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• Profits burn down for Samsung India this quarter: The decision by Samsung to withdraw the fire-prone Note 7 from all markets is likely to result in a Rs. 420 crore hit for the company in India this quarter, and pave the way for Google and Apple to grab market share at the top end. Samsung had discontinued the Note 5 model to introduce Note 7, but may now re-introduce the older model to recoup whatever losses that are possible. 

• ICICI Bank and Dubai's Emirates Bank are joining hands to use blockchain technology, in a first for both geos. The blockchain effort is likely to cut transaction costs and make international transactions near-real time. Savings for both banks is likely to be significant if the pilot is successful. Remittances from the Middle East to India are a big part of international transactions, and UAE, where Emirates Bank is based, is the highest contributor of remittances to India. 

• Even as Toyota and Suzuki have announced a new partnership to expand market share in India, Renault India is set to recall its top selling entry-level Kwid model, with 50,000 cars sold between October and May potentially seeing problems with a faulty fuel system. 

• A meeting of rivals?: In a vindictive move, after India compelled other SAARC members to pull out of a summit in Pakistan, Pakistan may be discussing a SAARC-like group in Asia that excludes India, according to a Pakistani newspaper. The report comes just as Dhaka prepares to host Chinese President Xi Jinping with the hopes of getting investments from China. India had earlier foiled an effort by Pakistan to get China added to SAARC.

• Photo of the Day: Dussehra celebrations this year in some cases acknowledged India-Pak tensions, with effigies of Nawaz Sharif and Pakistan symbols burnt as demons. NYT/Getty

Toyota and Suzuki are exploring a possible business partnership, one that will give Toyota much greater access to growing car markets like India. Suzuki is currently India's leading car manufacturer through Maruti Suzuki. A partnership with Toyota would benefit Suzuki as well, which has long focused on small cars but would now have access to Toyota's technology, including self-driving cars and electric motors. 

Toyota has long seen emerging markets like India a difficult nut to crack. A partnership would also help both the companies address a global car market that is rapidly changing with new battery-powered technologies, as well as self-driving solutions where tech companies like Google are leading over traditional car companies.

• State Bank of India is currently trading above its 200 day SMA, but the bank stock is likely to fall again on dismal Q2 results. Kotak has projected a 40% fall in net profit for SBI YoY due to provisions against bad loans, hopefully buffetted by higher loan recoveries. The news comes just as Vinod Rai, who is helping oversee turnaround in the sector, said that two large PSU banks may merge after addressing their bad assets. 

• Uber is now preparing to provide bus and van services in India, in an expansion the company calls 'Uber Everything'. The idea is to offer every option available for a passenger to go from point A to point B. The pilot in India will be managed from Bangalore's technical center. Uber had previously offered UberMoto, the two wheeler service, but had to retire it after regulatory pushback, and the insistence from the Karnataka government that the service was illegal. 

• What is the world's best-performing IPO? That would be Luen Wong Group Holdings Ltd, which jumped 1,438% on the first trading day after its April IPO and is now 6,715% above its offer price. This is an outcome less because of company performance and more due to the nature of Hong Kong's stock market, where over 50 companies had their market value jump over 1000% in a six month period.  

• GST reform is likely to push India past 8% GDP growth, says an S&P report. The estimate for India has gone up even as China struggles to maintain its growth footing and is now averaging around 6.1%. 

• Photo of the day: A man dressed as Spiderman cleaned windows at a children's hospital in Brazil and joked with the patients during the country's Children's Day. Reuters

• Bad loans in banks - the biggest choke to investment and credit growth in India - have grown 15% in the six months from December to June, to $138 billion, says Reuters. Weak credit and investment is already weighing down industrial production numbers, which contracted by 0.7% in August. The RTI request filed by Reuters resulted in the release of these numbers, just as the government has been weighing options to clean up these bad assets. The options include setting up a 'bad bank' that buys up these assets, a bank by bank cleanup, or asset swaps. Former RBI governor had opposed the bad bank option, but it remains on the table. Any entity set up would have to address this problem with government funds, meaning that one way or another, the taxpayer will be on the hook for this debt. 

• While bank NPAs remain a growth overhang, the government is working with McKinsey to address other issues of regulation, to unshackle businesses and make it easy to grow in India. An early focus has been on eliminating the paperwork required by businesses, and digitizing many requirements including labour certifications. 

• Facebook has launched Workplace, a company communication tool which puts the company in direct competition with businesses like Slack and Skype. Workplace does not connect to FB personal accounts, and while it has a news feed, the feed would be limited to company announcements and memos. The tool also allows voice and video calls. 

• Photo of the Day: militants have taken refuge in a government entrepreneurship development institute and are clashing with police in Pampore, Kashmir. The militants apparently crossed over via the Jhelum river. AP/Firstpost

• A big bang Pharma IPO: What is set to be the pharma industry's biggest IPO in a decade is coming up in early 2017, with Eris LifeSciences' Rs. 2000 crore IPO. The company, which figures in the top six in India for treating diabetes and high blood pressure, is seeking a Rs. 10,000 crore valuation. Eris currently clocks revenues of Rs. 800 crore and profits of Rs. 200 crore. 

• Not a happy Dussehra: there are some dismal second-quarter results are coming up for India's IT services companies, as everyone from TCS, Infosys and the smaller players are hit by weak spending, pricing pressures and automated offerings that are taking a big bite out of the IT services pie. The second-quarter is usually the better-performing quarter of the financial year, and this therefore does not bode well for yearly results. Infosys, which has already lowered its guidance once, is expected to do so again. Infosys has seen 5 price downgrades from brokerages in recent months, and TCS has seen three downgrades in the last month alone. 

• Repco Home Finance is the latest company to come under scrutiny by the CBI, with the agency searching company and home premises of directors after allegations of favoritism to some customers. The company insists that regulations were followed: the allegations are apparently regarding a Rs. 6 crore loan taken by a Coimbatore-based firm. 

• Amid recriminations, anger from telecom rivals, Reliance Jio has claimed a 'world record' in crossing 16 million subscribers in its first month. However, it remains to be seen if these subscribers stay on after the free data services expire in three months. 

• Photo of the day: India's indigenous fighter jet Tejas steals the show on Air Force Day. The maneuvers included the aircraft standing vertical in the air, loops and low-speed turns. Firstpost/Naresh Sharma

• The spectrum auction ended with Vodafone putting down the most amount of money, purchasing over Rs. 20,000 crore of spectrum. Airtel came in second, followed by Jio and Idea. Tata Teleservices faced strong bidding competition from Idea in renewing its Mumbai airwaves and ended up spending over Rs. 4,000 crore to retain its spectrum. Telcos however, could not bid on the highly efficient 700 MHz spectrum due to the steep pricing for the band. 

• After ICICI Prudential, another insurance company is preparing to list. SBI is now in talks with private equity investors to sell 5% of SBI Life, in discussions which will help set the price of the eventual IPO issue. SBI owns 74% in the life insurer. SBI is seeking a valuation of at least three times SBI Life's FY 16 value of Rs13,000 crore. ICICI Prudential Life listed at a multiple of over three times its FY16 value. 

• The Tata group is being sued by Docomo for damages and breach of contract,in a suit worth over $1.17 billion. The case has been filed in an American court, over Tata's refusal to pay the exit price for a buyout, which was agreed upon when Docomo invested in Tata Teleservices in 2009. The Tata group is currently losing Rs. 2 crore a day in court fees and costs.

• GoAir is challenging the use of 'Go' in IndiGo's name and website. Google has also been named as a defendent in the suit, for reasons as yet unclear. The court justice remarked that its good that GoAir is not demanding that Google also drop the 'Go' and change the company name to 'Ogle'.

• Photo of the day: Children fleeing ISIS-controlled areas in Syria ride in a pickup truck. Reuters

• Adani Transmission has purchased the transmission assets of the Anil Ambani promoted Reliance Infra, consolidating its presence in the space and becoming the largest private operator of power transmission networks in India. The deal closed at an estimated Rs. 2,000 crore, and follows close on the heels of Adani's acquisition of GMR Energy's power transmission projects and of the Aravali Transmission Company. 

• Thane Crime officials have raided seven call centres and arrested 70 employees for threatening US citizens and extorting them of money. The employees, trained to speak in an American accent, would contact US citizens posing as Internal Revenue Service tax officials, threatening them with jail terms and fines for irregular tax filings. They would then demand bank account details, and siphoned money from their accounts. The daily turnover of these call centres was to the tune of Rs 1.5 crore, with an annual collection of over Rs 400 crore. 

• Should you buy stocks during cross-border unrest? The BSE index fell by 1.6% on 29 September, the day the surgical strikes against Pakistan were reported. Markets rose significantly as the 1999 Kargil conflict was ongoing. However the Kargil war was a short-term conflict, and there is historical evidence that long-term tensions impact the economy and stock markets significantly, reducing trade and bringing down industrial production and consumer optimism.  

• Amazon has seen a big bump in its India sales this season, with sales growing 3X compared to last year. 70% of new customers came from Tier 2 and Tier 3 towns, suggesting that customer optimism and spending is widespread, aided by a better-than-average monsoon. The biggest selling item has been interestingly, the Amazon Prime membership in a country where analysts often claim that customers do not buy subscriptions or pay premiums for faster delivery/service. 

• Photo of the day: A treehouse Army lookout on the Line of Control. Firstpost

• Automation is threatening close to 70% of jobs in India, and 77% of jobs in China, says the World Bank. Automation of many industrial and service jobs, the bread and butter of growth in these countries, could mean large scale unemployment at a time India badly needs strong job growth for the many millions of young workers coming of age. India is among the youngest countries in the world, and the government will have to figure out new ways to address this challenge. Some solutions that are already being proposed in other countries include a universal basic income for all adults. 

• Google puts India in focus, making it among the first six markets it will launch the Pixel smartphone at a price of Rs 57k. The phone comes with virtual reality enabler Daydream, Google Assistant built-in, and unlimited cloud storage. The fancy features and the phone's appearance puts it in direct competition with top end phones including the Samsung Galaxy series and Apple iPhones. This is a big jump that Google is taking into the hardware space, with its additional announcement of Google Home. 

• The new RBI Governor Urjit Patel marked a definitive end to the Rajan era, with a cut to the repo rate - the borrowing rate for banks - from 6.5% to 6.25%. The RBI said all six members of the new Monetary Committee voted in favour of the rate cut, and cited falling inflation as the reason for the move. In the future the number of favorable votes in favor or against rate cuts are likely going to be an additional indicator to markets how optimistic the RBI is about inflation and growth. 

• In light of the upcoming Adiya Nuovo merger with Grasim, the Aditya Birla group may be looking to sell its minority stakes in the telecom tower and financial services businesses, while Grasim fully exits from its fertilizer and insulator companies. The telecom tower business is a subsidiary of Idea Cellular.

• Photo of the day: Brian Rakowski, Google VP of products, talks about the Pixel phone at the launch event. AP Photo/Eric Risberg

• The bidding war for spectrum may turn into a damp squib: Yesterday saw six rounds of bidding from telcos including Bharti Airtel, Vodafone, Idea Cellular and Reliance Jio bidding for Rs. 3,261 crore worth of spectrum, a steep fall from Saturday's bds worth over Rs. 53,000 crore. The high reserve price for the airwaves, especially in 700MHz has resulted in telcos not bidding for that particular band, despite it being rated as the most efficient. 

• The sales and price discounts available on Amazon, Flipkart and Snapdeal have again drawn the ire of offline retailers, who see the steep price cuts as hurting their own sales. They allege that the marketplaces are still violating new rules by requesting vendors to provide discounts; offline retailers are also miffed by the price structure and inventory advantages online retailers evidently have, enabling them to offer goods at lower margins. 

• The Supreme Court has put Karnataka in the dock over the Cauvery issue, with the SC saying it will only hear its review plea once Karnataka complies with the Court's earlier order to release water to TN. Karnataka says its down to just drinking water supply, and the state legislature passed a resolution against further release of water, defying the orders of the Court. 

• Analytics and data mining is what helped the Government identify black money holders, with just 15% coming forward voluntarily to disclose their wealth. Most of the rest came after the Income Tax department used data surveys and analytics to identify likely black money holders and approach them with the threat of prosecution. This suggests that attitudes towards tax compliance have not significantly changed, with people still attempting to evade the taxman as much as possible. 

• Photo of the day: India clinch the series against NZ with win, and reclaim the Number 1 Test ranking. Firstpost

One of the greatest influencers on how you spend and save, is what your parents did. Mothers who worried about the monthly budget and made you wear hand-me-downs, fathers who wanted to buy the small car because that’s what everyone was doing, a family whose savings consisted of gold in the Godrej almirah: all these still influence our decisions today in how we save, even though the economics have changed.

Take the Fixed Deposit instrument for instance. It’s an old-school instrument that’s been around for a long time, and that all the older generation in our families put money in. FDs however, became a favorite at the time because really, there was no other good option. Stock market reforms in India began in the late 1990s, and before that FDs were the only reliable financial instruments.

But Fixed Deposit accounts today have one of the worst taxation rates, with returns taxed at the normal tax rate. It’s true that the longer the FD time period, the better the rate - but the premature withdrawal fee involved for most Bank Account FDs limits the gains you can make.

Compared to FDs, Debt Mutual Funds hold the key to better returns, are there are broadly 3 kinds of Debt mutual funds which can replace FDs easily at low risk to the investor:

1- Ultra Short Term Debt Funds : These invest in debt paper with maturity of less than a year. These have the lowest volatility and are useful for when you want to park your money for a year or less.

2- Short Term Debt Funds: These invest in papers with average maturity which is typically less that 2-3 years.

3- Long Term Debt Funds or Income Funds: Ideal for investments for over 3 years.

4- Other debt options like Liquid Funds ( lowest risk, lowest returns) , Credit Opportunities (highest risk, highest returns - invest in Corporate bonds) and Gilt funds ( government securities but highest volatility) exist but they are not an exact replacement for FDs so we won't discuss them.

Pro tip: Debt funds also pay trail commission to your broker - so invest directly via the AMC's website and get that extra .5% per year in your account, rather than paying it to your broker.

Fixed Deposit rates have yielded anywhere from 7-9% in the past 5 years. We have chosen to take the average of 8% for the purpose of our annualized yield calculations.

The charts with the calculations are below. Even before taxes, debt instruments give out higher returns than FDs over both the 3 year and 5 year period. The long-term debt mutual funds hit double digits for average and weighted average returns*.

*Weighted average - where the returns are weighted based on the size of money managed by the MF(AUM). This is a better yardstick than ‘average’, since it gives the actual profit made.

What do you get if you put in Rs. 100?

Let’s say you invest Rs. 100 in each of these instruments.The inflation-adjusted value of that Rs 100 after 3 years is Rs 120, and after 5 years is Rs 143. With FDs you barely make any additional gain over inflation - you get Rs. 126 and Rs. 147 after three years and five years from an FD.

After taxes, the amount in FD does not even keep up with inflation, giving you Rs. 118 after three years, and Rs 133 after five years if you are in the top tax bracket.  Since Debt Mutual funds are taxed less heavily than Fixed Deposit and also have indexation benefits attached to them, the difference in returns becomes significant.

Over a 5 year term, Short term Debt Mutual funds on average have given nearly 20% more post-tax returns compared to a 8% FD. So while you end up with Rs 133 post tax in case of FD, you would end up with Rs 160 in case of Short Term Debt Mutual funds.

The takeaway from Part 2 is this: as investors, we need to break away from old habits that don’t fit our present investment environment.

In Part 3, I will talk about using PE effectively to measure and reduce the risk you face during equity investing. Read Part 1 of the series here.