Bet your money on few sectors as all unlikely to do well

The Securities and Exchange Board of India (Sebi) has mandated that (based on the Companies Act) all listed companies must have a woman director by April 1, failing which they may not be able to trade. This has resulted in a mad scramble to get a woman on board – a woman who appears to be eligible as all company directors are expected to have some financial knowledge or expertise in something. I believe that having women on company boards is an excellent move. Women (especially if they are strong) are unlikely to be intimidated and are more practical. It is important that companies choose the right woman director – one who will contribute and be effective as opposed to a "sister" or someone else just for the sake of fulfilling a requirement.

The prime minister has now urged those who are affluent to not claim the LPG subsidy. This apparently will release hundreds of crores. The question that arises here is whether all those who are "affluent" would forgo the subsidy? As an individual I am against subsidies and concessions as after a time people refuse to give these up. They begin to take this as a right and go to all lengths to show their eligibility. It is now 68 years since we received our independence. It is time we did away with subsidies, concessions and handouts. Only then can we as a nation become self sufficient and strong. We cannot remain a nation with job reservations, concessions, etc as that would result in mediocrity. Unless people aspire and work hard without the cushioning of handouts we cannot develop the way we should.

Though the markets broke its decline on Friday, with the Sensex closing at 27500 after falling for seven straight sessions and losing 1,279 points, it is expected that this volatility will continue on account of the Yemen impact and rising oil prices (due to Saudi's air strikes). There are fears of outflows of funds by risk averse foreign funds. India's markets are dependent on these funds as their ownership of domestic stocks have hit a record. The rupee too had fallen though it recovered marginally on Friday. As things stand, this may be a good time to enter the market in anticipation of good results for the March quarter. The choosing of investments must be focused, as all sectors are unlikely to do well. Pharmaceuticals, IT, finance and infrastructure are sectors I would focus on.

And talking of investments this is the time one invests in Section 80C investments to save tax. If one looks at returns some Equity Linked Savings Schemes (ELSS) have done very well – growing by over 30% over a three-year period. I believe that this is an investment one should make every year and then roll these over in the fourth year availing not only tax benefits but capital appreciation. The great benefit of this investment is that your money is locked in for only three years. The other investment you should have, of course, is in the Public Provident Fund. This is because you are not forced to invest the same amount every year, its interest is tax-free and you can begin withdrawing if required after five years. I do not believe in life insurance unless you have purchased a property on loan and you have taken a mortgage redemption policy to ensure that should you pass on the life cover would cover the loan outstanding, thus guaranteeing that your heirs and dependents are not left without a roof over their heads. My reasoning for this is that the return you receive is miniscule.

As India does not have social security I think it is also important that everyone subscribes to some pension scheme. The earlier you begin the better. It is a forced saving whereby you'd invest a fixed amount every year and that money would (depending on the fund and your risk appetite) be invested in equity or debt instruments or a combination of both. My recommendation would always be to invest in an equity fund as the returns would be much larger. Then when one decides to superannuate, the money could be placed in an income scheme that would ensure a regular income or used to purchase an annuity. The aim is to be able to accumulate enough that the income generated say thirty years from now is enough to maintain your standard of living.

Singapore's first Prime Minister, the legendary Lee Kuan Yew passed away at the age of 91. At the time of that country's independence Singapore riddled with poverty and corruption and was the despair of Asia. He single-handedly and autocratically transformed the island nation to become Asia's pride. As a country India is too large and too diverse but sometimes I cannot but feel that if we had one autocratic leader who had absolute power and was feared who had India's good and development as his sole agenda, that this country too would be transformed.

Raghu Palat

The writer is MD Cortlandt Rand and an author