Here is something to scare you. Assume you are 35 years of age, working in the private sector with a take-home pay of Rs 25,000 per month. You have dreams of retiring and tending to your roses when you are, say, 58. A fairly reasonable dream, you would say? As a prudent saver, you even have a modest nest egg in readiness. So, what's scary?

Here's what: the size of your 'modest' nest egg will have to be a whopping Rs 64 lakh, if you factor in inflation, want to maintain your standard of living, and if you assume a life expectancy of 75 years. And to reach that target, you need to start saving Rs 6,121 every month right from today.

That is not the kind of money most people save each month-unless you are one of those incredibly organised and far-sighted persons, in which case, of course, you needn't be reading this article at all. For the rest, face it-you are looking at salting away Rs 6,121 every month for the next 23 years. And then-this is when you get really frustrated-you get to reach your target only if your money grows 10 per cent each year and inflation remains a constant 5 per cent. If either of these two critical factors varies, you start the math all over again.

Who cares? Just you, apparently. The new Bill for a contributory pension scheme for government employees, which was introduced in the Lok Sabha last year, is in limbo, thereby delaying the setting up of the Pension Fund Regulatory and Development Authority, which is part of the legislation.

The market for retirement products per se has not developed despite the presence of private sector insurance companies. So far, the little growth witnessed in this segment has been pushed mainly by the tax exemption on pension products available under Section 80CCC of the Income Tax Act. According to available statistics, the pension products market in the private sector grew from Rs 700 crore in 2003-04 to Rs 1,100 crore in 2004-05. That's not something to write home about. "There is a complete lack of awareness about retirement. People tend to spend or save rather than invest for their retirement," says Sam Ghosh, CEO, Bajaj Allianz Insurance Company. This, however, is set to change, as a young workforce begins to earn far more than previous generations. Even after spending on consumption items and flirting with the equity cult, they mostly have enough investible surplus to start thinking of long-term savings. "Slowly, people are becoming aware of the benefits of systematic investment planning, rather than the earlier tendency of investing in an erratic manner," points out Sujit Ganguli, Marketing Head, ICICI Prudential.

Some hope: Finance Minister P. Chidambaram has given retirement products a leg up in this year's Budget by clubbing the limit under 80CCC with that available under Section 80C, thus, increasing the tax-exempt investment limit from Rs 10,000 per annum to Rs 1,00,000 per annum. The industry, however, is divided over this move. While some welcome it on the grounds that individuals can now invest up to Rs 1 lakh in retirement products, others point out that this might not necessarily happen. "Clubbing short-term and long-term savings under one section may encourage tax-savers to move towards short-term savings like ELSS (equity-linked savings schemes) of mutual funds. Insurance companies, which sell long-term retirement products of over 10 years, will also have to compete with short-term products like fixed deposits with tenures of over five years," points out K.S. Sridhar, Manager (Projects), HDFC Standard Life Insurance. The argument basically is that investors will gravitate towards other instruments when retirement plans are clubbed with all other savings, since unit-linked plans have a lock-in of five years which the others don't. "We will now have to push retirement products based on the risk cover aspect to compete effectively with other tax-saving instruments under Section 80C," says Ghosh. This unhappiness is echoed by Sridhar: "The ideal way would have been to enhance the limit under Section 80CCC."

On the other hand, ICICI Prudential Life Insurance, the largest private sector insurer, sees an opportunity in the revamped Section 80C. Says Ganguli: "Even under the new basket, retirement products will be bought for their long-term, regular payouts. They are an effective way to save taxes and earn potentially higher returns over the long term. To some extent, pension plans face competition from PPF (Public Provident Fund) in this area. ELSS, on the other hand, are typically short-term in nature and not suitable for retirement planning."

Says the CEO of a private insurance company: "Short-term bank deposits of over five years, which now enjoy tax exemption on interest earned under Section 80C, are taxable on maturity. This will encourage people to invest more in retirement products." Obviously, what insurance vendors are trying to sell is the fact that pension plans will come with bonus and annuity features built into them. Says Ganguli: "The chances of an upside in a unit-linked retirement product are very high compared to other tax-saving products available under Section 80C. In fact, inflation may eat away the moderate returns offered by other savings products."

Retirement planning: Buy a scheme that suits your age and risk profile

However, industry experts point out that ELSS are not that popular among tax-saving instruments, as they accumulate savings but don't come linked with a life insurance benefit. In fact, statistics from some private sector insurers show that of the Rs 40,000 crore mobilised by mutual funds through NFOs (new fund offerings) in 2005, ELSS attracted a paltry Rs 1,500 crore. "We are not very worried about ELSS, but may face some competition from PPF," says an insurance executive.

Your retirement bouquet: Today, there are broadly three options available to you when it comes to retirement planning. All the options come with life cover. The option you choose to take will depend largely on your age, income, risk appetite, and how and when you plan to retire.

Endowment plans: These are the traditional plans where you can choose the premium you want to, or can, pay, the amount you want to receive upon retirement, and the date that you want this amount. Your money normally grows at the rate of 5-6 per cent per annum under an endowment plan-this is not very high but that is because these plans invest a major chunk of the money in safe, assured return assets. This is particularly reassuring for risk-averse people, or those who are nearing the end of their earning years and cannot afford to take too many chances with their capital.

At the time of maturity, you can expect to get back the sum assured plus any bonuses that your policy might have earned. Although endowment plans are witnessing a gradual loss of popularity, that's possibly because markets are booming now, automatically making plans with market-linked earnings more attractive. As Ghosh says: "Unit-linked products are riding high on the market boom, but any reversal of the stock market cycle may bring endowment policies back to centrestage." And in any case, when it comes to the safety angle, there's little to beat this product.

Unit-linked plans: Today, unit-linked plans are the most popular retirement product among investors. In fact, their popularity has attracted some amount of flak because insurance companies have been accused of MIS-selling the product. The Insurance Regulatory and Development Authority (IRDA) has since brought them under the scanner and introduced several measures, including a five-year lock-in stipulation, to protect investor interest.

Under a unit-linked plan, you basically get to maximise your gains by taking a little bit of risk (the equity component is higher in these). After the new regulations, these schemes have become more transparent-you can monitor the performance of the scheme as NAVs (net asset values) are declared regularly. And insurers have been told to disclose what proportion of your money they put into the investment and insurance baskets. Since a large amount of the investible portion of your premium is put into equity, the returns are higher than from a traditional endowment plan. At the time of maturity, you get the sum that has accumulated in your scheme over the years. On an average, ULIPs can be expected to return 10-15 per cent per annum on an annualised basis. "ULIP products are popular among younger people who are willing to take a little bit of risk," says Sridhar.

Single premium plans: As the name suggests, under this policy, you are required to pay only a single premium in the first year. Because of this advantage, these plans are very useful for people with erratic income streams. Self-employed people, artists, sportspersons and businessmen typically should opt for single premium plans. Many policies give you the option of adding to this premium amount at any point when you have a lump sum to spare, thus, adding to your corpus at your convenience. "Single premium retirement products are becoming popular in the market because a customer doesn't want to keep putting in money for 10-15 years," says Ghosh.

The NAV issue: Most private sector insurance companies launched their retirement plans in early 2001 and today these are available at a premium. The NAVs of most of the plans are ruling between Rs 12 and Rs 20 (see tables). Ideally, if you are buying a retirement plan today, you should use this window to buy an existing retirement plan from a private sector insurance company at the current NAV. "It makes sense to buy an existing retirement plan rather than enter a new one when the market is running at a historical high," says Ganguli.

The mutual fund option: There is a fourth option for growing your retirement corpus-mutual funds. While it could be argued that understanding the nature of a pension plan and deciding which one suits your profile makes it a difficult exercise, practically anybody can invest in mutual funds. In fact, a mutual fund is a more efficient vehicle when it comes to investments and fund management.

If you are looking for long-term earnings, buy a close-ended or open-ended fund and stay invested till the maturity. Once the accumulation stage is over, take the money out and buy yourself an annuity plan from any private life insurance company. If you are young, invest in diversified schemes and see your money grow much faster than in a pension plan, and then buy yourself an annuity with your earnings.

But, if you are risk averse and don't trust either a mutual fund or pension plan, you could ideally opt for a PPF, and at the end of the 15th year, use the maturity amount to buy an annuity from any insurance company.

One word of caution though-if you are planning to take the plunge into a retirement fund right away, it is better to wait till the Pension Bill is passed. If it goes through, many mutual funds and other institutions like IDBI Capital Markets, UTI Mutual Fund and Principal Group may enter the pension space initially to handle the government retirement kitty and, at a later date, the savings of private sector employees. This means many more product choices for you and many more ways to get to your rose garden.

At A Screen Near You
The number of online trades has risen dramatically, but you still get some error messages. Has Net trading come of age?
By Nitya Varadarajan

Mukesh Gupta: "I have changed brokers many times in search of sound research repoerts"

Sure, you still want newspapers and your morning coffee but face it, the day really starts only after you have checked your e-mail, right? And it's not just mail-newsletters, diary prompts, bank statements, bill payments, ticket bookings-we can't seem to do without the internet. It comes as no surprise, therefore, to find that roughly 1.3 million Indians trade in stocks online. The bulk of this growth has, in fact, happened over the last two years. Today, online trading accounts for 12 per cent of the daily turnover at NSE (National Stock Exchange), up from 4 per cent in 2004.

The computerisation of NSE and NSDL (National Securities Depository Ltd) and the initiation of the T+5 settlement system (where settlements take place five days after the transaction) were the first triggers for online trading, but it was really the T+2 settlement that allowed it to fully take off. Today, every broker worth his salt and his place in the top 15 brokerages in the country claims to offer online trading.

ICICI direct.com and HDFC Securities were among the first and are today the largest players-ICICI direct.com alone has eight lakh registered users-in online broking. But traditional brokers are also entering this space aggressively. Kotak Securities has taken the lead with some heavy-duty marketing and has 75,000 users, while other players like Sharekhan (SSKI Securities) and 5paisa.com (India Infoline) are catching up. Smaller names like Motilal Oswal and Angel Trading are also actively promoting their online ventures, while many Tier 2 brokers such as JRG Securities and Emkay Share and Stockbrokers are coming out with public issues to raise money for tech revamps.

The problem, however, is that not all of these smaller companies offer online services that are fully hassle-free, or, for that matter, truly online. Smooth internet trading depends heavily on the magic three-in-one link-online trading account+savings account+online DEMAT account-which is where companies like ICICI direct.com and HDFC Securities score. The other big plus for them is their banking background, which automatically earns them the customer's trust.

While the banks score on connectivity, they lag behind in broking services and customer service. Meanwhile, the pure-play brokers who are going online are still conditioned towards offline broking-where the customer 'depends' on them and makes money based on this personal equation. These brokers still treat online broking with reservation-it takes clients away from their sphere of influence-and skimp on services.

Customers aren't really asking for the moon. All they want is a smooth, secure and anonymous trading platform where all transactions are executed with ease. In terms of transactions, they want simplicity and transparency, easy access to DEMAT accounts, records of the purchase and present prices of their stocks, and smooth fund transfers. In terms of service, they look for customised care, handholding for newcomers, solid research reports that can give them at least a 90 per cent hit rate, and, of course, broking rates that are competitive and commensurate with the services.

All of this is not available today, and certainly not on one platform. Most customers are using the trial-and-error method to find the online broker that suits them best. Some want low charges, some want high security, some expert advice-so it pays for you to do some groundwork before you decide who to go with.

If low brokerage is what you're looking for, Geojit Securities and 5paisa.com offer among the lowest rates; the former's intra-day charges are 0.03 per cent and delivery charges are 0.3 per cent each way while the latter charges 0.05 per cent and 0.2 per cent, respectively. ICICI direct.com, on the other hand, charges 0.10 per cent for intra-day trades and 1.25 per cent for delivery trade, plus an annual maintenance charge of Rs 500 for DEMAT accounts. Except for some sites like Geojit that offer it free, most others charge Rs 300-500 for DEMAT maintenance. HDFC Securities' rates, too, are high, at 0.15 per cent (intra-day) and 0.5 per cent (delivery), but companies like these have to justify their charges or face customers like Mukesh Gupta. This Mumbai-based investor, who has been trading on various platforms trying to find his ideal broking match, says: "The brokerage rates of these banks are too high compared to the services they provide."

Thyagarajan: "5paisa.com is lenient with delayed payments"

Most online brokers allow margin trading, which works on a standard format, where you deposit a minimum amount of about Rs 20,000 and are given a margin account that is four to five times this. Geojit's margin trading system, however, is totally different-it follows NSE's margins on scrips and adds 3 per cent or more for its risk management. So, if you have a Rs 10,000 deposit with Geojit and want to buy a scrip where NSE's margin is 15 per cent, Geojit gives you a margin of 18 per cent. Trades are automatically squared off after a warning trigger.

Another big factor that swings online investors is the quality of investment advice. ICICI direct.com, for instance, believes strongly in classroom education and this is perhaps a big reason for its large client base. It offers research reports, technical analysis and solid factual reporting. It also has a good FAQ (frequently asked questions) page telling the first-time online investor exactly what he needs to do for registration and trading. Motilal Oswal is another broker that gets full marks for investment counsel. With a base of 5,000 active online users, this company has made a name for its in-depth research and users say stock recommendations are mostly bang on target.

Poor research just as easily alienates clients. Online investors often complain that some research reports and company fundamentals cannot be accessed. But the companies are taking steps to address this. Says Kotak Securities CEO & Executive Director S.A. Narayan: "We have a centralised toll-free customer care number; if deficiencies arise despite this, we will endeavour to rectify them." Recently, Kotak has included e-mailed reports and an equity portfolio tracker among its services. Sharekhan scores very well on the stock recommendations front but investors complain of frequent technical glitches and poor service. Says a Sharekhan spokesperson: "Our Mumbai centre recently revamped the customer care centre, making it toll free. This is going to be implemented across centres."

Timings can also be an issue. On the Geojit site, for instance, day trading closes at 2.45 p.m. A customer complains: "Early closure makes it difficult for day traders." Kotak Securities, on the other hand, allows intra-day trades till the market closes and also waits for six days for delivery trade amounts to be settled, although it does levy an interest. While ICICI direct.com and HDFC Securities also square off at 2.30 p.m. and 3 p.m., respectively, the pure-play brokers generally allow trading till market closes.

Technical glitches continue at many of these online trading sites, making life difficult for customers. At the HDFC Securities site, customers complain about the absence of a live price scroll while the Sharekhan site requires users to download software for web-based trading, which means they cannot trade from anywhere they want. Says a Sharekhan client and a former Canara Bank employee A. Revathy: "I am seriously considering moving to an offline broker." Kotak Securities' customers complain of difficulties in downloading its advanced trading platform.

On the other hand, something like 5paisa.com's demo site-which allows you to see exactly what to expect from online trading after enrolling-goes a long way in building user confidence. Padma Thyagarajan, an hr manager with a café chain and a 5paisa.com trader, says: "In case of delayed payments, the site does not charge interest or sell the stock without intimating the client."

Many online brokers have moved from single to multiple platforms, each compatible for certain conditions. For example, Kotak Securities has three platforms: for LAN systems, for single PCs and for stock quotes. Others like 5paisa.com have two platforms, one Net-based and accessible from anywhere and the other CD-based. And Geojit has three platforms, one with streaming quotes, another without, and a third speedy download option that comes with a minimum brokerage commitment. Decide your usage pattern to discover what kind of platform you require.

Then, there's the security angle. While ICICI direct.com and HDFC Securities' banking backgrounds make their systems reassuring, the other sites too boast encryption software, firewalls, two-level passwords and internal audit systems; some like Geojit and 5paisa.com also educate clients on Net safety.

So, if you've been thinking it's just a question of signing up with the first web broker who approaches you, think again. You need to do some homework before you click the 'Buy Now' button.

NEWS ROUND-UP

April Rain
After a halcyon phase, the market is roiling again, triggering worries of an imminent crash. What's in store?

By Anand Adhikari

Date: 07 April 2006. The sensex is at 11,931 points, a historical high. The investor community starts chilling the bubbly to celebrate what now looks inevitable: the 12k breakthrough. The market has other ideas, though. Later that very day, it starts a sharp slide, slipping to 11, 237 points by April 13. There's palpable nervousness now, with dire predictions of a crash.

"It's psychological: the fear that the market is fully valued and may crash anytime is setting off panic reactions even when small negatives hit the bourses," says Sushil Muhnot, Managing Director, IDBI Capital Market Services. Experts say volatility has set in because the market breadth has been weak overall, with more stocks falling during a day than rising. (See Losers Are Gaining.)

Contrary to common fears, however, this is not possibly a sign of bad times ahead. "The fundamental story still looks intact," says Pankaj Namdharani, an analyst at sap Securities.

If that's so, just what is triggering the fall? "Large money flowing into a few select stocks breed volatility," says Namdharani. This might not continue. With 2005-06 results due to come out soon, investors are likely to take fresh positions in mid-caps. This will make the market more broad-based, say analysts. Remember also that the RBI has recently started putting the screws on liquidity, which has cooled off market speculation.

Adding to the chaos, of course, is the fact that FIIs (foreign institutional investors) are not playing ball, choosing to use the rise towards 12k to book profits instead. Their spurs: soaring global interest rates and high crude oil prices.

What's interesting, though, is that even in this high volatility scenario, there are buyers at the bottom pushing up the indices during the day. "Investors sitting on cash are definitely shopping in the market for good deals," agrees Muhnot.

To panic now is foolish. In fact, investors have to learn to live with heavy fluctuations when the market reigns at such high levels. Our tip: invest for the long term and ignore daily fluctuations.

Look Beyond The Biggies
In a booming cement market, the smaller companies look like they could pack a very strong punch.

Boom time: The cement sector is witnessing strong growth

Conventional wisdom will say this is not the right time to enter the stock market. But the cement sector, with its strong array of mid-rung companies, still has a significant number of value stocks. Some of these are still trading at a discount to their larger rivals at a time when the sector is showing strong growth.

The withdrawal of fiscal incentives has restricted capex in the cement sector to low-cost, brownfield expansions. This lack of new capacity, coupled with rising demand, is driving prices up and will help cement companies post good profits. With capacity utilisation at 88 per cent and the next greenfield plant still two years away, analysts feel the strong pricing trend will continue for some time.

Demand, in fact, is expected to grow by 10 per cent in the next two years, with the maximum push coming from the booming housing sector, government spending on infrastructure, and large private sector capex plans.

While large cap cement sector stocks are, expectedly, doing phenomenally well, the interesting story might lie in the mid-cap cement stocks now. Although they have already moved up in the last 15 trading sessions, analysts think there is still some steam left in select scrips. Says Jaspreet Singh Arora, research analyst, Angel Broking: "The recent run-up in biggies like GACL (Gujarat Ambuja Cements Ltd) and ACC (Associated Cement Co. Ltd) has created a gap between large-caps and mid-caps."

While your bet should be on the fact that some amount of catching-up will take place, as Arora says, the rise will be in select mid-caps only, such as those with higher operating margins compared to their peers. "For instance," he says, "the market will reward JK Lakshmi Cement more than Mangalam Cement." Analysts also say mid-caps with a strong niche presence like OCL India will benefit at this point. OCL is growing strongly in the eastern market, where capacity addition is likely to be slow. Another promising stock is Shree Cements, one of the most efficient producers in the north.

-Mahesh Nayak

Just what is driving the MTNL stock northwards? Market buzz has it that the BSNL-MTNL merger might finally be coming through. Says Alok Kejriwal, Director, KRIS Securities: "The news is pushing the stock up," but any merger is unlikely to happen overnight. MTNL operates in Mumbai and Delhi while BSNL is spread across India. The merged entity will have a subscriber base of 60 million, which will give it huge marketing clout with suppliers plus significant cost savings. "Since 1994, MTNL has underperformed. If a merger is actually on the cards, then there is certainly upside potential," says V.K. Sharma, Director & Research Head, Anagram Stock Broking. It looks fairly priced, but investors might have to wait a while for appreciation.

-Krishna Gopalan

Mutually Satisfactory

Sebi: Rewarding investors

Mutual funds are meant to encourage long-term investing but in India, piquantly enough, the schemehoppers make all the money. But Sebi (Securities and Exchange Board of India) is now finally rewarding faithful investors by prohibiting mutual funds from amortising new fund offer (NFO) expenses over five years. Funds will now even out expenses upfront and meet NFO costs (sales & distribution etc.) out of the entry load. Says Shashi Krishnan, CEO, Cholamandalam AMC: "This way long-term investors will not end up bearing everybody's expense loads." So far, schemes amortised expenses of up to 6 per cent of the total corpus over a five-year period, with the result that investors who stayed on in the scheme ended up bearing these expenses long after the short-term investors had exited. While Sebi's move won't necessarily stop scheme hopping, at least loads will now get fairly distributed.

-MN

Out Of The Box
They sell everything, from floor mops to biceps builders, but should you be buying? A look at the tele-shopping phenomenon.
By Shaleen Agrawal

Just about 10 years ago, our TV channels redefined commercialism as we knew it. Instead of ads touting a cure for the common cold, we got to see bright-eyed presenters demonstrate novel products like wrist exercisers, magic dusters and electrical doodads that did everything. And all you needed to do was call a number and order whatever it was you were watching on TV.

Since then, tele-shopping or sky shopping has come a long way. According to some estimates, it is today a Rs 300-crore industry, and Dinesh Vadiwala, CEO, Asian Sky Shop, predicts an annual growth of around 10 per cent. He may not be far wrong. Experts say sky-shopping accounts for 110 hours of TV time daily, of which 24 hours goes on prime channels. And, say insiders, the industry serves 20 lakh customers every year.

Asian Sky Shop, TVC, TSN, Telebrands and Shop 24 Seven are some of the companies that sell their wares on air. The intriguing products and the persuasive spin have mesmerised viewers alright but it has taken some time to convert them into buyers. "Interest in the industry has grown only in the last three years or so," says Vinod Agarwal, Chairman of TVC, one of the leading players in the business with estimated revenues of Rs 55 crore.

And here's the really cool thing about sky shopping in India, the land of the cautious buyer. Since people are paying as much as Rs 30,000 for, say, a treadmill, they would rather touch and feel it and be assured it really works. So, most sky shops have franchisees with physical shops that stock the products you see on TV. Customers see the stuff on their screens, then walk in, test and buy the product. And after one happy experience, they gain confidence about doing this sight unseen the next time. Shailendra Panchal of Mumbai-based Tanvi Enterprises, a TVC franchisee, recorded sales of Rs 4 crore last year.

But why would anyone buy products they've only seen on TV? Chiefly because these are unique, bordering on the bizarre, and rarely found on the shelves of your neighbourhood store. Where else will you find miracle juicer-grinders, magic mops, tenacious home tools, and machines that reduce waistlines, augment bustlines, remove wrinkles, or iron your hair? "We are constantly looking for innovative products," says Agarwal.

But, as Agarwal adds, novelty is not everything; price definitely matters. So, TVC is now beginning to sell cheap, not-so-unique products like branded crockery imported from Italy and Brazil. Says Agarwal: "The only way to increase business is to widen the range on offer. We will do so at low prices."

Should you buy? There are basically two issues when it comes to sky shopping: the danger of landing a dud and the premium price you pay for it. The former problem has been addressed to some extent by the franchise outlet, where you can test your purchase. Asian Sky Shop claims to also repair and/or replace faulty products. "We believe in providing value for money," says Vadiwala.

The array of products available on TV is definitely in the premium price band, ranging from Rs 990 for something like Ayurslim (an ayurvedic weight reduction medicine) and Rs 3,000-20,000 for gems and jewellery, to Rs 10,000-35,000 for Technowalkers and motorised treadmill. This is no deterrent though and buyers are increasing. Vadiwala attributes the growth to aggressive TV promotions triggering impulse purchases and to higher disposable incomes.

If you are paying so much, surely you should be assured of quality? But industry watchers say counterfeits are a real threat, with cheap duplicates available readily. And when a customer is fobbed off with a faulty product, or something that is not "what we saw on TV", can she get redress?

Pushpa Girimaji, consumer activist, recalls how a customer ordered jewellery from a TV shop and received something that was very different from what he had seen. The sky shop refused to replace the piece, saying it was merely an advertiser and that it was the supplier who was at fault. The good news: the consumer court ruled in the customer's favour, saying the sky shop was responsible for having delivered the wrong product, particularly since it had also charged the customer for insuring the product.

Unfortunately, not all customers can or do go to consumer court. "These programmes also reach small towns, where awareness is low," says Girimaji. And access to consumer courts, difficult. The solution is to protect consumers at the time of purchase itself. "There should be a trial period of 15 days, when the consumer can use the product and get it replaced for free in case of problem or fault."

Though both TVC and Asian Sky Shop say they have a mechanism for exchange of faulty products, TVC's franchisee Panchal says: "We don't take back products once sold. There is a company customer care department that takes care of complaints." According to him, all products come with a six-month warranty.

This anomaly about the exchange policy smacks of bad practice. Faulty goods are bad news, more so if they are food or health products. If the sky shops shrug off responsibility, exactly where does the consumer go?

Thus far, buying on TV has been a fun-and-games thing. But if, as these companies predict, products and sales mushroom rapidly, it's time some strong regulations were put in place. Failing which, we say it's safer for you to stay on the couch and watch cricket instead.

BY JAYANT R. PAI
Forecast 2006-07
Investment vehicles wildly outdid expectations last year. What's in store this year?

The year 2005-06 has just drawn to a close; and it was an extraordinary financial year in more ways than one. It was one of those rare years when almost every asset class gave positive returns. While one reason was genuine demand for the underlying value of most investment options, the other was the sharp rise in inflows from global institutional investors.

The crystal ball for 2006-07 is cloudy but some indications emerge:

* Debt mutual funds will partially regain lustre in line with rising interest rates. Also, the prevailing liquidity crunch will compel banks to offer juicier rates on short-term deposits. The tax break under Section 80C might help this asset class

* Equity market returns may be muted (maybe 10-12 per cent), as earnings tail off from these levels owing to stiff headwinds in the form of rising interest rates, oil prices, labour costs and rising new paper issuances. However, as always, certain sectors such as cement and engineering will outperform the broad indices

* Precious metals will continue as preferred hedges against inflation. The first Gold Exchange Traded Fund is likely to be launched this year. Investors should look at this for diversification.

* Real estate will continue to return around 15 per cent. However, incremental growth will be seen mostly in non-metros. In Mumbai, the freeing up of mill lands may dampen rates in some areas. Although housing demand will stay strong, higher home loan rates may prove a big negative

* Art will gain ground as a credible investment option. The newly instituted ET-Osian's Art Index has risen a stupendous 221 per cent y-o-y, easily beating other asset classes. However, it will stay an option only for the well-heeled investor.

The author is Vice-President, Parag Parikh Financial Advisory Services

Value-picker's Corner

RPG LIFE SCIENCES; PRICE: Rs 193

Some new products and a restructuring later, RPG life Sciences has recorded a turnaround, posting net profits of Rs 3.64 crore for the quarter ended December 31, 2005, up from a Rs 2-crore loss in the corresponding quarter in 2004. The only Indian maker of fermentation-based products, Epirubicin and Doxorubicin, this niche player is also looking to expand overseas. A debt restructuring and arbitration programme can help the company save about Rs 25 crore. Profits will also come from the sale of investments (2005-06 investments: Rs 135 crore). Analysts call it a promising turnaround story. At around 22 times, the stock is trading at a steep discount to its peers on forward earnings.

-Mahesh Nayak

Trend-spotting

-MN