Whoever said Gurgaon was the emerging corporate capital of the country?" I said in exasperation as our car hit nh8. The infrastructure in this mushrooming commercial, retail and residential hub on the outskirts of Delhi is in a shambles. Roads are in a permanent state of disrepair, traffic snarls are routine, and construction projects in full swing only add to the chaos.

"Infrastructure companies will be minting money out of Gurgaon in the days ahead," said my friend, manoeuvring the car out of a pothole. "We should buy stocks in some such companies," she added casually. It set me thinking. Indeed, as we looked around Gurgaon, I realised that if I kept my eyes open, I could pick up any number of stock tips around me.

And that's exactly what we did. Our Gurgaon visit was converted into a shopping-for-stocks trip. First, we identified areas that were obviously going to see heavy activity. Infrastructure companies-construction, cement, steel businesses-were an obvious choice. Next, going by the sheer volume of traffic, were the auto and, by corollary, the auto ancillary and oil sectors. The huge number of apparel outlets and the crowds there put textiles firmly on our list. Then, of course, banking services-there were ATMs and bank branches at every turn.

We had identified our sectors; over the next few days we roped in stock analysts to help us spot value picks stocks here. Ravi Sardana, Vice President, ICICI Securities, D.D. Sharma, Head (Research), Anand Rathi Securities; and Rajeev Thakkar, Head (Research), Parag Parikh, helped us create a list of picks. Retail and entertainment, both booming in Gurgaon, are absent in our list because these scrips, according to our experts, are highly over-valued.

Here are the stocks we finalised after several rounds of consultation and research. Go ahead; see how you too can make the most of our shopping trip.

Kesoram Industries makes tyres, tubes, cement, viscose filament rayon yarn, and cellophane paper. Of these, the cement business is likely to boom on strong volumes and robust prices. Increased demand for tyres will also boost turnover. Plus, analysts expect the untangling of crossholdings in the Aditya Birla Group to unlock hidden value. Earnings are expected to grow at 41 per cent CAGR between 2005 and 2007. Price: Rs 169.25

Crompton Greaves has emerged as a strong Indian MNC after the acquisition of Belgium-based Pauwels Contracting. It is among the world's top 10 transformer manufacturers. Revenues grew 37.3 per cent (y-o-y) in the third quarter of fy2005-06, thanks to a booming power systems and consumer products market. Analysts expect consolidated earnings to grow 46 per cent in fy2006. Price: Rs 910.10

Bharat Gears is the country's largest automotive gear manufacturer. It is the preferred supplier to OEMs like M&M, Ashok Leyland, Escorts, Tata Motors, and Volvo. Revenues are expected to grow at 45 per cent (CAGR) over the next two years. Price: Rs 90.60

Bharat Forge is the country's largest exporter of auto components and among the top chassis component makers worldwide. It has manufacturing facilities in five countries-India, Sweden, Scotland, Germany and North America. Analysts expect it to post combined sales of Rs 4,290 crore in fy2007 and a net profit of Rs 400 crore, with a consolidated EPS of Rs 20.3. Price: Rs 416.80

In the limelight: Infrastructure companies

Nagarjuna Construction Company is actively involved in roads, water and irrigation projects, being one of the early movers in BOT (build-operate-transfer) projects. An irrigation order from the Andhra Pradesh government and the water supply order from Gujarat and Maharashtra alone have contributed Rs 1,700 crore to its order book. Its current order book is around 3.7 times last 12 months' revenues. Price: Rs 298.85

Hindustan Construction Company is the country's largest private sector construction and infrastructure building company, with 29 projects in hand. Its ambitious hill-station township project at Lavasa, between Mumbai and Pune, alone could change its balance sheet. A Motilal Oswal report puts the value of HCC's share in Lavasa at Rs 300 crore. Analysts expect HCC's net profits to grow 52.3 per cent (CAGR) between 2005 and 2008. Price: Rs 143.90

Gammon India is one of the largest construction companies in India, with several lucrative National Highways Authority of India projects under its belt. It was one of the first entrants into the BOT segment. Its two annuity road projects have given superior returns of over 30 per cent. Analysts expect a CAGR of 30-37 per cent in earnings over the next three years. Price: Rs 524.90

Swaraj Mazda is active in the goods vehicles segment, with two powerful brands, Swaraj and Mazda. Sumitomo recently increased its stake in the company to 40 per cent. The company is also wooing Japan's Isuzu. An alliance with the latter will give a fillip to its portfolio in higher-end CVs. A 9 per cent growth in volumes and a 12 per cent growth in sales is expected in fy06. EBITDA margins are expected to rise to 8 per cent and pat 30 per cent. Price: Rs 371.60

Sanghvi Movers is the fourth largest crane-hiring company in Asia. It plans investments of Rs 135 crore in fy06-07, which should boost growth. Capex programmes across sectors have created a huge demand for cranes. Sanghvi is running at 95-100 per cent capacity utilisation, and is estimated to report an EPS of Rs 33 for fy06 and Rs 45 for fy07. Price: Rs 669.05

Crawling traffic & construction clutter: There's money to be made in the dim

International Combustion India makes heavy engineering equipment, gear motors and gear boxes. Capex increases in this space are likely to benefit the company hugely. It has orders worth Rs 30-32 crore for the next six months, and earnings are likely to grow 104 per cent CAGR between 2005 and 2007. Analysts find the stock valuation attractive at a P-E of 7.9x (estimated 2006-07 earnings). Price: Rs 315.20

Deepak Fertilisers and Petrochemicals produces bulk chemicals, and has a 70,000 mt isopropyl alcohol unit. It is expanding capacity of its ammonium nitrate business with an investment of Rs 400 crore. Experts say the ever-increasing demand from sectors like pharmaceuticals, textiles, paints and explosives will help it boost turnover and profits. It has a good dividend yield of 3.3 per cent, and is quoting at an attractive valuation of 5.9x (estimated 2006-07 earnings). Price: Rs 108.95

SKF India is a 54 per cent subsidiary of SKF, Sweden, and controls 29 per cent of the bearings market, with clients in the aerospace, automotive, electrical and industrial sectors. It will attain debt-free status by end-2006, and is de-risking its business portfolio by reducing its dependence on the auto sector. Experts expect a re-rating of the stock price, quoting now at 13.1X (estimated 2006 earnings). Price: 303.20

Colgate-Palmolive is one company that has managed to maintain its market share even as the fast moving consumer goods (FMCG) sector again witnesses buoyant growth. Analysts are upbeat about its future growth. Commercial operations in the Baddi plant commenced in April 2005, and the company can thus start availing tax benefits promised it by the Himachal Pradesh government. It is expected to record a 29 per cent growth in net profit over a 13 per cent growth in revenues in 2005-06. Price: Rs 379.30

ITC has a diversified presence in cigarettes, agri-business, packaged foods, confectionery, and other FMCG products. It also has the second biggest luxury hotel chain, and ranks third among private sector companies in terms of pre-tax profits. New ventures in FMCG and apparel are gaining ground and will likely be future revenue drivers. Analysts expect an over 23 per cent increase in sales and net profit in 2005-06. Price: Rs 163.65

Tata Chemicals has a 40 per cent share of the branded salt market, and is also a leading player in soda ash and fertilisers. The latter two businesses are likely to grow fast in the wake of good demand. Analysts expect net profits to grow 32 per cent y-o-y. Dividend yield in 2005-2006 is expected to be 3.6 per cent. Price: Rs 251.25

Syndicate Bank has an asset base of Rs 52,100 crore and a prominent presence in the West and South. Profits declined 7 per cent in 2004-05, but analysts expect strong growth over the next two years in retail, agriculture and credit to small and medium enterprises-the bank's core operations. The bank's profit is expected to grow 32 per cent over the next three years. Price: Rs 93.20

Raymond, a leading player in the booming branded apparel and retail industry, is also a strong player in worsted fabrics, and one of the few textile companies with a strong balance sheet (around Rs 600 crore in cash). Analysts expect EBITDA margins to expand from 11 per cent in fy05 to 16 per cent in fy07, while earnings are likely to record a CAGR of 47 per cent. Price: Rs 412.50

Arvind Mills is one of the world's largest exporters of denim, and market conditions suggest the company will grow consistently in the next two to three years. The dismantling of quotas, high demand, and lower cotton prices are expected to boost turnover and profits. Analysts expect profits to register a 37 per cent CAGR between 2005 and 2007, while return on equity is expected to increase to 14.3 per cent in 2006-07. Price: Rs 97.55.

SOUTHERN SPICE
If you are looking for spiralling returns from realty, head for Bangalore and Chennai.
By Rahul Sachitanand and Nitya Varadarajan

Another Garden City: Whitefield on the outskirts of Bangalore has seen steep rise in land rate

About six months ago, Seethalakshmi Ganesh bought a 950 sq. ft apartment at Thoraipakkam for Rs 16 lakh, which she can today sell for Rs 18-20 lakh. That's a cool 25 per cent appreciation and is more or less the real estate story across the two southern cities of Chennai and Bangalore. In both cities, real estate prices are peaking an ascent that began just about three years ago. In both cities, a couple of areas stand out for the sheer degree of appreciation-Whitefield in Bangalore, and the Old Mahabalipuram Road (OMR) area in Chennai.

Whitefield, Bangalore

From being a pensioner's paradise a decade ago, eight million residents today squeeze into the steel and glass metropolis that is Bangalore. Fuelled by the it and BPO industries, Bangalore has been growing like a mushroom cloud, trying to accommodate a populace that is growing at 15-20 per cent per year. Skyrocketing real estate rates mean that people are now willing to go that extra mile to find a home. And, equally, businesses are going further away from the central business district in their search for land.

In this race to head out of Bangalore, Whitefield on the city's eastern periphery has become the magnet, first for the it companies and, over the last two-three years, for large residential properties. And it is today perhaps Bangalore's strongest realty magnet. "Whitefield has displayed high growth as a major peripheral business district of Bangalore over the last decade. Anchored by the International Tech. Park, Whitefield has evolved from a suburban industrial location into a technology hub with large multinational companies setting up operations here," says Manisha Grover, Associate Director, Strategic Consulting, Jones Lang LaSalle.

Infosys office, OMR: It companies have fuelled real estate growth here

Over a dozen large private parks have been developed here over the last couple of years, and projects covering an aggregated four million sq. ft are expected to be completed by end-2006. Real estate developers and analysts point out that the profile of buyers and residents has also completely changed over the last decade. It's today a mix of large villas, two-bed apartments and swaank row houses priced at over Rs 1 crore. "Whitefield has become the new growth driver of Bangalore's real estate market and land rates have climbed 50-60 per cent in the last 12 months in this locality," says Sushil Mantri, Managing Director, Mantri Developers.

Gurgaon near Delhi developed along similar lines, with offices first coming there to leverage cheap real estate and then employees shifting house to cut commute time. Part three saw the whole gamut of supporting infrastructure come up-malls, multiplexes, schools and even hospitals. "We believe Whitefield is taking a similar path," says Grover. Residential developers have already made a beeline for the locality, with developments like Golden Blossom, a 550-unit apartment complex with its own departmental stores, clubs, parks, and play grounds on about nine acres of land.

Realtors like Mantri Developers are queuing up too. "We have acquired 60-70 acres there and plan to have exclusive 6,000-12,000 sq. ft villas, each priced at over Rs 2 crore soon," says Mantri.

Supporting these developments are investments in multi-million dollar campuses by MNCs like sap and Dell and Indian companies like iGate and Infinite Computer Solutions.

The booming popularity of Whitefield as a Tier-I residential and office location means the surrounding social infrastructure has also begun to fall into place. "It's no longer a question of just working and living in Whitefield. Now, there are a lot of facilities here itself," says Jonathan Yap, Managing Director, Ascendas India. The ITPB mall, which has everything from gyms to restaurants and shops, was the first step in this evolution, and several others are in the pipeline. Other infrastructure like hotels, hospitals and schools have also come up rapidly. With Bangalore's population growing this may just be the beginning of the boom at Whitefield.

Siruseri, Chennai: Lack of infrastructure has not stopped realtors from flocking here

OMR, Chennai

Till recently, the OMR stretch outside Chennai was nothing much than a prosperous village. Residents along the stretch were largely small traders or factory workers employed in the small-scale industries in Perungudi. Then the it companies discovered the area. Cognizant, Infosys, Wipro, TCS, and HCL Tech. all came in with huge campuses; and in 2003, the Tamil Nadu government labelled OMR an 'it Corridor' and started to six-lane it. It fuelled a speculative price rise that is causing ripples even now.

In just the past one year, land prices in OMR have almost tripled, from roughly Rs 300 per sq. ft to Rs 900 per sq. ft. Rentals in pockets at Rs 6 per sq. ft are comparable with Adyar (Rs 7 per sq. ft), an upmarket residential area with every amenity. Luxury row houses are going for roughly Rs 1,950 per sq. ft.

Amenities along OMR, however, do not justify the prices. Do these prices reflect a true value or are they largely driven by speculative buying? Take the road itself, which is prone to waterlogging and among the worst roads in the city, despite being labelled the it Corridor. There are no large department stores or supermarkets, schools, hospitals or restaurants. Public transport is infrequent and crowded, and the road is choked with private buses serving the engineering colleges and it campuses. Despite this, investors are in for a good deal. In 2004, a block of 32 apartments was sold at Rs 1,150 per sq. ft at Thoraipakkam, an area of OMR. Within five months, five of the new owners sold their flats for Rs 1,650 per sq. ft.

Meanwhile, about 26 more it campuses are coming up along the OMR, while the Perungudi Velachery road (just off the OMR) is getting many new buildings. With land prices here too climbing gradually, this could be a good investment if you can afford it. A new hospital has come up here and signs of affluence are seen, with large shops and wide roads. The Tamil Nadu government is acquiring a whopping 1,000 acres for the Siruseri Park, but the development will not be restricted to Siruseri, spreading instead across the entire OMR stretch.

Land prices get cheaper as you move towards Siruseri, starting at about Rs 350 per sq. ft. But big builders are coming in. Singapore Realty is planning residential complexes within Siruseri 2, Mumbai's Hiranandani Group has picked up 95 acres, while other big builders are waiting in the wings. The prospect of development has pushed up prices in places as far away as Tiruporur from Rs 1 lakh an acre to Rs 4 lakh, although the second phase development of the it corridor is still a few years away.

Fourteen months ago, an investor bought land behind the Infosys campus for about Rs 400 per sq. ft. Today, nothing is available there for less than Rs 1,250 per sq. ft. Says E. Manoharan, Managing Director, msn Property Development: "Today, it is cheaper to buy and hold land here than do any development."

CHECKLIST

Real estate is an illiquid and still slightly risky buy. If you are planning to buy land outside the city, whether as an investment or for living in, do your homework first:

• When you plan to move to the suburbs, decide if you can handle the commuting, and factor in the cost. You will have to drive to the city for theatres, cinemas and restaurants

• See if there are good schools, hospitals and supermarkets in the area

• Check infrastructure and amenities like roads, water supply, sewage and electricity connections

• Make sure that you are not being sold property in a lowland or marshy area, which is prone to flooding

• Check title deeds and the urban layout plans. Often, unscrupulous developers will sell you land that has been earmarked for parks or schools

• Check the access to your property. Is it sandwiched behind some it company? Lack of approach roads lowers chances of appreciation

• If you are near a potentially large it campus, there is danger of the government notifying your property at any time. Ensure that there is no current notification on the land

• Property is highly illiquid-it is difficult to get a buyer when you want to sell. Make sure you only tie up your investible surplus. Or plan to live there.

NEWS ROUND-UP

High Sugar

Sitting pretty: With prices upwardly mobile

Sugar is not exactly fancied stock on D street. But a sudden revival in the commodities market has changed its fortunes quite dramatically, with a strong rebound happening on the back of soaring income levels. "The reason for the bullishness can be largely explained by the high prices in the international market. The price has touched its 25-year high in the international market," says V.K. Sharma, Investment Consultant, Anagram Securities. In Inddia, prices are ruling in the Rs 1,950 to Rs 2,050 per quintal range.

Sugar demand is predicted to touch 19.2 million tonnes in 2005-06 against a production of 17.5 million tonnes. Credit rating agency CRISIL expects this demand-supply imbalance to continue. In its assessment of the price situation in January, RBI said: "Although global production in the 2005-06 season (October-September) is expected to increase, led by a record harvest in Brazil and a recovery in India, higher global sugar consumption, especially from the developing countries of the Far East and Latin America, and declining stocks in China and India, are likely to keep sugar prices firm in the coming months."

It's a situation the sugar companies on the bourses are basking in, with stocks like Bajaj Hindusthan and Balrampur Chini Mills making prominent gains. However, being a commodity, the industry is prone to cyclical movements. Prices were Rs 1,100-1,400 per quintal between 1991-92 and 2002-03, but the uptrend started soon after, with prices touching Rs 1,750 in 2004-05. As new capacity is built worldwide, there is every chance of prices falling or stagnating at a particular level. However, analysts think sugar prices could remain firm for the next couple of years at least. The industry price-earnings (P-E) multiple is currently a high 20-25-Bajaj Hindusthan has a P-E of 32 and Balrampur Chini 29. It's a good time to invest but equally important to be cautious.

-Anand Adhikari

Smooth ride: The road ahead looks equally good

Cement Shakeout

Clearly, the Holcim-Gujarat Ambuja deal has set interest levels soaring in the cement sector. And given the country's emphasis on infrastructure development, the industry is likely to gain significantly. Analysts tracking the sector see immense potential. So, what are the stocks to look at? Devina Mehra, Director & Chief Global Strategist, First Global, maintains a "moderately positive" outlook on the sector. She points out that the Gujarat Ambuja stock is fully valued, but is upbeat on stocks like India Cements, ACC and Ultratech. Other interesting stocks: Shree Cement and K.J. Lakshmi Cement. What's important to note, though, is that cement is a cyclical industry and in that sense, an outlook that is too long term may not be so prudent. The biggest positive as far as investors are concerned is that the sector is growing by about 11 per cent per annum.

-Krishna Gopalan

What Happens At 10K

Euphoria greeted the sensex touching the 10K mark on February 6. In the past year, the Sensex has zoomed 52 per cent, from the 6,602 of December 31, 2004. With most retail investors unable to participate in the rally, the question that arises is this: What significance does the number really have for them? Says I.V. Subramaniam, Fund Manager, Quantum Mutual Fund: "It's just another milestone and one should not, therefore, attach too much importance to it." In fact, similar euphoria was generated 20 years ago when the index touched 400. The retail investor actually need not worry about tracking or exploiting these milestones. "Investors should concentrate on making good allocations rather than think about the index," says Subramaniam. From here on, what will work is a bottom-up approach rather than an index approach to stock-picking.

-Mahesh Nayak

THE YIN OF INVESTING
Or why women continue to be more conservative than their male counterparts when it comes to investing decisions.

Indian women have been handling money since the days of Ahilya Bai Holkar, who was an astute manager of state finances in the mid-1700s. Sadly, things do not seem to have progressed much since then. Most women continue to remain conservative investors, who believe in traditional instruments that give assured returns, such as fixed deposits, post office deposits and RBI bonds. Now, though, things seem to be finally changing. The boom in the equity market has seen more women seeking high-risk, high-return avenues for their investments. And the interesting fact is that these women are both from high-profile jobs and from ordinary households. And as the number of such women increases, financial service providers are increasingly launching niche products. In fact, mutual funds (MFs) like ING Vysya have launched exclusives schemes like Mahilanivesh for women investors, tailored to suit their investment philosophy.

The important thing that has changed is that more women today have large independent incomes. Not only do they have to make tax-saving investments, they also have to plan smart to take their earnings further, which invariably leads them to new investment avenues. Says Sharmila Doshi, Institutional Dealer, Asit C. Mehta: "Of late, many women, especially housewives, have started investing in direct equities. Thanks to the electronic media, women have even started tracking stocks and managing their family portfolio."

The second factor is the stock market rally, which has tempted women to take a little risk with their money. Says Vikas Sachdeva, Country Head (Business Development), ING Vysya MF: "In places like Nagpur, women are even doing day trading." As Doshi points out, the arrival of online trading has made the stock market much more accessible to women.

Recognising the huge potential in this investing segment, financial service providers are targeting it. Geojit Securities recently started several all-women trading branches, while MFs too are trying to attract women investors. Says Sachdeva: "We have nearly 2,000 women investors from all walks of life in our fund Mahilanivesh. Mostly, they are conservative and don't understand mf and equities. We sell by explaining the concept of rupee-cost averaging, to prove that over a period of time they will certainly make money."

The third factor that has pushed women to equity is the drastic fall in interest rates of fixed-income instruments. This has meant that even older women are taking that big leap from assured returns to market returns. A single parent and an ex-banker, H.J. Badshaw, 60, used to invest only in RBI bonds and company fixed deposits. But the booming stock market has encouraged her to start looking at equity. "On the advice of my daughter, a finance professional, I have started investing in equity MFs. The decline in interest rates is the primary reason for my decision," she says, but adds that she is not very comfortable with equity. As a senior citizen, of course, Badshaw should ideally keep her equity exposure to the minimum. She plans to put most of her money in fixed deposits and take the 9 per cent rate applicable for senior citizens.

"The risk of capital diminishing as well as the lack of confidence and knowledge about equity products is the key reason why women stick to traditional instruments," says Aditi Someshwar, formerly a consultant with Airtel, who has put her investible surplus only in insurance products or fixed deposits.

Says, Shalini Tibrewala, fund manager, JM Financial AMC: "Unlike men, who have acquired a higher risk appetite, women are still conservative. They require a guarantee for their investment, at least the invested capital, which is why we have seen most women investing in bank deposits, postal schemes, RBI bonds and provident funds." Tibrewala herself, being a debt fund manager, used to invest exclusively in debt instruments. In the last one year, what with falling interest rates and rising equity markets, she has shifted her portfolio to a mix of equity and debt, but debt continues to account for a substantial portion of her portfolio.

While some change is visible in the way women are handling investments now, the fact remains that much progress remains to be made. That will happen as awareness about financial products increases. The end result can only empower women more.

-Mahesh Nayak

WHICH PLAN FITS YOU?
There are various ways to invest in a mutual fund. A look at how the options work.

By Mahesh Nayak

With the sensex touching the 10K mark, the equity market has never looked more attractive. Or more scary. Is the market over-valued? Is it worth entering equity at such high levels? However, with assured returns sliding down, investors are forced to look at other asset classes, especially equity. The best way for the average investor to get into equity is via mutual funds (MFs). And in MFs, the best and safest way is to come in through a Systematic Investment Plan (sip).

But are sips the only option that MFs offer by way of investment method? Actually, there are two other methods too, but these are seldom mentioned. The reason being that retail investment in MFs is still so new in India that there is little scope to talk of the variants.

Which is why it makes sense to speak here of the various ways in which you can allocate your money into MFs. First, of course, is sip. This plan allows you to invest in any fund by way of monthly instalments. Says Ranjeet Mudholkar, CEO, Financial Planning Standards Board India: "As a concept, sips have been in existence for a long time. They should be used primarily for equity investment, which helps averaging costs without having to time the market."

SIPs are ideal for people who are starting off their investing life. The earlier you start, the more surplus you will end up post-retirement. The numbers illustrate this in a particularly dramatic fashion (see The Power Of Regularity).

A second kind of investment is the Systematic Withdrawal Plan (SWP), which allows investors to take money out periodically from a debt or equity fund in equal instalments. SWP takes away the need for you to time the liquidations of your investments. You are allowed to redeem a certain number of units from your investment to make up each withdrawal instalment, and you can choose how much and when you want to withdraw from the fund. However, you have to tell the fund beforehand about your withdrawal periodicity, and where and how you want the money delivered.

SWPs are of two types-the fixed product, where the investor chooses to receive a fixed sum each month, by way of withdrawals. The second is the appreciation product, where you can instruct the fund to redeem units only to the extent of capital appreciation, if any, on the units.

Since SWPs can be used to set up a regular stream of monthly or quarterly income, they make sense for retired people or for those without a regular source of income.

The third option is the Systematic Transfer Plan (STP). Here, investors who are primarily invested in the debt market can take a call in the equity market by using the STP route. STPs are used to transfer funds from floating or debt schemes to equity schemes at regular intervals. The trick is to keep the exposure down to the minimum, or at least, only invest surplus funds after immediate needs are met, so that the volatility in the market does not impact the investor.

Though most funds allow funds to be transferred from debt to equity, only a few allow the reverse. Kotak Mutual, for instance, has the two-way option. This is particularly useful when an investor wants to contain his equity investment within a desirable limit. Here, too, you have to choose between a fixed plan, where a preset amount is transferred periodically, or the appreciation plan, where the transfer happens only when capital appreciation on your investment crosses a certain preset limit.

Let's look at how Ramesh Patil, 48, a Mumbai-based businessman, has used these options. When he got a bonus of Rs 3 lakh, Patil wanted to invest in the equity market at a higher rate of return than what he could hope to get from assured return instruments. However, the market in January 2005 was so volatile that he did not dare risk a direct equity exposure. That's when his financial adviser told him about STPs. Basically, Patil's entire Rs 3 lakh is invested in a floater fund. Every month, Rs 25,000 is transferred from the floater fund to the equity fund for one year. In the last nine months, till September 2005, Patil's investment has given him 17 per cent absolute returns. This might be lower than the absolute returns from the Sensex for this period, but it certainly is a higher return than the risk-free rate. And if Patil wants money for any future contingency, he can use the SWP option, as his capital would have accumulated in equity over the next three months.

The fact, though, is that very few investors have actually learnt to make these various options work for them. According to Hemant Rustagi, CEO, Wiseinvest Advisors: "Despite being a good product, sips still aren't in favour as distributors undersell them; their commission is dragged out over six months, whereas in a lump-sum investment they get a commission when they sell the product."

The SIP

As an investing tactic for beginners, sip has little competition. Working on the principle of rupee-cost averaging, it is the best way to grow your money. Your average cost per unit will be much less than the average price per unit.

Says Ajay Bagga, CEO, Lotus India AMC: "Apart from averaging, sip brings in discipline in investing. To play the equity market, you need nerves of steel. Although the market gives you opportunities, emotions trap most investors even as they try to time the market." If you are investing in equities through sip, any time is the right time to buy. According to a Standard Chartered Mutual Fund spokesperson, if you had invested Rs 5,000 per month in the Sensex from 1997 till date, via a sip, your investment would have nearly doubled. So far, you would have invested Rs 4.75 lakh and would have redeemed Rs 8.49 lakh.

Actually, most parents use just this tactic when, for instance, they start accumulating gold as soon as a daughter is born. What they are doing basically is to systematically invest in gold at regular intervals, which grows not just in quantity, but in worth over the years. The sip option has given excellent returns over the years (see Top sips...). Historically, equity has given the highest return among asset classes. "Over 25 years, equity has given a compounded annual growth of 18 per cent compared to gold and bank deposits at 7.5 per cent and 7 per cent, respectively. In fact, equity has beaten inflation, which has been about 7.2 to 7.3 per cent," points out Bagga.

As of now, retail investment in MFs is itself low, so it will take a while for people to grasp second-level plans. But if they are to make the most of withdrawal or transfer plans, they first have to start investing in equity, and the right first step there is the sip.

Cover All Bases
A look at insurance for pre-existing illnesses.

Mediclaim for pre-existing illnesses: A healthy trend

You buy insurance to help meet spiralling medical costs. And then you find the only bills your mediclaim policy won't cover are for the illness you suffer from. Till recently, no insurance policy covered pre-existing illnesses, but today you do have a few options to choose from. The best solution for individuals looking to cover pre-existing illnesses is to subscribe to group insurance. Most companies today give their employees group cover at zero or discounted premiums. Such mediclaim policies that are tailored by insurance companies for their corporate clients do cover pre-existing diseases. In fact, most such policies do not even ask for a pre-purchase health screening.

If, however, your employer does not offer group insurance, you could look at enrolling with a hospital health scheme. Many large hospitals offer an umbrella under which individuals can bargain with insurance companies for group mediclaim coverage, similar to what companies offer. In fact, the hospitals even help you file the claims so that they are passed fast.

Your third option is to look at PSU insurers who offer modified covers-Oriental Insurance's Good Health and National Insurance's Sampoorna Arogya. Basically, depending on its gravity, your existing illness is not covered for an initial number of years, and then covered, but with caps on room rent, operation fees, etc. A 30-year-old will pay about Rs 2,300 premium (sum assured: Rs 3 lakh), while a 60-year-old will pay about Rs 3,900. However, PSU insurers only insure the whole family, not individuals.

Among private insurers, Bajaj Allianz has Silver Health, a policy for people aged 45 and above, which covers pre-existing diseases. Premiums and features vary based on individual health reports. Thankfully, a healthy trend is being set in mediclaim rules.

-Nitya Varadarajan

Value-picker's Corner

TODAY'S WRITING PRODUCTS; PRICE: RS 89

From 54 per cent in 2000, the organised sector now controls 70 per cent of the writing pens market. Today's, the only listed pen company in India, is reaping the rewards. Operating in an industry with a healthy growth rate of 20 per cent, Today's is expanding capacity from 1.5 million pens per day to 4.5 million. It is also venturing into office and school stationery. For the quarter ended December 2005, it reported a 56 per cent rise in net profit. At Rs 89, the stock trades at a P-E of 8.97 on an annualised EPS of Rs 9.92. The scrip is expected to move up, following its new plant going live in April 2006.

-Mahesh Nayak

Trend-spotting

High-powered: There's definitely light here

There is resurgence in the power sector-industry watchers say the long-awaited growth phase is finally here. Investment in the sector has increased from Rs 73,800 crore in the years between 2001 and 2005 to Rs 2,95,700 crore (estimated) in those between 2004 and 2007. And, from about 2,500 MW in 2002-03, power generation has moved to 8,000 MW in 2005-06. MNCs like ABB and Siemens have posted impressive growth rates of 33 per cent and 56 per cent, respectively. Easun Reyrolle, the only Indian company that operates in the sector, bears watching. Its profits rose 240 per cent for the third quarter, and its turnover is set to touch Rs 100 crore. The stock has risen from about Rs 265 six months ago to Rs 700 today. There are definitely bright days ahead.

-Nitya Varadarajan