen to
at high value for a smaller value resulting in artificial a pre-determined level, the operator asks B company
loss. to sell the shares in a particular lot size on a particular
Suppose company B (beneficiary) foresees that date and time (in carefully synchronised trades). B
it is going to have to report huge profits in its books has bought the shares at a high price and has, thus,
of accounts. It may wish to reduce its taxable income incurred a short-term capital loss. This loss is returned
by taking entry of a bogus loss in its books to reduce to B in cash. This allows B to get a bogus STCL
its taxable profit. So B approaches operator O entry which is set-off against the regular profit.
have recorded statements of share brokers where they Dhruva Purari Singh? From what we gather, precious
have accepted that this cash has been used for providing little. DGIT has acted against only five companies of the
accommodation entry of bogus LTCG, says the report. 84 in the Kolkata list.
Almost a year after the report was submitted, on 16
Any Action Taken? March 2016, the central board of direct taxes (CBDT)
This report, along with a long covering note (no. F issued directions to carry out detailed enquiry into
No75A /2015-16/257-273) from Bishwanath Jha, taxpayers who had invested money in penny stocks
principal director of I-T (investigation), Kolkata, whose share prices were rigged for booking bogus LTCG
was sent to the director general income tax (DGIT) or STCL, citing the investigation conducted by Kolkata
(investigation) of various Indian cities, including investigation directorate. But that was all.
Mumbai, Delhi, Ahmedabad, Bengaluru, and also to In July 2015, Shaktikanta Das, then revenue secretary,
director general (international tax) Mumbai, along with wrote a secret letter to the SEBI chairman, reminding
a list of beneficiaries and a request that it be shared him about the Kolkata investigation on fictitious LTCG.
with their assessment officers. If the beneficiaries are The letter said, Such rampant manipulations call
assessed somewhere else, Mr Jhas letter requested that for concerted and coordinated action by the agencies
the information be passed on to the DGIT concerned. concerned. SEBIs proactive role in the above context is
So, what happened to all the painstaking work done by crucial. It is surprising that SEBI needed to be goaded
Cover Story.indd 8 13-01-2017 17:05:59

COVER STORY
Brokers in the I-T Investigation Net
F or this report, Moneylife wrote

to all 22 brokers mentioned
in the report (see list alongside)
recorded where they accepted that
they wilfully allowed known entry
operators like Deepak Patwary and
Prawesh Baria run their scam of
LTCG. They never bothered to
and sought their responses and verify the KYC norms as required.
The Calcutta Stock Exchange
reactions. Only Religare and Anand Very interestingly, it was also
Gateway Financial Services
Rathi acknowledged our emails. found that Anand Rathi group
Religare said We have not been SMC Global Securities is receiving share capital in their
involved in any illegal conversion Anand Rathi Share & Stock Brokers smaller investment companies,
of money from black to white. Comfort Securities from well-known entry operators
Ujjwal Punmiya of Anand Rathi Korp Securities of LTCG market, like Jagdish
Securities kept trying to persuade Religare Securities Purohit and Akash Agarwal. This
us to drop the story and then Destiny Securities makes a clear nexus between
asserted that "Our firm is not at Eureka Stock & Share Broking broker and operator. About SMC
all in any way involved in illegal Madhya Pradesh Stock Exchange Global, the report says Many
conversion of money by using Dynamic Equities sub-brokers as well as regional
Long-term Capital Gains Tax. As a Manu Stock Broking office manager have accepted
broker, we provide platform to our their role in accommodation
Nakamichi Securities
clients directly or through our sub- entry providing syndicate. They
Baba Bhootnath Trade & Commerce
broker to trade in securities which have also accepted that they
are permitted by stock exchanges. Intellect Stock Broking receive cash commission from
Transactions are done by the client East India Securities beneficiaries/ key operators
at their own and we do not keep Abhinandan Stock Broking for being part of the syndicate.
any track of gain or losses made by Fort Share Broking We have also impounded such
our clients. RNA Capital Markets documents from the office of
However, the I-T investigation Sosha Credit SMC Regional Office, which
report asserts that "statements Millenium Stock Broking suggest that they receive huge
of regional head and employees Kayan Securities cash commission.
(of Anand Rathi Securities) were
and pushed in this manner. SEBI should have been on Why did SEBI not record any adverse finding?
top of this issue on its own, after grandly claiming, in After all, SEBI has draconian powers since 2013 under
December 2014 and again in April 2015, that it has which it can enter and search buildings, places, vessels,
bust schemes that misuse the stock market platform for vehicles and aircraft of defaulters. Its officers can break
money-laundering. open the lock of any door, box, locker, safe, almirah,
In fact, our sources believe that SEBI itself is a etc, to get information. It can ask for information or
stumbling block in exposing the scam, even though it records from any person, banks, authorities, boards or
has claimed that it has consistently acted against such corporations. It has the powers of search and seizure,
companies. Mr Das, in his letter, told the SEBI chairman: attachment of properties and arrest and detention of
Investigations conducted in the transactions of the defaulters; it can also pass disgorgement directions.
aforesaid nature could not bear the desired fruits inter Finally, the government has also allowed the market
alia for the reasons that in most of such transactions regulator to seek information from other regulators
the regulators concerned such as SEBI did not record within India and abroad with retrospective effect, going
any adverse finding qua such transactions. Judicial as far back as 1998.
authorities have held that unless the corporate veil is And, yet, Mr Das had to ask SEBI chairman UK Sinha
lifted, onus on revenue is not discharged. The action to tear down the corporate veil. He also had to remind
taken by SEBI in such cases unravelling the faade is of him to take necessary action in the 84 scrips identified
critical importance, in these cases for effective handling by the Kolkata investigation directorate. While SEBI has
of menace of bogus LTCG. invested in highly sophisticated and expensive market
Cover Story.indd 9 13-01-2017 17:06:23

COVER STORY
LTCG Scam: A Failure of SEBIs Surveillance System
O ver the past seven years, Moneylife has been

publishing reports of one case of market
manipulation in every issue. These cases do not require
has recently barred more than 250 entities, including
individuals and companies, from the securities market
for suspected tax evasion and laundering of black
much effort to unearth. We can start looking at the money through stock market platforms There is
listed companies, alphabetically, and easily find cases an urgent need for having effective preventive and
of illiquid, closely-held stocks, with no business to punitive action in such matters to prevent recurrence
speak of, that are rigged a few hundred percent. In of such instances.
other words, price-rigging for booking bogus long- SIT recommended that SEBI needs to have an
term capital gains is widespread and continuing with effective monitoring mechanism to study such unusual
impunity. rise of stock prices of companies
companies We believe that
Our objective
ctive has to be to prevent with effective and timely monmonitoring by SEBI a
such manipulation.
ation. But, from 2001, significant number of such instances can
when the JPC (joint parliamentary be checked in time. This clearly means
committee) was as enquiring into singularly failed in its
that SEBI has sin
the Ketan Parekhekh scam, up to job, despite spending
sp over Rs50
2015, when the SIT (special installing sophisticated
crore on inst
investigation team) of the surveillance systems.
real-time su
Supreme Court urt on black The ononly action SEBI has
money flagged d this off, SEBI taken, so far, is banning
has been foundnd lagging some eentities from the
far behind the curve in stock mmarket. But SIT says,
catching price-rigging.
-rigging. Barring such entities
Barrin
Here is what
hat SIT from securities market
said, in 2015: SEBI would not be of (sic)
woul
surveillance software that would help in ensuring

cost over Rs50 crore of appropriate actions
public money in two Dear Mr Hariharan, by the Income Tax
rounds of investments, authorities. SEBI may
Greetings from Moneylife. l 2015) prepared by Directorate
the finance ministry had stigation Report (dated 27 Apri take note of violations
This mail is regarding an Inve submitted to SEBI. This report
Kolkata, a copy of which was
to tell SEBI to devise a of Income Tax (Investigation), s (LTCGs) bene ficiary through stock market. of KYC (know your
-term capi tal gain
mechanism to raise is about entry of bogus long customer) norms by
rt.
Moneylife has a copy of this repo bai also wrote a letter to Chie
f
triggers on this kind nd Sawant, a MP from Mum the stock brokers for
In November 2016, Shri Arvi n. This lette r from the MP talks
of suspicious trading copy marked to SEBI Chairma further appropriate
vigilance Commissioner, with n by SEBI in cases concerning
misuse of stock
y and illeg al actio n take
on real time basis so about contradictor this lette r as well. action.
LTCG. Moneylife has a copy of
that preventive action exchange system to generate in Mon eylife mag azin e and would like to know Ironically, Mr Das
r story on this
We are planning to write a cove
could be taken before has been a member
from SEBI... stigation Report prepared by
entities mentioned in the Inve
laundering takes place. 1. What action was taken on the of SEBIs board of
Mr Das ended his the I-T Department? y action as suggested in the directors and is also
er investigation and necessar
2. Has SEBI conducted furth
letter with a reminder er from the MP? in the race to head
Investigation Report and Lett k market system for generatin
g
that the income-tax t are the step s take n by SEBI to prevent misuse of stoc the regulatory body.
3. Wha
Act, 1961, prescribes bogus LTCG benefits? nsistent approach" by SEBI in But that does not
d that it was a "deliberate inco
time limits within 4. The MP, in his letter has state seem to have made
SEBI have to say about this?
such similar matters. What does
which assessments can be able to resp ond at the earliest before Monday. any difference. In
Hope you would
be completed and tax fact, under his watch,
demands can be raised. Thanks & regards, SEBI did something
Yogesh Sapkale
Therefore, timely action Deputy Editor
even worse. It has
from SEBI in such cases investigated dozens
Cover Story.indd 10 13-01-2017 17:09:13

COVER STORY
strong deterrence. In case it is established that stock the DWBIS project will exploit the power of modern
platforms have been misused for taking LTCG benefits, technology in terms of computation and speed of data
prosecution should invariably be launched under analysis and host pattern recognition algorithms,
relevant Sections of SEBI Act. Section 12A, read with to crack insider trading. Despite all this hype and the
Section 24 of the Securities and Exchange Board of enormous amount of money spent, stock manipulation
India Act 1992, are predicate offences. SIT went on continues, right under SEBIs nose.
to suggest that the enforcement directorate should then Moneylife had found out, in 2013, that 48 staff
be informed to take action under Prevention of Money members are posted in the integrated surveillance
Laundering Act for the predicate department (ISD) of SEBI,
offences. It is remarkable that SIT which houses the IMSS and
had to tell SEBI what it should do The only action SEBI has taken, DWBIS. The IMSS contract
in such cases! so far, is banning some entities value was of Rs20.55 crore.
In 2013, Moneylife wanted to from the stock market. But SIT Then, SEBI adopted the Rs34.38
know how many cases of price says, Barring such entities from crore DWBIS which became
manipulation, detected by SEBIs securities market would not be operational in 2010. This is a
integrated market surveillance of (sic)strong deterrence lot of taxpayers money and
system (IMSS) and data nobody knows how effective
warehousing business intelligence the surveillance system is. Or
system (DWBIS), resulted in prosecution, or consent if anybody in SEBI is truly looking at all the cases
orders, or were dismissed due to lack of evidence or were triggered by the systems or are they doing it selectively.
still pending investigation. In a shocking disclosure, Despite draconian powers and plenty of funds, SEBI
SEBI replied that it did not have information relating to is extremely reluctant to act effectively against price
its market surveillance system! manipulation and LTCG scamsters. Should not the
SEBI has spent crores of rupees on the so-called SEBI board, revenue secretary and the finance minister
state-of-the-art surveillance systems, IMSS and the be asking why?
more modern DWBIS. Earlier, SEBI had touted that
of cases but acted in an arbitrary manner. While it has KYC norms of clients to help the syndicate members,
selectively gone after a few cases of price manipulation says the investigation report. It further says that the
and fi led proceedings against them, it has let off certain Calcutta Stock Exchange has registered itself as a broker
others involved in similar manipulation. This has ensured with BSE and provided a large number of terminals
that even the cases it claims to be pursuing actively have to sub-brokers who are involved in such price rigging
been significantly weakened. operations. Strangely, the regulators have not bothered
We understand that SEBIs role in weakening the to act against them, despite a detailed I-T investigation
investigation, or being selective in its approach, has also having nailed the involvement of many big names.
been raised by Arvind Sawant, member of parliament The National Democratic Alliance (NDA)
(MP) from the Shiv Sena. This south Mumbai MP government has made a lot of noise about going after
has written to finance minister (FM) Arun Jaitely on black money, especially those who had ostensibly
12 November 2016 pointing out the contradictory hoarded a stash of cash. The demonetisation exercise has
and illegal action taken by SEBI in cases of booking caused enormous hardship to people and forced them
bogus LTCG. He wants the FM to call for the files on to make huge sacrifices for purification of our corrupt
these investigations and also check how long SEBI system. Revenue secretary Hasmukh Adhia, under
has been sitting on these matters. An investor group whom the CBDT and I-T department works, is at the
is also understood to be pursuing the matter of market forefront of the PMs note-ban operation. Isnt it clear
manipulation. that he would have far more success if he shuts down the
The weakest links in the chain of the bogus LTCG market manipulation that is routinely allowing people to
scam are stock brokers, who are regulated by the launder thousands of crores rupees every day? It is time
exchanges and SEBI. What kind of KYC norms do he set up a team to plug the LTCG scam. The work of
they follow, when they allow clients to rig penny stocks identifying those involved needs to start at SEBI Bhavan
through their terminals? Brokers often compromise on in Mumbai.
Cover Story.indd 11 13-01-2017 17:09:43

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Stockletter (MSSN) Ad Oct 15.indd 3 16-12-2016 18:31:11

MUTUAL FUNDS FUND FACTS
Hot and Cold Stocks of Mutual Funds in December 2016

Indian Oil Corporation, ITC and Sun Pharmaceuticals Industries were preferred most in
December. Shares of Tata Motors, Aditya Birla Nuvo and Reliance Industries witnessed highest
selling by mutual funds. ICICI Prudential Value Discovery Fund purchased Sun Pharma shares
worth Rs200.91 crore whereas Birla Sun Life Frontline Equity sold Tata Motors shares worth
Rs115.24 crore. Reliance AMC sold AB Nuvos shares worth Rs339.12 crore.
Top Bought Companies Top Sold Companies

Company Name Value Company Name Value
(Rs Crore) (Rs Crore)
Indian Oil Corporation 594.42 Tata Motors (533.34)
ITC 461.10 Aditya Birla Nuvo (353.90)
Sun Pharmaceuticals Industries 381.61 Reliance Industries (320.30)
Infosys 246.17 Hindustan Petroleum Corporation (139.19)
HCL Technologies 213.66 Axis Bank (117.70)
Gail (India) 208.35 Bajaj Finserv (117.37)
Sheela Foam 194.69 Mahindra & Mahindra Financial Services (109.87)
Larsen & Toubro 193.78 Bajaj Auto (109.44)
ICICI Prudential Life Insurance Co 187.79 Crompton Greaves (98.62)
Oil & Natural Gas Corpn 152.90 Bharat Petroleum Corporation (95.12)
HDFC Mutual Fund
Sun Pharmaceuticals Industries 111.60 Bharat Petroleum Corporation (116.29)
Gail (India) 89.23 Coal India (78.03)
Infosys 80.83 Sun T V N etwork (77.49)
Oil & Natural Gas Corpn 78.04 Mahindra & Mahindra Financial Services (55.24)
Adani Ports and Special Economic Zone 71.74 Aurobindo Pharma (32.35)
ICICI Prudential Mutual Fund
Sun Pharmaceuticals Industries 405.98 Reliance Industries (205.28)
Larsen & Toubro 134.32 Bajaj Finserv (157.82)
Container Corporation Of India 119.93 Axis Bank (127.56)
TVS Motor Company 114.85 Bajaj Auto (111.66)
Housing Development Finance Corporation 102.27 Tech Mahindra (51.94)
Reliance Mutual Fund
Indian Oil Corporation 126.35 Aditya Birla Nuvo (339.12)
ICICI Prudential Life Insurance Co 86.32 Tata Motors (283.44)
Mahindra & Mahindra 70.53 Reliance Industries (131.39)
Divis Laboratories 68.13 Cipla (62.45)
ITC 66.38 Bharat Electronics (52.75)
Franklin Templeton Mutual Fund
Axis Bank 58.90 Tvs Motor Company (45.17)
Ultratech Cement 47.97 Motilal Oswal Financial Services (36.74)
Indian Oil Corporation 44.22 Reliance Industries (36.27)
Berger Paints 42.42 Tata Consultancy Services (20.88)
Asian Paints 40.29 Tech Mahindra (17.05)
Fund Facts.indd 2 13-01-2017 18:27:50

StockWatch Stocks and sectors that catch our eye
DI S H T V Dish is trading at a P/E (price-to-earnings) ratio of

13.92, market-capitalisation to sales ratio of 2.95 and
Is it, at last, at the market-capitalisation to operating profit ratio of 8.73.
The stock is reasonably valued. The promoters (Zee
inflection point? group) hold 64.44% of the shares, but 41.14% of the
promoter holding is pledged.
Dish TV has the largest market share (26%),
T
he business prospects of Dish TV have appeared followed by Tata Sky (21%). It had a net subscriber
promising to investors over the years; but the base of 14.5 million for FY15-16 and 0.66 million have
company has disappointed them. But is it now been added by 2QFY16-17. Dish is now consolidating
at an inflection point, finally? its market presence by taking over the business of
Dish TV provides direct-to-home (DTH) satellite Videocon D2H through a merger. It will also help bring
television and also provides teleport services to about synergies, reduce operational costs
broadcasters of various channels.
nels. and increase efficiencies.
It has been in the business The merged entity will be
since October 2003 and now renamed Dish TV Videocon
re
offers more than 582 channels ls Limited and will be led by Jawahar
Li
and services, including 22 audio
dio Lal Goel, chairman and managing
channels and over 55 HD channels
annels director of Dish TV and brother of
direc
and services, distributed through
ugh Subhash Chandra, founder of the Zee
Subhas
2,268 distributors and 244,668 68 The promoters of Dish TV will
group. Th
dealers across 9,322 towns. hold 36% of the shares, Vd2h Principals
The business of distributing
ng TV promoters and senior management of
(the promo
channels is tough and Dish, like
ike its Videocon D D2h) will hold 28%; the balance
competitors (mainly Tata Sky), ), 36% w will be held by foreign and Indian
has been making losses for years.
ears. institutional and retail investors, in the
institu
However, it became the first and merged company.
merge
only DTH company to reportt Dish TV Videocon served 27.6
Dis
profits for two consecutive years for FY14-15 and million net subscribers in India, as of 30 September
FY15-16. Net profit was Rs3.14 crore for FY14-15, for 2016, on a pro-forma basis, out of a total of 175
the first time in more than a decade, which increased to million TV households in India. Videocon D2H had
Rs692.42 crore for FY15-16, of which Rs402.90 crore 16% of the total market share and so the amalgamated
was contributed by tax refunds. entity would capture more than 40% of the market
For the quarter ended September 2016, sales grew share.
by 3.57% year-on-year (y-o-y) to Rs779.29 crore According to current plans, under phase-III and
(Rs752.42 crore), while net profit was Rs70.08 crore phase-IV of digitisation, 120 million homes are to be
(Rs86.96 crore), falling by 19.41%. For the past digitalised. From 2014 to 2016, 41 million set-top
five years, average sales growth has been 16.74%. boxes (STBs) have rolled out in phase-III and 17.8
Calculated on the basis of trailing 12-month profits, million in phase-IV. Analogue cable comprises 38%
Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into
account your individual circumstances, financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable, we do not guarantee its accuracy and the
information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future
results. Investors must do their own research before acting on them. Data Source: Centre for Monitoring Indian Economys Prowess database.
Those who have subscribed to the stockletters should only follow the stocks recommended there.
StockWatch.indd 2 13-01-2017 17:13:52

STOCK WATCH
SPICEJET
Investors Still Not Convinced?
Adjusted closing Price in Rs
Low-cost Operations
110
A viation is a tough business. Airlines have

no control over fuel cost and the market is
competitive. Keeping costs low is the key to efficiency.
90
Of the three terms of aviation companies listed,
SpiceJet is the smallest in sales. However, it seems
70
to be more efficient in managing its costs, at least
50
Dis-economies of Scale?
Jan-15 Jul-16 Jan-17 11.50% 11.28%
11.09%
11.00%
of the total distribution industry, followed by DTH at 10.50%

33% and digital cable at 29%. 10.00%
When phase-III and IV of Digital Addressable 9.69%
System (DAS) is fully operational, analogue cables 9.50%
will end and, thus, a huge market is up for grabs for 0.27%
9.00%
DTH and digital cable providers. Dish has launched
8.50%
special plans starting from Rs99 per month to target Employee Cost to Sales
subscribers in phase-III and IV, which has 7,709 urban SpiceJet Interglobe Aviation Jet Airways
areas and the rest of India (excluding Delhi, Mumbai,
Kolkata, Chennai and 38 notified cities which were a
part of DAS phase-I and II). employee costs. SpiceJet has the lowest employee
The Indian TV industrys market was predicted to cost as a percentage of sales, at 9.69%, whereas Jet
be at Rs61,700 crore in 2016, and is expected to grow Airways makes the highest sales but also incurs highest
to Rs1,09,800 crore in 2020. Subscription revenues employee cost as a percentage of sales, at 11.28%. The
account for Rs40,700 crore of the total for 2016 and net profit margins of Jet Airways are not so impressive
is expected to grow at a CAGR (compounded annual either, at just 5.54%, with SpiceJet at 8% and led by
growth rate) of 15.8%, reaching Rs73,300 crore. The Interglobe Aviation at 12.33%.
rest comes from advertising revenue.
The total number of households for 2016 was 284
million, of which 181 million were TV households. The total households are expected to increase to 306
million by 2020 and the TV households to 202 million.
Thus, TV penetration is expected to increase from 64%
Analogue is the huge market opportunity in 2016 to 66% in 2020. The C&S (cable and satellite)
that can be captured in future households are also expected to increase to 173 million
in 2020, from 152 million in 2016, the penetration
increasing from 84% to 85%.
The distribution industry is heavily taxed; licence
fees are 8% AGR (adjusted gross revenue) instead of
29% Analogue Cable
38% 10% GR (gross revenue). However, entertainment and
DTH service tax will be subsumed after the rollout of GST
Digital Cable (goods and services tax).
33% Has the time come for Dish TV to emerge as a
stable cash machine? If Dish has, finally, turned the
corner in terms of profitability, incremental additions
of subscribers will flow straight to the bottom line
helping it earn high return on capital.
StockWatch.indd 3 13-01-2017 17:15:23

STOCK WATCH
UN UOTED
STORIES OF PRICE MANIPULATION
Negotium International Otherwise, the company incurred a

(Rs)
Trade (Rs42) loss in FY15-16. The stock moved from
95
Rs9.5 on 10 April 2015 to Rs89.1 on
N egotium International Trade, 24 October 2016, on an adjusted

80
formerly known as Mahadushi 65 basis, a rise of 838% over one and a

International Trade, claims to be
50
838% half years. It fell by 50% by January
involved in import and export of goods 2017 and was trading at Rs42.40 on 3
and also acts as trainer, consultant 35 January 2017. Now, the operators are
and advisors for various services. The 20 back trying to rig it up. We came across
company got listed on the Bombay an SMS which said, Earn 100000 Rs
5
Stock Exchange (BSE) on 21 March Mar-14 Aug-15 Dec-16 profit in 3 days> buy 5000 shares of
2014 at Rs360 (face value of Rs10 NEGOTIUM IN (BSE CODE: 537838)
per share). Within seven months, in October 2016, the company again split above 42.40 TGT 55 + SL 40. When will
October 2014, these shares were split the shares of Re1/share. Its sales, for regulators weed out such companies
into 10 shares of Re1 each. A year later, FY15-16, were Rs3.62 crore. However, from the market which are used to
in October 2015, these shares were the net profit was just Rs6 lakh; this turn black money into white through
consolidated back into Rs10/share. In included other income of Rs17 lakh. pump-and-dump operations?
MARKET TREND
Hard Slog Ahead So, from gradually accelerating real

GDP growth rate from 7.5% to over 8%
Lprobably, formed a very short-term bottom and we

ast fortnight, I had mentioned that the indices have, per annum, CMIE now expects this growth
trajectory to move down to about 6% for
could see a halting rally over the next week or so. Over the next five years. The economy is unlikely to achieve
the last fortnight, the Sensex has moved from 26,626 to a growth of 7% any time during the coming five years,
around 27,300. The rise has been slow but steady. The says CMIE. This is because of a sharp reduction in private
reason is the same that I highlighted last fortnight. Indian final consumption expenditure, a fall in retail prices of
investors and domestic institutional investors continued perishable goods, dislocation of labour and losses in
to display exceptional bullishness, despite mounting wages and a breakdown of supply chains in some parts.
evidence that the economy has experienced a big jolt Over 90% of the transactions in India are cash-based.
from demonetisation. As I write this article, comes some I have reckoned that the dislocation is temporary;
sombre assessment by Centre for Monitoring
toring Indian normalcy would
woul be restored as soon as adequate
Economy (CMIE), an independent think tank. currency come
comes into ATMs and this is about to happen
CMIE has scaled down this years growth
owth in a few months. But CMIE does not think
estimate by 164 basis points, following so. It estimates that restoration of full
demonetisation. However, the bigger liquidity (will) range from mid-January
shock is about how long the impact to September 2017. Two thousand rupee
would last. The head of CMIE, Mahesh currency
cur notes do not provide liquidity like
Vyas, writes, We expect the long-term damage the decommissioned currencies provided
to be greater than the damage caused to o growth during and so
s we believe that liquidity is likely to be
2016-17. On an average, growth during th the coming
i fi five restored
t only towards the early second half of
years up to 2020-21 has been scaled down by 187 basis 2017. I am not sure whether the market has factored
points compared to our earlier forecast for the same in all this. Expect the market to struggle at the current
period. levels, for a long time. Debashis Basu
StockWatch.indd 4 13-01-2017 17:15:57

TAX/ FIXED INCOME
Small Savings Schemes Rates Unchanged
T
he governments move to deposits, like POMIS (post-office no TDS, the interest on the NCD
demonetise Rs1,000 and monthly income scheme), POTD is taxable. The coupon offered is
Rs500 currency notes has (post-office time deposits), National good, considering that interest rates
led to a lowering of bank Savings Certificate (NSC), Kisan are on a decline. It is a good option
fixed deposits
eposits Vikas Patra (K (KVP) and Senior compared with long-term bank
(FD) rates.
tes. Savings Scheme (SCSS),
Citizen Saving FDs which are offering 6.5%pa
Low bank nk FD will lock in at the existing rate to 7%pa. But SREI Equipment
rates, coupled
oupled tenure of the product.
for the tenu Finances NCD rating is lower than
with taxes,
xes, can Interest rate on other SSS AAA rated NCDs which are a better
be disastrous
strous products, like Sukanya
prod option. Lower rating translates into
for those
se Samriddhi Account (SSA)
Sam a higher coupon rate due to the
depending
ing and public provident associated risk.
mainly on fund (PPF), may change
income from during the tenure. They
durin New Scheme for Senior Citizens
their savings.
vings. currently offer interest rate
curren Offers 8%
Another
other of 8.5% and 8%, respectively. The government has announced
option is investing a new scheme for senior citizens
in smalll savings Is SREI Equip
Equipment Finance NCD (60 years and above) which will
schemess (SSSs) that Worth It? give a fixed 8% return on 10-year
offer better
tt rates than b
t th bank FDs.
k FD SREI EEquipment
i Finances (a bank deposits of up to Rs7.5 lakh.
The good news is that government subsidiary of SREI Infrastructure The interest will be paid monthly.
has kept interest rates on SSSs Finance) public issue of secured Details of the scheme are awaited.
unchanged for the January-March redeemable non-convertible An existing scheme which allows
quarter. You can opt for SSS debentures (NCD) opened on Section 80C deduction for the
products rather than bank FD, but 3 January 2017. The interest rate money invested is the Senior Citizen
understand that bank FDs have is 9.50%pa (per annum) for three Savings Scheme (SCSS). Currently, it
more flexibility than SSS products. years and 9.75%pa for five years. offers interest @8.5%pa on deposits
Each SSS has different features, The rating is BWR AA+ (BWR of up to Rs15 lakh with a maturity
lock-in period, penalty for Double A Plus) (outlook: Stable) period of five years. SCSS has a
premature withdrawal, interest by Brickwork and SMERA AA/ lock-in period of five years. Banks
rates, etc. Understand the product Stable (SMERA Double A/ Stable) offer an exit option after one year,
features before investing. SSS term by SMERA. Even though there is with penalty.
G-Sec Yields Down

Issuer Maturity Next Last Yield ISIN Rating
T he 10-year benchmark G-Sec yield, Date Coupon (%)
which sets the tone of the fixed- HDFC 7.90% 24 Aug-26 24 Aug-17 7.6 INE001A07PN8 CRISIL AAA
income market, has declined by 15
LIC Hsg Fin 8.35% 18 Oct-19 19 Oct-17 7.57 INE115A07ID2 CRISIL AAA
basis points (bps) in the last fortnight
to end at 6.39% on 6th January. HDFC 9.65% 19 Jan-19 20 Jan-17 7.51 INE001A07MH7 CRISIL AAA
NSE data as of last trade date of 6 January 2017
G-Sec Maturity Yield to Bajaj Fin Ltd 7.50% 02 Dec-19 02 Dec-17 7.67% INE296A07NG3 CRISIL AA+
Date Maturity (%)
01 December 2044 7.06 LIC Hsg Fin 7.60% 30 Mar-20 30 Mar-17 7.60 INE115A07GX4 CRISIL AAA
22 June 2045 7.05 Power Finance Corp Ltd

02 May-26 02 May-17 7.36 INE134E08IE1 CRISIL AAA
10 November 2033 7.04 8.03%
G-Sec yields on 6 January 2017 BSE data as of last trade date of 6 January 2017
Fixed Income.indd 1 12-01-2017 20:57:47

HANDHOLDING:
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or the press/TV. (But do they know more than you? And how do you know that?)
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are only a sales target for them)
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Option 5: Choose Moneylife Advisory

A no-bias, no-conflict platform. Ask any confidential question about investments, insurance and taxes
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MSSN Handholding.indd 1 15-12-2016 18:07:06

Supported By
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My chartered accountant (CA) is
Queries
At Moneylife Foundations
of the opinion that service tax under
the category of Online information
and database recovery service may
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both, my CA and I, are uncertain
about it. Your opinion would be of
Tax Helpline great help.
Ask tax-related questions at moneylife.in/taxhelp. Its free Nikhil Vadias Reply:

If the material is sold as an e-book, I
think, you have to pay Maharashtra
Income from Tuitions you should have maintained books value added tax (VAT) @6%
of account. under entry C-76. The Section
I have income from tuitions.

Earlier, as my income was below
the exemption limit, I had not
When balance sheet/profit &
loss account are not filled in
ITR 4 utility, it may be processed
says, Printed material including
annual reports, application
forms, account books, calendars,
filed income-tax returns (ITRs). as a defective return. Non-filling diaries, catalogues, race cards and
However, I filed my returns for of columns, annexures in the ITR publications which mainly publicise
AY2015-16 and AY2016-17. form, or not mentioning net profit goods, services and articles for
I filed my ITR in Form 4. I have not or gross profit and not maintaining commercial purposes
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Ameet Patels Reply: whichever is earlier. Thus, for mentioned by your CA. If there is
The form you selected, ITR 4, AY2015-16, the return can be a separate charge for downloading
is correct, since ITR 4 is for revised by 31 March 2017 at the e-books, VAT would be applicable.
individual/ Hindu undivided latest. However, if your original
families (HUF) having income from return has been filed beyond the Expenditure on Self-
business/ profession. As per Section time limit given in the IT Act, it occupied Home
44AA of the Income-tax Act, 1961, cannot be revised.
if the gross receipt from the business
exceeds Rs10 lakh, or if net income
(taxable income) from
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C an a taxpayer claim any
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the business exceeds against the question, Are you liable
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the three years Act, 1961, you should reply Yes. for expenditure incurred for
immediately preceding maintenance of the self-occupied
the concerned financial year Tax on Sale of E-books house. If the maintenance
relevant to the assessment year, expenditure is in the nature of
the individual/ HUF will have to
maintain books of accounts as per
Rule 6F of the Income-tax Rules,
I am a blogger based in Mumbai.
I offer an e-book containing key
articles of my blog as a premium
capital addition (e.g., permanent
civil changes etc), it can be added
to the cost of house and is
1962. In your case, since your net download to readers. I need advice deductible against future capital
income is more than Rs1.20 lakh, about which indirect tax would be gains, if any.
Tax Queries.indd 2 12-01-2017 20:59:07

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Tax Helpline.indd 1 29-07-2016 17:49:42

USEFUL APPS YAZDI TANTRA
Podcast Addict: An App for Sudoku Free: Play It on Your

All Musical Tastes Mobile
P odcasts are, typically, audio broadcasts (like radio),

available online. You have a choice of channels catering
to various interests. Once you have
S udoku Free from genina.com is a great game to be played
on your Android phone. Simple, minimalistic design, a
clean interface and many, many options make it so enticing
subscribed, updates from the channels ls that you will never look for a paper puzzle again. It has
are automatically downloaded on four difficulty levels and the facility
your phone for you to play, at your to carry on from where you were
convenience. Podcast Addict is a interrupted. So, if you get a phone
wonderful app to manage multiple call and have to exit the game, you
podcasts. You can download it on will find the puzzle where you left it,
your phone, once, and then search forr when you get back. With auto-save,
channels. My favourites are TED Talks, undo and redo, pencil marks, online
Freakonomics, Harvard Business Review (HBR), Ideacast competitions and much more, this
and the $100 MBA Show. is a game which can engross you for hours. Enjoy, when
Among Indian content, I enjoy listening to NewsLaundry you travel or are idling.
- Hafta and CNN IBN. There is a whole load of interesting Android: https://goo.gl/9NMRzd iOS: https://goo.
podcasts on cooking, music and regular radio, TV and gl/3VD4YH
news channels. Fish around and you will discover some
real gems. Search by channel, interests and more and
Podcast Addict will come up with the goods.
Four Letters: Not a Dirty
Podcast Addict is free and also allows you to stream Game at All!
live video, along with your favourite YouTube channels.
Try it out and share your own discoveries with me.
Android: https://goo.gl/hV5Xh3 iOS: https://goo.gl/Tg4aJQ F our Letters is a simple game: You are given four letters
and you have to compose a word within a timeframe.
Well, it is not as simple as it sounds. Initially, the words are
Lumosity: Have Fun, Get easy, to prod you on, but they become difficult progressively.
Keep making the words and keep scoring. The challenge
Cerebral increases, the longer you last. You can
correct your mistakes or rearrange
L umosity is a set of professionally designed brain games

that you can play on your computer online or on
your mobile. The games are designed to improve your
the letters, all within the timeframe.
You can slide your fingers over the
letters to go faster. When the time
memory and attention span. Used by over 70 million people runs out, you can have another go.
worldwide, Lumosity has a personalised training programme Once you have high scores, you can
that challenges your brain. The games are designed by share it with friends on Facebook and
neuroscientists, in collaboration with
neuro compete with them for higher targets. It may sound simple;
multiple universities, to train memory,
m but, after a couple of rounds, you are hooked. Be warned.
attention and more. With roots in the Android: https://goo.gl/519f2V
study of neuro-plasticity, Lumosity iOS: https://goo.gl/glxUB3
games are used in research and
have been incorporated into studies
by top scientists worldwide. Yazdi Tantra is a chartered accountant
The basic games are free and by training, computer consultant by
interesting. If you want your brain to be profession, entrepreneur-developer by
more active and see, and compare, your scoring patterns, hobby and trainer in his leisure time.
He is currently the vice-chairman of
there is a paid version with a 30-day money-back guarantee.
Zoroastrian Co-operative Bank Ltd
I enjoy playing these games for 10 minutes a day, three- and has been running a medium-sized computer
four days a week. So will you, I reckon. company ON-LYNE for the past 24 years.
Android: https://goo.gl/v1kEVb iOS: https://goo.gl/6GRKa4
Tantra - column.indd 1 12-01-2017 20:47:21

LEGALLY SPEAKING SD ISRANI
Banks Need To Give Notice

on Loan Recovery
M
ost of us have to deal with banks on a regular In IndusInd Bank Ltd vs Gurusiddappa Basavaaj M
basis and, with emphasis on making India (2016), the consumer had taken a loan of Rs10,00,000 for
cashless, dealings with banks are bound to grow purchase of a lorry. He was regular in making payments
exponentially. Customers have no choice but to bank on towards EMI but, due to financial constraints, some
their bankers! However, not all experiences of consumers monthly instalments were not paid. The bank seized his
are positive; at the same time, sometimes, consumers fail vehicle without proper notice. The consumer approached
to discharge their duty vis--vis the bank. the Bank for release of the lorry after making some payments
In one case of a consumer complaint, an individual had and it was done.
obtained a car loan of Rs4,57,690 from a private bank. Subsequently, the consumer was again unable to keep
The amount had to be repaid in 35 EMIs (equated monthly up the EMI payments. Once again, the Bank seized the
instalments) of Rs18,270. The complainant paid only four lorry. The consumer requested the Bank to release the
EMIs. As a result, the bank, forcibly took away the vehicle lorry after mobilising the money to pay the dues but, to
from the possession of the complainant. his utter surprise, he was told the
The complainant sent a notice vehicle has been sold.
demanding Rs5,01,092.72 and another Alleging deficiency on the part
notice dated demanding Rs3,39,593.72, of the Bank, the consumer filed a
in spite of having made a payment complaint before the district forum.
of Rs73,000. Alleging deficiency of The matter eventually landed
service on the part of the bank, the before NCDRC where the Bank
customer filed a complaint and claimed submitted that the complainant was
Rs7,00,000 as compensation. a chronic defaulter. Its contention
The bank rejected the complaint was upheld by NCDRC.
and submitted that, as the complainant In another case, a consumer had
had defaulted in payment of EMIs, the taken a life insurance policy from
vehicle was repossessed and sold, for Rs1,61,000. At the Life Insurance Corporation of India (LIC). He gave a
the time of repossession, Rs5,00,593.72 was the loan mandate to his bank to directly pay the monthly premium
outstanding. regularly through ECS from his account. After some time,
The district consumer forum allowed the complaint and the purchaser of the policy died. When his legal heirs claimed
directed the bank to pay Rs10,00,000 as compensation the amount from LIC, it was refused on the ground that
under various heads and Rs10,000 as cost of litigation. the premium for some months had not been paid. His
An appeal filed by the bank was partly allowed by the heirs dragged the bank to the district forum which ruled
state commission and the compensation was reduced to in their favour on the ground that the bank had failed in
Rs3,00,000 . The bank filed a petition before the National adhering to the mandate given by the accountholder. This
Consumer Disputes Redressal Commission (NCDRC). order was upheld by the state commission.
NCDRC noted that there was default in payment of NCDRC concurred with the orders passed by the two
instalments and the bank had the right to take possession lower forums. [State Bank of India vs Kanta Devi and
of the vehicle. But the bank could not place any document others (2016)]. The lesson to be learnt from this case is that
on record to substantiate that, before repossession, and also a customer should not take it for granted that the banker
before the sale, a notice was served. Therefore, NCDRC will always do its duty as per the mandate and should keep
concluded that there was deficiency on the part of the bank tabs on the payments.
in repossessing the vehicle and selling it without notice.
However, the amount of compensation was reduced by
NCDRC. SD Israni is a corporate lawyer & Fellow
Failure by the bank to follow due procedure helped of ICSI. Email: sdisrani@gmail.com
the consumer to retrieve the situation, to a large extent.
[Kotak Mahindra Bank Ltd vs MD Sarif Ansari (2016)].
Legally Speaking.indd 2 13-01-2017 17:45:10

HEALTH BM HEGDE
Coronary Angiography, the Villain

of the Piece
I have said that the soul is no more than the body. ratio) across a block, almost 90% of the so-called critical
And I say that the body is not more than the soul. blocks become benign and need to be left alone. No
Whitman in 1855 hospital, to my knowledge in India, does FFR studies,
although they do all and sundry tests to collect money
M
edicine is flying blind. Thousands of from patients. If one has a two-camera angiogram facility,
medical journal articles are published where all the so-called blocks are simultaneously viewed
every month on potential new treatments from two angles at 90 degrees to each other, even the 90%
and diagnostic tests. Precious few of them measure how well block might just be only 10% block from another angle.
doctors are doing in the real world, outside of controlled No hospital has that facility either, as it will cut down
trialswhat they are doing right, what they are doing their angioplasty indications to less than 20%! How can
wrong and what they are forgetting to do entirely. No they show a profit to their shareholders?
wonder our medical system wastes billions of dollars a They all follow the Wall Street greed! In essence, the
year, writes Mathew Herper of Forbes magazine. only indication for angioplasty is immediately after a heart
Last week, The Outlook published a detailed article on attack, if the vessel blocked is the one causing the heart
angioplasties in our hospitals and their hazards. Most of attack. Exertional angina (most patients have that) is no
it was about the cost of stents and their misuse and abuse. indication for angioplasty. Medical treatment is better.
Little did the writer, or even the interview that followed, Lifestyle change is the basis of all coronary artery disease
touch upon the crucial pointthe coronary angiogram, treatment. Asymptomatic patients have no indication for
the villain of the piece. angioplasty at all. Do understand that coronary artery
I had written about it and have been doing so even blocks are not synonymous with coronary artery disease.
before some of the leading American researchers, like Therefore, the only way to curb angioplasties, and the
Harlan Krumholz, came on the scene. The only area where attendant exorbitant costs to patients and the exchequer,
angioplasty has a proven track record is immediately after is to ban routine angiograms to diagnose coronary
(minutes after) a heart attack, if the heart attack-related artery disease. Way back in 1991, the Harvard group of
coronary artery is the blocked culprit with an added clot Professor Bernard Lown had shown that a moratorium
blocking the vessel. on coronary angiography alone can save patients from
For heart attack patients, Dr Krumholz picked door greedy cardiologists.
to balloon timehow fast the patient is treated upon A paper in Journal of the American Medical Association
arrival at the hospital. Hospitals that are doing badly on began a debate in the UK to cut down on cardiac centres
this measure cant blame it on how long the ambulance there, to save money for the NHS and the lives for
took to get there. Angioplasty is done to make money their patients. Tom Treasure, an aggressive cardiac
by frightening patients and their relatives that there are surgeon, made a plea in The Lancet. The
blocks in the coronary arteries. Almost every living human scientific role for angiogram is only when
being, including children, has one, two or even three vessel the patients clinical assessment
blocks. This was shown so elegantly in the post-mortem demands either an angioplasty
angiograms done on 205 American young soldiers shot or bypass surgery for
dead in Vietnam and Korean wars. relief of chest pain
So, almost all our angioplasties are done unnecessarily. just to know
The epicardial vessel blocks (shown to patients and relatives where to
to frighten them) do not usually critically restrict heart
muscle blood flow which takes place through collateral
vessels (natures bypass) and the perforating coronary
vessels dilation (coronary reserve) when needed in young
healthy individuals. This process is well oiled in nature,
called pre-conditioning, helping patients to get over the
blocks.
In addition, if the doctor studies the FFR (flow fraction
BM Hegde.indd 2 13-01-2017 17:43:11

HEALTH BM HEGDE
plumb. Legislations to control the cost of stents will not that get into the arena of patient-care.
do any good to patients who are now being exploited Starting with some of the audits just completed, we
through unnecessary angiograms for diagnosing coronary could move on to other areas. Many of the unmeasured
artery disease. physiological effects of in-dwelling catheters come to mind
The government must legislate to have outcome first. The Swan-Ganz catheter was introduced without
audits of all such procedures; only then will we make appropriate validating studies to compare with identical
cardiologists practise scientific cardiology, nothing else. groups without the catheter. This catheter, by itself, could be
For big corporations, the idea that you cant manage it if an adverse factor for many critically ill patients. ( Spodick
you cant measure it is an old chestnut. General Electric, DH, Uncritical critical care, British Medical Journal, The
Toyota and other companies have had data-driven quality Swan-Ganz catheter. 1999; 115: 857-858)
improvement efforts, for years. But medicinesupposedly In an observational study by AF Connors and colleagues
a more scientific professionhas been slow to measure showed that in critically ill patients, after adjusting for
itself. Dr Krumholz has been one of a handful of pioneers selection bias, the catheter was associated with increased
behind the scenes pushing to do this. mortality and increased utilisation of resources.
There are many other reasons to work on banning Extrapolating another study done in Worcester,
diagnostic angiograms in asymptomatic patients faster. ED Robin estimated that around 15,000 unnecessary deaths
Knowledge, said Karl Popper advances NOT by could have occurred in 1984 alone and his paper goes on
repeating known facts, but by refuting false dogmas. One to estimate a total of nearly 100,000 excess deaths in the
cannot agree more. Modern medicine abounds in dogmas: US since 1975 due to the catheter. Following these studies,
many of them have not been scientifically audited. Science there was a justifiable demand for a moratorium on the
is change. Every single hypothesis is true until refuted by use of the catheter until further prospective controlled
new knowledge. Knowledge today, in the medical field, studies cleared the mist. Understandably, strong opinions
is replaced by information, resulting in doctors relying were expressed against the demand for a moratorium, but
only on information and not wisdom. The so-called the opinion, unfortunately, ignored some of the very valid
evidence-based medicine really is evidence data in the field.
burdened. Coronary artery surgery is the next popular surgical
Medical muddling seems procedure crying for proper audit. There was a demand for
to be a profitable audit in this area way back in the early 1970s. Indeed, all
business. new surgical procedures are better audited by controlled
studies before being routinely performed in practice
There was hardly any substantial change in this area
even as recently as 1997. (Hegde BM, Coronary Artery
Revascularisation - Time for reappraisal Proceedings of
the Royal College of Physicians Edinburgh, 1997)
More recently, an audit showed ethically unacceptable
New results of overuse of both bypass and angioplasty in the
tests, new immediate post myocardial infarction scenario. (Use of
devices and cardiac procedures and outcomes in elderly patients in
new drugs pour the US and Canada, New England Journal of Medicine,
into this arena on 1997: 336; 1500-5.)
an unprecedented Writing a very balanced editorial in the same issue,
scale. Harlan Krumholz from Yale laments: In a fee-for-service
It is time to audit all the system, cardiac procedures generated billions of dollars in
technologies used in patient-care, revenues each year. A high volume of procedures brought
just as we have placebo-controlled prestige and financial rewards to hospitals, physicians and
trials for drugs before releasing them the vendors of medical equipment.
for human use. Even in the case of drugs, in
some rare instances, release of drugs for patient Professor Dr BM Hegde, a Padma
use before they are audited by such trials had Bhushan awardee in 2010, is an MD,
resulted in major damage resulting in their withdrawal PhD, FRCP (London, Edinburgh,
Glasgow & Dublin), FACC and FAMS.
from the market. It stands to reason that we should debate He can be reached at hegdebm@gmail.com
the issue of auditing untested technologies like angiograms
BM Hegde.indd 3 13-01-2017 17:43:28

HEALTH BM HEGDE
ANAEMIA MAY use, explains Thomas

BE A REASON FOR Flint, co-first author of the
HEARING LOSS MEDICAL DEVELOPMENTS FROM study from the University
A recent paper in
Journal of the
American Medical
AROUND THE WORLD of Cambridge School of
Clinical Medicine. This
inability to generate
Association suggests that anaemia has provided clues as to why cancer energy sources triggers a second
could be one of the significant immunotherapya new approach messaging process in the bodya
causes of hearing loss, at all ages to treating cancer by boosting a hormonal responsethat suppresses
but more so in the elderly. This was patients immune systemmay fail the immune cell reaction to cancers,
revealed in a large study done at in a substantial number of patients. and causes failure of anti-cancer
Penn State University (Pennsylvania, Ayurveda relies on this in cancer immunotherapies.
USA). treatment.
Cancer immuno-therapies CHEMO BRAIN
involve activating a patients
immune cells to recognise and
destroy cancer cells. They have
T his is not an unusual
complication of chemotherapy.
People with chemo brain, often,
shown great promise in some report loss of mental sharpness,
cancers; but, so far, have only been including increased lapses in
effective in a minority of patients concentration, difficulty in
with cancer. The reasons behind remembering certain things and
these limitations are not clear. problems finishing tasks.
Now, researchers at the at the A recent studyled by Michelle
University of Cambridge have C Janelsins, an assistant professor
There is an association between found evidence that the mechanism of surgery in the Wilmot Cancer
iron deficiency anaemia (IDA) in behind a weight loss condition that
adults and hearing loss. The next affects patients with cancer could
steps are to better understand this also be making immuno-therapies
correlation and whether promptly ineffective. The condition, known
diagnosing and treating IDA may as cancer cachexia, causes loss of
positively affect the overall health appetite, weight loss and wasting in
status of adults with hearing loss. most patients with cancer, towards
To find out the connection between the end of their lives. However,
the two, the researchers postulated cachexia often starts to affect
that reduction of the bloods oxygen patients with certain cancers, such
carrying capacity could be one as pancreatic cancer, much earlier in
such factor. But the most important the course of their disease. Institute at the University of
factor seems to be the lack of myelin In research published recently Rochester Medical Center in New
sheath that covers the nerves. in the journal Cell Metabolism, Yorkhas thrown more light on
Since both are common diseases, scientists have shown in mice that this problem. The study has been
it is important to know the even at the early stages of cancer published in the Journal of Clinical
connection of treatable hearing loss development, before cachexia is Oncology.
with anaemia. Generally, hearing apparent, a protein released by the Researchers have various
loss is sudden but it could also cancer changes the way the body, terms for chemo brain, such as
be gradual. This is an eminently in particular the liver, processes its cancer treatment-related cognitive
treatable problem. own nutrient stores. impairment, cancer-therapy
The consequences of this associated cognitive change and
WHY CANCER alteration are revealed at times of post-chemotherapy cognitive
IMMUNOTHERAPY MAY FAIL reduced food intake, where this impairment. But many questions
IN MANY PATIENTS messaging protein renders the liver remain unanswered. We do not
A weight loss condition that

affects patients with cancer
incapable of generating sources of
energy that the rest of the body can
know when and why chemo brain
arises and who is most at risk.
BM Hegde.indd 4 13-01-2017 17:43:45

YOU BE THE JUDGE BAPOO MALCOLM
Trap, Not Tempt, a Criminal

T
his has to be the horror story of the year. There is a conundrum in this. Was the first judge
American justice gone Wild West. And a sensible guilty of excess? When the law insists on the harshest
appellate court to the rescue. punishment, the judges hands are tied. It then calls
Readers will recall an article in Moneylife, titled Is for great courage, and a very reasoned judgement, to
Trapping and Entrapment the Same?. Trapping is right nullify what is an unintellectual statute. Few judges
and entrapment completely wrong. A sequence in the want to rock the boat, lest their advancement be
Jack Palance film, The Horseman, set in Afghanistan, impeded. Prosecuting attorneys will try for the severest
explains the sin of enticing a person to do wrong. It sentences to boost their careers. Its a tug-of-war.
calls for punishment for the enticer. The question that must agitate any mind is the one
Three strikes and you are out of entrapment. We have discussed these issues before. In
In baseball, if the striker fails to connect with the ball this case, should the police lay such a blatant trap, just
three times he is declared out. Three strikes n youre to entice any passer-by who wants to help himself to
out. That thinking has crept into some American a few dollars, to prove their
states judicial rules, when dealing with habitual effectiveness? For this answer,
offenders. Third conviction and he we revisit an Indian
or she is sent away for life. court and the moral courage
Locked up and the keys that a magistrate showed at
thrown away! Umbergam, south Gujarat.
New Orleans, Umbergam lies on
Louisiana. A man walks Maharashtras northern
past a jeep, window border. It has industrial
down. He sees a estates to lure then Bombays
laptop on the seat entrepreneurs. With the
and two currency businessmen came the
notes. They totalled workers. They would travel
US$15, about Rs1,000. by a slow train that would stop
The man picks them up, at platform No. 3, to allow the
leaves the laptop behind. The following fast train to breeze through
man had three previous convictions. He had on line one. To catch connecting buses,
walked into a trap. passengers would cross lines two and one, exposing
The money was planted by the cops. They were themselves to danger.
waiting for, what is now called, the catch of the day. To curb this, a policeman would round up a
The man was arrested. He was convicted for what, even dozen or so people every day as they clambered on to
in India, may not amount to much. The prosecuting platform No. 1 and march them to the local court to be
advocate reminded the crime court of the three-strike fined.
rule. The judge concurred. The man was given a life One of them, a lawyer, admitting his guilt, asked
sentence. For US$15. It would now cost the state 10 the magistrate if the cop were not failing in his duty
times as much, every day, to keep him in prison; for his by not preventing the dangerous crossing, rather than
lifetime! Justice gone haywire? allowing it, just to get his daily quota of fines. The
In appeal, usually a court of equity, the judge saw magistrate agreed, returned the fines and reprimanded
the light. His Supreme Court had noted the harshness the policeman. Brave decision. Three cheers. Cops, who
of the three-strikes law but, reluctant to interfere hide behind walls to nab errant motorists, encourage,
with the legislature, had called for a bit of sanity. The not prevent a misdemeanour.
matter was remanded to the trial court indicating the
street theft shockingly minor in nature, the amount
extraordinary in its triviality and the life sentence Bapoo Malcolm is a practising lawyer in
an unconscionable punishment that shocks our Mumbai. Please email your comments to
mail@moneylife.in
sense of justice. It called for a sentence that was not
unconstitutionally excessive.
You Be the Judge.indd 2 12-01-2017 20:53:26

TECHNOLOGY MOBILE
BHIM May Need Governments

Helping Hand
In the past, NPCI had failed to nurture and promote its own products such as IMPS and RuPay.
Will its UPI-based app, BHIM, be any different, wonders Yogesh Sapkale
T
he cashless or digital cash push after used for only one bank account for receiving money. The
demonetisation has given rise to new apps and user can add more than one bank account but has to use
methods. Bharat Interface for Money (BHIM) one account as default.
is another mobile app developed and launched by After downloading and installing BHIM, the user
National Payment Corp of India (NPCI). Available only can register by providing her debit/ATM card details and
on Android platform at present, BHIM is inter-operable mobile number. NPCI says it would get all other details
with other unified payment interface (UPI) apps and from the bank. This, however, makes me nervous about
bank accounts. However, based on past experience of how, with just two pieces of information which may be
NPCI not promoting its own apps or instruments, I easily available, NPCI is able to get all my bank details.
wonder if the BHIM app would be any different. NPCI says it obtains this information in a masked
I was present when NPCI launched
unched manner and BHIM, as an app, is unable to see
its much talked about interbank k it. In addition, the information is
mobile or immediate payment only exchanged and not stored
service (IMPS). IMPS offered anywhere. Or so claims NPCI. I
instant payment transfer would prefer my bank to guard
through mobile, a seven-digit all my details rather than allow
mobile money identifier (MMID)) a third-party app or interface to
number and mobile personal al access it, in whatever manner.
ac
identification number (MPIN). N). The user, then, needs to create a
This was a secure, authentic system,
em, UPI PIN (not the M-PIN) by entering
UP
but was never really promoted or the last six digits of her debit/ATM
pushed by NPCI for reasons best card and its expiry date. After that,
known to itself. It is the same story user will have to fill in the one-time
the u
with RuPay, which was supposed ed to password (OTP) received. At present, the
passw
offer low transaction cost solutions
utions user is allowed to perform transactions
for card payments. But for the Pradhan
adhan worth Rs10,000
R each time and a maximum
Mantri Jan Dhan Yojana and the recent of Rs20,000
Rs20 within 24 hours.
push, RuPay would have been languishing
i hi For sending and receiving money, both the users
far behind MasterCard and VISA, in terms of number of need to be registered users of the UPI platform. If not,
transactions and average value per customer. you can carry out transactions using IFSC code, bank
Coming back to BHIM, it allows you to make account number, MMID and mobile number of the
instant bank to bank payments through mobile number, other person. Upon successful transaction, the user gets
payment address or a QR (quick response) code. Also, a confirmation SMS. If she does not, after an hour or
contrary to popular belief (and WhatsApp messages), so, she needs to contact the customer-care at her bank.
BHIM requires a Smartphone, Internet access and a Thus, transactions, except refunds, are done online and
bank account where your mobile number is registered. the customer needs to follow the regular channel to get
BHIM supports English and Hindi at present and needs the money back for a failed transaction.
access to phone calls and SMS from the mobile phone. As per NPCI, there are no charges for making
There are small issues, though. BHIM can be used transactions through BHIM. However, banks are allowed
only for banks that are live on UPI platform. Also, before to levy charges as UPI or IMPS transfer fee. Transfer fee
the launch of BHIM, several banks have launched their or transaction charges was one of the reasons for IMPS
own UPI apps. Hence, it is doubtful whether customers, not taking off. Hence, we have to wait and see whether
who are already using their banks UPI app, would move BHIM can stand on its own or whether it would require
to BHIM. Another issue is that at present BHIM can be an additional push from the government.
Technology.indd 1 12-01-2017 20:46:03

BOOKS
Shoe Dog
Building Nike Was No Shoo-in
W
hen was the last time that you felt a little The hunch pays off brilliantly in the creation of a
breathless after you finished a business book, billion-dollar company. But much of the book is about
as if you had just come back from a three-mile dealing and negotiating with, the Japanese, business
run? When was the last time that you felt a distinct urge Samurai and, ultimately, getting the upper hand over them.
to go out and buy the product which the book is about To students of business, it is a handbook about dealing
and the only thing that stopped you was your measly cash with the Japanese and a case study about how to come
balance? When was the last time that you called up your out on top. It is fascinating to see how, by sheer mastery
friend and used adjectives like unputdownable to describe of technology, the Japanese have become an economic
a business book, a word used more often when describing superpower.
a thriller? And when was the last time you were distinctly It is also the story of Buck Knights genius in surrounding
tempted to read a 400-page book at one sitting? himself with slightly eccentric, but brilliant, men and
Well I dont know about women who were all shoe dogs completely obsessed
you, but I dont remember with the making and selling of shoes. Many of them
the last business book I felt happened to be accountants because Buck Knight was also
that way about. Phil Buck an accountant. And many of them happened to be lawyers
Knights memoir is a roller- because Buck Knight and the company got entangled in
coaster of a journey that has a several legal snafus with the potential to make or break
high for every low and a tear the company; Nike also had a life and death legal battle
for every smile. It is riveting. almost at its very inception which it won quite handily.
The book is divided
into several chapters, each
being a particular year in I couldnt sell encyclopedias to save my
the life of Buck Knight and life. The older I got, it seemed, the shier I got,
the company, Nike. You
are taken on a year-by-year
and the sight of my extreme discomfort
journeyfrom the creation often made strangers uncomfortable
SHOE DOG of the company till its, finally,
PHIL KNIGHT going public. It is the story of One of the unusual things about Knight is that he comes
Scribner the most iconic shoe brand from the laid-back state of Oregon, which is not exactly
Pages 386; Rs599 in the world and if you are known for its business prowess, because of which Buck
worried that you need to be a had a continuous problem raising money; he went nearly
shoe dog (a person completely obsessed with shoes), dont broke on more than one occasion, including a time when
worry if you are not one at the start of the book; you will everything came nearly apart and he was almost referred
be one by the time you end it. to the FBI (Federal Bureau of Investigation). But, like a
The book begins in 1962 when Buck finishes his cat with nine lives, he managed to survive that.
education at Stanford Graduate School of Business and, One of his most brilliant moves was to make the
on a lark, takes a journey around the world. He gets legendary running coach Bowerman a partner in the
seduced by the beaches of Hawaii where he spends some venture. Bowerman came up with many memorable designs,
time but, ultimately, goes to a shoe company in Japan including the waffle shoe, and gave the company credibility
where he represents that he has a shoe company in America among runners. He also hired a lot of runners who knew
and could he please sell their shoes in America for them. the product really well. One thing that repeatedly saves
The Japanese economy is still struggling in the aftermath Buck is the belief that his company is more sincere and
of the Second World War, but is slowly picking up its pieces honest than his competitors.
and has already started dominating the car markets of Buck Knights is a story that all young entrepreneurs
the world. It is Bucks hunch that what the Japanese did should read. And, if you want to follow Buck Knight
for the car market they, along with him, can do for the when you get into trouble the next time, go for a six-mile
shoe market. run. Harsh Desai
Book Review.indd 2 12-01-2017 20:32:07

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THE During discussions that night, Subba Rao called
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discussed the course of action and then planned
to go to the Chairman, Maneck N Goiporias
house. But they were told that Goiporia was out
meeting
eeting somebody and would return only after
10 pm.
m. It was then that Khemani and Subba Rao
decided that Sitaraman should be called back.
Theyy even sent somebody over to the branch
and broke
roke open Sitaramans drawer. It was a
desperate
sperate move. There was nothing there...
The skyscraper that houses BSE hadnt yet

come up. There used to be a trading ring, where
brokers and jobbers struck deals, located in the
adjacent three-storied structure. The ring was a
The authors have excellent credentials for attempting reserved area, open only to jobbers and brokers.
this book, which takes the subject head-on which is its Harshad was just an onlooker. But he had a
endearing quality. INDIA TODAY burning desire to get in and do deals. He cajoled
the doorman and stepped in to watch how the
Written in a racy style, the book weaves together
world of the stocks spun on its invisible axis.
the main players and the not-so-well-known sub-
That afternoon a new chapter began in the life of
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Harshad Mehta. A totally unfamiliar world that
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Scam Ad.indd 1 21-10-2016 18:07:06

MONEY FACTS STOCKS
INDIAN MARKET TRENDS FUND FLOWS

The Sensex and the Nifty rose 2% each during the fortnight Foreigners: Foreign institutional investors were net
ended 11 January 2017. ML Mid-cap Index, ML Mega-cap sellers of stocks during the fortnight (Rs2,877.53
Index and ML Large-cap Index advanced 6%, 5% and 4%, crore). They sold shares worth Rs26,853.92 crore.
respectively. ML Small-cap Index soared 7%.
0
Share Prices Index, July 2016=100 -165
130
-330
-495
FII Net Investments
(Rs Crore)
115
-660
-825
2 Jan-17 11 Jan-17
100
Indians: Domestic institutional investors were net
buyers of stocks (Rs3,090.71 crore). They bought
shares worth Rs18,807.13 crore.
85 1,125
Jul-16 Oct-16 Jan-17
900
ML Large-cap ML Small-cap Nifty ML Micro-cap
DII Net Investments
ML Mid-cap ML Mega-cap Sensex (Rs Crore)
675
450
Index 30 Dec 11 Jan +/-
ML Micro-cap Index 87.37 94.07 8% 225
ML Small-cap Index 100.31 107.14 7%

0
ML Mid-cap Index 108.10 114.18 6% 2 Jan17 11 Jan-17
ML Mega-cap Index 101.95 107.09 5%

ML Large-cap Index 102.64 106.40 4%
GLOBAL MARKET TRENDS
9,400
Nifty 8,185.80 8,380.65 2%
Sensex 26,626.46 27,140.41 2% 9,300
Taiwan Weighted
Mega-cap Gainers/Losers 30 Dec 11 Jan Change 9,200
Dalmia Bharat 1,355.85 1,675.10 24% 9,100
Mphasis 565.55 530.35 -6%

9,000
Large-cap Gainers/Losers 30 Dec 11 Jan Change

8,900
Jul-16 Oct-16 Jan-17
MMTC 52.80 69.35 31%
Mindtree 521.75 488.15 -6% Korean Composite, the FTSE and S&P 500 rose 2%
Mid-cap Gainers/Losers 30 Dec 11 Jan Change
each, while Nikkei and Shanghai Composite went
up by 1% each. Hang Seng advanced 4%.
Usha Martin 15.03 21.15 41%
Index 30 Dec 11 Jan + / (-)
Intrasoft Technologies 424.20 390.90 -8% Hang Seng 22,001 22,935 4%
Small-cap Gainers/Losers 30 Dec 11 Jan Change Bovespa 60,227 62,446 4%
NASDAQ Composite 5,383 5,564 3%
Sanwaria Agro Oils 5.00 7.96 59%
Korean Composite 2,026* 2,075 2%
TGB Banquets & Hotels 74.65 63.05 -16%
FTSE 7,143 7,290 2%
Micro-cap Gainers/Losers 30 Dec 11 Jan Change S&P 500 2,239 2,275 2%
STI India 10.87 24.40 124% Nikkei 19,114 19,365 1%

Shanghai Composite 3,104 3,137 1%
MPS Infotecnics 0.26 0.18 -31%
Taiwan Weighted 9,254 9,346 1%
(All Prices in Rs) * 29 Dec 16
Money Fact.indd 2 13-01-2017 18:23:45

MONEY FACTS STOCKS
Whats H T

Sugar companies were in demand during the fortnight. Ugar Sugar Works,
Uttam Sugar Mills, DCM Shriram Industries, Oudh Sugar Mills and Dhampur
ML SECTORAL TRENDS
Shares of sugar companies, trading
companies and steel companies
Sugar Mills advanced 47%, 36%, 33%, 31% and 26%, respectively. soared 15%, 14% and 13%,
respectively. Stocks of non-ferrous
Companies 30 Dec 11 Jan +/- metals companies advanced 10%.
Stocks software and IT services
ML Sugar Index Ugar Sugar Works 25.25 37.10 47%
companies declined 2%. Stocks of oil
110 Uttam Sugar Mills 54.80 74.80 36% & gas services companies and retail
DCM Shriram Inds 227.25 302.25 33% companies ended flat.
105
Oudh Sugar Mills 105.40 138.15 31%
100 ML Sectoral Trends
Dhampur Sugar 131.20 165.65 26%
Sugar 15% Software & IT serv -2%
Dharani Sugars 33.20 41.85 26%
95
Trading 14% Oil & Gas Services 0%
Dwarikesh Sugar 320.65 396.20 24%
Steel 13% Retail 0%
90 Dhampure Specialty 16.75 20.40 22%
Odds 11% Hotels 1%
Upper Ganges Sugar 311.40 377.55 21%
85 Non-ferrous Metals 10% Consumer Products 2%
Jul-16 Oct-16 Jan-17 Thiru Arooran Sugars 57.65 69.70 21%
All Prices in Rs

FOOD INFLATION
Whats N T Combined food inflation declined

to 2.56% in November 2016
Software and IT (information technology) services companies were compared with 3.71% recorded
punished. MPS Infotecnics tumbled 31%, while Mindtree and Mphasis for October 2016. For rural and
went down by 6% each. Infosys and Hexaware Tech declined 4% each. urban areas, food inflation in
November 2016 was 3.25% and
Companies 30 Dec 11 Jan +/- 1.35%, respectively. Vegetable
ML Software & IT Services Index prices fell by 10.35% in November
MPS Infotecnics 0.26 0.18 -31%
2016 compared with those
Mindtree 521.75 488.15 -6% 110 prevailing in October 2016.
Mphasis 565.55 530.35 -6% Inflation in fruit prices was 4.52%
Info Edge (India) 899.25 852.65 -5%
105
in November 2016, while pulses
Infosys 1,010.70 969.10 -4% 100
Hexaware Tech 207.15 199.40 -4% Declining

95
Tech Mahindra 488.90 474.05 -3% 8.00%
Cyient 504.90 492.20 -3% Annual Change
90
Zensar Technologies 954.50 933.10 -2%

85
Gemini Comm 1.90 1.86 -2%
Jul-16 Oct-16 Jan-17 5.25%
All Prices in Rs
BULK DEALS
2.50%
Nov-15 May-16 Nov-16
Date Company Buyer Seller Rs Cr
12 Jan-17 Websol Energy System Parton Commercial Pvt Prosperous Vyapaar Pvt 2.13
were dearer by 0.23% year-on-
11 Jan-17 Dhabriya Polywood Digvijay Dhabriya Prateek Jain 1.43 year. Inflation for cereals stood
04 Jan-17 Diksat Transworld Escorp Industries Pvt Overskud Multi Asset Management Pvt 0.44 at 4.86% and inflation for milk
09 Jan-17 Fair Deal Filaments Harsh Mahendra Shah . Pawankumar Durgadutt Kabra 0.30
products was 4.57%. Price rise
of non-vegetarian items, such
02 Jan-17 Kavita Fabrics Ganesh Ramesh Nibe Sangam Advisors 0.10
as meat and fish, was 5.83% in
05 Jan-17 N2n Technologies Rohit Saboo Surendra Shaymsundar Bang 0.10 November 2016 compared with
11-01-2017 Transglobe Foods Parthasarathi Sibyala Jignasha N Thesia 0.03
6.00% in October 2016.
Money Fact.indd 3 13-01-2017 18:23:59

BEYOND MONEY
A Social Revolution through

Classical Dance
W
ith over 30,000 graduates, 10,000 classical the arts for change.
dance performances, audiences in 97 countries In 2009, the Citizen Resource and Action Initiatives
and a vibrant performing arts environment, was formed to provide practical guidance to citizens on
Darpana Academy of Performing Arts is a centre for artists law, to help them fight their own battles; they were also
committed to excellence, innovation and the excitement of trained to use the Right to Information Act, to solve
using the arts for change. Darpana is one of Indias oldest problems and get justice.
performing arts institutions, not only in Gujarat but in During the past 30 years, Darpana has reached 12.5
the country. It has a beautiful campus on the banks of the million people. Through the use of television and film,
Sabarmati River, only a mile away from Mahatma Gandhis theatrical and street performances, quizzes and debates,
famous Ashram. Mrinalini Sarabhai, the legendary Bharata puppets and board games, we have been able to effectively
Natyam dancer and founder of Darpana who passed talk about a range of sensitive issues, says a Darpana
away on 21st January 2016, wrote, When Darpana was spokesperson. It organises workshops and runs short- and
founded, it was regarded as a cultural oddity and a curiosity long-term courses for people, including children, on topics
in this industrial city of Ahmedabad where artistic activity ranging from martial arts to puppetry, mask-making,
had hardly any place. But painting and folk dancing.
my husband, Vikram, kept Darpanas library is a
telling me that someday resource centre for students
Darpana would have a and contains materials on
strong influence in Gujarat. all forms of dance, drama,
The early scepticism about literature and other art forms,
Darpana, way back in from around the world. It
1949, transformed into houses 10,000 volumes and
an awakening, as the has an impressive collection
organisation grew from of arts-related periodicals
strength to strength and and videos. In 2014, Revanta
also diversified its activities Sarabhai took charge of the
to work for change in conservatory, to revitalise
society through dance and it. While Darpana has been
the arts. Mrinalini Sarabhai, producing accomplished
in a radical departure from the spiritual core of classical dancers, others can also come to the Academy and perform.
Bharata Natyam, used the dance style to depict the horror In 1994, Darpanas amphitheatre Natarani, a state-of-
of dowry violence. the-art venue, came into existence and provides local
In 1977, Mallika Sarabhai took over as Darpanas audiences the opportunity to see world-class performances
honorary director and accelerated its growth. In 1980, while also providing an important platform to artists.
Darpana for Development was established to focus attention Natarani presents close to 80 events every year, including
on changing behaviour through the arts. Government dance performances, concerts, plays, arts festivals and film
departments, ministries and other non-government agencies screenings. Darpanas audiences range from arts-lovers to
began partnering with Darpana to educate the public in people in positions of power, the less privileged, children,
issues of health, education and empowering women. women, tribal populations and more. Darpana is known
For instance, Darpanas puppeteers worked with the around the world as a centre of innovation in the arts.
ministry of rural development to teach Darpana is an institution run
rural women the benefits of using a under The Karmakshetra Educational
smokeless stove. The theatre department Foundation, a public charitable trust,
created a play called Ma to rally people DARPANA ACADEMY OF registered under the Bombay Public
to educate and transform the masses. PERFORMING ARTS Trust Act 1950. Readers donations are
Over the years, two departments were Usmanpura, welcome and are exempt under Section
Ahmedabad 380013
established to focus on the work of using 80G of the Income-tax Act.
Gujarat
Telephone: (079)27551389
Email: admn@darpana.com
Web: www.darpana.com
Beyond_money.indd 1 12-01-2017 20:30:49

REGISTERED WITH THE RNI UNDER NO. MAHENG/2006/16653. Postal Registration No: MCW/184/2015-2017. POSTED AT PATRIKA
CHANNEL SORTING OFFICE, MUMBAI 400001. Date of Publishing 13 January 2017. Date of Posting Alternate Tuesday & Wednesday.

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