The Economic Times Wealth - July 18, 2022

24 Pages·2022·4 MB·English

T E T
HE CONOMIC IMES WILL YOU

GAIN FROM
PAY-AS-YOU-
DRIVE MOTOR
INSURANCE?
P11
www.etwealth.co | Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | July 18-24, 2022 | 24 pages | `8
YOUR
TAX FILING
CHECKLIST
These nine steps will help you prepare your tax
return and ensure smooth filing. P2
How to Five Should
balance stocks that you opt
saving and resisted for FMPs
spending downturns this time?
P7 P8 P10
cover ssttoorryy
02 The Economic Times Wealth July 18-24, 2022
You have
to file tax
YOUR
returns if…
TAX FILING
CHECKLIST
Your gross total
income (before
deductions and ex-
These nine steps will help you
emptions) exceeded
prepare your tax return and the basic exemption
limit of `2.5 lakh
ensure a smooth filing. (`3 lakh for senior
citizens and `5 lakh
for very senior citi-
zens under the old
tax regime).
Your total sales,
turnover, or gross
receipts in business
exceeded `60 lakh.
Your total gross
receipts from
profession exceeded
`10 lakh.
You spent more than
`2 lakh on overseas
travel.
You deposited `50
lakh in a savings
bank account or `1
crore in a current
bank account.
Your electricity bills
S aggregated more
E
G
A than `1 lakh
M
Y I
T
ET You have foreign
G
S: assets or income or
O
T
O signing authority
H
P
in a foreign bank
By Babar Zaidi very easy in recent years. If everything is tax forms now require the assessee to give account.
handy, the whole process does not take more the breakup of his gross salary, mentioning
A
s the last date for filing tax returns than 30 minutes. As you get ready to file, go the various heads of income. You will have
Your TDS or TCS was
approaches, many taxpayers are through our checklist of nine things to keep to mention the basic salary, HRA and other
`25,000 (`50,000
hoping that the deadline will be in mind. These steps will help you prepare a allowances, such as LTA, uniform allowance,
for senior citizens)
extended. Our advice is not to wait flawless return and ensure smooth filing. etc. In many cases, the Form 16 will not offer a
till the last few days to file your detailed breakup, but only give a gross salary or more.
return. Whether there is an extension or not, GET THE FORM 16 figure. The taxpayer will have to work back-
it is always better to get these things out of OR 16A FOR SALARY wards by subtracting the amounts claimed You have to claim
the way as soon as possible. If you have got all BREAKUP for various exemptions from the gross salary the refund of TDS or
the necessary documents, why do you want to and then declare the remainder as his basic TCS paid.
wait till the last day? For salaried taxpayers, the first step is to get salary. Make sure the final salary income
Besides, filing your return has become their Form 16 or 16A from their employer. The matches with that in the Form 16 or 16A.
cover ssttoorryy
The Economic Times Wealth July 18-24, 2022 03
“If there is no mismatch
What the AIS in the information in
Form 16 , Form 26AS
knows about you
and AIS, the return will
Apart from personal details, the AIS has information get processed faster.”
on the following f inancial transactions
AMIT MAHESHWARI
Income from salary, profession or business PARTNER,
AKM GLOBAL
Interest earned on deposits and bank accounts
Interest earned on small savings
“AIS may get updated
even after the return is
Purchase and sale of stocks and mutual funds
filed. One should report
Income from dividends
the actual income and
not blindly rely on AIS.”
Rental income from property
Income from lotteries, horse racing, etc
KARAN BATRA
CHARTERED
Tax deducted at source (TDS) on income ACCOUNTANT
Purchase of foreign currency
Tax collected at source (TCS) on specif ied expenses Age Management Services. The statement
is in your mailbox within minutes of plac-
ing the request. Similarly, stock brokers
Tax refunds claimed
provide capital gains statements for all
trades done during the year.
What’s more, these capital gains state-
ments can be uploaded on tax filing portals
Some exemptions like HRA can be claimed about 7-10 days for a correction to reflect in filing ITR, taxpayers should go by the ac- where the relevant information gets picked
at the time of filing returns even if it is not the Form 26AS, so one should act immedi- tual transaction numbers and not wholly up and duly included in the tax return.
mentioned in the Form 16. However, it is ately,” says Tilotama Gourisaria, Partner rely on the AIS numbers,” says Gupta of However, if your stockbroker does not give
better to furnish the required information in Kolkata-based Agarwal Lodha & Co. Cleartax. “The AIS may get updated in the information in the same format as
to your company so that the exemption is future even after one has filed his return,” required by the tax filing portal, you will
factored in the Form 16 numbers. It has MATCH INCOME says Chartered Accountant Karan Batra. have to key it in manually or put it in a com-
been observed that tax returns in which AND TDS, TCS The good news is that taxpayers can patible Excel file.
the declared income, exemptions and submit their feedback on the information Don’t ignore this even if you made a loss
DETAILS IN AIS
deductions match those in the Form 16 get given in the AIS. “A taxpayer can respond on equity investments during the year.
processed faster and without a hitch. Once you have checked the TDS and TCS whether the information is correct, par- “Losses can be adjusted against gains
details in your Form 26AS, match them tially correct or incorrect. The discrep- from other assets. Unadjusted losses can
VERIFY DETAILS with the details in the Annual Information ancy can be pointed out in the feedback,” be carried forward for up to eight financial
OF TDS, TCS IN Statement (AIS). Launched last year, the says Gourisaria. years,” says Amit Maheshwari, Partner,
AIS is a comprehensive statement of all AKM Global.
FORM 26AS
financial transactions conducted by an GET CAPITAL GAINS
Before filling up the form, check whether individual during the year. It has details STATEMENTS FROM INCLUDE INTEREST
all the tax deducted on your behalf has of all incomes received by the individual BROKER, MFs ON DEPOSITS AND
been credited to you. The Form 26AS has (including salary, profession, rent, inter-
BANK BALANCE
details of all payments made to you and the est, etc.) from various sources. It also has If you have invested in stocks and mutual
TDS on these payments. This includes TDS details of where and how much the indi- funds, you must also get a capital gains A large number of taxpayers do not report
on interest from deposits and bonds and vidual invested and spent during the year statement from your broker and mutual other incomes, including interest on de-
dividend income. It will also have details (see graphic). funds. Long-term gains beyond `1 lakh posits and savings accounts, in their tax
of tax collected at source (TCS). TCS is Though the AIS covers all possible from equities and equity-oriented funds returns. There was a time when they could
levied on certain transactions, including financial transactions, it is still work in are taxed at 10%, while short-term gains get away with it if they managed to avoid
transfer of money abroad or purchase of progress and some details may not get are taxed at 15%. TDS by splitting deposits across several
foreign currency. This TCS can then be captured in the form. “The AIS depends on The tax rate is higher and tax calcula- banks. This is no longer possible. “The
adjusted against your tax liability. You can information from multiple sources. It will tion is far more complicated for non-equity AIS has details of all the incomes of a PAN
access your Form 26 AS either through the take some time to integrate all the infor- funds and other assets, such as gold and cardholder. Every rupee earned as inter-
tax department portal or your Net banking mation at one place,” says Sudhir Kaushik, real estate. Short-term gains are added est will show up in the AIS,” says Kaushik
account to check if the TDS and TCS deduc- CEO of tax filing portal, Taxspanner. In to the income and taxed at normal rates, of Taxspanner. Even if you have multiple
tions are correctly mentioned in it. fact, the AIS Handbook of the tax depart- while long-term gains are taxed at 20% af- deposits across different banks and no TDS
If you find that some TDS or TCS has not ment specifically states that “there may ter indexation. The average person will not has been deducted, the interest earned will
been credited to you, contact the deductor be other transactions relating to the tax- be able to calculate his gains from mutual be mentioned in the AIS.
immediately. “Maybe the deductor has not payer which are not presently displayed in funds after indexation. Mercifully, mutual Don’t forget to report the interest on tax-
deposited the TDS or TCS, or maybe the AIS. The taxpayer is expected to check all funds calculate this for you and even give free options, such as the PPF and Sukanya
TDS has been deposited but the statement related information and report complete you the tax liability. You can log on to your Samriddhi Yojana, in the tax return as
has not been filed yet. It could also be due and accurate information in the income mutual fund and get a capital gains state- well. While this will not add to your tax
to the wrong PAN or incorrect amount in tax return”. There could be mismatches as ment within minutes. A better idea is to get liability, you will be able to explain the
the TDS statement,” says Archit Gupta, the government’s system might not have a consolidated statement from a mutual source of money when the account eventu-
CEO of tax filing portal, Cleartax. “It takes acquired complete information. “While fund transfer agency, such as Computer ally matures after a few years.
cover ssttoorryy
04 The Economic Times Wealth July 18-24, 2022
DECLARE INCOME
FROM CRYPTO
ASSETS
Many taxpayers
This year’s budget has clarified how gains
are hoping the 31 July
from virtual digital assets, such as cryp-
tos, will be taxed. However, the taxation deadline will be extended.
of gains in the previous financial year is
mired in confusion and contradictions. Our advice is not to wait
Will cryptos be treated as equities and
till the last few days to file
long-term gains of up to `1 lakh be tax-free
and short-term gains taxed at 15%? Or will
your return. Why delay
they be at par with non-equity assets and
short-term gains added to income and long- something that can be
term gains taxed at 20% after indexation?
Batra says that in recent tax notices sent to done in 30 minutes?
investors, the department has specifically
asked why their income from crypto trad-
ing has not been shown as capital gains.
“Therefore, it is advisable to show this in-
come as capital gains,” he says.
Kaushik of Taxspanner advises taxpay-
ers to play safe and pay 30% tax on gains as
laid down in this year’s budget. His logic:
this year’s budget has placed virtual digi-
tal assets in the same bracket as lotteries.
While the law is not retrospective and ap-
plies from 1 April this year, there is also no
reason to assume a different tax treatment
for previous years.
There is another, more serious complica-
tion. “There is no clarity whether cryptos
will qualify as Indian or foreign assets.
In case they are treated as a foreign asset
(if remittance is received in foreign cur-
rency), crypto investors will have to de- “Don’t forget to include “Penalty for missreport- and money,” says Maheshwari. It’s a
clare these holdings in the returns. Failure small fee for peace of mind that your tax
interest income in the ing foreign assets can be
to disclose foreign assets may expose the return is flawless and will not lead to a
individuals to stringent proceedings under return. Every rupee up to `10 lakh per year. notice.
the Black Money Act,” points out Aditya
earned as interest will It can also lead to prison
Agarwal, Partner in Mahesh K Agarwal VERIFY THE TAX
& Co. He says it would be prudent to report show up in AIS.” for up to seven years.” RETURNS BY FILING
crypto holdings in Schedule FA as foreign
THE ITR V
assets in order to avoid getting into legal
problems later. The tax filing process does not end with
SUDHIR KAUSHIK ARCHIT GUPTA the submission of the ITR. A crucial step
FURNISH DETAILS CEO, TAXSPANNER CEO, CLEARTAX still remains. After you submit your re-
OF FOREIGN ASSETS, turn, you need to verify the same within
120 days. If not verified within this pe-
INCOME
“It takes about 7-10 days penalties can be levied for non-disclosure riod, the return becomes invalid and you
Foreign assets are indeed a minefield of foreign assets,” says Kaushik. could get slapped with a penalty for non-
for a correction to reflect
littered with potential tax mistakes. All filing. There are six ways to verify your
foreign assets, including foreign bank in the Form 26AS, so one CHECK DEDUC TIONS, income tax return.
accounts, financial interests, immovable EXEMPTIONS IN Aadhaar-based OTP: For this, your mo-
should act immediately
property, accounts in which an individual bile number and PAN must be linked to
FINAL FORM
has signing authority, and any other capi- if one spots an error.” your Aadhaar.
tal asset held by the individual outside Once you have filled all the details, don’t Net banking: Verify the return by log-
India, must be reported in the tax return, be in a hurry to submit your return. Filing ging to the tax filing portal through your
irrespective of the total income of the indi- the tax return has become easier in recent Net banking account.
TILOTAMA
vidual. GOURISARIA years, thanks to the pre-filled forms and Bank account: Generate Electronic
Given the complexity of the task, many PARTNER, AGARWAL integration of information from various Verification Code (EVC) through your
people may be tempted to omit this. LODHA & COMPANY sources. Even so, many taxpayers have no- bank account. For this, you must have a
This can prove costly. Willfully holding ticed discrepancies in the AIS and glitches pre-validated bank account.
back information on foreign assets can in tax returns. “Use the pre-fill option very Demat account: The process is the same
“It’s not clear if cryptos
invite serious charges under the Black carefully,” cautions Kaushik. “Make sure as bank account to generate an EVC.
Money (Undisclosed Foreign Income And will qualify as Indian or that no deduction or exemption has been Bank ATM: Your ATM card can gener-
Assets) and Imposition of Tax Act, 2015. missed.” Before you submit the form, go ate an EVC, but this facility is restricted
foreign assets. If foreign
“Misreporting can lead to penal conse- through each section carefully to see if all to a few banks.
quences under the Black Money Act, which assets, they have to be the details are correct. Signed ITR-V: Send a signed copy of
can be as high as `10 lakh per year. The It is a good idea to pay a finance profes- ITR-V to the tax department at:
declared in the return.”
undisclosed income will be taxed at 30% sional to assist you in the task. Tax portals CPC, Post Box No - 1, Electronic
without adjustment of any expenses and charge a small fee for assisted filing, where City Post Office, Bengaluru - 560100,
a penalty of up to 90%. It may also entail a tax expert will examine your return Karnataka.
imprisonment up to seven years,” cautions before it is submitted to the department.
ADITYA AGARWAL
Gupta of Cleartax. Don’t think you can get “Taxpayers’ knowledge is restricted to the
PARTNER, MAHESH K
away once the return is processed. “Cases AGARWAL & COMPANY basic provisions of tax laws. Tax profes- Please send your feedback to
[email protected]
can be opened even up to 16 years later, and sionals add value and save you both time

review pprreevviieeww
06 The Economic Times Wealth July 18-24, 2022
Fall of rupee: stocks product
NEWS IN BRIEF
launches
Bajaj Allianz Life Insurance that can gain & lose
::
cuts cash levels Mutual Funds
Bajaj Allianz Life Insurance Motilal Oswal AMC has launched the
Company is drawing down Motilal Oswal S&P BSE Financials ex
Exporters are bound to benefit, even as importers suffer.
its cash pile to load up Indian Bank 30 Index Fund. The open-ended
stocks on a bet that the equity scheme will track the total returns of
With six days of non-stop losses, the Indian ru-
market rout will bottom out S&P BSE Financials ex Bank 30 Total
pee is now headed for its longest weekly losing
soon. The insurer, with assets Return Index. The fund will be the
of about `850 billion, has cut its streak after 2008. It also looks poised to break first of its kind passive fund that aims
cash levels by 300 basis points the psychologically important 80 level against to provide exposure to the financial
in the last three months and the US dollar amid concerns of steeper tighten- services sector, excluding banks. The
will deploy the remaining re- ing by the US Fed. Recession worries are also minimum investment required is
serves in the coming months, fuelling demand for the US dollar, seen as a `500. The NFO closes on 22 July.
said Sampath Reddy, Chief safe haven. Besides the impact of a weakening
Investment Officer at Bajaj rupee on the country’s economy, any major Quantum Mutual Fund has
Allianz. It is set to buy growth movement in the currency also impacts a num- launched Quantum Nifty 50 ETF
stocks at reasonable valuations ber of listed companies. Fund of Fund, an open-ended
and large private sector banks fund of fund scheme that will
Stocks that stand to gain
without bad loan woes. invest in units of the Quantum
—Bloomberg IT majors like TCS, Infosys, Wipro, Tech Nifty 50 ETF. The fund combines
Mahindra, HCL Technologies, and Mindtree, the efficiency of an ETF with
Budget holidays to get that earn a bulk of their revenue in dollar Laboratories and Balkrishna Industries are the convenience of an index
costlier from 18 July terms are likely to benefit from a weakening also potential gainers. In the past month, fund, giving investors the best
of both worlds. The minimum
If you are planning a budget rupee, shows data from StockEdge. Divi’s Lab has been up 4.5% and Balkrishna
investment required is `500.
holiday, you will have to pay Andrew Holland, CEO, Avendus Capital, Industries by 6.3%.
The NFO closes on 1 August.
more for your hotel rooms from said it is a good time to be a contra buyer in IT
Stocks that stand to lose
18 July 2022. This is because the stocks. “The collateral damage has been done. Motilal Oswal AMC has launched
Goods and Services Tax (GST) These stocks are cheap. Rupee is a huge tail- A weak rupee makes imports expensive and the Motilal Oswal S&P BSE
Council has announced that wind and I think it will remain a tailwind,” he companies which import their raw materials Healthcare ETF, an open-ended
even hotels that charge below said. TCS earns about 50% of its revenue in dol- tend to feel the pain. Crude oil is a major raw scheme that will track the S&P
`1,000 a day will come under lar terms from the US clients, Infosys receives material cost for bluechip Asian Paints. When BSE Healthcare Total Return
the GST net. A press release by approximately 60% of its revenues from North the rupee goes up, the import bill for India’s Index. At present, the index has
the GST council stated, “Hotel America, while HCL earns around 55% of its largest paint company automatically rises. 97 constituents spanning pharma,
accommodation priced up to revenue from America alone, the data shows. Rival Berger Paints also feels the same pinch. hospitals, diagnostic and medical
`1,000 a day shall be taxed at IT stocks have, however, been under pres- Other major companies that get impacted neg- equipment sectors. The minimum
12%.” However, the government sure due to the impact on margins and fears atively include Tata Steel, JSW Steel, Pidilite investment required is `500. The
is yet to issue a notification. over the possibility of a recession or slowdown Industries, Astral and Supreme Industries. NFO closes on 22 July.
—Preeti Motiani
in Europe. Besides, other exporters like Divi’s — Nikhil Agarwal
::
Insurance
Canara HSBC Life Insurance has
introduced Guaranteed One Pay
BENGALURU, CHENNAI SET TO HIRE THE MOST
Advantage Plan, a non-linked non-
participating individual savings life
insurance plan. The policy gives
The July-Sep quarter has seen a jump in hiring over the previous quarter, as per the latest TeamLease survey.
guaranteed maturity benefits along
with life cover to the policyholder.
India sees sharp rise in Information technology, sales The plan offers single life and joint
hiring in 2022-23 lead in hiring demand life coverages. Buyers can also opt
for a loan against the policy after it
MARKETING acquires surrender value.
53% Apr-Jun
61
54% % 63% July-Sep Aditya Birla Sun Life Insurance has
34% 38% ENGINEERING launched the ABSLI Fixed Maturity
SALES 57% Apr-Jun Plan, a non-linked, non-participating
Apr-Jun Apr-Jun Jul-Sep Jul-Sep 82% Apr-Jun 70% July-Sep endowment plan that gives
2021-22 2022-23 2021-22 2022-23 90% July-Sep guaranteed benefits on maturity. This
HUMAN RESOURCES
single-premium plan has a minimum
IT 21% Apr-Jun
Hiring higher in tier 1 cities 75% Apr-Jun 22% July-Sep tteerrmm ooff f1i0v ey eyaerasr.s T ahnedr ea ims naox ipmeunmal ty
METRO & TIER 1 83% July-Sep BLUE COLLAR for early surrender.
Apr-Jun 83% OFFICE SERVICES 50% Apr-Jun
July-Sep 89% 30% Apr-Jun 57% July-Sep Bajaj Allianz Life Insurance has
33% July-Sep launched QR code-enabled services.
TIER 2 * Figures are for July-Sep 2022-23
Small businesses show biggest It provides customers access to 15
Apr-Jun 55%
Bengaluru most popular services on their phones.
jump over previous quarter
July-Sep 62% The customer can simply scan the
intent on hiring
LARGE QR code available at the company’s
TIER 3
BENGALURU CHENNAI HYDERABAD branches and self-service their life
Apr-Jun 34% SMALL MEDIUM 91% Apr-Jun 78% Apr-Jun 70% Apr-Jun insurance policies. They can make
July-Sep 37% 95% July-Sep 87% July-Sep 75% July-Sep premium payments online, view or
download policy-related documents,
RURAL
MUMBAI DELHI PUNE such as policy bonds, IT certificates,
20% Apr-Jun 41% 47% 36% 40% 65% 69% 76% Apr-Jun 71% Apr-Jun 60% Apr-Jun and fund performance statements,
22% July-Sep Apr-Jun July-Sep Apr-Jun July-Sep Apr-JunJuly-Sep 83% July-Sep 78% July-Sep 66% July-Sep switch funds as per their choice, etc.
Source: TeamLease Employment Outlook Report. The survey was conducted among employers of 865 businesses across 14 cities and 23 sectors, in April and May 2022.
guest ccoolluummnn
The Economic Times Wealth July 18-24, 2022 07
How to balance saving
and spending
Instead of just focusing on investments, young people should learn how to
strike a balance between consumption and savings, says Dhirendra Kumar.
T
he public discussion about
savings and investment in the
media or social media is focused
DHIRENDRA KUMAR
on the wrong issue. The most
CEO, VALUE RESEARCH
important point always seems to
money be where to invest. Which is the hot stock
right now? Which is the best mutual fund?
mysteries
And, heaven forbid, which is the hottest
crypto? To a young person who has just
started earning and is casually observing
all this, the entire exercise about investing
appears to be about choosing the best
investment. This is completely misleading.
The real problem is that most people are not
Once you observe the investing at all, or investing too little. They
magic of compounding start too late in life, sometimes don’t start at
in your savings, and all, and when they do, they invest too little.
Teaching the value of saving to young
once you realise that
people is supposed to be a big part of finan-
money just multiplies
cial literacy. However, some years ago, I
on its own, this
came across an interaction that gave me
personal experience a fresh perspective on the psychology of
will be far more saving among those who have just started
effective than any earning. On a television show, during a
f inancial literacy class personal finance Q&A, a young man asked
a question. He had just started earning and
that you attend.
he wanted advice on what to do with his
money. His greatest wish in the world was
Saving is not really about
the arithmetic of returns
and interest rates, and so S
E
G
A
on. It’s actually a way of M
YI
T
thinking, a habit. T
E
G
to buy a motorbike worth `1.5 lakh. He had while there are loans to be paid off. Even
Please send your feedback to
been dreaming about it for many years as so, my point is that such a person should [email protected]
something he would do when he started also save a little bit, even if it’s just `1,000
earning. It’s not an uncommon dream. a month. Even if it’s saving the money in a
He wanted to know the fastest way to save simple instrument like a recurring deposit
enough money to buy a bike. In response, in his bank.
he received simple and sensible advice, The reason is that, at its heart, saving is
complete with detailed calculations about not really about the arithmetic of returns
how much he should save, what the returns and interest rates, and so on. It’s actually a
would be, and when he would be able to buy way of thinking, a habit. A person who saves
the motorbike. As a conservative invest- even a trivial amount of `1,000 a month is
ment adviser, I should have concurred a fundamentally different kind of person
with this approach. Postponement of wish than the one who spends everything.
fulfilment is supposed to be a cornerstone of What I’m saying may not pass the test of
good financial behaviour. However, I found correct financial advice, but it’s probably
myself thinking that if he started saving better to spend on what you want, as long
now, he would probably be 30 years old by as you know that it’s an indulgence, and at
the time he would be able to buy it, and that the same time, start getting into the habit
he would be just too old to enjoy riding that of saving. Once you observe the magic of
bike the way a young person would. In fact, compounding in your savings, and once
he probably would not even want it then. So, you realise that money just multiplies on
perhaps, he should break the rules of good its own, this personal experience will be far
financial behaviour, and buy that bike right more effective than any financial literacy
now with borrowed money, on an EMI. class that you attend. Inevitably, the savings
Does that mean that he shouldn’t save at grow, people save more, and it becomes a
all? After all, it makes little sense to save virtuous cycle.
stocks
08 The Economic Times Wealth July 18-24, 2022
Five stocks that resisted
market downturns
S
E
G
A Fundamentally strong stocks with high resistance during corrections can be good long-term investments.
M
YI
T
T
E
G
by Sameer Bhardwaj so far compared to an average of 18.01 for Tata Consultancy Services
the calendar year 2021.
The risk of global stagflation “FII outflows in the first quarter of UPSIDE
12-M forward PE Current price (`) 1-year target price (`) POTENTIAL
is making investors nervous. 2022-23 have been the highest ever at $15
15.2
Stagflation is an economic billion. This, coupled with higher 10-year %
25.9 3,085 3,554
phenomenon where slower G-Sec yields, worsening external balance,
economic growth is accompa- and consequent currency depreciation,
THE COMPANY REPORTED inline ANALYSTS’ RECOMMENDATIONS
nied by high inflation. Both, emerging provided a very challenging backdrop to
revenue growth in the f irst quarter of BUY HOLD SELL
and developed markets, are experiencing the equity market,” states a recent Motilal
increased volatility in their financial Oswal report. 2022-23. The growth was driven by 22 15 11
an uptick in the consumer packaged
markets. Benchmarks MSCI Emerging The start of the first quarter earnings
goods and retail segments, followed tive on the stock as the near- to medi-
Market Index and MSCI World Index have season could further increase domestic
by communication, media and BFSI um-term demand environment remains
lost over 20% in 2022 so far. market volatility as India Inc. is expected
segments. According to a report by robust. The deal booking remains strong
Such stagflation risks have emanated to witness a decline in sequential profit-
HDFC Securities, strong bookings across verticals, led by a multi-year tech
from the pandemic-induced lockdowns ability. The ongoing supply constraints,
in BFSI, gains in deal market share, upcycle. It expects the operating margin
and the recent Russia-Ukraine war. While high fuel and power costs, and a decline
strengthened hyperscaler partnerships, of the company to increase sequentially
lockdowns dented the global economic in volumes due to lower exports are some
broad-based growth across business over the next three quarters, aided by
growth, the war resulted in a significant of the factors that are expected to drag the
groups, and strong FCF generation are positive operating leverage, improving
increase in prices of commodities and en- quarter-on-quarter (q-o-q) performance.
the key positives in the f irst quarter. employee pyramid, and moderation in
ergy products, which led to a rise in global The first quarter preview reports from
A Yes Securities report remains posi- employee attrition.
inflation. The consequent increase in in- Kotak Securities and PhillipCapital
terest rates by the global central banks has expect an over 15% q-o-q decline in the
100 Tata Consultancy
raised concerns about economic recovery aggregate net profits of their respective
Services
as higher rates discourage both consump- coverage universe. Though there will be
96.60
tion and investment. growth in y-o-y terms, such growth will be
Such risks are more pronounced in the due to the low base effect as the first quar-
US and Eurozone economies. However, ter of 2021-22 was impacted by the second
emerging economies like India are likely Covid wave.
to see spillover effects like lower export de- There are also silver linings in form of
mand and volatility in capital flows (FDI/ correction in the global commodity prices, Nifty 50
FII). The domestic market benchmark robust GST collections, and revival in 102.33
Nifty 50 lost 7.5% year to date, whereas the credit growth. The Bloomberg Commodity
NSE Volatility Index averaged 21.4 in 2022 Index lost 5.5% in the first quarter of 2022- 12 July 2021 12 July 2022
stocks
The Economic Times Wealth July 18-24, 2022 09
23. However, the benefits of such com-
Power Grid Corporation of India SRF
modity price moderation will be visible
from the second quarter of 2022-23, adds
12-month Current 1-year target 12-month Current 1-year target
the Motilal Oswal report. UPSIDE UPSIDE
forward PE price (`) price (`) POTENTIAL forward PE price (`) price (`) POTENTIAL
As domestic equities are at a cross-
11.8 21.3
roads of headwinds and tailwinds, it is 10 213.4 238.6 % 28.3 2,199 2,666.8 %
important to identify stocks that display
good resistance to market or external
risks. When the market is in correction A STEADY PERFORMER due ANALYSTS’ RECOMMENDATIONS GROWTH IS EXPECTED ANALYSTS’ RECOMMENDATIONS
mode, the downside resistance of a stock to asset additions in the past BUY HOLD SELL across segments. While BUY HOLD SELL
few years, the company aims the specialty chemicals
can help judge its ability to manage 22 4 1 24 4 1
to explore the smart meter segment will grow due to
market risks. Resistance implies a fall
business where it expects supportive government
in the stock price that is lower than the According to a recent JP be supported by the strong
a decent IRR. It will also policies (tax incentives,
reduction in market benchmark during Morgan report, capex is a demand for packaging f ilms-
emerge as a key player in PLI), export opportunities,
a market correction. key driver for the company’s BOPET and BOPP.
the execution of the Battery and product innovation,
ET Wealth analysed stocks with earnings and multiples. Ris- A recent JM Financial
Energy Storage System. The the f luorochemicals
market caps greater than `1,000 crore ing power demand, system report believes that the com-
company sees its presence business will benef it due
during multiple market corrections in strengthening, and new seg- pany’s HFC segment (a type
across the value chain to a robust refrigerant gas
order to identify those that showed bet- ments (storage /distribution) of refrigerant) will benef it in
and aims to improve the price environment that is
ter resistance. Further, this universe can drive upgrades. Improved the long run due to supply-
government’s transmission supported by volume growth
of stocks was screened using multiple payout ratios are also ex- demand mismatch since there
and distribution system. It is and realizations in both
financial metrics to look for those that pected due to free cash f low is no capacity addition from
also foraying into solar power domestic and international
had sound fundamentals. accretion. China amidst rising demand.
generation and rooftop solar markets. On the other hand,
The data for the past 10 years, from
systems. the packaging segment will
June 2012 to June 2022, was observed. Power Grid Corp of India SRF
The market peaks and troughs were
124.30 145.06
identified using the BSE Sensex daily
closing values. A minimum fall of 10%
from the peak to trough was recognised 100
100
as correction or market downturn. Also,
for identifying a correction, the differ-
ence between peak and trough was kept
at a minimum of eight weeks. Five such
corrections were identified. The major-
ity of such corrections were triggered by
Nifty 50
external or market factors. Nifty 50
102.33
The first correction was triggered 102.33
by the Chinese stock market sell-off be-
12 July 2021 12 July 2022 12 July 2021 12 July 2022
tween 29 January 2015 and 11 February
2016, when the Sensex tanked 22.7%.
US-China trade wars triggered the sec- Navin Fluorine International CCL Products
ond correction between 28 August 2018
and 26 October 2018, when the markets 12-month Current 1-year target 12-month Current 1-year target
UPSIDE UPSIDE
lost 14.3%. Volatility due to Lok Sabha forward PE price (`) price (`) POTENTIAL forward PE price (`) price (`) POTENTIAL
elections and market reaction to the 11.9 24.8
first full budget of the NDA government 46.6 3,729.7 4,175.3 % 19 404 504 %
after its return to power dragged the
Sensex down by 10.4% between 3 June THE COMPANY WILL benef it ANALYSTS’ RECOMMENDATIONS THE COMPANY WILL ANALYSTS’ RECOMMENDATIONS
2019 and 19 September 2019. The fourth from a healthy order book BUY HOLD SELL benef it from higher coffee BUY HOLD SELL
correction came during the onset of the that provides strong revenue prices, capacity expansion
15 7 2 9 0 0
Covid pandemic, when the markets lost visibility going forward. in Vietnam, rising share of
over 38% between 14 January 2020 and Robust growth prospects in India business, aggressive
23 March 2020. The fifth correction is be- the CRAMS segment, strong According to a JM Financial distribution plans in the A Nirmal Bang report
tween 18 October 2021 and 17 June 2022, pricing power in the inorganic report, the company stands domestic market, and strong expects the company to ben-
when the markets lost 16.9% due to con- f luorides segment, and strong to gain signif icantly in the global demand. The demand ef it from incremental capex
cerns about rising global inflation. demand for refrigerants are long run as patent expiry till for spray-dried coffee and value-addition capacity
The stocks that have gained during other growth drivers. 2034-36 for HFO will help continues to remain healthy, creation from 2022-23. Such
corrections or have lost less than the Hydro f luoro olef ins (HFO), limit price erosion. Also, the which is economically benef its include improved
market benchmark, BSE Sensex, across a high performance product, strong demand growth of cheaper. The company is per/kg margin, consistent free
these five market corrections were also offers strong growth op- HFO-1233zd and distinct ad- also seeing signs of stability cash f lows and improvement
filtered out. To determine the funda- portunities. The company has vantage in terms of customer despite geopolitical issues. in return ratios. It expects
mental soundness of such stocks, the entered into a contract with acceptance over many other Economies of scale and strong cumulative FCF generation of
last 10 years’ annual data (from 2012-13 Honeywell to manufacture the HFOs, will provide incremen- customer relationships are around `650 crore over the
to 2021-22) on dividend payout ratio, patent product HFO-1233zd. tal benef its. other strongholds. next four years.
year-on-year EPS growth, and return Navin Fluorine
on equity (RoE) were extracted from International 100
100 CCL Products India
Bloomberg. Only the companies whose 96.59
10-year average of each of the above met- 104.39
rics was greater than 15% were filtered
out. Also, only companies that reported
positive EPS in each of the last 10 years
were included.
ET Wealth lists five such stocks and
their future growth prospects. Barring Nifty 50
TCS and Navin Fluorine, the other three Nifty 50 102.33
saw a decline in their long-term debt to
102.33
equity ratio between two intervals, that 12 July 2021 12 July 2022
is, between 2012-13 and 2021-22. 12 July 2021 12 July 2022 Current price as on 12 July 2022. Nifty-50 12M Forward PE: 17.46. Source: Bloomberg.
mutual ffuunnddss
10 The Economic Times Wealth July 18-24, 2022
Should you opt for
However, there are some caveats. With
FMPs, investors don’t have much idea
about what will go into the fund. There
are no restrictions on the quality of bonds
FMPs this time? that these can invest in. FMPs, like many
open-ended funds, have had a tainted
history in this regard, with several being
hit by defaults in low quality paper. This
diluted the actual realised NAV at the time
As the fixed tenure mutual fund schemes with a chequered past make a
of maturity, with some funds paying only
partial maturity value. A few FMPs gave
comeback, go through the pros and cons before deciding to invest.
investors the option to delay, or roll over,
the scheme maturity to a later date. These
episodes ensnared even larger fund houses
by Sanket Dhanorkar with established track records.
“The 2007-08 period, as well as the 2018-
T
he once popular fixed matu- 19 period, saw fund houses renege on the
rity plans (FMP) are making promise of returning money on maturity,
a comeback on AMC store instead offering a roll-over of maturity
shelves. With bond yields date or a shift to other funds. This does not
currently at attractive levels, provide much comfort,” remarks Vidya
AMCs have started offering, or are lining Bala, Head, Research, Primeinvestor.in.
up, FMPs of varying maturities. These Recently, several fund houses merged a
will provide investors the chance to lock few of their maturing FMPs with open-
in at prevailing yields without worrying ended debt funds, after offering an exit to
about interest rate risk. But do investors investors. However, these episodes have
really need to dive back into a space with a made the industry wiser, insists Prabhu.
chequered past? “The industry has learnt after every fiasco
FMPs are fixed tenure mutual fund and has used it to strengthen internal
schemes that invest in securities with processes, even as regulations have
matching tenures. These are closed-ended become tighter,” she says.
in nature. This means that investors can While the spectre of defaults is in the
only enter and exit at a specified time. past, it is not the only concern. Lack of
Unlike open-ended funds, FMPs have liquidity is another limitation. Investors
an expiry date, after which the investor cannot exit before maturity of the scheme.
gets the money back. The attractive fea- While these can be sold in the secondary
ture is that it allows for some degree of market through stock exchanges, the
predictability of return, even if it is not reality is that FMPs don’t see any trad-
guaranteed. The fund manager deploys ing activity, restricting the ability to
the money in securities of matching ten- exit at any time. The biggest argument
ures and holds on to them till fund expiry. favouring FMPs is that these will lock in
Unlike the open-ended funds, these do elevated yields today, but some feel there
not keep buying and selling securities in are superior alternatives to lock in higher
the interim. This dilutes the interest rate yields. Bala argues, “FMPs were popular
risk, that is, the possibility of interest rate when they were marketed as alternatives
changes impacting the fund return. FMPs to fixed deposits as there were limited op-
seem particularly appealing now because tions to ‘lock’ into better yields when rates
the yields are higher than that of bank rose. Today, investors have many options
fixed deposits of similar tenures. Roopali ES to lock in without giving up on the benefit
G
Prabhu, CIO and Co-head of Product and MA of liquidity.” She reckons that passive debt
Solutions, Sanctum Wealth Management, YI funds with target maturity, far lower cost
T
T
asserts, “This is a good time to lock in E as well as high credit quality, make for
G
yields through FMPs as we are at a point good alternatives. “The promise of liquid-
Return of the FMPs
from where yields will not move substan- ity and knowing where the money will be
tially higher.” invested (fund has to mimic the bench-
These also offer better tax efficiency. These closed-ended mutual funds were launched early this year. mark index’s construct) provides higher
FMPs with a tenure of more than three transparency,” Bala adds. These also come
Scheme name Tenure (days) Maturity date Corpus (` cr)
years provide the benefit of indexation, with a defined maturity and, hence, offer
where investors are allowed to adjust the Aditya Birla SL FTP-TQ-1879D 1,879 16 May 2027 176 predictability of returns. However, con-
returns against inflation. The gains re- trary to FMPs, these are open-ended, and
alised after this period are taxed at a rate HDFC FMP-Sr 46-1162D 1,162 20 May 2025 27 afford an exit to investors at any time.
of 20% after indexation. During periods This can have a flipside, as Prabhu ar-
HDFC FMP-Sr 46-1861D 1,861 13 Apr 2027 375
of high inflation, this indexation benefit gues, “The open-ended structure of target
allows you to keep tax liability muted. In HDFC FMP-Sr 46-1876D 1,876 18 May 2027 26 maturity funds exposes them to investor
case of fixed deposits, the entire interest behaviour in the form of intermittent in-
is clubbed with income and is taxed as per Kotak FMP-294-105D 105 8 Jul 2022 204 flows and outflows, which can impact the
the specified slab rates. Some FMPs offer final yield. In FMPs, investors are forced
Nippon India FHF-XLIII-5-2315D 2,315 4 Jul 2028 139
a double indexation benefit. This comes to hold till maturity, so there is higher cer-
into play when you invest in an FMP with SBI FMP-58-1842D 1,842 20 Jan 2027 202 tainty of realising the expected yield.” If
a tenure of a little over three years before you do want to park money in FMPs, make
31 March. When the FMP matures, you SBI FMP-59-1618D 1,618 6 Jul 2026 23 sure your time horizon matches that of the
are eligible to claim indexation benefit for fund maturity. Opt for AMCs with a proven
SBI FMP-60-1878D 1,878 7 Apr 2027 199
four years instead of three years, even if track record in this space and diversify.
the holding period is only a few days over SBI FMP-61-1927D 1,927 1 Jul 2027 270
three years. The twin benefit of predict-
ability of returns and tax efficiency make SBI FMP-62-191D 191 07-Oct-2022 134 Please send your feedback to
[email protected]
FMPs a rewarding proposition.
Source: Accord Fintech. Compiled by ETIG Database.