CONTENTS
LETTER
ISSUE CONTENTS
26 July 2012
FROM THE
EDITOR
18 SEBI’s Share Sale Rules: Bear Market Dilutions; ATM Fraud: Tech Tricks; SEBI’s VRS: Unclear Objectives
Loans Gone Bad
DIFFERENT STROKES
Seeking 20 Desperately a Rally
P
ublic sector banks (PSBs) in India are a product of the economic policies that were supposed to deliver a ‘socialistic pattern of society’. Conceptually appealing, the idea has been quickly misused, as happens to ideas in a democratic country with widespread illiteracy. Politicians, who control the economic levers, find a way to exploit assets that ‘belong to the people’. Top managers and some of the loans given to businessmen are products of corruption or influence. Accountability is low. No wonder bad loans grew by 56% during FY11-12. We are not sure that the policymakers want to do much about it. Assuming they do, what can be done? Gurpur, a banking analyst, with years of hands-on experience, explains. In two companion pieces, Sucheta Dalal points to the corruption in toplevel appointments and our analysts explain how investors should be choosing bank stocks. SEBI has once again short-changed the retail investor. Sucheta, in her Crosshairs section, explains how promoters enrich themselves through the ‘preferential allotment’ route and how SEBI has made it even easier for them to raise money, by relaxing some of the rules. Systematic investment plans (SIPs) are a popular way to invest and mutual fund companies have launched different variants of SIP. This time, our Mutual Fund Pointer section explores the various kinds of SIPs that mutual funds try to market to consumers. Are they safe and smart? Turn to page 22 to find out. A lot of consumers use financial planning the wrong way and usually get disappointed in the end. R Balakrishnan tells us the right and practical way to go about constructing a financial plan. Moneylife Foundation hosted two successful consumer related events last month. Sandeep Jalan, an advocate, talked about how to deal with situations involving law, judiciary and enforcement agencies. In the other event, Shirish Deshpande, a leading consumer rights activist, told the audience how to devise an effective strategy to win consumer battles. We plan to conduct many more such events. Stay tuned. Debashis Basu MONEYLIFE | 26 July 2012 | 10
But can the Sensex be engineered to bring back investors and whitewash corruption scandals? FUNDS
24 Cover Story Public Sector Banks: Loans Turning Bad The bad loans of public sector banks grew by a whopping 56% during 2011-12. This has little to do with slowdown and points to a deep systemic malaise. Assuming that the government wants to do something, what steps need to be taken? And what should investors do? An analysis by Gurpur
22 SIPping Flexibly Systematic investment plans come in different variants. Are they useful? Jason Monteiro reviews them SMART MONEY
13 Your Interest
31 Simplicity Works Best
First pay credit card dues and then file complaint; GlaxoSmithKline pleads guilty; ordered to pay $3 billion; Bundi UC Bank penalised for excessive service charges; Auto-makers to repair manufacturing defects free for 7 years
Many people try to fit a financial plan to their wants rather than the other way around STOCKS
14 Your Money
32 Street Beat
Mutual Funds: Entry Loads; Property: Online Registration; Mortgage: NHB Forms Mortgage Guarantee Firm; Banks: Schemes for Farmers, FCNR Deposits; Offshore Savings: Hoarding in Swiss Banks
– Deccan Cements: Profitable Operations; – Chaman Lal Setia Exports: Quality Exporter
16
Current Account
Mental Accounting: How Marketers Take Advantage of Us
17 LOOSE CHANGE Moneylife Quiz; Sound Bites: KC Chakrabarty, Chanda Kochhar, Dr Manmohan Singh, Jim Rogers Disclaimer: Moneylife has a policy of not allowing its editorial staff to buy and sell stocks that are written about in the magazine. All personal transactions in individual stocks are subjected to internal disclosure rules.
WHICH WAY
38 Bullish Noises But the short-term move that started in early June is maturing POPULAR PICKS
The most popular 39 RIL: stock. Is it worth it? Fund managers must have it in their portfolio because it is an index heavyweight
STOCKS VALUE PICKS
CAREERS
40 InOut&
with 52 Coping Job Loss
This time, we saw an exodus of six stocks because they became expensive
If you have been laid off, remember it is not the end of the world. Keep your spirits up, look after yourself better and be flexible, suggests G Venkatesh, after talking to several people who had lost their jobs
STOCKGRADER 42 Medium Term
Atul Auto shot up 15%, Repro India rose 6% while Wabco India fell 5%
Long Term
Gruh Finance skyrocketed 15%, UltraTech Cement rose 6% while Berger Paints India fell 5%
HEALTH
What Swarajya 54 Means to Me – When one has a free mind, diseases will only be exceptions – Pulse beat: Medical developments from around the world LEGALLY SPEAKING
INSURANCE
44 Insurance Trends – HDFC Life Smart Woman: Not-so Smart – Reliance online term plan: A Crowded Market Segment – HDFC ERGO Home Insurance: Online Option AUTO
New 46 The Old Maruti Will Maruti Suzuki have the gumption to change the way cars are sold in India? AIR TRAVEL
Better, Get Social 48 Travel Media in Your Pocket Airlines, hotels and the travel community are turning out to be more responsive online. This makes your travel better & improves experience TRAVEL
49 Lucerne: Holiday Paradise Centrally located, in the heart of Europe, Lucerne is an outstanding combination of a culture city, stunning mountain vistas and a pristine lake, found Naveena Israni
56 Mantralaya to Manesar A Saga of Blunders & Lessons for Investors EVENTS
60 Moneylife Foundation Events – Moneylife continues its series of successful event to empower its members
– One should be unhesitant to file a consumer complaint to curb malpractices says Mr Shirish Deshpande
BEYOND MONEY
Sight 66 Giving to The Blind Judith Fernandes writes about how this unique organisation is working to make life easier for the visually challenged and ensure that they become contributing members of society
DEPARTMENTS Letters............................. 4 Book Review.....................58 Money Facts.....................63