Personal Finance Magazine Moneylife 30 June 2011 by Moneylife Digital

SUCHETA DALAL ON:

CENTRE NOT SERIOUS ABOUT RECLAIMING BLACK MONEY Personal Finance Magazine

I-T EXEMPTIONS: CAN YOUR HEART DEPRECIATE?

INVESTORS & TALENT QUIT THE AMBANIS Rs 25

30 June 2011

moneylife.in

Lazy Portfolio The

Scared of market volaƟlity? Grow your wealth the

lazy, easy way

CURRENT ACCOUNT 13 – LIC‘s Competitive Policy – Is the Sensex Undervalued?

Cover Page_139.indd 2

FUNDS 23

– Markets & Global Inflows – Schemes Awash in Cash

STREET BEAT 32 – Petronet LNG – Kajaria Ceramics

6/11/2011 1:59:28 PM

Advertisements.indd 1

6/2/2011 5:33:27 PM

Advertisements.indd 7

6/10/2011 6:14:30 PM

Volume 6, Issue 9 17 June – 30 June 2011 Debashis Basu Editor & Publisher editor@moneylife.in Sucheta Dalal Managing Editor suchetadalal@yahoo.com Editorial Consultant Dr Nita Mukherjee

Editorial, Advertisement, Circulation & Subscription Office 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai - 400 028 Tel: 022 2444 1059/60 Fax: 022 2444 2771 E- mail: mail@moneylife.in E- mail: sales@moneylife.in Subscription e- mail subscribe@moneylife.in Pune Jitendra Garsund “SANSHREY”, Nanai Baug Society, BT Kawade Road, Ghorpadi, Pune - 411 036 Mobile: 9881309801 E- mail: jrg.pune@gmail.com New Delhi DDA Flats, J- 3/66, Kalkaji, New Delhi - 110 019 Chennai 14, Mian Sahib, IInd Street, Near Madras Youth Hostel, Chepauk, Chennai - 600 005 Tel: 044 4215 5442 Bengaluru 1st Floor, 13/1, 7th Main Road, 1 Cross, Saibabanagar, Srirampuram, Bengaluru - 560 021 st

Kolkata 395, Lake Gardens, Kolkata - 700 045 Tel: 033 2422 1173/4064 4318 Hyderabad C/o Rajnidev, 15- 2- 16,1st Floor, Shop No.9, (Beside Ramdas Paper Mart), Gowliguda Chaman, Hyderabad - 500 012 Moneylife is printed and published by Debashis Basu on behalf of Moneywise Media Pvt Ltd and printed at Magna Graphics,101C&D, Government Industrial Estate, Kandivli (West), Mumbai - 400 067 and published at 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai - 400 028 Editor: Debashis Basu

RNI No: MAHENG/2006/16653

Letters to the Editor PUBLIC INTEREST Desperate measures: loans costlier, EMIs (equated monthly instalments) dearer and growth to go south! Write to the Editor! The only investment that Most newspapers often Win jewellery agree with the rulers and enhances your face value. experts and talk about ‘inflation independent of growth’. It is common knowledge that high speed growth, nearing 9%, heats up the economy and leads to inflation. In a country Congratulations Subrahmanian SH from Mumbai! as vast as India, hotYour letter to the Editor wins a Surat Diamond gift. spots develop in the most Keep writing! Keep winning! unexpected quarters. Forget prevention, it is almost impossible to anticipate the actual cure! In earlier decades, it was possible to import, to quell food inflation. We, unfortunately, have not even the basic sincerity to preserve the food-grains in ‘safe’ storage’! It seems better to let them rot in government warehouses rather than feed the poorest of the poor millions in India! There’s lot of scope—but is there any plan for improvement? Again now, when we are falling back on imports, item(s) actually cost much more as our imports ignite international market prices. Here are a few of my thoughts: 1. Agriculture is not given the importance it deserves. 2. Manufacturing industries, especially small- and medium-scale units, also deserve adequate stimulus. 3. For vegetables and cereals, only a long-term strategy can produce results. Small one-time corrective actions by our babus and netas are actually detrimental and only middle men benefit at a loss to farmers and industries. The states and the Centre have to act in unison—else, one state’s failure may cause shortage/inflation elsewhere as well! The practice of stopping the movement of agriculture produce is also not a viable option. The Centre must intervene in wheat, rice and staple items like bajra effectively and in time. We have reached a point oi t where oint h inflation i fl ti has become unmanageable g geable and the Reserve Bank of India (RBI) is only worried about the necessity of bringing down inflation to a comfortable level. Finally, the RBI has raised its short-term lending l (repo) rate by 50 basis sis points (bps) to 7.25% and the t shortterm borrowing rate (reverse repo) by 50 bps to 6.25%. .25%. It has increased its key interest r rates for `` rest

MONEYLIFE | 30 June 2011 | 4

Letters.indd 2

6/7/2011 8:42:34 PM

Advertisements.indd 5

6/8/2011 1:17:56 PM

LETTERS

` the ninth time since March 2010! It has also increased

the savings bank rate by 50 bps to 4% from 3.5%— the first time after 19 years—a move that will possibly give slightly higher returns to depositors. The RBI has also lowered the economic growth projection to 8% for the current fiscal, compared to 9% estimated by the finance ministry. The Planning Commission also has endorsed RBI’s hawkish policy of hiking key rates to contain inflation! Critical diseases need critical measures for the desired solution. The rate hikes in the recent past clearly indicate that the correct solution lies elsewhere. Shouldn’t we learn from experience the futility of such an exercise? It had invariably increased the borrowing cost of the banks’ clientele. It’s, therefore, time to look for other options, especially correcting our supply-side economics. What I fail to understand is, why is the government shying away from raising interest rates on small saving schemes like the PPF (Public Provident Fund)? As of now, this is the only solace for us over 70, whom we may call the ‘older elderlies’. In the absence of a Welfare State, we have no option but to save for a rainy day, as well as leave at least a precious little for Gen Next. The RBI’s efforts in controlling inflation have hardly had the desired effect unlike, for instance, in the US. During my recent visits in 2007 and in 2009, we hardly noticed the presence of any inflation. The most obvious reason is the increasingly strong signals the RBI has been sending about tightening liquidity and moving away from a soft monetary policy. As it has repeatedly stressed, inflation hurts and needs to be dampened. Often, at around 10%, the wholesale price index (WPI) is still above comfort levels; after a long hiatus, the RBI finds the WPI for manufactured goods also rising. In response, banks (particularly the private ones) have shifted focus from high-cost bulk deposits to current account and savings account deposits, to cut costs. Now, commodity prices too could swing upwards after a momentary lull; fuel & petroleum prices are consistently moving up internationally. How then can such a monetary policy help curtail the baneful effects of these factors? Hence, higher interest rates will only add to those

rising costs even before the business cycle begins to rev up. True, inflation has to be tamed urgently because it precedes growth and is not the result of it. But North Block has to forge the weapons. All we have right now is pious rhetoric or resounding silence. Hence, the decision basically reflects that inflation is a monster here in India. Policymakers need to ponder whether hardening rates will smother inflation or harm the depressed credit market and, by implication, economic prospects. Will they? Subrahmanian SH, Mumbai, by email

MAMATA FOUNDATION This is with regard to the article on “Bridging the Divide” on Mamata Charitable Foundation published in Moneylife (16 June 2011). The URL of the Foundation’s website has changed to: www. mamatacharitablefoundation.com. Jyoti Sachade, Pune, by email

HOUSE, THAT? The Cover Story “Best Fund Houses” (Moneylife, 19 May 2011) is interesting. However, the method of allotting ranks is flawed. Apples have been compared with oranges. How can you compare a small fund house with a 37 times bigger fund house in terms of assets under management (AUM) and number of investors? The selection of Rs1,000 crore as base for AUM is arbitrary and does not make any sense. By selecting the base at around Rs5,000 crore, the number of fund houses would have been limited to around 10 and the comparison would have made some sense. If you were very keen to include the smaller fund houses, then there should have been two categories, one with AUM less than Rs5,000 crore and the other with AUM more than Rs5,000 crore. Smaller fund houses, like Canara Robeco, Tata Mutual, IDFC Mutual and Fidelity Mutual, which have only one or two highperforming schemes, have been unfairly given higher rank than HDFC Mutual, ICICI Prudential Mutual, Birla Sun Life Mutual and UTI Mutual which have three to four high-performing schemes. A fund house which has a larger number of highperforming schemes should get a higher weightage. The ranking has been distorted due to flawed methodology. ``

MONEYLIFE | 30 June 2011 | 6

Letters.indd 4

6/8/2011 5:14:00 PM

Advertisements.indd 6

6/8/2011 3:52:48 PM

LETTERS

` By including all schemes

Housing’ is a euphemism Bulls and bears are Write to the editor! for the ‘CEO’. Nothing of fund houses, to arrive unpredictable. Invest in diamonds. Win jewellery can happen without at average return, your the connivance of methodology gives unfair the CEO. But while advantage to smaller commenting on the fund houses with lesser so-called innumerable number of schemes. anecdotes about Including the number of chartered accountants NFOs (new fund offers) Write to the editor. If your letter is the best, You’ll (CAs) swinging loan in the methodology has Win Surat Diamond jewellery. deals, you have been no logic. The basis of led to believe by vested weightage given to each interests in public sector banks (PSBs), that these can factor is not clear. happen without the active collusion and connivance of Anil Kumar Kapila, 60 Aggar Nagar Extension, the CMDs (chairmen & managing directors) of PSBs. Ludhiana, Punjab – 141 012, by email It is highly unfair to portray that all CAs are using their respective positions to swing deals. Many 1. When an individual investor decides to make an academicians from technology and management investment s/he is usually not bothered with the size of institutes on PSB boards use ingenious methods the fund house. Even then, by taking Rs1,000 crore as to make money. Not all, of course. Many honest the base for equity assets under management (AUM), CA-directors, in fact, have saved their banks from we have already eliminated 22 fund houses (out of 41) many dirty deals. Many PSB CMDs are uncomfortable from our analysis because they are too small. By the with CA-directors, only because they raise inconvenient way, every single one of the top five has assets of more questions. Any professional intervention is despised than Rs5,000 crore. The No 7 and No 8 fund houses and contemptuously dismissed. So much for corporate also have assets of more than Rs5,000 crore. The governance! ranking will change if the sample is limited to Rs5,000 Vikranth Malhotra, by email crore. 2. Since size of AUM is one of the four criteria—the larger the better—we cannot see how small houses HELP US TO HELP YOU have got an unfair advantage. Moneylife offers its readers a unique service—helping Indeed, smaller fund houses redress grievances on a best-effort basis. However, we can actually claim that we have limited resources to devote to this effort and can have discriminated against only pursue complaints that come to us by email. We them—exactly the opposite request readers to please send us crisp complaints, with of your argument! all the facts on email (not as an attachment) and send 3. Canara Robeco and us the supporting documents, only if we ask for them. Tata come after HDFC and We cannot handle physical letters. — Editor ICICI, not before. Even on the basis of performance, HOW TO REACH US Letters to the Editor can be emailed to editor@moneylife.in or without taking any other can be posted to: The Editor, Moneylife Magazine, Unit No. 315, 3rd criterion into consideration, Floor, Hind Service Industries, Off Veer Savarkar Marg, Dadar (W), investors in IDFC’s schemes Mumbai 400 028 or faxed to 022-24442771. Letters must include and Fidelity’s would be far the writer’s full name, address and telephone number and may be edited for clarity or space. ahead of UTI’s and SBI’s. New Subscriptions & Customer Service 4. NFOs are the biggest For new subscription requests, complaints about current source of mis-selling and investors’ losses. — Editor subscription and books, write to subscribe@moneylife.in or

PUBLIC LOOT Your article ‘Corporate Governance: Private Sector’s Bribe-giving’ (Moneylife, 7 April 2011) was well written. You have spoken about the nexus between a ‘little-known broker’ and LIC Housing Finance. ‘LIC

to Subscription Manager, Unit No. 315, 3rd Floor, Hind Service Industries, Off Veer Savarkar Marg, Dadar (W), Mumbai 400 028 or call 022-24441059-60 or fax to 022-24442771. Advertising For information and rates, email us at sales@moneylife.in or call 91-022-24441059-60.

MONEYLIFE | 30 June 2011 | 8

Letters.indd 6

6/9/2011 7:36:44 PM

Advertisements.indd 2

6/3/2011 4:42:13 PM

LETTER

ISSUE CONTENTS

30 June 2011

FROM THE

EDITOR Relax, Rake It In

ou must be apprehensive about where the market is heading. Investors who want to share the returns from the market fall back on friends, relatives and brokers. Those who are risk-averse keep their money in bank deposits. The more adventurous would, obviously, be working furiously on their demat accounts, listening to the talking heads—or trawling ‘hot’ websites—who give out ‘tips’. So what should you do? Our Cover Story will help you take that much-needed vacation, visit the zoo with your kids or help you climb the nearest mountain. We are actually advising you to sit back and relax with our Lazy Portfolio. Sometimes, doing nothing other than allocating your money between just two assets (fixed income and select equity funds) will achieve a lot for you. This simple approach that we had advocated—way back in 2007 and tweaked in 2010—has done very well, indeed. Take a look inside to see how these portfolios have performed and follow the 2011 strategy confidently. So drive away your blues, bring out your bean bag and watch the rain lash against your window pane. It is the season to be lazy—and smart. Meanwhile, our Moneylife website has become even more vibrant—we give you a sneak peek into what we offer you online on a daily basis. We continue with our Power of One series, where we feature Subhash Chandra Agrawal, who can inarguably be called the father of public activism in India. Far removed from the publicity that our current ‘activists’ have been receiving, Mr Agrawal has carried on his fight for decades—much before the introduction of the Right to Information (RTI) Act. On the RTI Act, Moneylife Foundation held another successful seminar by Vinita Deshmukh, a Pune-based senior journalist and civic activist. And our Kolkata seminar was a resounding success, continuing with our Foundation’s mission to spread financial literacy and empower investors. After Pune, Nashik, Gurgaon and Kolkata, our next stop is Bengaluru. Stay tuned. Debashis Basu

26 Cover Story

The Lazy Portfolio

Scared of market volatility? Grow your wealth the lazy, easy way. The Lazy Portfolio, first introduced in 2007, has done very well. We tweaked it in 2010—that, too, has done fine. We now introduce an even simpler portfolio

13 Current Account – LIC’s Jeevan Arogya is a combination of a hospital cash cover and a defined benefit policy for the entire family -- Is the Sensex Undervalued? Depends on your assumptions; analysts are too optimistic – Barbie Tearing Indonesia’s Forests Apart: Greenpeace accuses Mattel and Walt Disney of destroying rainforests

17 LOOSE CHANGE Moneylife Quiz; Soundbites

Tax Evasion: Who says the government wants to go after black money stashed abroad; Tax Benefits: Is your heart a piece of plant & machinery for you to get tax breaks?

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.

MONEYLIFE | 30 June 2011 | 10

Content.indd 2

6/10/2011 8:58:34 PM

CONTENTS EVENTS

DIFFERENT STROKES

from the 20 Fall Pedestal

Foundation 50 Moneylife Seminars

Ambani Companies: With senior employees in jail and investors losing money, Dhirubhai Ambani’s legacy looks badly tarnished

•

STOCKGRADER 39

•

“Investor, Empower Yourself” in Kolkata Using the RTI Act

Momentum M m t m SMART MONEY

s 22 Something’ Got To Give Property rates are exorbitant; inventories are piling up. But the realestate sector could offer some good picks—if there is a revival

Sadbhav rallied 5% and Shree Renuka Sugars jumped 10%, while M&M declined 6%

Medium Term

Dabur India and Petronet LNG surged 6% each, while Vivimed Labs declined 2%

Long Term

Godrej Consumer Products soared 10%, while Cairn India fell 3% and Marico lost 2%

FUNDS

Fund Pointers

– Foreign fund schemes are flooding the Indian market even as Indian savers shun the equity products of their own country – Ten equity diversified schemes were substantially into cash when the market peaked last November

INSURANCE

Insurance Trends

Group Mediclaim: Employee contribution is increasing with focus on preventive healthcare; Tata AIG’s ULIP is offering a premium payment term of 5 or 7 years; Sampoorn Samridhi is innovative but avoidable; Chola’s Total Home Protect addresses a small but important segment; Fine Print: IRDA may allow banks to sell products of two insurers; Will IRDA’s complaint-handling improve now?

SAVING AND INVESTING

58 Earning Curve Montier’s 7 Laws of Investing: Risk is Not a Number TRAVEL

On, and Off, 60 Himachal: the Beaten Track Jaideep Mukerji takes in this culturally rich and visually stunning part of northern India, dotted with landscapes of fertile green valleys, glacier-fed mountain rivers and high snow peaks

AUTO

Boot 46 Loot, & Scoot

STOCKS

Street Beat

Every car has anti-theft fittings, but security is still a concern

BEYOND MONEY

66 Eye Openers

Petronet LNG: One of the fastestgrowing companies in the energy sector; Kajaria Ceramics: Low value and high growth; Sabero Organics Gujarat: Recommended thrice, Sabero just got taken over at a huge premium

Shukti Sarma discovers Retina India which helps people with retinal disorders, and brings them on a common platform with physicians, researchers and other specialists POWER OF ONE

WHICH WAY

Fasten Your Seatbelts

The current dullness will soon give way to huge gyrations

Content.indd 3

48 Cleansing the System Subhash Chandra Agrawal wields his pen like no one else can, says Veeresh Malik

DEPARTMENTS Letters ............................ 4 Book Review .................... 56 Money Facts .................... 63

6/11/2011 3:30:17 PM

www.moneylife.in If you haven’t clicked on the Moneylife website yet, here’s e’s whyy you sshould. TOP of the LIST News you had better not miss Look before you keep The crash of Sun TV Network and SpiceJet stocks underscores the danger of investing in fast-growing companies, while ignoring their political links

news 14 reasons why you must visit the Moneylife website

HAVE YOUR SAY Vote in the Moneylife poll on the top issues of the week Are you still looking to buy gold?

Gold run Russian researchers studying the developing gold bubble point to a possible crash in June

MARKET WATCH Stay ahead of the indices

62%

Tracking the stock market action; analysing domestic and global factors; mapping the movement; describing the outlook and deriving the likely direction, day after day

Yes

35% No

Can’t Say

Because your opinion makes the change...

Share of the riches Piramal, Kanoria, Laﬀans are some of the companies that are reluctant to share huge gains from the sale of businesses with minority shareholders

Games Kalmadi played Mani Shankar Aiyer wrote to the PM about how Suresh Kalmadi purchased support and sidelined those who were inconvenient

S&P CNX NIFTY

MONEY WISE

5,600

The right and the wrong options

5,540

>> DSP BlackRock plans two more global funds. But should you invest?

5,480

5,420

>> Staying out: How to avoid ‘get-rich-quick’ schemes and scams

5,360

5,300 20 May-11

30 May-11

09 Jun-11

ML FOUNDATION

>> Morgan Stanley launches mid-cap fund. But mid-cap funds have been known to stray from their objectives

Spreading financial literacy

WEB EXCLUSIVE On issues that matter to you

>> Participate in Moneylife Foundation workshops and seminars on matters that concern us all. Whether it is about how to be safe and smart with money, or digging out critical information by using the RTI Act, the discussions will benefit you. To become a member of the Foundation, visit www.mlfoundation.in TO GET THIS AND MORE...

to our daily newsletters

for

moneyweb.indd 1

FREE

William Gamble

Anil Thakraney

Vinita Deshmukh

Sudhir Badami

How bureaucratic and political ambitions, and greed are leading governments in emerging economies to buy back big businesses

The thing about Indian advertising that depresses the most is the thoughtless use of celebs. And the most irritating choice has to be Amitabh Bachchan

An illiterate villager in Pune uses the Right to Information Act to get back land belonging to his family that was taken by land sharks

It is necessary to answer questions that have been raised about the Bus Rapid Transit System for Mumbai. But it is more important not to delay its implementation

6/10/2011 8:38:42 PM

CURRENT ACCOUNT

H e a lt h P l a n

LIC’s Jeevan Arogya— Competitive Health Insurance It is a combination of a hospital cash cover and a defined benefit policy for the entire (immediate and extended) family. Raj Pradhan explores whether it can compete with mediclaim

IC (Life Insurance Corporation of India) has launched a new non-linked health insurance plan called ‘Jeevan Arogya’. The company has sold more than 10,000 policies in less than a week and expects the product to be a grand success. The policy offers comprehensive hospitalisation benefits for the whole family of the principal insured. The plan also offers to cover the parents-in-law of the principal insured besides the spouse, minor children and parents up to age 80. This is a combination of hospital cash and defined benefit policy. This plan is not a substitute for mediclaim, but can act as a supplement. A mediclaim policy only reimburses the expenditure incurred on the treatment of an illness at a

hospital. There are several other expenses that are, typically, incurred which mediclaim policies do not reimburse. Expenses such as travel,

attendant’s lodging,

loss of income loss (for the patient and/or the attendant), prehospitalisation diagnostic tests, medicine, etc, can run up to as much as 30%-40% of the total cost of treatment of an illness. Moreover, mediclaim covers limited day-care procedures. The hospital cash benefit pays daily allowance for every day of hospitalisation. It is offered for a maximum of 30 days in the first year and 90 days per year thereafter, inclusive of stay in an ICU (intensive care unit). The maximum number of days in an ICU is restricted to 15 in the first year and to 45 days per year thereafter. There are four options offered for per-day allowance—Rs1,000, Rs2,000, Rs3,000 and Rs4,000. The defined benefits are payable regardless of the insured getting reimbursement under any other scheme, on the basis of certified photocopies of the original bills. This is for proof of the surgery having been carried out. The defined benefit plan may pay more than the actual cost of the surgery. The plan covers 140 major surgical benefits, 140 day-care procedure benefits, other surgical benefits and an ambulance benefit. The major surgical benefit will be maximum 100 times the daily hospital cash benefit. For example, if the policyholder takes the Rs1,000 hospital cash allowance option, then major surgical benefit will pay maximum Rs1 lakh in a year. The lifetime limit for major surgical benefit is eight times the major surgical benefit. In this example, the lifetime limit is Rs8 lakh. The plan has a fixed benefit for 140 surgical procedures—like major surgery of the aorta, heart-valve replacement using mechanical prosthesis, lung transplantation and so on. Category 1 will entitle you to 100% of the major surgical sum assured, which is Rs1 lakh in the above example. `

13 |30 June 2011 | MONEYLIFE

Current Account.indd 3

6/10/2011 8:08:46 PM

CURRENT ACCOUNT

` Splenectomy, thoracoplasty, aortic

valve repair and so on (Category 2) will entitle 60% (or Rs60,000 in the above example). Total prosthetic replacement of the hip joint (Category 3) and TIPS (transjugular intrahepatic portosystemic shunt) procedure for portal hypertension (Category 4) will get 40% and 20% of major surgical sum assured, respectively. The plan does not cover any pre-existing condition, unless disclosed and accepted by LIC prior to the date of cover commencement. The day-care procedures will be five times and other surgical benefits will be twice the daily hospital cash benefit per day. In the above example, they will be entitled to a flat Rs5,000 and Rs2,000 (per day), respectively. It is only an added incentive of the plan. For example, cataract surgery, operation of glaucoma, operation of nasal turbinates and so on will get Rs5,000 in the above example. All surgical procedures not in the 140 major surgical list and 140 day-care procedures are considered as other surgeries. The ambulance benefit will get expenses up to Rs1,000 based on an event that needs Category 1 or 2 major surgery. The plan offers a premium waiver benefit and a no-claim benefit. In the event of Category 1 or 2 major surgery for any insured covered under the policy, the total annualised premium following the date of the surgery will be waived. The no-claim bonus will add 5% to the daily allowance in the following year of a claims-free current policy year. The plan has optional term assurance and an accident benefit rider. There is a rebate of 2% of premium for yearly payment and 1% of premium rebate for halfyearly payment. Premiums are guaranteed for three years from the date of commencement of the policy. With

mediclaim premiums going through the roof every year, customers will be attracted by the three-year guarantee. Moreover, uncertainty of cashless mediclaim with publicsector insurers and rejection of some claims on flimsy grounds by general insurers can make Jeevan Arogya attractive for disgruntled customers. Customers have to realise that the unique selling proposition (USP) of this plan is based on the event of one of the 140 major surgeries occurring—as defined in the plan. It is possible that the surgery you have to undertake may not fall in the 140 major surgeries defined in the plan—or may be classified as Category 2, 3 or 4 (entitling you to 60%, 40% and 20%, respectively). The plan will be less useful in such cases and this is the limitation of

Uncertainty of cashless mediclaim with public-sector insurers & rejection of some claims by general insurers can make Jeevan Arogya attractive for customers the plan. For example, coronary angioplasty with stent implant for two or more coronary arteries is Category 3 (40% of the major surgical sum assured); coronary artery bypass grafting (CABG) is Category 1 (100% of major surgical sum assured), but also needs two or more coronary arteries to be bypassed via open chest surgery. What if the patient opts for minimal invasive CABG? A mediclaim policy will pay for hospitalisation without surgery or any kind of surgery. There are other health plans like ‘critical illness’ policies which will pay the policyholder having ‘critical illness’ without surgery or any kind of surgery. LIC Jeevan Arogya is

certainly addressing a new benefit segment. To make the plan compete with mediclaim, LIC is offering a quick-cash facility by allowing payment of 50% entitlement during hospital stay in the case of 57 specified major surgeries. It is difficult to predict if this ‘quick’ payment can work efficiently at all hospitals in different parts of the country. It is certainly an attempt by LIC to smoothen the payment process so that the customer has less to pay from his own pocket during the hospital stay. The total premium to be charged for a policy will be the sum of premiums in respect of each member to be covered in that policy. The indicative annual premium for Rs1,000 (daily) hospital cash benefit and Rs1 lakh major surgical benefit is Rs2,242 for age 30, spouse premium of Rs1,730 for age 30 and child premium of Rs794 for age 5. The actual annual premium will be decided by LIC and there may be a need for medical examination, especially for elderly parents/extended family. There are several plans offering only hospital cash benefits starting from Rs662 (Bajaj Allianz) for Rs1,000 per day allowance for a policyholder of 30 years. LIC Jeevan Arogya, which offers premium of Rs2,242 for Rs1,000 per day allowance and major surgical benefit up to Rs1 lakh for 140 major surgeries and 140 day-care procedures, is competitive in the current market scenario. For higher coverage, a customer may need to buy a policy for Rs4,000 per day hospital cash benefit which will entail Rs4 lakh major surgical benefit. The customer needs to go through the 140 major surgical benefits and 140 day-care benefit annexure to understand which surgeries are covered in the plan and how much it will pay out for each procedure.

MONEYLIFE | 30 June 2011 | 14

Current Account.indd 4

6/10/2011 8:08:59 PM

CURRENT ACCOUNT

MA R K E T VA L UAT ION

22%. On how many occasions has the Sensex achieved an earnings growth of 22%, especially when the first three months of the year have been a washout? Look at the Depends on your assumptions. Beware: the analysts with chart below to get some sense. In fact, assumption of such growth broking companies are too optimistic is simply absurd. Last year, which was great for earnings growth, EPS 10% correction.” Kotak’s estimate irtually every single brokerage of a Sensex EPS of Rs1,216, is lower expanded by 21% or so. Battling house is optimistic about a the headwinds of higher interest and than consensus estimates tracked market rebound, assuming that rising raw material cost, it is a pipe by Bloomberg which is around the current market valuation is dream to think that EPS growth Rs1,240. low. Arguments like “forward The consensus looks like a prime would be 22%. Actual growth price to earning ratio of Sensex would probably be half of that. example of ‘groupthink’. Here is just 14” are fairly common, What if EPS growth is only about leading one to believe that the 11%? Sensex is undervalued. But is it? This is not unlikely, given how The bullish argument is based badly Sensex companies have done on a key assumption—earnings in the March quarter without any growth. Earnings are the lifeblood plausible reason and warning. And, of markets, and if, indeed, earnings if the growth is lower at 10% (not were to grow robustly over 2012, impossible), EPS will be Rs1,120— stocks may be undervalued. But can way off the Bloomberg consensus you really bet on a robust earnings estimates. This would be a shocker growth? Like most brokerages, for the market. No wonder, Richard Kotak Securities certainly is. Bernstein, who was the chief “The BSE30 is trading at 14.4X investment strategist for Merrill is why. In FY09-10, the Sensex FY2012E EPS (earnings per share) Lynch & Co, told the Reuters 2011 companies probably recorded an (full market-cap basis)… Downside Investment Outlook Summit that risks of earnings exist but they have EPS of Rs834. In FY10-11, a year “I think what people are completely of robust recovery, the EPS was somewhat receded with cuts during missing is that the risk is not here probably Rs1,013. Three months the recently-concluded 4QFY11 in the United States. The risk is in of FY11-12 are almost over. If results season. The nature of emerging markets. There are just the EPS estimate of Rs1,240 for earnings precludes large cuts unless monstrous risks in emerging markets FY11-12 has to be achieved, macro conditions turn drastically right now in my opinion.” Stay negatively. We find the valuation of what should be the growth rate cautious. — Debashis Basu the Indian market reasonable after a over the year? An EPS growth of

Is the Sensex Undervalued?

High Expectations

FY11- 13:19% CAGR

Sensex Earnings Growth

129

181

FY93

FY94

FY95

FY03- 08:25% CAGR

FY96- 03:1% CAGR

FY93- 96:45% CAGR 250

266

291

278

280

FY96

FY97

FY98

FY99

FY00

FY08- 10:0% CAGR 1013 718

216

236

272

FY01

FY02

FY03

348

FY04

450

FY05

1431 1203

833

820

834

FY08

FY09

FY10

523

FY06

FY07

FY11

FY12E FY13E

Source: Motilal Oswal Securities

15 | 30 June 2011 | MONEYLIFE

Current Account.indd 5

6/11/2011 3:11:22 PM

CURRENT ACCOUNT

E nv i r o nme nt al Ac t iv is m

Barbie Tearing Indonesia’s Forests Apart?

BOTTOMLINE BY MORPARIA

does have a point. But APP insists that its material (paper) is 96% recyclable. The NGO’s mission is to save the planet’s forest cover. But why has it wasted material on that massive sign which it has draped on Mattel’s Los Angeles building? The City of Angels certainly could have done without these avenging green angels.

Greenpeace accuses Mattel and Walt Disney of destroying rainforests

his is no laughing matter. If controversial environment group Greenpeace has its way, tiny tots will not be able to play with their Barbie dolls or even poor old Mickey Mouse. According to a recent Reuters’ report, Greenpeace has said that “it had evidence that Barbie doll packaging comes from Indonesian rainforests” and it was “contributing to the country's rapid deforestation.” The Mattel structure near Los Angeles has been draped with a massive sign saying “Barbie, it’s over. I don’t date girls that are into deforestation.” Of course, the banner featured a Ken doll. The green entity’s sleuths have discovered that the doll’s packaging comes from Indonesia, the report adds. The packaging is being manufactured by Indonesian paper firm, Asia Pulp and Paper (APP). Greenpeace

But hang on for a minute. Hasn’t Greenpeace heard of social networking campaigns? They can bring down governments—and prevent the felling of trees, you know. We hope the next time this titan of the green lobby decides to wear (or rather drape) a cape to fight evil, it uses a mouse. And spares Mickey, Barbie and Ken. — Devarajan Mahadevan

MONEYLIFE | 30 June 2011 | 16

Current Account.indd 6

6/9/2011 7:41:28 PM

LOOSE CHANGE

Surprise Gift for Quiz winners from:

Moneylife Quiz - 104 Another quiz to tickle your brain. The answers to this quiz are in this very issue. The winner will be chosen by a lucky draw from correct entries. The answers will be published in the next issue. Send in your answers to quiz@moneylife.in with the Quiz no., your name, address and telephone number before 26 June 2011. 1. Who introduced Subhash Chandra Agrawal to the Right to Information Act? a. Arvind Kejriwal b. Bhaskar Prabhu c. Ashok Ravat d. Anil Khatri 2. Where is Petronet LNG building another liquefied natural gas receiving and re-gasification terminal? a. Sikkim b. Kochi c. Ranchi d. Agartala 3. Who coined the term ‘BIMARU’? a. Piyush Jain b. Vivek Agrawal c. Ashish Bose d. Mohit Sharma 4. What was the building where The Indian Institute of Advanced Study is located previously known as? a. Viceregal Lodge b. Country Club c. Royal Theatre d. Orchid Hotel 5. In which town is Uruswati Himalayan Folk Art Museum located? a. Naldehra b. Naggar c. Mashobra d. Krignano 6. Who took the initiative to form Retina India? a. Geeta Jain b. Dr Jayesh Kumar c. Dr Rajat N Agrawal d. Mohan Aacharya 7. In which year did Kajaria Ceramics start manufacturing in Sikandrabad, Uttar Pradesh? a. 1988 b. 1990 c. 1998 d. 2001 8. ‘Jeevan Arogya’ non-linked health insurance plan is launched by which insurance company? a. Oriental Insurance b. SBI Life Insurance c. Life Insurance Corporation of India d. HDFC Standard Life The answers to Moneylife Quiz-103 are: • 1-a. Steve Kaplan and Antoinette Schoar • 2-b. Emerald Buddha statue • 3-c. 2008 • 4-d. 1988-89 • 5-a. 1989 • 6-b. Jyoti Sachade • 7-d. Humphrey Neill • 8-c. Deepak Yohannan In all, 23 readers got all the answers right last time. The winner of Quiz-103 is Suresh Pitkar from Mumbai. Congrats Sir! You will get a surprise gift from Surat Diamond Jewellery.

Sound Bites “Reporting has to be credible. You see our banks… when the chairman retires, profit declines. If we don’t make the system credible and create a standard, people will report anything” – KC CHAKRABARTY, DEPUTY GOVERNOR, RBI, in Business Standard

“I moved out because I wanted to do better things outside. I had a wonderful time with Infosys for 17 years… Now I have nothing left to prove at Infosys” – TV MOHANDAS PAI, FORMER DIRECTOR (HR), INFOSYS, in The Financial Express

“The (insurance) industry started selling insurance as an investment product, like a mutual fund, and we lost focus because it’s a different product altogether” – DK MEHROTRA, ACTING CHAIRMAN, LIC, in Mint

“Since the day Mr Bernanke went to Washington, I knew he was going to be a disaster. He has never been right about anything in the 7 or 8 years he has been there… The only thing he knows to do is to print money. He doesn’t understand finance, he doesn’t understand currencies, he doesn’t understand economics. He understands printing money... that’s what he’ll do...” – JIM ROGERS, SUCCESSFUL INVESTOR, on CNBC 17 | 30 June 2011 | MONEYLIFE

Loose_change.indd 3

6/10/2011 8:18:32 PM

Exclusive news, the stories behind the headlines and the truth between the lines by Sucheta Dalal

T A X E VA S I ON

The Farce Continues Who says the government wants to go after black money stashed abroad?

he fact that at least 18 Indians have nearly Rs44 crore stashed in Liechtenstein, a tiny European tax haven, was known and reported by the media way back in early 2008. Their names were among the 1,400 that a bank official sold to tax authorities in Germany and other countries. While countries like the US, the UK, Australia, Germany and Italy immediately initiated action, India has been moving at a snail’s pace. In the three intervening years, mounting pressure from activists and opposition parties to bring back tax-evaded money to India forced the government to sign agreements with dozens of countries to share information on tax evasion. Finally, on 9th June, a daily published the 18 names with exact details of cash held in Liechtenstein banks and the tax penalty that has been computed by tax officials. Does it mean that this paltry taxevaded money would now boost our tax coffers? It is unclear. One media report says that the CBDT (Central Board of Direct Taxes) has submitted

an affidavit in the Supreme Court saying: “18 Indians had deposited Rs24.26 crore as tax on Rs43.83 crore held in the bank accounts.” Another says that the process of recovering money with penalty has been initiated in 17 of the 18 cases. But this, too, may not be accurate. Vishwabandhu Gupta, a retired income-tax commissioner based in Delhi, tells us that the tax authorities are still reluctant to take any action. He says that the very fact of stashing money in a tax haven is proof of an intention to ‘wilfully evade taxes in India’. This does not require a long-drawn litigation, if the authorities are determined to collect tax. Under Section 276 (C) of the IncomeTax Act, a person who ‘wilfully attempts’ to evade tax, penalty or interest chargeable, then ‘without prejudice to any penalty’ that may be imposed under the Act, is punishable with rigorous imprisonment of not less than six months, extending to seven years. This harsh penalty is applicable even when tax evaded exceeds just Rs1 lakh. The Income-Tax Department has no qualms arm-twisting honest taxpayers, even on TDS (tax deduction at source) issues arising out of its own confused drafting. Yet, it drags its feet over return of black money from tax havens and collection of interest and penalty.

The government simply does not want money coming back from tax havens.

TAX BENEFITS

Heart of the Matter Is your heart a piece of plant & machinery for you to get tax breaks?

ormer law minister Shanti Bhushan is regularly in the news these days. So it is surprising that a case that he lost in the Delhi High Court in June attracted only routine reporting and no analysis. Mr Bhushan, 80, had sought tax deduction of Rs1.74 lakh for a heart operation under Section (31) of the Income-Tax Act on the grounds that the heart was ‘plant’ and expenditure incurred on its surgery should constitute ‘current repairs’. His case was that his professional work had led to a heart attack and that his income had increased significantly after the operation (repairs). The income-tax appellate tribunal as well as the Delhi High Court rejected Mr Bhushan’s claim and now he plans to approach the Supreme Court. Mr Bhushan’s annual income is over Rs10 crore, so the case is not about a paltry deduction, but about pushing legal boundaries. The learned judges recognised this ``

MONEYLIFE | 30 June 2011 | 18

CROSSHAIRS.indd 2

6/10/2011 8:12:04 PM

` saying, “the issue raised is both

ingenious and novel” and “the question raised is the product of experience, deftness and obvious artfulness of the petitioner (Shanti Bhushan) who is a seasoned, experienced and eminent Advocate of the country.” The Court then spelt out three parameters for allowing a deduction. First, that the expense should be incurred ‘wholly and exclusively’ for the purpose of the profession; second, it cannot be an expense to bring into existence a capital asset; and third, it should not be an expense of a personal nature. The Court ruled that the claim will not stand because the heart as an ‘asset’ did not find mention in the balance sheet since its ‘cost of acquisition’ cannot be determined. It said that the claim also failed the ‘functionality’ test, since the heart was necessary for survival and cannot be considered a ‘tool’ of trade or professional activity. And, finally, the expenditure incurred on its ‘repair’ was not wholly and exclusively for the assessee’s profession and no direct correlation could be drawn between the two. But, consider this. Anybody over 60 knows that it is impossible to find reasonably-priced health insurance. And anyone who is self-employed or outside the government/organised sector knows that galloping inflation and healthcare costs (in cities these are rising at 20%pa) as well as a changed lifestyle requires people to keep working well past the

age of 60. In the absence of any semblance of social security, the heart, the brain, the knees, and even eyes, are, indeed, important ‘plant and machinery’ for the selfemployed, especially for those over 60 for whom getting medical insurance is a battle. So far, neither the government nor the court has recognised this, except for the tiny deductions available under Section 80 D. So it could well be that the Supreme Court may be willing to push the envelope further and Mr Bhushan’s initiative may provide relief to many who really need it. Human Value Accounting In a sarcastic reaction to Shanti Bhushan’s litigation, an economic daily has argued that if heart surgery were allowed as a deductible

Former law minister Shanti Bhushan

expense for ‘plant & machinery’ under Section 37, it could lead to absurd claims that even groceries and clothing should be allowed as fuel for the plant. This misses the heart of the matter—it is not about a body part that is germane to the issue. While Mr Bhushan’s move to treat his heart as ‘plant

and machinery’ may be unique, the concept of attaching a money value to human resources and their external goodwill is neither new nor bizarre. Management experts have found a way to allow companies to evaluate human assets—it is called human value accounting—through metrics such as skills, strategies, leadership, motivation, attitude and so on. So why can’t the concept be translated to evaluating human value for self-employed persons, or for those whose work, by its very nature, involves a very short span of high-earning potential (film stars or sports persons)? There could well be a case for such individuals to get tax deductions on expenses that will enhance their earnings potential. Or, senior citizens who cannot get

PTI

insurance cover except at a steep price, procedures such as kneereplacements or cataract and cardiac surgeries can extend their working life and income-generating capacity significantly. Let’s hope Mr Bhushan’s appeal will, at least, trigger a wider debate on the issue.

19 | 30 June 2011 | MONEYLIFE

CROSSHAIRS.indd 3

6/10/2011 8:12:13 PM

DIFFERENT STROKES SUCHETA DALAL

AM BANI C OM P ANIES

Fall from the Pedestal With senior employees in jail and investors losing money, Dhirubhai Ambani’s legacy looks badly tarnished

ll of a sudden, their immense wealth, access to Swan Telecom, it triggered the exit of Hasit Shukla, a political power, ability to scuttle all investigation compliance officer and company secretary of Reliance for wrongdoing and their media clout don’t seem Communications. No large and complex group can run without a team to be working anymore. For the first time in over 30 years, the business empire that Dhirubhai Ambani built, of smart leaders in charge of various group companies through fair means and foul, has lost its glamour. This is and functions. But Reliance, under Dhirubhai and later evident in a spate of critical, cynical media reports and his sons, has always operated a little differently. The the rapid decline in the stock price of Reliance group family worked with a set of extremely close confidantes companies, whether controlled by Mukesh or Anil and trusted lieutenants. Professional managers reported to this inner coterie which had all the powers but Ambani. Even when Reliance (headed by an ailing Dhirubhai never ever signed any document. In fact, a close aide of Ambani) battled Indian Express and the VP Singh Mukesh Ambani routinely boasts that he would never government in the 1980s, or the Ambani siblings sign a paper or even send an email directly. Satish Seth fought a more bloody war a few years ago, there was was part of the inner circle of the combined Reliance a general sense that business would bounce back and empire and privy to all its secrets even before he chose to align with Anil Ambani, along with emerge stronger, once they buried the hatchet. Instead, what we are No large and complex group Amitabh Jhunjhunwala and Tony witnessing in 2011 is a never-before can run without a team of Jesudasan, two others of the inner sense of derision from investors and smart leaders, but Reliance coterie. This was a well thought media about their tall claims and has always operated with out strategy which ensured that investigation agencies manner of doing business. We have a set of close confidantes, government found it extremely difficult to target already pointed out that investors’ distrust is evident in the steady with professionals reporting the inner circle directly. It also gave to this inner coterie them time and space to work their decline in the share price of all neta-babu network to bury all Reliance group companies. But, the bigger worry, in the coming years, will be their ability, investigations and protect executives who signed the especially of the Anil Ambani group, to hire appropriate business deals. It worked perfectly for over 30 years, until the events talent to head their enormous business empires. In the past year, there has been a stream of exits from of the 2G telecom scandal spun out of everybody’s this group. In October 2010, Inder Bajaj, who headed control. The arrest of senior executives, and Satish Seth’s Reliance Infratel, had quit. The turning point now would statement to the CBI, has changed everything. It has be the imprisonment of three top executives of Reliance sent waves of fear through the group’s managers and Communications—Gautam Doshi (managing director), should even be a lesson for the managers of other familySurendra Pipara and Hari Nair since early April. Soon controlled companies. Many competent senior executives after, SP Shukla, CEO of Reliance Infratel and two other realise that a fat pay package cannot compensate for senior executives (Arun Sur and Jagbir Singh) quit. becoming a scapegoat for the group’s dubious activities. When Satish Seth, a close aide of Anil Ambani, told the Clearly, Anil Ambani realises this. On the 55th day since Central Bureau of Investigation (CBI) that he was only they were imprisoned, Anil Ambani sought permission a consultant and Gautam Doshi was responsible for all to meet his executives in Tihar Jail. On the same day, a decisions relating to Reliance ownership and exit from cute media leak said that Tina Ambani had sacrificed her ``

MONEYLIFE | 30 June 2011 | 20

DIFFERENT STROKES.indd 2

6/10/2011 7:44:23 PM

DIFFERENT STROKES SUCHETA DALAL

Ltd (RIL) has been equally beleaguered by exits of Doshi. Some would say, it hardly means much and this senior personnel in various businesses such as Reliance Retail (Raghu Pillai, Sanjeev Asthana and Gunender is the least they can do. Remember, Satish Seth was among the four key Kapur). Also, its retail rollout and the performance of executives along with Anil Ambani and two group its KG-Basin oil wells has been such a damp squib that companies (Reliance Infrastructure and Reliance Natural investors aren’t impressed by Mukesh Ambani’s promise Resources Ltd) barred from investing in the secondary of a digital revolution through an “end-to-end solution market as part of the settlement order negotiated with across the digital value chain.” Worse, nobody is clear the Securities and Exchange Board of India (SEBI) along whether production from the KG (Krishna-Godavari) with a Rs50-crore payment. The settlement allowed Basin wells is being deliberately held back or whether the expectations themselves were the Anil Ambani group to bury unrealistic. a huge scandal over misuse of The RIL scrip, once a The Reliance scrip, once accounts of some diamond traders bellwether stock, has grossly and transactions in excess of underperformed the market, a bellwether stock, has grossly underperformed the market $2 billion. While SEBI, and its even during the bull run. during the last two years of the chairman CB Bhave, is credited Now, when the stock is bull run. While the group grew with ‘being tough’ in that case (by languishing and there are rapidly and set records in project the media and Mr Bhave himself), no clear answers, investor implementation, large institutional the fact is that the consent order is opaque and deliberately hides the confidence has been shaken— investors were willing to turn a and questions will be asked blind eye to the fact that large exact nature of charges as well as chunks of revenues went to private the findings, including the report it companies of the promoters. The strategy was simple. had received from the Reserve Bank of India. Family-owned affiliate companies got supply contracts Things can only get hotter. The government is in complete disarray over how to deal with campaigns from the parent and were built through hefty loans from against corruption and the Lokpal Bill to make politicians the parent company. When sufficiently valuable, they and bureaucrats more accountable. Meanwhile, more were merged with RIL in a ratio that helped increase the telecom scandals are spilling out into the open (the Ambani family stake in Reliance. The business routed Dayanidhi Maran-Aircel connection and the alleged to such privately-owned companies of Mukesh Ambani private exchange that he created by appropriating over has now ballooned to over Rs4,000 crore, according to 300 phone lines from Bharat Sanchar Nigam), and with a digital media report. None of this mattered when the the Supreme Court spotlight firmly on them, investigation group was growing at breakneck speed and rewarding agents are hardly in a mood to jeopardise their careers. investors. When the stock underperforms so badly and As we said in the previous issue of Moneylife, the there are no clear answers, investor confidence is shaken group’s iffy reputation has had a deleterious impact even and questions are bound to be asked. on its mutual fund business, which has so far performed Sucheta Dalal is the managing editor of Moneylife. Subscribers excellently. get free help in resolving their problems with select providers of The Mukesh Ambani-controlled Reliance Industries financial services. She can be reached at suchetadalal @yahoo.com

` annual holiday to console the distraught wife of Gautam

Just married?

What about financial security ever after? Take the right financial vows Once every fortnight

For subscription offers that are a steal, look for a form elsewhere in this issue or our website at www.moneylife.in

21 | 30 June 2011 | MONEYLIFE

DIFFERENT STROKES.indd 3

6/10/2011 7:44:38 PM

SMART MONEY R BALAKRISHNAN

RE AL -E S T AT E PRIC E S

Something’s Got To Give Property rates are exorbitant; inventories are piling up. But this sector could offer some good picks—if there is a revival

veryone seems to believe that real-estate prices in the metros are likely to correct downwards significantly. This is also borne out by the fact that the execution of several large projects that kicked off during the 2007-08 madness are getting delayed. In fact, in Chennai, I see many projects still selling at prices below what they were launched at, apart from changes in plans that involve change in usage, cutting corners on facilities, etc. The interesting dichotomy I see is in the size and scale of projects. In the metros, large projects tend to be on the fringes of the city, or in new growth areas, due to availability of land. Within the city, supply of new housing stock is limited and demand is strong. So in the heart of many cities, prices of small projects have risen dramatically, while prices have slumped in most large projects. Of course, when I mean ‘slumped’, prices are still not attractive enough to buy, yet. So what is holding these prices up? I see unsold stock, incomplete projects and steady prices. In 2007-08, most of the demand was of a speculative nature where hot money chased quick and easy returns. Book a flat at the base price around the time of the ground-breaking ceremony. As it progresses, prices start to rise. Sell it before the project is completed and enjoy full profits on less than the full investment. Banks and housing finance companies also contributed to the speculative frenzy through full financing and more—some banks gave out furniture also! In the 2008-09 crisis, hot money rushed out. Prices fell, particularly of large projects in outlying areas. Projects got delayed, were reshaped, and prices stagnated. Many overpriced projects had to correct prices in a big way. Two years later, there still isn’t much recovery in prices. Projects are still taking time to sell. Inflation has been high which means the cost of construction is increasing. So, the days of super-profits for builders may be behind us. I recall balance sheets of companies like DLF showing net profits of over 70% of sale value! This has to come down to reasonable levels. For investors, this

means real-estate stocks are also still untouchable. Many of the real-estate companies are raising money through privately placed paper at high interest rates. Some companies are trying to reschedule their obligations. The debt on the balance sheets of most real-estate companies is still at uncomfortable levels. We also had a phase of euphoria when nearly every real-estate company projected huge returns on ‘SEZ’ (special economic zone) development. Most now want to give back the land or change the use to something else! Unless there is corruption, it is unlikely that usage would be allowed to be changed from ‘SEZ’ to ‘commercial’. So, I would keep away from the SEZ dreamers for a few more years. The shares of most real-estate companies appear to be holding for now, although they are nowhere near the stratospheric levels of 2008-09. And, given the lack of transparency and periodic bad news (for instance, Unitech in the 2G scam), investors have no reason to put money into real-estate stocks. The inference—there is some serious money that is still backing this sector. But the biggest risk for the sector is political instability and this scare could bring about a real slump. Another aspect is the steep decline in rentals for commercial properties across most large cities. The oversupply situation seems to be correcting with the withdrawal of some projects; this will probably stabilise the rentals. The interesting fallout: newer properties are commanding higher rentals. Apart from better infrastructure, the new properties have a very large hidden premium—the carpet area to built-up ratio is significantly less. I would keep an eye on companies that are able to hold on to commercial properties and earn rentals from them. I would also like to revisit companies with low-tozero debt and low profit margins. They would do well when the next real-estate boom happens. It is difficult to take a call on when we would see a revival in this sector. But this is one sector where there could be value picks. The author can be reached at balakrishnanr@gmail.com

MONEYLIFE | 30 June 2011 | 22

column_Balakrishnan.indd 2

6/9/2011 7:37:52 PM

MUTUAL FUNDS POINTERS

F O R E I G N F U NDS

and DSP BlackRock China Fund. All four are open-ended fund of funds (FoF) schemes investing in units of their respective international BlackRock Fund.

Fund will be benchmarked against the S&P BMI Global Gold and Precious Metals Index. Franklin Templeton launched two foreign funds, FT India FeederFranklin US Opportunities Fund which seeks to provide capital appreciation by investing in overseas mutual funds/unit trusts that primarily invest in securities of United States of America and FT India Feeder-Templeton Asian Growth Fund which seeks to provide capital appreciation by investing in overseas mutual funds/unit trusts

HSBC Brazil Equity Fund, an FoF has been just launched in the market. The money will be funnelled into HGIF Brazil Equity Fund, managed by HSBC Global Investment Funds (HGIF). Deutsche Mutual Fund has announced the launch of DWS Gold and Precious Metal Offshore Fund which will invest in DWS Invest Gold & Precious Metals Equities Fund. The

that primarily invest in securities in the Asia Region. JP Morgan has recently launched a new offshore fund known as JP Morgan America Large Cap Equity Off-shore Fund. The primary objective of the scheme is to seek long-term capital growth by investing in JP Morgan America large-cap equity offshore funds which invest in large blue-chip US ``

Distant Investing Foreign fund schemes are flooding the Indian market even as Indian savers shun the equity products of their own country

oreigners are keen to buy Indian equities and have taken the Indian market to great heights. At the same time, Indian savers are avoiding Indian equities, despite the enormous value that Indian stocks have created over the past two decades. This is resulted in the retail participation of Indians in their own markets dipping to alarmingly low levels even as foreign investors have come to own a large chunk of Indian equities. You would think that Indian fund companies would be desperate to channel Indian savings into Indian schemes. But many mutual funds promoted by foreign fund companies are furiously bringing foreign funds into India to channel Indian savings into overseas equities. It has almost become a fad. DSP BlackRock Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch four global fundsâ&#x20AC;&#x201D;DSP BlackRock Latin American Fund, DSP BlackRock World Agriculture Fund, DSP BlackRock New Energy

23 | 30 June 2011 | MONEYLIFE

Fund pointer.indd 2

6/10/2011 8:03:20 PM

MUTUAL FUNDS POINTERS

` companies. It will be benchmarked

Foreign Hand Schemes

Invest in

DSP BlackRock Latin American

Units of BlackRock Global Funds Latin American.

DSP BlackRock World Agriculture

Units of BlackRock Global Funds World Agriculture.

DSP BlackRock New Energy

Units of BlackRock Global Funds New Energy.

DSP BlackRock China

Will funnel money in units of BlackRock Global Funds China.

DSP BlackRock Global Allocation

Units of BlackRock Global Funds-Global Allocation Fund.

DSP BlackRock Global Dynamic Equity

Units of BlackRock Global Fund-Global Dynamic Equity.

Mirae Asset India-China Consumption

Sectors & companies benefiting from the consumptionled demand that is driving the world’s fastest-growing economies, India and China.

HSBC Brazil Equity

Will invest in HGIF Brazil Equity.

DWS Gold and Precious Metal Offshore

Units of DWS Invest Gold & Precious Metals Equities.

JP Morgan America Large Cap Equity

Units of large Blue chips US companies.

JP Morgan ASEAN Equity Off-shore

ASEAN countries, which include Singapore, Indonesia, Malaysia, Thailand, Vietnam, Philippines, Cambodia, Brunei, Laos and Myanmar.

Reliance Indonesia Opportunities

Equity and equity related instruments of Indonesia and Indian markets.

Motilal Oswal MOSt Shares NASDAQ-100 ETF In securities constituting NASDAQ 100 Index. FT India Feeder-Franklin US Opportunities

Overseas MFs/unit trusts, which invests in securities of US.

FT India Feeder-Templeton Asian Growth

Overseas MFs/unit trusts, which invests in Asian securities.

C a s h l e ve l s

Cash Call These 10 schemes were substantially into cash when the market peaked last November

n 5th November 2010, the Sensex peaked at 21,104. Seven months are over and the index is down 12% from that level. Interestingly, some funds went substantially into cash just before the peak in early November. Among the 200-odd equity diversified schemes, 10 had cash levels of more than 15% of their assets under management (AUMs) at the end of October 2010. Of these, seven have outperformed their benchmarks. The most prominent among the 10 equity schemes were: Reliance Small Cap, Canara Robeco Large

Cap+ Fund and ICICI Prudential Dynamic Plan. Of these three fund houses, Reliance was the lucky one as it had just launched the new scheme—Reliance Small Cap—in September 2010. Hence, it had around 60% cash when the market peaked; this gave Reliance an added advantage as it was saved from buying expensive stocks. But the other two, namely, Canara Robeco Large Cap+ Fund and ICICI Prudential Dynamic Plan really proved to be good market-timers with cash levels of 28% and 35%, respectively. The funds have bucked the seven-month downtrend with a

to the Russell Top 200 Index (net of 30% withholding tax). Global funds offer diversification benefits by investing in stocks (bio-tech, technology, energy, agriculture and mining, etc) which an Indian investor may not be able to buy by just investing in domestic schemes. However, funds that put your money in other countries don’t necessarily offer another round of diversification. In fact, markets in countries around the world have been moving in sync. During April 2009-March 2010, the Sensex was up 77% while the MSCI Emerging Markets Index was up 74%. Noncorrelated market movement is not easy to find. That apart, you are exposed to risks unique to different countries and sectors that you know nothing about. Choose very carefully.

return of -1% and -2%, respectively, when their benchmarks are down by -9% and -8%, respectively. We are not suggesting or recommending any of these funds. But one should keep an eye on them because they had the courage to go into cash when the market was expensive.

Market Timers Scheme Reliance Small Cap Sahara Growth ICICI Pru Dynamic Plan Edelweiss Absolute Return Canara Robeco Large Cap+ Escorts Growth Plan Escorts High Yield Equity IDFC Equity Fund-Plan A Baroda Pioneer PSU Equity Quantum Long-Term Equity

Cash Level* 60% 41% 35% 30% 28% 25% 22% 21% 20% 19%

Return -4% -11% -2% -1% -1% -18% -10% -7% -13% -7%

Source: Mutual Funds India * As on Oct 2010

MONEYLIFE | 30 June 2011 | 24

Fund pointer.indd 3

6/10/2011 8:03:39 PM

Advertisements.indd 4

6/7/2011 8:44:44 PM

COVER STORY

Lazy Portfolio The

Scared of market vola lity? Grow your wealth the lazy, easy way. The Lazy Portfolio, first introduced in 2007, has done very well. We tweaked it in 2010â&#x20AC;&#x201D;that, too, has done fine. We now introduce an even simpler portfolio. By Debashis Basu & Megha Vora

he stock market has gone nowhere for almost a year now. The mood has been bearish since November 2010. Foreign institutional investors are withdrawing funds every other month. Fears of rising inflation, higher interest rates and slower earnings growth have colluded to dampen the prospects of equity markets in the short term; and it appears that the pain will persist for a while. Several analysts have already revised earnings estimates downwards due to the recent from bout of discouraging results fro om India Inc. Most experts

agree that equities will take a further knock in the coming few months. So what can investors do to ride the storm and yet emerge on the winning side, irrespective of where the market decides to take them? In such circumstances, investors tend to do one of two contrasting things. One, get fidgety and go hunting for the latest hot stock or equity fund that can beat the market. Or hunker down deposits. and park cash in relatively higher-yielding fixed dep The former is a sure-shot route to disaster while the latter lull you `` strategy may look safe but is not smart. It will lu

MONEYLIFE | 30 June 2011 | 26

Cover Story.indd 2

6/10/2011 7:58:00 PM

COVER STORY

` into a sense of comfort for months—keeping you safely

out of the market when it eventually takes off. Here is our take on the right thing to do—sit back, calm down and be really lazy. Yes, you read it right. The smartest thing you could do at such a juncture—in fact, any other juncture—is to be really lazy with your investments. That doesn’t mean dumping all your cash in a fixed deposit. Rather, you should choose a set of mutual funds (MFs) that has done well over a long period and hold it for a reasonably long term. Plus have some portion of your wealth safely tucked away in bank FDs (fixed deposits). It is a simple approach that is gradually catching on in the West—one that we had advocated way back in 2007 (see Moneylife, 25 October 2007) and then in 2010 (see Moneylife, 20 May 2010). The ‘lazy portfolio’ is the simplest solution for the average saver who has neither the time nor the interest to ‘study’ markets, stocks and funds. Indeed, this lazy investor will probably beat the hyperactive investor who watches business TV, trolls websites and keeps herself updated with the latest news on companies, Indian markets, global markets, interest rates, political developments— there is so much to keep yourself busy with, after all!

active investor would spend worrying about investments. Forget about the frequent rebalancing, market timing and active trading. Just create a well-diversified portfolio and stop tinkering. Remember Terrance Odean’s and Brad Barber’s famous research conclusion: “The more you trade, the less you earn.” Extra taxes, fees and commissions will eat into your nest egg. They found that passive buy-and-hold investors beat active traders by substantial margins—18.5% to 11.4%—over a six-year period. Lazy portfolios incorporate balanced asset-allocation strategies that have proven to be solid performers in bull as well as bear markets, often beating the benchmark indexes by healthy margins. Indeed, you would be better off focusing on everything else—let your portfolio work

Why the Lazy Porƞolio? Our lazy portfolio is a simple and effective way to create wealth. There is no need to look for the very best fund manager or the highest-yielding fixed-income product. Those of you who are reading about lazy portfolio for the first time may well ask why we are advocating such a dull method for investing. Well, for starters, investing should be simple and straightforward. The more complicated and exciting it becomes, the higher the chance of getting one’s fingers burnt in the process. “Investing should be dull,” says Nobel-winning economist Paul Samuelson; “Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas.” There are three main reasons why lazy portfolios are winners: One, they’re simpler. You will never need more than a few mutual fund schemes. So forget the other 230 schemes out there. Two, you save on commissions that always dog the hyperactive investor. Three, you save the enormous amount of time and effort that an

its magic in the background while you enjoy some of the better things of life—spend quality time with your family; get some regular exercise; keep in touch with distant friends and relatives; play catch with your kids or spend time on their lessons. There are so many important things in life which require more of your time than what you spend daily worrying about your investments. All you need to stay in the game is a simple, well-diversified portfolio of select funds that will ride any type of market to give solid returns over the long term. What does that entail? No trying to time the markets, no active trading and no drooling over get-rich-quick schemes. To be ahead of the curve, you only require a sound investment objective, expectations of realistic returns, a few simple financial products and a reasonable timeframe to allow your investments to work. ``

The lazy investor will beat the hyperactive investor who watches business TV, trolls websites and keeps herself updated with the latest news 27 | 30 June 2011 | MONEYLIFE

Cover Story.indd 3

6/10/2011 7:58:20 PM

COVER STORY

So the next time the market jumps 40% and your lazy portfolio makes 30%, don’t panic. It would just be a temporary phase `

Trying to time the market to buy funds and stocks Employers were hyperactive, expanding their businesses. is futile for the average investor. A Morningstar study The stock market was the most hyperactive of all, yofound that investors in MFs are bad timers. They buy at yoing in a gut-wrenching manner every other day. It is the top and sell at the bottom. This comes in addition at such times that the lazy portfolio does best. It allows to the challenge of picking funds. That is where the lazy you to be calm in your investment approach rather than portfolio comes into the picture. We are advocating three chase every hot stock you can lay your hands on. Laziness things for the investor who wants exposure to stocks but is a safe and smart strategy. It was the first time that does not have the time to look at all options—one, buy Moneylife came out with the concept of a ‘Lazy Portfolio’. MFs rather than stocks; two, choose one of the three In order to draw up a portfolio for the lazy investor, the portfolios we recommend, based on how safe you want one factor we considered as the most important was the to be; and three, stick to these over long periods, through longevity of a fund in the Indian market. The core of bad markets and good. What is the reward? The magic lazy investing is being able to trust your fund to deliver good returns over the long term. of compounding that can make How did the portfolio do— anyone wealthy… slowly but between 1 September 2007 and surely. 30 May 2011? Our aggressive How to select the MFs? Don’t portfolio has given a return of worry; we have done all the 6%; the balanced portfolio has hard work for you. Globally, the given a return of 8%; and the cornerstone of a lazy portfolio conservative portfolio has given is index funds which mimic the a return of 6%. These returns returns of the broader indices by are much better than the market investing in stocks in proportion performance. The Sensex return to the underlying index. Index for the same period is just 4.76% funds are a great alternative to CAGR (compounded annual active investing because they growth rate). This is where asset eliminate the problem of fund allocation helps. When markets selection. Unlike in the US, are moving sideways or down, however, index funds offered in you can see the advantage of India do not come with the right asset allocation in your portfolio. flavour. High costs, ‘enhanced And remember markets can move indexing’ and active management sideways for years. The periods leave a sour taste in the mouth. The Lazy Portfolio, first introduced in 2007 when markets shoot up are really On the other hand, many and updated in 2010 short, sudden bursts; and these actively-managed funds have don’t last. Those are the only proven themselves—over several years through varied market cycles. We have chosen periods when a lazy portfolio will not perform. So the from the ranks of those which have done very well over next time the market jumps 40% and your lazy portfolio the past five years—a period of intense volatility. But, makes 30%, don’t panic. It would just be a temporary before that, let’s review how you would have done had phase. you followed our earlier lazy portfolios.

Lazy Portfolio 2010 Lazy Portfolio 2007 That year, the world was anything but lazy. Employees were hyperactive, hopping from one job to another.

Financial year 2009-10 was average for returns but with huge volatility for Indian markets. They were being rocked like a boat caught in a tidal wave. Investors ``

MONEYLIFE | 30 June 2011 | 28

Cover Story.indd 4

6/10/2011 7:58:33 PM

COVER STORY

` were in a quandary about the direction of the market;

they tried to grab every bite of wisdom spewed by financial newspapers, market analysts and television commentators in an effort to anticipate the market’s direction or learn about upcoming hot stock-picks. Except that, these analysts and experts had little clue on what they were rambling about. We suggested that investors sit back, calm down and be really lazy. The same that we did in 2007. Over the past one year, you would have earned an average 8% return across all the three portfolios, with much less volatility. However, in 2010, we had added bond schemes to the portfolio which led to lower returns. If you used banks FDs, which is what we are recommending now, your returns would have been 9% across all three portfolios. The Sensex earned 10.02% for the same period—with far greater volatility. This is the temporary phase we have mentioned above. It was that simple—no research reports, no fancy analysis, no market timing, no business TV channels. No expert advice. Just plain laziness.

who can bet on return-maximising funds; slightly lessaggressive investors who need some protection from the sharp slide that equities suffer periodically; and those who want to invest only in funds that are especially mindful of the downside. Each of these portfolios also has a progressively higher level of investment in fixed deposits and the best of equity funds. (See box “Methodology” for details). The Aggressive Portfolio For the aggressive investor, we have put together the best equity diversified growth funds over a five-year ``

Aggressive Portfolio Equity (80%)

5-Year Return

HDFC Equity

17%

Franklin India Prima Plus

15%

Templeton India Growth

15%

Lazy Portfolio for 2011

Reliance Growth

15%

As we said, lazy portfolios should have the best of funds ranked for three types of investors—aggressive investors

Fixed Deposits (20%)

F i x e d I N C OM E

Keeping It Simple Why bond schemes are not for you

ur new lazy portfolio has become simpler. With even more intense research, we have arrived at the conclusion that our lazy portfolio for 2011 would consist of only a few equity schemes and bank fixed deposits for the fixed-income part and not bond funds. There were several reasons for eliminating bonds from our portfolio. The most important point is that the main aim of the lazy portfolio is steady returns—we are not aiming to maximise our returns in all market conditions. The advantages of bond funds are well-touted—lower risk and steady income, in addition to liquidity of investments. During an economic slowdown, bond funds tend to perform better than other investments. According to mutual fund houses, bond funds are considered better than FDs because bond funds provide the best opportunity to gain from interest rate movements. However, before you decide to jump in, it is worth asking: How do these merits of bond funds and their performance stack up against FDs? Bond funds are volatile

8.50%

and have not earned higher returns than bank FDs—except in 2004 and 2009 (see Moneylife, 2 June 2011). Even adjusted for the tax breaks, bond funds don’t deliver a significantly higher return. This means that there is no need to pull out money from FDs and put it into a bond fund. But the bigger issue is that the principal in an FD is risk-free and return is non-volatile. The return from

a bond fund can go down from 7% to 5%, if the bond fund manager does not time an interest-rate cycle properly. Even the best of bond managers have their ups and downs. An FD with major scheduled banks is completely safe, zerorisk and liquid.

29 |30 June 2011 | MONEYLIFE

Cover Story.indd 5

6/10/2011 7:58:52 PM

COVER STORY

key component of the portfolio for the lazy investor is a good mutual fund (MF) scheme. The core of lazy investing is being able to trust your MF scheme to deliver quality returns over the long term. To arrive at the few schemes that make the grade, one factor that we have considered to be the most important is the longevity of the scheme. For this, we have analysed all equity diversified growth schemes in existence on or before 1 April 2001. Out of the 220 equity diversified growth schemes in existence as of today, only 43 have been around for more than 10 years.

METHODOLOGY

We ranked these 43 schemes on the basis of their five-year performance to build a portfolio for those who would

` period. But a good portfolio should have an ideal mix of

equity and debt. We recommend that only 20% of your investments should be parked in fixed deposits. As much as 80% of your assets should comprise equity funds. We suggest a combination of the top four equity funds and bank fixed deposits in terms of returns over a five-year period. So which are the MFs that you could possibly put your money into? Refer Aggressive Portfolio table for the list of equity funds you should consider. The Balanced Portfolio For the less aggressive investor, who would put equal weight on return and risk, a higher debt component would do a better job. Apart from 40% of assets being

like to invest without the tedious eﬀort of tracking the performance of their investments. We have taken four schemes which have delivered the highest compounded annualised returns over the five-year period. However, an ideal portfolio should have a mix of debt and equity; so we have added to it bank fixed deposits as the debt component. This time, we have excluded debt funds completely from our lazy portfolio. We have mentioned in the Box, “Fixed Income” the benefits of bank fixed deposits compared to bond funds or debt funds.

the shortlisted funds in this category for this class of investors. The Conservative Portfolio For conservative, risk-averse investors, who are worried about protecting their wealth first, we would suggest a higher weight to the debt category apart from giving minimum exposure to equity funds. A sound strategy would be to park 60% of your assets in FDs. The balance 40% should be distributed in the four top-performing equity funds. Conservative Portfolio table provides the break-up of the selected funds in this category. That’s it. That’s all you need to do to beat many fund managers and all the wise brokers. Having done that,

Conservative Portfolio

Balanced Portfolio Equity (60%)

5-Year Return

Equity (40%)

5-Year Return

HDFC Equity

17%

HDFC Equity

17%

Franklin India Prima Plus

15%

Franklin India Prima Plus

15%

Templeton India Growth

15%

Templeton India Growth

15%

Reliance Growth

15%

Reliance Growth

15%

Fixed Deposits (40%)

8.50%

allocated to FDs, the balance 60% should be allocated to equity funds. This portfolio would provide the perfect mix for protecting somewhat against a downslide while leaving sufficient headroom for capturing opportunities in equities. Balanced Portfolio table gives a selection of

Fixed Deposits (60%)

8.50%

relax, take off your shoes and sit back in the comfort of your couch. You can now start reaping the rewards from your lazy portfolio, while enjoying your life and yet making big bucks on your investments. We intend to make this an annual feature in our magazine. Stay put until we review the lazy portfolio next time.

MONEYLIFE | 30 June 2011 | 30

Cover Story.indd 6

6/10/2011 7:59:06 PM

Kya lagta hai? Hope

Fear

Greed

Confidence

Sorry, we are devoid of all feelings Ask a silly question and you will get a silly answer. Like stock tips that depend too much on chance, hunch and feeling, best exemplified by the standard market expression … “lagta hai”. Unfortunately, the market does not respect your ‘feelings’. Successful stock investing is about developing a method and following it. Which is why our Research Desk does not write about the stocks we ‘feel’ will do well. We apply logically-designed screening. We do not arbitrarily pick the stock of the fortnight. We use models. We do not let our opinions rule. ‘What do you feel?’ is a question we cannot answer. Because when it comes to stocks, we are devoid of all feelings

Moneylife Stock Analysis Methods. Not Feelings

Own Ad (Kya Lagta).indd 1

6/10/2011 9:30:09 PM

STOCKS STREET BEAT

Unbiased & Methodical Stock Picking that Works!

P e t r o ne t LNG

Full of Energy

tio n St or ies of Pr ice Ma nip ula

One of the fastestgrowing companies in the energy sector

e had written about Petronet LNG in our Cover Story (Moneylife, 10 April 2008). At that time, the stock was trading at Rs64. It is currently trading at Rs137, handsomely outperforming the Sensex over this period. The stock is still a good long-term buy. Petronet LNG, one of the fastest growing world-class companies in the Indian energy sector, has set up the country’s first liquefied natural gas (LNG) receiving and re-gasification terminal at Dahej in Gujarat, and is in the process of building another terminal at Kochi in Kerala. While the Dahej terminal has a capacity of 10 million metric tonnes per annum (mmtpa), the Kochi terminal will have a capacity of 2.5mmtpa. Oil and Natural Gas Corporation, Indian Oil Corporation, Bharat Petroleum Corporation and GAIL (India) have an equity stake of 12.5% each in Petronet LNG. GDF Suez holds 10% and the Asian Development Bank (ADB) holds 5.2% of the equity. The balance 34.8% is held by the public. The company has tied up 7.5mmtpa of LNG with Qatar-based RasGas on a long-term basis for its Dahej terminal. It has also signed a deal with ExxonMobil for supply of approximately 1.5mmtpa of LNG from the Gorgon LNG Project, Australia, on a long-term basis for the Kochi LNG terminal. Petronet has already commenced construction of its LNG receiving, storage & re-gasification terminal at Kochi which will have a capacity of 2.5mmtpa, expandable to 5mmtpa, depending on LNG supplies and market conditions. The terminal will help in meeting the demand of natural gas for power, fertilisers, petrochemicals and other industries in the southern states. Revenue for the March 2011 quarter stood at Rs3,985.97 crore, a growth of 67% over Rs2,385.45 crore in the previous corresponding quarter. Operating profit in the same period ``

Ankush Finstock k (Rs5) Ankush Finstock is into investment in securities, trading in equities & derivatives and works as a commission agent. Revenues in the past nine quarters fluctuated from Rs1.01 crore in the March 2009 quarter to Rs12 lakh in the September 2010 quarter and to Rs86 lakh in the March 2011 quarter. Ankush registered operating losses in the March 2009, December 2009, and in (Rs)

Ankush Finstock 5 4

232%

3 2 1 Feb-11

Apr-11

Jun-11

the March, September and December 2010 quarters. It posted operating profits in the June 2009 and June 2010 quarters and in the March 2011 quarter. The stock price? It’s on a tear. The price has jumped 232%—from Rs1.70 on 23 February 2011 to Rs5.65 a piece on 7 June 2011. As usual, the regulators have not taken notice of the unusual rise in the stock price in just over three months.

Recommended Price Rs18

MONEYLIFE STOCK IDEAS

THAT WORK

Moneylife Issue 8 April 2010

88%*

Exit Price Rs28

(Stop Profit triggered on 26 November 2010)

(SURYA PHARMACEUTICAL)

* Annualised returns

MONEYLIFE | 30 June 2011 | 32

Stock-Streetbeat.indd 2

6/10/2011 8:43:32 PM

STOCKS STREET BEAT

Unbiased & Methodical Stock Picking that Works!

` was Rs351.31 crore compared to Rs202.20 crore, a jump of

74% over the March quarter of 2010. The company’s splendid performance in the fourth quarter has been attributed to a rise in volumes, 100% capacity utilisation at its Dahej terminal, increase in price, a 5% increase in re-gasification charges from January this year and efficient internal consumption of gas. Petronet has drawn up plans to diversify into power generation and city gas distribution Mar-11 Sept-10 Dec-10 Sales* 3,057.72 3,627.64 3,985.97 (CGD). It has proposed to set up a 1,200MW OP* 271.62 345.61 351.31 (megawatt) power plant 67% at Dahej. In a recent Y-o-Y Sales Growth -10% 62% 74% development, Petronet and Y-o-Y OP Growth 7% 66% 9% Gazprom Global LNG— OPM 9% 10% through its Singapore OP: Operating Profit, Y-o-Y: Year-on-Year, OPM: Operating Profit Margin *Figures in Rs crore affiliate, Gazprom Marketing and Trading Strong Network Singapore (GM&TS), (Rs) a 100% subsidiary of 140 Gazprom Marketing & Trading—have concluded 130 a memorandum of understanding for the 120 long-term supply of LNG. Petronet LNG 110 Under the terms of the agreement, Petronet will 100 receive up to 2.5mtpa Jan-11 Mar-11 Jun-11 of LNG from GM&TS’s international supply portfolio for up to 25 years. Its average revenue and operating profit in the past five quarters were 21% and 28%, respectively. Its average operating ``

tio n St or ies of Pr ice Ma nip ula Autoriders Finance nce (Rs7) (Rs In the 1990s, Mumbai-based Autoriders Finance introduced innovative financing packages and hire-purchase financing schemes like loan melas, ‘phone for a loan’, ‘Toyota Temptation Contest’, a free car scheme, an ‘auto gold mine’ contest, etc. But the company has reported no revenues in the past eight quarters from March 2009 to December 2010. It recorded operating (Rs)

Autoriders Finance 5

464%

4 3 2 1 Mar-11

Apr-11

Jun-11

losses of Rs4 lakh in the September 2009 quarter; Rs1 lakh in the March 2010 quarter and Rs4 lakh in the September 2010 quarter. For the other quarters, the company had nil operating profit. But that didn’t prevent the stock from leaping 464% from Rs1.21 on 30 March 2011 to Rs6.83 per share on 7 June 2011. The manipulators have been busy, ramping up the stock while SEBI and BSE are sleeping.

Recommended Price Rs28

MONEYLIFE STOCK IDEAS

THAT WORK

Moneylife Issue 21 May 2009

135%*

Exit Price Rs86

(Stop Profit triggered on 10 December 2010)

(Jay bharat maruti)

* Annualised returns

33 | 30 June 2011 | MONEYLIFE

Stock-Streetbeat.indd 3

6/10/2011 8:45:29 PM

STOCKS STREET BEAT

Unbiased & Methodical Stock Picking that Works!

S A B E R O ORGANIC S

the stock was s ll cheap. We had again covered the Sabero scrip in our 21 April 2011 issue—even though it had fallen and was trading at around Rs49. Then came the big news— Recommended thrice, Coromandel Interna onal, part of Sabero just got taken over the Murugappa group of Chennai, is at a huge premium going to buy 42.2% of the promoters’ stake in Sabero at Rs160 a share. The news has taken the scrip to Rs127.50 e first wrote about Sabero Organics Gujarat’s scrip in the at the me of wri ng. The all-cash deal amounted to Rs250 crore at issue dated 16 July 2009, when it was trading at Rs29.50. We had again Rs160 per equity share at a premium of around Rs65 per share, valuing men oned the scrip in our issue the company at Rs592.41 crore. dated 20 May 2010, when its price Coromandel will make an open oﬀer had risen by 181% since July 2009. At that me, we had men oned that to purchase an addi onal 31% stake

Rich Harvest

` profit margin for the five-quarter

period was 9%. Total revenue for the fiscal ended 31 March 2011 was Rs1,326.52 crore compared to Rs1,074.69 in the previous fiscal, a growth of 23.43%. Net profit for the last fiscal stood at Rs61.97 crore, a 53% jump over Rs40.45 crore in the year-ago period. Return on net worth for the financial year ended March 2011 was 23%. The board has recommended a dividend of 20% for FY10-11 against 17.50% in the previous year. Petronet has earmarked a capital expenditure of Rs1,800 crore for fiscal 2011-12, a majority of which has been earmarked for

the Kochi terminal. It will also need around Rs100 crore for operational expenses. With a rise in demand for natural gas, Petronet has already booked around 97% of its available capacity at Dahej. It also plans to go in for additional spot cargoes to fulfil the gas demand. Based on the annualised results for the March 2011 quarter, the company’s market-cap to revenue was 0.64 times and market-cap to operating profit was 7.29 times. In view of India’s constantly increasing energy demand and Petronet’s plans to fulfil a part of the unmet demand, the stock makes a good long-term buy at the current price.

(Rs)

130

Sabero Organics Gujarat

110 90 70 50 30 Jun-10

Dec-10

Jun-11

in Sabero at Rs160 per share from the market. If you had invested in Sabero, should you tender your shares? In fact, you should buy more of Coromandel Interna onal which is headed for greater heights.

KAJARIA CERAMICS

Tall Tile Low value and high growth

ajaria Ceramics manufactures ceramic wall & floor tiles and glazed & polished vitrified tiles. The company also markets international tile brands, bath-ware and wooden flooring solutions. Promoted by Ashok Kajaria in technical collaboration with Todagres, SA (Spain), it started manufacturing at Sikandrabad (Uttar Pradesh) in 1988. The ``

Recommended Price Rs62

MONEYLIFE STOCK IDEAS

THAT WORK

Moneylife Issue 16 July 2009

62%*

(Ap paper mills)

Exit Price Rs83

(Stop Profit triggered on 29 January 2010)

* Annualised returns

MONEYLIFE | 30 June 2011 | 34

Stock-Streetbeat.indd 4

6/10/2011 8:46:16 PM

STOCKS STREET BEAT

` company’s production capacity

has grown 30-fold from 1msm (million square metres) in 1988 to 30.60msm in 2011 with manufacturing also done at Gailpur (Rajasthan) and Morbi (Gujarat). Its competitors include Cera Sanitaryware, Hitkari China, Regency Ceramics and Somany Ceramics. Of these, Cera and Somany are both excellent companies but Kajaria is a better bet than both of them. It has recorded a faster revenue growth and seems to be more proactive in introducing new products. Apart from organic growth, Kajaria acquired a 51% stake in Gujarat-based Soriso Ceramic in an all-cash deal for Rs5.62 crore in February 2011. The acquisition will help the company increase its capacity further to cater to the southern and western parts of the country to save on transportation charges. In March 2011, Kajaria completed the expansion of its 6msm (annual capacity) plant at Gailpur with an investment of Rs129.90 crore. The plant manufactures high-end polished/ glazed vitrified tiles. In the month, the company also converted its 2.60msm ceramic tile unit into a vitrified tile manufacturing facility at Sikandrabad with an investment of Rs20.30 crore. The full impact of enhanced production from both these plants is expected in FY11-12. Kajaria has also signed a long-term agreement with GAIL (India) for the supply of gas to its Gailpur unit, replacing high-cost propane. For the financial year ended 31 March 2011, Kajaria recorded

Unbiased & Methodical Stock Picking that Works!

a standalone net profit of Rs60.66 crore against Rs35.85 crore in FY09-10. In the same period, the company’s standalone net revenues rose to Rs952.35 crore from

Sept-10

Dec-10

Mar-11

222.21

253.85

281.86

OP*

34.89

39.7

42.65

Y-o-Y Sales Growth

20%

41%

31%

Y-o-Y OP Growth

15%

37%

38%

OPM

16%

15%

Sales*

OP: Operating Profit, Y-o-Y: Year-on-Year, OPM: Operating Profit Margin *Figures in Rs crore

Smooth Surface (Rs)

100

Kajaria Ceramics 90 80 70 60 Jan-11

Mar-11

Jun-11

Rs735.53 crore. Sales volumes increased to 29.71msm in FY10-11 from 25.28msm in FY09-10. In FY10-11, the company’s standalone earnings per share (EPS) increased to Rs8.24 from Rs4.87 in FY09-10. For FY10-11,

operating profit (earnings before interest, taxes, depreciation and amortisation) stood at Rs148.54 crore compared to Rs115.67 crore, on account of higher revenue. Kajaria recommended a dividend of 100% (Rs2 per equity share of Rs2 each) for FY10-11. The capital employed in the business increased marginally to Rs502.24 crore in FY10-11 from Rs452.17 crore in FY09-10, despite investment in 6msm brownfield capacity expansion, conversion of part of the ceramic tile capacity into a vitrified facility and acquisition of controlling stake in Soriso Ceramics. The average return on capital employed jumped to 24.94% from 18.94% in FY09-10, while average return on net worth jumped to 29.45% from 20.40% in FY09-10. Kajaria’s quarterly performance has been robust as well. Standalone net profit for the quarter ended 31 March 2011 leapt to Rs18.43 crore from Rs12.77 crore in the corresponding period last year, backed by a sharp rise in net revenues to Rs281.32 crore from Rs214.46 crore. Over the past five quarters, Kajaria has reported an average growth in revenues and operating profit of 27% and 24%, respectively. Its average operating margin is 15% and return on net worth is 27%. For the kind of growth that Kajaria is recording, its valuation is very attractive. Its market-cap to revenues is just 0.59, its market-cap to operating profit is just 3.90 times. Consider buying the stock at the current market price.

Disclaimer: Street Beat stocks are selected from over 1300 stocks in the Moneylife database. This report is for informational purpose only. None of the stock information, data and company information presented herein constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general information that does not take into account your individual circumstances, financial situation or needs; nor does it present a personalised recommendation to you. Individual stocks presented may not be suitable for you. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future results. Investors must do their own research before acting on them. Exit Strategy: Please exit if the stock closes 20% below the purchase price. This is called stop loss. However, if the market price is above 50% of the purchase price, exit if the stock falls by 20%, below any day’s closing price. This is called stop profit. Data Source: Centre for Monitoring Indian Economy’s Prowess database.

35 | 30 June 2011 | MONEYLIFE

Stock-Streetbeat.indd 5

6/10/2011 8:46:50 PM

6000 Stocks.

Just 30 minutes a day. A Winning Edge.

Let us do it all for you: screening, research, analysis, grading and tracking Weekly stock letters for high profits with low-risk strategies, delivered by email

oneylife magazine has been bringing you the finest approach to stock picking â&#x20AC;&#x201C; methodical, non-impressionistic and ethical. The same team that created a proven system that beats the major indices year after year now offers stock letters in different flavours for investors with different investment horizons and objectives. Here is what you get:

Cheetah: Short-term momentum Antelope: Medium-term growth stocks available at reasonable prices Lion: Long-term valueâ&#x20AC;&#x201D;stocks that have a reasonable chance of beating the market over time. Only large companies are recommended Annual Price of Each Stock Letter: Rs995 Special Combo Offer for Any Two: Rs1,495 Special Combo Offer for All Three: Rs1,995

Stock letter new.indd 2

Whatâ&#x20AC;&#x2122;s Inside - Weekly market view - A short list of stocks to buy, with reasons - Weekly updates on all recommended stocks, and clear recommendations on when to sell Email us at mail@kensource.com for a sample Our Investment Philosophy 1. Value is a subjective idea impossible to capture in any financial formula 2. Price is the most important information and should normally overrule most other factors 3. An open mind about value and closed mind about price allows us to go wherever the opportunities currently are. We do not limit ourselves to specific styles and themes

6/10/2011 3:36:50 PM

Investment Process: We crunch thousands of numbers to spot trends, unearth bargains and use our years of perspective and knowledge of companies and managements to select the stocks that best meet the relevant investment criteria. We suggest holding at least 50 stocks in the portfolio, it improves your chances of owning those rare few stocks that everyone wishes they had spotted too—earlier. How are we different from a mutual fund and your stockbroker? 1. Unlike mutual funds that hold your stock through a sharply falling market and often end up with poor returns, we believe that the only objective of an investment is to earn positive returns. Buying scrips of good companies is not an end in itself. 2. Unlike mutual funds, we do not benchmark ourselves against arbitrary indices. We aim to earn positive returns in all markets.

Company

Issue date

Surya Pharmaceutical Titan Industries Godrej Consumer Products Ambuja Cements Dr. Reddy’s Laboratories Bajaj Auto Lupin Rural Electrification Corp Punjab National Bank Tata Chemicals Colgate-Palmolive

28 Jun-10 24 May-10 24 Feb-10 26 Jul-10 23 Aug-10 26 Jul-10 23 Aug-10 24 May-10 26 Apr-10 26 Apr-10 19 Apr-10

3. Mutual funds propagate that you cannot time the market. This is because it gives them an excuse to invest lazily—hold on to companies in a declining market. We believe that timing is crucial. The best stocks will decimate your portfolio if you don’t sell them on time. 4. Unlike stockbrokers, we are not concerned with whether you buy 50 shares or 5,000; whether you buy/sell once a week or 20 times a week. Our income is not tied to your actions. We earn by selling ideas that we have to be responsible for. Our stock letters will survive only if you make money. In contrast, brokers earn their commissions irrespective of whether you make money or not. Cancel within four issues. You can cancel your subscription within four issues. We will return your money for the remaining period of subscription. You can cancel by email or phone.

Recommended Price (Rs) 184 2237 262 115 1,326 1,235 371 276 1,032 341 734

Exit Price (Rs) 294 3,316 372 142 1,617 1,487 442 328 1,196 393 846

Return 60% 48% 42% 23% 22% 20% 19% 19% 16% 15% 15%

YES, I wish to subscribe for one year to the following winning stock letters: Cheetah: Short-term momentum Antelope: Medium-term growth stocks Lion: Long-term value Annual Price of Each Stock Letter: Rs995; Special Combo Offer for Any Two: Rs1,495; Special Combo Offer for All Three: Rs1,995 NAME: ____________________________________________________________________________________________ ADDRESS: __________________________________________________________________________________________ PHONE (Office): ____________ Phone (Res): ____________ E-mail address: _____________________________________________ Date of Birth: ____________________ (MM) (DD) (YY) (Please ensure correct date of birth if payment is by credit card) _____________________ Profession: _____________________ Designation: ____________________________________________________________ Monthly Household Income: (Please tick the appropriate) ( ) Below Rs25,000 ( ) Rs25,000 - Rs50,000 ( ) Above Rs50,000 ( ) Please find enclosed ( ) Cheque / ( ) Demand draft number ____________________________________ dated __________________ favouring Kensource Information Services Pvt. Ltd. ( ) Please charge it to my ( ) /( ) /( ) /( ) My card number is _______________ & expiry date is ____________ (MM / YY) DATE: ______________________ SIGNATURE: ______________________ Please fill in this order form and mail it with your remittance to Kensource Information Services Pvt. Ltd., 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400 028. Credit card orders can be faxed to Mumbai 022-24442771. In case payment is through credit card, expiry date of the card should be mentioned. # Rates and offers are valid only in India. This offer is valid for a limited period. # All disputes shall be subject to Mumbai jurisdiction only.

Privacy Policy We do not give away your e-mail or postal address, telephone number, or any other information that you provide to us. We use this information solely to service your account

Stock letter new.indd 3

6/10/2011 7:39:53 PM

STREET BEAT WHICH WAY

Debashis Basu

Fasten Your Seatbelts

because I have equally strong arguments on both sides. The market is unlikely to move up because valuations are high and earnings growth is going to be muted, especially in the context of high commodity prices and The current dullness will soon give way to high interest rates. On the other hand, the negatives are not that numerous to force institutional investors to start huge gyrations offloading shares in large quantities in a hurry. We have a standoff. This can be broken by events. n Friday, 6th May, the sensitive index of the There are two events that can bring bulls back Bombay Stock Exchange closed at 18,518. to life. One, no further tightening by the Reserve Five weeks later, it is at 18,268.54. For those Bank of India (RBI) and another round of stimulus or who have not noticed non-trending markets, this is a quantitative easing in the US—called QE3—after the nice lesson. Over long timeframes, lasting years, and QE2 ends in June. Conversely, if the RBI does one more sometimes even in shorter timeframes, lasting a few weeks—as we are witnessing now—markets do nothing round of tightening and there is no QE3, markets will crack. Indeed, even if there is no tightening and QE3 is for you. They churn sideways in a narrow range. For all seen to be iffy, the dollar will rally and that itself will be the volatility that stocks naturally bring, markets can a concern for those foreign investors who have a shortgo to sleep for extended periods. Volatility goes down, term stake in the Indian market. dullness ensues and day-traders While we don’t suggest that you get whipsawed and frustrated. The market is still in rely on the oodles of opinions and Long-term investors too get fidgety. no-man’s land. It may forecasts available on the Internet, If they have been waiting for as an interesting aside, John Taylor, certain stocks to fall before they take a few weeks for chairman, CEO and founder of become worthy of buying, the wait a major move, this FX Concepts—one of the world’s seems interminable. TV channels low volatility situation largest hedge funds focused on have little engaging to talk about, cannot last for long currency trading—believes that apart from asking anyone with QE3 won’t happen and the dollar an opinion whether the market will rally sharply. will break out upwards or Moving from events to downwards. fundamentals—which ultimately So, will we break upwards influence valuations—the or downwards? We simply don’t market is in no-man’s land. know. Indeed, nobody knows. But We still assume that the one thing is certain. A low volatility Sensex companies would situation does not last for long. That collectively earn Rs1,100 or so of EPS is not in the nature of the markets. (earnings per share) in FY11-12 and that makes It may take a few weeks but we are a Sensex below 16,500 reasonably valued. headed for a big move, which I define On the higher side, the Sensex can rally all as 11% or so (around 2,000 points on Medium-term: — the way to an overvalued level of 22,000. the Sensex). The reason why I am not Long-term: — (Feedback at editor@moneylife.in) clear which way the market will move is

investment that is

not subject to market risks

Attractive gifts, invitation for events and free online help. For a subscription offer that is unique, look for a form elsewhere in this issue or on our website at www.moneylife.in

MONEYLIFE | 30 June 2011 | 38

Which way.indd 1

6/10/2011 7:43:07 PM

STOCKGRADER MOMENTUM

Sweet Rally

44%

Compounded Annual Return

Sadbhav rallied 5% and Shree Renuka Sugars jumped 10%, while M&M declined 6% Gainers: Sadbhav Engineering is contemplating placing two major bids in the mining sector—one to Northern Coalfields and the other to Gujarat Industries Power Company (GIPCL). It has already submitted a Rs1,100-crore bid to Sardar Sarovar Narmada Nigam in the irrigation sector. Sadbhav Engineering rallied 5% in the fortnight. Parrys Sugar Industries plans to issue preference shares to its promoters up to Rs100 crore and increase its authorised capital by Rs100 crore. It has called an extraordinary general meeting on 28th June, to obtain shareholder approval. EID Parry (India) Ltd has three sugar plants with a combined crushing capacity of 11,500 tonnes of cane per day. The scrip gained 3%. Titan Industries expects its revenue in the current fiscal to be over Rs8,200 crore (revenues were Rs6,532.97 crore in 2010-11), on the back of estimated strong jewellery demand. Its jewellery segment is expected to grow more than 30%, while watch sales are expected to rise over 22% in the current fiscal. Titan Industries gained 10%. Bank of Baroda (BoB), which calls itself ‘India’s international bank’, has opened its 11th branch in Uganda as part of its renewed focus on the African continent. The public sector lender, which already has a presence in several African countries, is Company

RS Grade

Funda Grade

Final Grade

Entry Date

Dish TV India

Sadbhav Engineering

Titan Industries

already among the top five banks in Uganda, with plans for further expansion. BoB gained 4%. Shree Renuka Sugars jumped 10%; Cadila Healthcare rose 3%. Oracle Financial Services Software rose 2%. Losers: Morgan Stanley cut its rating on Mahindra & Mahindra (M&M) to ‘equal-weight’ from ‘overweight’, saying sharp margin compression in the Q4 of FY10-11 implied lower earnings growth in the near-term. Last month, M&M lagged estimates with 6.3% rise in quarterly net profit; it warned that higher raw material costs could hurt margins. M&M declined 6% in the fortnight. Hindalco Industries, the flagship company of the Aditya Birla Group, has reported a 16.25% fall in its profit before tax (PBT), at Rs8,433 crore for the year ended 31 March 2011, against a PBT of Rs10,069 crore in the previous year. Consolidated revenue grew 19% year-on-year to Rs72,078 crore, its best-ever performance. The stock fell by 7%. Bhushan Steel settled 5% lower. Educomp Solutions declined 7%; Shriram Transport Finance fell by 8%. Note: Please read our changed methodology for grading stocks (given below). We have also added a column showing returns since the stock’s appearance in the table. Returns from new stocks added are counted after one issue.

RS Grade

Funda Grade

Final Grade

Entry Date

Return*

Company

06 Aug-10

62%

Sesa Goa

21-Jan-11

-15%

28 Apr-11

Bank of Baroda

29 Apr-09

166%

16 Apr-10

124%

Shriram Transport

18 Feb-11

-14%

Sintex Industries

01 Apr-11

11%

HDFC Bank

04 Mar-11

Return*

M&M

28 Apr-11

-14%

Bhushan Steel

28 Apr-11

-18%

GSK Consumer

29 Apr-09

190%

HDFC

15 May-09

68%

Fed-Mogul Goetze

28 Apr-11

Hindalco Industries

23 Jul-10

17%

Federal Bank

13 May-11

Bank of India

21 Jan-11

-7%

Oracle Financial Serv

23 Dec-10

-3%

Educomp Solutions

27 May-11

-7%

Cadila Healthcare

12 Nov-10

18%

Shree Renuka Sugars

06 Aug-10

-4%

Orchid Chemicals

28-Apr-11

-11%

EID-Parry (India)

12 Nov-10

-18%

*Non-annualised

Methodology: Momentum Stockgrader is a fortnightly ranking of stocks, based on two key factors that drive stocks—one, market-related or quantitative and, two, fundamental. The quantitative factor is the relative strength (RS), which is a stock’s relative outperformance during the past 10 weeks over select companies. For arriving at fundamental grades, we have used only operating profit growth and sales growth over three quarters. For momentum stocks, RS carries a higher weightage. Focus only on stocks with final grade A. When we include a stock in the grader, it is based on the fortnightly closing price of the scrip that coincides with our issue and that would be the entry price. Similarly, when we drop a stock from the grader, it is based on the closing price on Friday, as we go to print.

39 | 30 June 2011 | MONEYLIFE

Momentum.indd 2

6/10/2011 8:56:32 PM

STOCKGRADER MEDIUM TERM

Zooming Ahead

51%

Compounded Annual Return

Dabur India and Petronet LNG surged 6% each, while Vivimed Labs declined 2% Gainers: Dabur India and Petronet LNG rose by 6% each in the fortnight. Ipca Laboratories and Linc Pen & Plastics gained 5% each. Information technology services and solutions firm Tata Consultancy Services (TCS) has bagged a contract from Ahli Bank to provide software solutions for the Bank’s brokerage operations in Qatar. TCS had earlier announced the launch of TCS Bancs Treasury 5.0, an integrated, multi-entity, multi-currency treasury solution, for providing support to front-, mid- and back-offices. The stock rose by 4%. Supreme Petrochem rose 5%. Whirlpool of India gained 2%. Bajaj Auto, India’s second-largest two-wheeler company and Kawasaki have together launched the ‘Ninja 650R’ motorcycle in India at a price of Rs4.57 lakh. Bajaj Auto was up by 1%. Siemens VAI Metals Technologies has won an order from stainless steel producer Viraj Profiles to supply an AOD (argon-oxygen decarburisation) converter for its plant located at Tarapur (Maharashtra). Siemens India will Company

RS Grade

Funda Grade

Final Grade

Entry Date

Petronet LNG

29 Apr-09

Munjal Auto Inds

26 May-11

Kajaria Ceramics

Vivimed Labs

Orchid Chemicals

Lupin

Titan Industries

HDFC Bank

TCS

Return* 172%

handle some of the local manufacturing for the project as well as supervise the installation and commissioning of the plant. Siemens India ended flat. Losers: The government has announced the approval of 16 foreign direct investment proposals worth Rs923.55 crore. Vivimed Labs, which is into personal-care products, was one of them. It also got a green signal for a Rs3.75-crore proposal for manufacturing of organic chemicals and pharmaceuticals. The stock fell 2%. United Phosphorus and Seshasayee Paper & Boards fell 3% each, Suprajit Engineering and Amara Raja Batteries fell by 1% each. Unichem Laboratories fell by 2%. Changes: We are recommending exit from Seshasayee Paper and United Phosphorus. Note: Please read our changed methodology for grading stocks (given below). We have also added a column showing returns since the stock’s appearance in the table. Returns from new stocks added are counted after one issue.

Company

RS Grade

Funda Grade

Final Grade

Entry Date

Return*

Sun Pharmaceutical

29 Apr-09

92%

Dabur India

01 Apr-10

45%

26 May-11

Ipca Laboratories

20 Jan-11

26 May-11

-2%

Linc Pen & Plastics

26 May-11

20 Jan-11

-10%

Orient Paper & Inds

26 May-11

29 Apr-09

206%

Oracle Financial Serv

23 Dec-10

-2%

01 Apr-10

142%

CMC

23 Dec-10

-3%

29 Apr-09

115%

Cadila Healthcare

20 Jan-11

10%

10 Jun-10

58%

Amara Raja Ba eries

28 Apr-11

8% -6%

Supreme Petrochem

27 May-10

46%

Ranbaxy Laboratories

20 Jan-11

Siemens

27 May-10

24%

SEL Manufacturing

26 May-11

Supreme Industries

26 May-11

Bajaj Auto

03 Feb-11

10%

Time Technoplast

26 May-11

HCL Technologies

29 Apr-09

Suprajit Engineering

11 Nov-10

-11%

291%

HDFC

29 Apr-09

89%

Nestlé India

29 Apr-09

145%

Whirlpool of India

11 Nov-10

-24%

CRISIL

29 Apr-09

132%

Unichem Lab

29 Apr-09

137%

*Non-annualised

Methodology: Medium Term Stockgrader is a fortnightly ranking of stocks, based on two key factors that drive stocks – one, market-related or quantitative and, two, fundamental. The quantitative factor is the relative strength (RS), which is a stock’s relative outperformance during the past 26 weeks over select companies. Our grading methodology of fundamental factors includes two key scores, growth score (GS) and value score (VS), carrying equal weightage. We then combine the RS grade and fundamental grades. Focus only on stocks with final grade A. When we include a stock in the grader, it is based on the fortnightly closing price of the scrip that coincides with our issue and that would be the entry price. Similarly, when we drop a stock from the grader, it is based on the closing price on Friday, as we go to print.

MONEYLIFE | 30 June 2011 | 40

Medium Term.indd 2

6/10/2011 8:55:06 PM

STOCKGRADER LONG TERM

Strong Foundation

52%

Compounded Annual Return

Godrej Consumer Products soared 10% and Ambuja Cements rose 1%; Cairn India fell 3% and Marico lost 2% Gainers: Godrej Consumer Products Ltd (GCPL) has acquired a 51% stake in South African hair-care firm Darling Group Holdings for an undisclosed amount with an option to buy out the entire company in five years. GCPL expects the acquisition, its fourth in South Africa in as many years, to add to its earnings from the first year itself. The stock soared 10% in the fortnight. Sun Pharmaceutical Industries’ acquisition of Israel’s Taro Pharmaceutical Industries is finally paying off. The March quarter revenue of the Indian drug-maker rose 35.5% year-on-year (y-o-y) to Rs1,463.4 crore. Of this, Taro, which grew 21%, contributed nearly Rs480 crore. The stock jumped 7%. Ambuja Cements, India’s third-largest cement-maker, has acquired an 85% stake in Nepal’s Dang Cement Industries for Rs19.13 crore. The stock rose by 1%. Nestlé and Power Grid Corporation climbed 5% and 4% respectively.

Losers: London-based Vedanta Resources Plc may accept the government’s conditions for approving its planned $9.4-billion bid for control of Cairn India as high oil prices make the deal attractive, investors said. Vedanta may agree to pay its share of royalties from the nation’s biggest onshore oil deposit, currently borne by Cairn India’s partner ONGC. Cairn India was down by 3%. Cummins India and Marico were down by 3% and 2%, respectively. Drug-maker Lupin said that it has inked a licensing agreement with Sydney-based private specialty life sciences company NeuClone Pty for cell line technology to develop cancer-treatment medicines. The stock fell 1%. Note: Please read our changed methodology for grading stocks (given below). We have also added a column showing returns since the stock’s appearance in the table. Returns from new stocks added are counted after one issue.

Company

RS Grade

Funda Grade

Final Grade

Entry Date

Ador Fontech

29 Apr-09

691%

Titan Industries

03 Feb-11

26%

Emami

26 May-11

Cummins India

12 May-11

Hindustan Unilever

25 Nov-10

TCS

29 Apr-09

280%

Castrol India

28 Apr-11

Lupin

29 Apr-09

206%

Power Grid Corp

03 Feb-11

Nestlé India

29 Apr-09

145%

CMC

23 Dec-10

-3%

Godrej Consumer

26 May-11

12%

Ranbaxy Laboratories

20 Jan-11

-6%

Ipca Laboratories

20 Jan-11

Orchid Chemicals

25 Nov-10

-6%

Petronet LNG

26 May-11

Adani Enterprises

29 Apr-09

207%

Shoppers Stop

26 May-11

GSK Pharmaceuticals

29 Apr-09

101%

Berger Paints India

26 May-11

Sun Pharmaceutical

29 Apr-09

92%

Marico

26 May-11

-2%

Ambuja Cements

19 Aug-10

11%

Return*

-4%

Company

RS Grade

Funda Grade

Final Grade

Entry Date

Asian Paints

27 May-10

Return* 47%

ITC

27 May-10

41%

Cadila Healthcare

20 Jan-11

10%

Karur Vysya Bank

10 Jun-10

-20%

SRF

27 May-10

39%

CRISIL

29 Apr-09

132%

Bajaj Auto

03 Feb-11

10%

HDFC Bank

29 Apr-09

115%

M&M

28 Apr-11

-14%

Cairn India

29 Apr-09

81%

HDFC

01 Apr-10

18%

*Non-annualised

Methodology: Long Term Stockgrader is a fortnightly ranking of stocks, based on two key factors that drive stocks: one, market-related or quantitative and, two, fundamental. The quantitative factor is the relative strength (RS), which is a stock’s relative outperformance during the past 26 weeks over select companies. The fundamental factor includes growth score (GS) and value score (VS). GS is based on operating profit growth and sales growth. VS is calculated considering market-cap as a multiple of five quarters of average sales and operating profit, as well as latest Return on Net Worth (RoNW). The long-term list carries more large-cap stocks. Focus only on stocks with final grade A. When we include a stock in the grader, it is based on the fortnightly closing price of the scrip that coincides with our issue and that would be the entry price. Similarly, when we drop a stock from the grader, it is based on the closing price on Friday, as we go to print.

41 | 30 June 2011 | MONEYLIFE

Long Term.indd 2

6/10/2011 8:56:15 PM

“You Can’t Time the Market.” Maybe.

21,100

18-31 Jan ‘08

12-25 Oct ‘07

It is easy to describe market moves. It is hard to predict them which is why fund managers tell you that you “The huge over-speculation... cannot time the market. You will get vivid descriptions should now lead to some painful correction...” of the past everyday from business channels and the 6 -19 Jun ‘08 next day from newspapers. You will get sensible and “Time for a Break?” occasional predictions from only one source. You know 2-16 Aug ‘07 what’s more valuable 9-22 Nov ‘07

17-31 Jul ‘08

15 Feb-1 Mar ‘07

17,325

“Time to Go Neutral” “The market may correct “We don’t have a forecast” 10%-15% before the next move up” “If the government moves to slay the monster of inflation, stocks will suffer collateral damage”

23 Apr-7 May ‘06

“A new downleg may start soon”

28 Mar-10 Apr ‘08 31 Aug-13 Sept ‘07

13,550

“Is the market due for a fall?”

2-15 Ja

“A short-term bottom may be very near”

16-29 Mar ‘07

“A Rally Now?”

“Weakness ha 4-17 August ‘06

“The panic looks done for now”

9,775

Sensex “Might the markets be ready to surprise us on the upside?” “Expect another leg of stock market rally”

6,000 Apr-06

Jul-07

Nov-08

We have no compulsion to issue breathless market calls like TV channels or brokers, who make money by getting you to trade frequently. We are a fortnightly magazine. But we don’t issue market calls every fortnight. Moneylife market calls are infrequent. But they have been reasonably accurate so far. But, of course, the past is no guide to the future.

Sensex.indd 2

6/10/2011 7:36:30 PM

13-26 Aug'10 18-31 Dec‘09

23 Apr-6 May'10

The Coming Decline

Short-term Top?

4-17 Dec‘09

Time To Sell? 19 Jun-2 July ‘09

Headed Down?

“Is the market about to crack?”

6 Nov-19 Nov ‘09

11-25 March '10

31 July-13 Aug ‘09

“We have no Forecast”

A Buyers' Market

2-15 Jan ‘09

“Buy the dip”

27 Feb-12 Mar ‘09

akness has resurfaced” “A Breakdown?”

30 Jan-12 Feb ‘09

“A weak rally now”

Nov-08

13-26 Mar ‘09

“Another weak rally”

Feb-10

Jun-11

Moneylife Stock Analysis

KNOW WHAT’S COMING

Sensex.indd 3

6/10/2011 7:37:37 PM

Insurance Trends New products, regulations, features and options, interpreted from your perspective

G R O U P ME DIC L AIM

More Expensive, Fewer Options Employee contribution is increasing; focus is now on preventive healthcare

any companies are struggling today to find ways to lower the cost of their overall benefits programmes, while still serving the needs of their workforce. The annual survey by India Insure Risk Management & Insurance Broking Services Pvt Ltd shows that companies are moving away from managing the cost of illness and are looking through a wider prism—

preventing illnesses and promoting employee health and well-being. Employee contribution and proportionate payment from companies are rising, while allowance for room rent during hospitalisation is coming down.

There has also been an increase in capping of insurance cover for diseases. Companies with employee strength of less than 5,000 have spun off parental coverage into a separate policy with 100% of the premium being borne by the employee. Also, despite private insurers competing vigorously, 73% of group health policies are still placed with the government insurers. Employers have identified rise in medical costs, dependent claims and poor employee understanding of how to use plans as the key challenges in maintaining affordable benefit coverage. Some 73% of respondents to the survey had claims ratio of more than 100%. Premium rates have increased for more than 75% of the respondents, compared to last year. Companies can count on two things: first, health costs will increase faster than inflation; second, the burden will continue to shift from the public to the private sector—and to employees. The fact that organisations have not made drastic decreases in their benefit offerings, in spite of the economic slowdown and overall increase in costs, is a promising

sign and displays the importance of benefits to employees and employers alike. This clearly substantiates the fact that ‘employee benefits insurance’ is increasingly being deployed as an employee retention tool, according to the survey.

ULIP

Flexible, but with High Charges Tata AIG’s new ULIP is strangely offering a premium payment term of only 5 or 7 years

ata AIG Life Insurance Company has recently launched two unit-linked products (ULIPs) —‘Tata AIG Life Insurance InvestAssure Gold Supreme’ and ‘Tata AIG Life Insurance InvestAssure Maximizer’. The premium payment term of only five or seven years for a policy term of 20 to 40 years is strange, considering that life insurance products are supposed to be longterm, systematic savings. The mortality rates on offer are among the lowest in the industry. The plans offer loyalty additions of 0.25% of the regular premium fund value, paid every five years— starting from the 10th anniversary of the policy. They offer flexibility to choose from seven fund options for enhanced investment opportunities or allow the insurer to invest on your behalf by offering portfolio strategies of systematic money allocation & regular transfer (SMART) or automatic asset allocation (AAA). The plans offer optional riders of accidental death benefit and a critical illness rider. The total of premium allocation and policy administration charge (PAC) is ``

MONEYLIFE | 30 June 2011 | 44

Insurance.indd 2

6/9/2011 7:35:00 PM

INSURANCE TRENDS

` on the higher side compared to

other ULIPs introduced after September 2010. The premium allocation charge (PAC) is 5% for first to third years and 4% for the fourth year to the premium payment term. The monthly PAC is 0.25% for a premium band of Rs48,000 to Rs1,19,999 and 0.15% for Rs1,20,000 and above. The PAC can be increased by 5% (compounded annually) and it will continue till the end of the policy term. InvestAssure Maximizer offers the choice of two life cover options—premium life cover (death benefit is the combination of sum assured and fund value) and standard life cover (death benefit is higher of sum assured or fund value). The premium life cover will entail more funds going towards mortality charges. This plan also offers flexibility to increase/decrease the basic sum assured from the next policy anniversary.

T r a di t i o n al P l an

Opaque and Low Returns HDFC Life’s Sampoorn Samridhi Insurance Plan is innovative but avoidable

DFC Life has launched Sampoorn Samridhi Insurance Plan, a ‘with-profit’ traditional product. The key highlight of the product is that a customer can opt for any of the maturity benefit options—enhanced cash option (enhanced maturity amount at the end of the policy term) or enhanced cover option (additional sum assured, payable on death). The indicative premium (for a 30–year insured person, and a policy term of 10 years for sum assured of Rs2.5 lakh) is Rs30,653. The ‘reversionary

bonus’ is guaranteed to be at least equal to Rs30 per Rs1,000 of the sum assured, for all bonuses declared up to 31 March 2021. The other bonus (interim or terminal) is non-guaranteed. The Plan provides the flexibility in premium paying frequency—monthly, quarterly, half-yearly and annual as well as the option for deciding the term of the policy from 5 to 40 years. Customers whose sum assured is Rs5 lakh and above can avail a discount of 5% on the basic premium.

Home Insurance

Home Protection Chola’s Total Home Protect addresses a small but important segment

hola MS General Insurance has launched ‘Chola Total Home Protect’ product. Chola Total Home Protect comes in three variants covering risk to contents up to Rs25 lakh. The scheme will cover buildings (only for self-owned houses) against fire, acts of God and terrorism. It will offer cover for value of construction cost from Rs5 lakh onwards. The contents are covered against fire, burglary, earthquake and terrorism and the sum insured would be from Rs1 lakh to Rs25 lakh. Household appliances are covered against electrical and mechanical breakdown for a sum insured up to Rs12.50 lakh. There is no need for customers to submit invoices or the serial number of electronic appliances (usually required by insurance companies) to insure valuables at homes. The agents will survey the house, once a policy is bought. In the event of a claim, the sum insured will be paid after investigation.

Fine Print IRDA may allow banks to sell products of two insurers

nsurance Regulatory and Development Authority (IRDA) has said on that it is considering a proposal to allow banks to sell products of two insurance companies each in life and nonlife categories, a move that will supposedly help expand the insurance market. As per the current rule, a bank is allowed to sell products of one life insurance and one general insurance firm. Insurers have been demanding that they be given option to tie up with more. In 2009, IRDA had set up a committee to suggest ways to deepen insurance penetration. We doubt whether this move would achieve this objective. Besides, for customers it has marginal value. The staff of public sector banks, with the widest network, are usually unaware of the products they are selling and private banks have been the biggest source of mis-selling insurance products.

Will IRDA’s complainthandling improve now?

RDA has launched IGMS (Integrated Grievance Management System), an online grievance portal for customers. The grievance redressal record (not official but anecdotal) of IRDA is not outstanding. Customers have don’t get complained that they do replies and the Insurance Insuran Ombudsman’s Om office of functions fu under archaic un rules that are rule anti-consumer. anti-co

45 | 30 June 2011 | MONEYLIFE

Insurance.indd 3

6/9/2011 7:39:54 PM

PERSONAL BUSINESS AUTO

AN TI- TH EF T F ITTIN GS

Loot,&Boot Scoot Every car has them, but security is still a concern, says Veeresh Malik

ave you seen how what was ‘luxury’ and ‘exclusive’ a year ago, is now basic and readily available, across all levels in the automobile world? Airbags, LEDs (light-emitting diodes), keyless start, internal electronics, leather seats and other ‘extras’, which were found largely in the costlier vehicles, are now available in the humble lowerend hatchbacks also. But the largest amount of progress has been made with anti-theft devices, especially the upper-end ones, which were geared more for high-end luxury cars. One particular highly secretive anti-theft vehicle locator device, which works on the principle of homing signals sent out for decades by internal transmitters that can be tracked by a variety of methods, is now on offer also for items as low in cost as laptops. As of now, due to all sorts of wireless laws in India dating centuries back, these are not officially for sale—but it appears that some were fitted in vehicles that had been stolen abroad and illegally imported into India—and then tracked down using these technologies.

Maybe that explains why some very expensive luxury cars (Aston Martin, Bentley, Rolls-Royce and others) have recently been found ‘abandoned’ in and around Delhi. The transmitters are said to have the capacity of being received five to eight kilometres away in any direction, even if stored underground or inside garages, with the receivers working on devices as simple as antennae mounted on cars or airplanes. Expensive luxury cars still get stolen all over the world—but disposing them of is increasingly difficult now. In one celebrated case reported in the US, these upper-end luxury cars were being stolen simply so that they could be cannibalised and then sent to the scrapper’s yards as soon as possible. That some automobile manufacturers may actually be encouraging such activities so that their sales go up cannot be ruled out, according to sources in the recovery business. It appears that similar sentiments prevail in India too. The eventual loser, of course, is the driving public—our insurance premiums continue to rise as a direct result.

INDIAN MOTOR SPORTS

Oily Affairs Will our F1 track record become a CWG repeat?

y articles on the state of affairs of motor sports in India as well as the co-linked real estate issues in and around Greater Noida (where the Formula One races are in danger of soon becoming the Formula None event, while the land goes elsewhere), appear to have sparked some emotional outbursts from members of the FMSCI (Federation of Motor Sports Clubs of India). On their website, the FMSCI claims to be a ‘National Sports Federation recognised by the Government of India’, as seen on their ‘racing licence forms’, but does not appear to be on the list of national sports federations that have been granted annual recognition for 2011, as seen on the list posted on the official Indian website (http://yas.nic.in/writereaddata/ linkimages/2544648041.pdf). At the same time, although public memory may be short, the involvement of Suresh Kalmadi ``

MONEYLIFE | 30 June 2011 | 46

Auto.indd 2

6/10/2011 8:08:27 PM

PERSONAL BUSINESS AUTO

` in this sporting event has been

quietly withdrawn. Likewise, there are no accounts available, either with the FMSCI or as yet with the department of sports, on who is paying for what and how. It is likely that the complete Formula One circus in India is a private event—in which case, a simple RTI (Right to Information) application will bring out whether the government of India or any of its many arms spent anything on what is rapidly turning out to be something with memories of the Commonwealth Games. Motor sports are certainly an essential part of the evolution of the automobile industry in India—but if it has to be at public cost, then it needs to be done with greater transparency. As of now, FMSCI is amongst the few sports federations that do not adhere to the RTI Act of India 2005, the least that is expected of an organisation claiming to be a ‘Public Authority’ in the letter and spirit of the word.

B UILDIN G BR AN D VAL U E

Across the Board Why not the same brand for personal use—and for public transport?

rands should not make a difference as far as public transport is concerned. But increasingly, if you look around, brand equity is kicking in here too. So a luxury bus is an almost generic ‘Volvo’ and a new-generation railway coach is ‘LHB’, while Metro coaches are now being referred to as ‘Bombardier’. Regardless of the manufacturer. This includes ultra-luxury marquees like Aston Martin—the first few double-decker city buses designed by them have been spotted on London streets, doing valiant duty on test runs for

city transport. Likewise, MercedesBenz has always been known for its trucks and buses as much as it is for its luxury cars. BMW makes subway coaches in collaboration with Siemens. Various luxury brands from the Volkswagen (VW) group like Audi share knowledge and technologies with group company bus & truck manufacturer Scania. Why Tata, VW and BMW choose to keep their public transport brands separate from the car brands, and others like Mercedes-Benz, Hyundai and Toyota carry the same brand across, is certainly up to them. But here’s a prediction— single brands across categories will

An automaker’s public transport and private transport brand names should be the same. A few manufacturers have figured out the connection probably be more powerful and hold more value in the years to come, compared to multiple brands. There will be some value in associating the benefits of technology utilised across user categories which will filter across to aspirational buyers; that’s already happening in some cases. An automaker’s public transport and private transport brand names should be the same. A few manufacturers have figured out the connection—whether ultimate luxury or public transport, buyers seem to want the same things from an automobile company—value.

NAME GAMES

Under the Hood Marketing won’t work, if the product does not deliver

espite the advantages of building a strong brand, marketing suits will continue to try to confuse consumers with multiple brand names. A good example is the whole Skoda-VW-Audi-Bentley-Bugatti thing, along with the fact that Porsche happens to own a majority stake in VW. Attend a VW group press conference and you often don’t know what is going on. There are multiple

brand names for vehicles that share underpinnings and ‘platforms’. Just different coloured horses on the same old merry-go-round. The world has figured it out. But, in India, we are going brand-conscious, without really going behind the brand. For example, the mere idea of owning an expensive motorcycle costing lakhs is a great turn-on, but our home-grown Royal Enfield, sweeping the honours globally at a fraction of the price, gets the cold shoulder.

Veeresh Malik started and sold a couple of companies, is now back to his first love—writing. He is also involved actively in helping small and midsize family-run businesses re-invent themselves.

47 | 30 June 2011 | MONEYLIFE

Auto.indd 3

6/10/2011 8:08:54 PM

POWER OF ONE SUBHASH CHANDRA AGRAWAL

PUBLIC ACTIVISM

Cleansing the System Subhash Chandra Agrawal wields his pen like no one else can, says Veeresh Malik

changes, even while he continued his business activities. n a day and age when mobile phones and the Internet were yet unknown, and communication was During a meeting with Moneylife, he recounted his experiences through decades of constructive rebellion mainly by letters written on postcards and ‘inlands’, against different aspects of the system. a young Subhash, while studying engineering in the late Mr Agrawal’s letters to editors were the starting 1960s, took on the might of the system. He complained point. He also collected correspondence from others in writing to a Hindi newspaper about a bus conductor on their issues of concern, and sent them to various who misbehaved with him and did not provide him the authorities, even up to the President of India. It meant ticket and the change. buying multiple copies of a publication to cut out Complaining about the government in any form specific accounts to dispatch them with covering letters. those days was easily construed as being ‘anti-national’ Today, this is all done at the click of a mouse; but the and could lead to harassment. The episode became a inspiration and strategy is the same. turning point in his life. The complaint had his college Among some of his early successes were address too and officials from the public sector bus improvements in the cheque clearance system, company turned up at the college looking for him the better utilisation of passenger train rakes and even next day. Initially, he thought they were out to fix him the frequency of a consumer and he bunked. It turned out empowerment serial, called that they were there to give ‘Rajani’, starring the late Priya him a written apology from Tendulkar. the conductor and give him the Over time, his style changed ticket and the change. from writing complaints, which That day, Subhash learnt sometimes could result in loss the power of the written word; of jobs for those against whom never mind that it gave him complaints were made, to sending writer’s cramps in the years to suggestions that he found to be come. Starting with handwritten more positive and result-oriented. letters, he graduated to a manual He became a name in the circles typewriter. After a break during of power and is a record holder the Emergency, and with a in the Guinness Book of World handbook of addresses of Indian Records for writing thousands publications that came his way, of letters to Indian newspapers. Subhash Agrawal became a oneHis most notable successes were man army in the art and strategy With a handbook of achieved by what he fervently of writing letters, even as he describes as ‘the power of the addresses of Indian completed his studies and joined pen’. the family business. publications that came The enactment of the RTI Mr Agrawal qualified as an his way, Subhash Agrawal (Right to Information) Act was a engineer. He was also a student became a one- man army game changer. After 32 years of of law for a few semesters. in the art and strategy of writing letters to the media, he His early experience, and a writing letters was introduced to the RTI Act by shattering family litigation, Arvind Kejriwal in 2005. As Mr exposed him to the flaws of the Subhash Chandra Agrawal Agrawal says, the Act has actually judicial system and strengthened Veteran Activist `` become ‘a right to live’ now. his resolve to fight for systemic

MONEYLIFE | 30 June 2011 | 48

Power of One.indd 2

6/8/2011 8:39:32 PM

POWER OF ONE SUBHASH CHANDRA AGRAWAL

In late 2006, his application to KG Balakrishnan, the former Chief Justice of India (CJI), raised a constitutional question. Mr Agrawal asked whether the judges serving under Justice Balakrishnan in the Supreme Court had disclosed their assets, as required by an earlier judicial resolution. The CJI refused to give an answer. Mr Agrawal won an appeal at the Central Information Commission, but the Supreme Court challenged the decision in the Delhi High Court! Mr Agrawal’s application triggered a nationwide debate on the RTI Act and its applicability to the Supreme Court; it turned the spotlight on judicial corruption. For weeks on end, the battle was front-page news in India’s largest newspapers, and RTI became the subject of discussion among Delhi’s elite. It was clear, by this time, that the law had made a substantial impact. In the first three years, more than two million applications were filed. Post-offices even reported a shortage of ten-rupee postal orders that are commonly used for payment of RTI fees. Mr Agrawal himself has filed over 1,000 RTI applications. The print media is the key to his strategy. He sends signed hard copies by post. Addresses and names of key persons in the media are available in the Indian Newspaper Society’s handbook. The other important element is relentless follow-up, forwarding ‘suggestions’ to all public authorities concerned, including those whom he labels as ‘super public authorities’. What this achieves can best be called the forcemultiplier effect, where eventually the concerned person is first flooded with the same ‘suggestion’ from various sources and, subsequently, also presented with an RTI application asking for an ‘action taken report’ on the matter. However, the key is to have queries that are very precise and not vindictive. A well-known example is the RTI case on judges’ assets. He simply asked whether the judges of the Supreme Court had filed details of their assets according to the existing notification. Mr Agrawal hastens to explain that it was not his intention to know the assets of the judges, rather only to ascertain whether they had placed the information before the relevant authorities or not. So, how does he select issues? Mr Agrawal says he files at least one RTI application every day. They are based on four main sources: the thousands of letters and suggestions that he receives every day, reading media reports, information from people inside government, and specific requests to draft RTI applications on behalf of journalists, some of whom are looking for exclusive stories. Today, Subhash Agrawal’s home-office is neatly

lined with files that are arranged chronologically. He devotes around four hours everyday to his mission, in addition to the 10-hour day he puts in for his regular business, maintaining a Chinese Wall between the two activities.

India’s first chief information commissioner Wajahat Habibullah with Mr Agrawal

What does the future hold? His disarming response is that making suggestions to improve the system is his core competency and a passion that will continue with the help of RTI, as long as he can. He sees others taking over the baton. With the advent of email and the Internet, there is a deluge of information and the number of people writing RTI applications is swelling. So the differentiator that makes for success and preeminence is the quality of background research and ability to frame the query well. This remains his top priority. The other factor that drove Mr Agrawal was a painful personal episode, in which people in the senior judiciary connived with some family members to drive him to a level beneath which it was almost impossible to sink—without actually dying. That experience is now behind him, with the guilty being brought to book regardless of how mighty they were, and he has moved on from strength to strength. This also led to his third project, which is to bring systematic improvements in the judiciary—an area that most people are reluctant, even scared, to touch—but he feels confident enough to take the risk. There is a familiar ennui when we talk about the regular culprits in the system—mainly civic bodies that make life miserable for people. But there is hope, too, in the support that he gets from various authorities and individual officials who are willing to sit across the table and discuss ways to improve things. It’s enough fuel to drive him to fight on. — With inputs from SH Subrahmanian

49 | 30 June 2011 | MONEYLIFE

Power of One.indd 3

6/8/2011 8:39:55 PM

ML FOUNDATION EVENTS

“INVESTOR, EMPOWER YOURSELF” IN KOLKATA

“Without consumer awareness, we cannot ask for consumer satisfaction” Moneylife Foundation, in association with Union Bank of India, held its first seminar “Investor, Empower Yourself” in Kolkata on 4th June. This is a continuation of the Foundation’s eﬀort to spread financial literacy and increase awareness about investor rights across India

“T

he Union Bank of India is going to institute a training programme for its officials and create an intelligence unit,” said AA Thakur, the Bank’s Kolkata DGM (deputy general manager). The initiative is a sequel to their customer assistance programme named ‘Nav Nirman’. Keeping in tune with the first phase, branches will be revamped, callcentre services made more efficient and grievance redressal speeded up. “From June 2011, these initiatives will be rolled out across about 250 branches over the next one year, and then will be scaled up to cover the rest of the organisation,” said Mr Thakur. He also lauded the efforts of Moneylife in promoting consumer awareness and spreading financial literacy. “Without consumer awareness, we cannot ask for

consumer satisfaction. It is good that Moneylife has taken the responsibility to educate people on financial issues,” he said. Debashis Basu, editor, Moneylife and trustee of Moneylife Foundation, talked about simple investment mantras that can lead to substantial wealth creation over a long period. He explained how to invest smartly in equity schemes and

Mr Thakur at the Kolkata seminar

stocks, and pointed out the merits of compounded interest over a long term. The key, he said, was to start early, with modest expectations and hold on for a long term. Later, he presented an exhaustive analysis of mutual funds and how to choose sensibly to maximise gains and reduce risks. He said, “Many people avoid investing in stocks and mutual funds because the market appears scary, thanks to the financial jargon and complicated terms that ‘experts’ spew. But India’s investing population is going down, and one must understand that simply keeping your money locked up, with inflation steadily rising, will erode your savings. And, since longevity has increased, you would have long years after retirement to lament.” He pointed out that gold is a speculative asset. One has to `` buy and sell it, invest smartly in

MONEYLIFE | 30 June 2011 | 50

Event.indd 2

6/10/2011 7:48:45 PM

ML FOUNDATION EVENTS

` it and understand how currency

speculation works, because gold’s value depends on the movement of the dollar and, consequently, the value of the rupee. Mr Basu also warned investors about putting money in portfolio

The youth are taking to savings and becoming smart

management schemes. Citing historical data, he showed what would be the best mutual funds and stocks to invest in. He said, “The market is full

of names, but barring a few, none has yielded substantial returns over the long run. There are many schemes with fancy names, but one has to look at how they have performed over the years, and the margin by which they have beaten the market.” He asked investors to keep track of developments in the sector. “Fund managers are always changing companies. The good ones are always dependable,” he said. “Loyalty, today, does not mean anything. Don’t stick to an agent or a company just because your father invested in it. Be ready to change, when you get a better deal.” Sucheta Dalal, managing editor of Moneylife and trustee of Moneylife Foundation, talked about various scams and how to avoid them. She also warned people against getting involved in chainmarketing schemes and asked them

to beware of Internet scams that have landed many people in trouble and cost them considerable amounts of money. Ms Dalal also spoke on the need for wills and some basic housekeeping to update nominations

A participant raises an issue during the Q&A session

for bank deposits, capital market instruments and residential flats in cooperative societies that can save a lot of hardship to one’s heirs or relatives.

USING THE RTI ACT

‘RTI can be used by anyone to great effect’ Senior journalist and RTI acƟvist Vinita Deshmukh thinks that people’s parƟcipaƟon in the RTI movement is a must

here was a man, who was sentenced to prison for committing murder. However, due to his good conduct, he was kept in an open cell. When he protested against the quality of prison food, he was shifted back to the closed cell without any reason. But using the RTI (Right to Information) Act, he obtained a copy of the Indian Prison Manual Act, and then wrote to the press about the injustice meted out to him, and, finally, was restored to an open cell. Narrating the incident 31 May 2011, Vinita Deshmukh, senior journalist and RTI activist said at ``

A view of the audience

51 | 30 June 2011 | MONEYLIFE

Event.indd 3

6/10/2011 7:49:28 PM

ML FOUNDATION EVENTS

Foundation on the effective use of the Act: “If a prisoner can use the RTI Act, why can’t we? I don’t say that we take on a huge scam, but there are several small matters which directly concern you, and which you can remedy.” Ms Deshmukh has used the RTI Act several times, as a journalist and activist, and in her professional capacity, she has advised many citizens on the proper use of the Act. “All big things start at the personal level. If everyone becomes an RTI user, it will start with small, personal issues—but ultimately, will lead to wider social change,” she said. She cited the example of a senior citizen Sharad Phadke, whose enquiry into bank compensations for failed ATM transactions led to the RBI (Reserve Bank of India) mandating that banks have to compensate customers if they are not set right within seven days instead of 12. A sum of Rs1,000 had been debited from Mr Phadke’s Bank of India account, even though the ATM transaction had failed. He waited for a long time for compensation, but the Bank ignored him. Finally, he filed an RTI query and immediately, he received the original amount and the charges for the delay. He further pursued the matter, and found out that all banks were spending considerable sums compensating people for failed transactions just because the matter was not settled within the stipulated time. Another interesting case was that of a farmer who was duped by land brokers and his land title documents were changed. Despite a victory at the court, the official concerned refused to restore his ownership, citing a fraudulent ongoing court case. After a long wait, the farmer, finally, filed an RTI application,

asking for the details of the ongoing case in this matter and the fraud was exposed. Today, the same officer is being tried for criminal charges. Ms Deshmukh talked about using the RTI Act effectively through a series of case studies on how the Act can be used by individuals for the betterment of society or to find answers to other problems. She said how she had used information obtained under the Act to make Pune residents aware of the environmental & civic laws being flouted by Dow Chemicals, which was planning to set up a chemical plant in the garb of a ‘research centre’ there. Facing large-scale

Vinita Deshmukh, journalist and RTI activist

If a prisoner can use the RTI Act, why can’t we? I don’t say that we take on a huge scam, but there are several small matters which directly concern you, and which you can remedy

“

` a seminar organised by Moneylife

popular agitation, the government called a halt to the project and Dow Chemicals voluntarily moved out. She also spoke about her book To the Last Bullet, which tells the story of how Ashok Kamte died in the 26/11 attack, as revealed through the call logs of the police control room which were obtained by Mrs Kamte under the RTI

Act. “The backlash was severe, and we ‘women’ were advised by politicians to return to affairs that befit our position. But we see this as a major victory, because now people can know the truth,” said Ms Deshmukh. She also spoke on how senior citizens, peasants and journalists have used the Act to obtain information and put pressure on the authorities to do their jobs and stop corruption. “Instead of waiting for 30 days and then run the risk of further delay for appellate follow-ups, use Section (4) of the RTI Act, which allows any citizen to go to a public authority’s office and inspect files and records,” she said. She talked about how grievances have been addressed almost immediately after filing an RTI application and how missing files appear miraculously when information is sought. “Government babus don’t show it, but they are scared of the RTI. Use it as often as you can; it will not only check corruption but also ensure better, speedy and efficient governance,” she told the packed audience. Ms Deshmukh expressed her optimism on the use of RTI Act in India. “India is much ahead of the USA in the public use of right to information, and if we say that 35% of the applications filed are replied to satisfactorily, that is quite some achievement. If people take up the issue seriously, they can force the government to act properly,” she said. Ms Deshmukh’s seminar complemented the earlier seminars on the Act by Ashok Ravat and Bhaskar Prabhu, organised by Moneylife Foundation. Her column for Moneylife focuses on the effective use of RTI. Mr Ravat and Mr Prabhu had described their association with the RTI movement and provided tips for better use of the Act.

MONEYLIFE | 30 June 2011 | 52

Event.indd 4

6/10/2011 7:50:05 PM

One year of financial literacy, one year of pro-investor & pro-consumer advocacy

56 SPEAKERS 5736 ATTENDEES 68 EVENTS 5720 MEMBERS 1 FOUNDATION In just one year, Moneylife Foundation has enriched many lives with unique events, opinions, actions and advocacy initiatives

It’s Only the Beginning Moneylife Foundation financial literacy events have covered: • Credit Cards

• Long-term Investing

• Mobile Payment Systems

• Consumer Banking Services

• Credit Scores

• Wills, Nominations & Transmission

• Co-operative Housing Society Laws

• Tax Returns & Scrutinies

• Chain Marketing Schemes

• Reverse Mortgage

• Legal Compliances for NGOs

• Being Financially Safe & Smart

BECOME A MEMBER. IT IS FREE

To become a member of Moneylife Foundation and to receive invitations to these workshops, please contact: Dione/Judith: (022 24441058-60) Or mail us at: mail@mlfoundation.in. Or visit www.moneylife.in

newmlf.indd 1

6/11/2011 3:12:11 PM

UNIQUE CONTENT

GIFTS OF KNOWLEDGE

FREE SOLUTIONS

Only Moneylife gives you an outstanding mix of relevant information, safe advice, sharp and unique analysis... all wrapped in world-class design.

We offer you relevant and unique free books on investment and finance, not run-of-the-mill consumer items irrelevant to the world of personal finance.

Got a genuine problem? Moneylife will give you free help for a solution. An exclusive & unique offer, only for our subscribers.

Subscription Ad_new.indd 1

6/10/2011 3:32:59 PM

Timeless Investment Wisdom:

Buy Value at Great Prices

50% off 40% off 30% off for 3 years

for 2 years

for 1 year

Hurry! Limited Period Offer Subscribe Now Choice

(Please tick)

Period 12 Months 24 Months 36 Months

NEW SUBSCRIBER

No. of Issues 26 Issues of Moneylife Magazine 52 Issues of Moneylife Magazine 78 Issues of Moneylife Magazine

Special Offer Rs455 Rs780 Rs975

EXISTING SUBSCRIBER YOUR SUBSCRIPTION NO.

BASIC DETAILS

NAME: ________________________________________________________________________________________________________________ ADDRESS: _____________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________ PHONE: (Office):_______________________Phone (Res): _________________________E-mail address: ______________________________________ DATE OF BIRTH: _______________________(MM) (DD) (YY) (Please ensure correct date of birth if payment is by credit card)

PAYMENT DETAILS

PROFESSION:_________________________DESIGNATION ________________________

( ) Please find enclosed ( ) Cash, ( ) Cheque / ( ) Demand draft number ___________ Dated: ________________________ for (tick one) ( ) Rs455 ( ) Rs780 ( ) Rs975 Favouring Moneywise Media Pvt Ltd ( ) Please charge it to my ( ) /( ) /( ) /( ) My card number is __________________________ & expiry date is _________ (MM / YY) DATE: __________________ DESIGNATION ________________________________

Add Rs50 extra for outstation cheques

Please fill in this order form and mail it with your remittance to Moneywise Media Pvt Ltd, 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400 028. Credit card orders can be faxed to Mumbai 022-24442771. In case payment is through credit card, expiry date of card should be mentioned. # Rates and offers are valid in India only. This offer is valid for a limited period. # Please allow 4-6 weeks for the delivery of your personal copy. # All disputes shall be subject to Mumbai jurisdiction only. Introduce a friend / Fill in the details below and we will send a free copy to your friend. * Name: ___________________________________________________________________________________________________________________________ Address: __________________________________________________________________________________________________________________________ Email ________________________________________________ Tel: ___________________________ *Free copy will be sent only to addresses which can be verified prior to sending

Subscription google Format.indd 1

6/10/2011 3:33:25 PM

BOOKS

Wisdom of Crowds The author could have given us more

o discussion on Indian demography is complete without reference to professor Ashish Bose. A scholar par-excellence, Dr Bose has headed the Population Research Centre at New Delhi and has represented India at almost all major international demography meets. Naturally, readers would expect from any book penned by one, who had witnessed Sanjay Gandhi’s infamous populationcontrol drive and later coined the term BIMARU (to denote the backward states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh), some profound, never-heard-before stories and HEADCOUNT weighty insights. And this is ASHISH BOSE where we go wrong. Penguin Viking Headcount never goes Pages 214; Rs450 beyond the mundane collection-

Rocks and a Hard Place You cannot get a better view of Pakistan

inship, sect, ethnicity, religion, caste—Pakistan has enough and more divisions. So predictions of our neighbour’s impending demise have been doing the rounds almost from the very moment that Cyril John Radcliffe drew the line that tore apart the subcontinent and shattered the lives of millions. But Pakistan is still holding its ground. Pakistan-A Hard Country is one of the most detailed accounts of a country which often seems like it is held together by chewing gum (or willpower, if you like)—but what still makes it tick? Anatol Lieven knows, and it shows in this work. As an Indian reviewer, it is very, very easy to forget that Lieven is writing about Pakistan, and not our own country. Both neighbours share the same litany of woes—corruption, poverty, a slack, underpaid police force... you know the rest. Did you say ‘emerging

of-anecdotes route. The stories are, of course, enjoyable; some of them really play out before your eyes. But if one is expecting some gripping politically-loaded narrative, one is bound to be disappointed. The majority of Dr Bose’s recollections is about his meetings with ministers, politicians, bureaucrats and international conferences. No wonder, we don’t have anyone else apart from Jawaharlal Nehru and the next two generations, Imelda Marcos, Dr Manmohan Singh, JRD Tata and Dr Bose’s masseuse in Headcount. This is not necessarily the author’s fault, because he makes it clear in the Preface that this book is just a recounting of some of his memorable experiences. And so we have wonderful anecdotes about some famous people which make us realise that they are human beings like the rest. Dr Bose’s accounts of Jawaharlal Nehru and Indira Gandhi are particularly enjoyable. So is his experience with the BBC crew and running over a bull in a small UP village. But considering that he has been at the centre of the two most crucial junctures in Indian demography, Dr Bose really could have given us more. During the Emergency, Dr Bose witnessed Sanjay Gandhi’s disastrous family-planning methods. It is laudable that he did not hesitate to call a spade a spade during the Emergency; but Dr Bose’s recollection barely exceeds his chats with his masseuse and ``

market’ or South Asian ‘tiger’ India is any different? Read this book, and you will know better. In fact, Pakistan even scores over India when it comes to a few basic human development indices. “Pakistan was ahead of South Korea in development in the early 1960s,” writes Lieven. That was when India was completely enmeshed in the licence-permit-quota-raj, when profit-making private enterprises were ‘nationalised’ and subsequently run to the ground. Oh, we were also trundling along at the ‘Hindu rate of growth’ then. “If Pakistan were an Indian state, then in terms of development, order and per capita income, it would PAKISTAN-A HARD find itself somewhere in the COUNTRY middle, considerably below ANATOL LIEVEN Karnataka, but considerably Allen Lane above Bihar,” says the writer. Pages 560; £16.99 One couldn’t agree more. Too ``

MONEYLIFE | 30 June 2011 | 56

Book Review.indd 2

6/9/2011 7:25:50 PM

BOOKS

` descriptions of some official parties

and conferences which he attended. He could have given us some arresting experiences from his field work; stories of villagers—who had to suffer Sanjay Gandhi’s obnoxious whims in vasectomy camps—are only touched upon tangentially. Dr Bose falls into the same trap of blaming Sanjay for the excesses of the Emergency, while portraying Indira Gandhi as a ‘helpless and indulgent mother’. Mrs Gandhi had a lot to explain about on her several economic moves and controversial ideas on international relations, apart from violent trampling of fundamental rights. Maybe, Dr Bose, being a demographer, was more concerned about the family-planning drive; but a person of his connections and standing is expected to be more forthright and observant. He coined the term BIMARU. Clubbing the then largest states (home to the maximum number of

` many books have been written by

armchair commentators on Pakistan (and India)—these works do not even skim the surface of the ills plaguing one-fifth of humanity. Lieven has taken the pains to talk to almost every section of Pakistan’s society. Here’s what he has to say: “I have good friends among the Pakistani elite, but I also take much of what they say with several pinches of salt—even, or especially, when their statements seem to correspond to Western liberal ideology, and please Western journalists and officials.” The years that Lieven has spent in Pakistan as a journalist with The Times have surely helped. Of course, every book has its warts. The author could have surely avoided gushing over Pervez Musharraf like: “Given Musharraf’s personal honesty (in marked contrast to most of his predecessors) and progressive credentials...”. This General, with

Parliamentarians) together in an acronym that indicates their ‘sick’ demographic status caused an outrage in the Cabinet. Incensed MPs criticised the nomenclature and Dr Bose’s findings. But even today, these states are a cause of worry for economists and demographers. Dr Bose’s accounts of his field surveys get more prominence, but one wishes to know more about this epoch. The trouble with compiling a book based on personal anecdotes that occur over time is that it can lead to repetition. ‘Headcount’ is no exception. The sections and chapters are cleverly titled but, often, Dr Bose’s narration rarely matches up to the potential the title offers. Headcount is an enjoyable read. You will know the transitions that the family welfare and health department went through and how ‘10 Janpath’s’ perception of family planning has evolved. True to the title, Dr Bose is an astute demographer. But political commentary is not his cup of tea. — Shukti Sarma

his Kargil misadventure, successfully derailed what was arguably the closest India and Pakistan came to burying the hatchet, once and for all. The main argument that Lieven makes is that Pakistan is not a failed— or failing—State. This is in spite of the inherent fissiparous tendencies in the country, the all-powerful army (and its notorious sibling, the ISI) or the shaky political ‘system’ (if one can call it that) and the paranoia towards India that most Pakistanis exhibit. In fact, this book argues that climate change is what threatens Pakistan’s future. If only Pakistan-A Hard Country had been written after the storming of Abbottabad! That’s not Lieven’s mistake, of course, but the narrative would have been much more powerful, capturing the convulsions that Pakistan is going through in the aftermath of Osama’s killing. — Devarajan Mahadevan

No, Not Again Can we peep into the future, please?

t is a problem when authors constantly harp on the immediate past—they should be condemned, to misquote Santayana. And quoting Francis Fukuyama (half a page) is not on— we are nowhere close to the end of history. David Smith drops a lot of names in The Age of Instability (Profile Books; pages 294); thanks to his access-all-areas entry passes to high-profile cocktail circuits, in his capacity as the economics editor of Sunday Times—since 1989. Among his chats with several worthies, Smith recounts how he had bumped into Gordon Brown in 2004, when he “went to one of the (UK) Treasury’s regular drinks parties.” Brown told him to write a book on the ‘great stability’. Smith should have agreed; we could then have had a good laugh while reading a book—steeped in hubris—called The Great Stability, after all hell broke loose. And pray why release a book written in 2009 in mid-2011? We, on the Indian subcontinent, do read books, you know. Better order a couple of pizzas rather than shell out Rs695 for this book. “Bored with endless grandstanding and people being wise after the event?” Not my words. The back of this book says this. The answer is a resounding yes. — DM

57 | 30 June 2011 | MONEYLIFE

Book Review.indd 3

6/9/2011 7:26:05 PM

Learn the basics of saving and investing

Earning Curve

MO N T I E R ’ S 7 L AW S OF INVES T ING

Risk Is Not a Number Academics try to quantify risk as a number. Practitioners define it as permanent loss of capital

n finance, risk is typically measured in terms of standard deviation, variance or beta. It is quantified on the basis of the volatility of an asset. But, according to value-investor Benjamin Graham, this concept is wrong—“Real investment risk is measured not by the percent the stock may decline in price in relation to the general market in a given period, but by the danger of a loss of quality and the earnings power through economic changes or deterioration in management.” Warren Buffett, one of the most successful investors in the world and the chairman of Berkshire Hathaway, does not treat risk as a number; rather he defines risk, using the dictionary term, as ‘the possibility of loss or injury’. In his firm’s 1993 stock-letter he wrote, “Risk is defined as the chance of permanent capital loss—not the volatility of market prices.” That is also one of James Montier’s seven immutable laws of investing. Montier sits on the asset allocation

team of one the largest US-based fund managers, Grantham, Mayo, Van Otterloo & Co (GMO). However, conventional definitions of risk are to be found everywhere; finance academics, and the hordes of MBAs they ‘train’ everywhere, always try to define risk as a number. It is the heart of modern portfolio theory (MPT). MPT looks to optimise risk and return in order to construct an ‘efficient’ portfolio of assets having different risk characteristics. Often, the volatility

of the return on assets, which isn’t necessarily the same thing as its risk, is substituted for risk in the measurement. Charles Brandes, founder of Brandes Investment Partners and a disciple of the Benjamin Graham school of value investing, debunks this definition—“defining volatility as risk (as MPT does) obscures the true definition of investment risk as the possibility of losing money— this concept is irrelevant and downright dangerous at worst.” Montier says that the obsession

with the quantification of risk has replaced a more fundamental intuitive and important approach to the subject. It is foolhardy to reduce risk to a single figure. As mentioned earlier, risk is incorrectly defined as a measure of volatility. Therefore, the more volatile an asset, the riskier it is said to be. Risk-averse investors, going by this definition of risk, lose out on generating high returns. The reason is volatility is not the same as risk and it is volatility in the market that is needed for investors to generate returns. As Keynes noted, “It is largely the fluctuations which throw up the bargains and the uncertainty due to fluctuations which prevents other people from taking advantage of them.” Montier establishes this in a paper, “I Want to Break Free, or, Strategic Asset Allocation ≠ Static Asset Allocation,” of May 2010, by studying the volatility of the S&P 500. The research revealed that the periods of low volatility were typically followed by a decline in asset price, while periods of high volatility were great opportunities to invest as they gave the highest returns. Using the real-life definition, Montier formulated the ‘Trinity of Risk’ saying that permanent impairment of capital can take place due to three factors (not mutually exclusive). One, valuation risk—paying too much for an asset; two, fundamental risk— there is something wrong with the economics of the asset; and three, financing risk—leverage can’t make a bad investment good, but it can make a good investment bad. This gives investors a new approach to understanding risk. Unfortunately, many investors, professionals and individuals, rely solely on the numerical derivation of risk and end up taking too much of risk or too little of it.

MONEYLIFE | 30 June 2011 | 58

Earning curve.indd 2

6/6/2011 6:38:43 PM

UNIQUE BOOKS FROM MONEYLIFE/KENSOURCE The most thrilling business book ever written in India. A fast, colourful narrative knitting together the life and times of all stock market players involved in two of Indiaâ&#x20AC;&#x2122;s biggest stock market scams.

LIST PRICE: `400 MONEYLIFE PRICE: `350

These commonsense guides tell you in an inimitable easy-to-understand, peppered with lots of real-life examples, what you must know to make successful investments in stocks and funds.

LIST PRICE: `125 MONEYLIFE PRICE: `100

LIST PRICE: `1,300 MONEYLIFE PRICE: `1,100

LIST PRICE: `1,200 MONEYLIFE PRICE: `1,000

Two priceless books of autobiographical narrative that candidly reveal the unique thought processes, untiring efforts and colourful anecdotes of top achievers such as Ratan Tata, Amitabh Bachchan, Mukesh Ambani, Aditya Puri, Rajiv Bajaj, RA Mashelkar, Keki Dadiseth, Geet Sethi and others.

COMBO PRICE `2,000

GET YOUR COPY NOW

AVAILABLE AT CROSSWORD BOOKSTORES Contact details: Mail in your remittances to Moneywise Media Pvt Ltd, 315, 3rd Floor, Hind Service Industries Premises, Off Veer Savarkar Marg, Shivaji Park, Dadar (W), Mumbai 400028. Credit card orders can be faxed to Mumbai 022-24442771. In case payment is made by credit card, date of birth should be mentioned. Rates and offers are valid in India only. This offer is valid for a limited period. Please allow 4-6 weeks for the delivery of your personal copy. All disputes shall be subject to Mumbai jurisdiction only.

Book Ad.indd 1

6/10/2011 3:12:56 PM

SPENDING TRAVEL

THE BHIMAKALI TEMPLE WITH ITS UNUSUAL ARCHITECTURE AND WEALTH OF WOOD CARVINGS, THIS TEMPLE IS A MAJOR STRUCTURE DUPLICATED NOWHERE ELSE IN THE HIMALAYAS

HIMACHAL

On, and Off, the Beaten Track Jaideep Mukerji takes in this culturally rich and visually stunning part of northern India, dotted with landscapes of fer le green valleys, glacier-fed mountain rivers and high snow peaks isited by hundreds of thousands of travellers every year, Himachal Pradesh is known for the popular destinations of Shimla, Manali, Dalhousie and Kullu. These towns have a wealth of heritage, architecture and history to explore but, travel a little beyond and you will be away from the crowds, driving through towns and villages that have changed little over the centuries. You will also have the opportunity to experience the real Himachal, a wonderful blend of Hindu and Buddhist architecture, beliefs and customs, all in a spectacular mountainous setting. Shimla, the state capital of Himachal, is perhaps

the most visited of the Indian hill resorts. Once there, step away from the Mall, busy with shoppers and step into the newly restored Gaiety Theatre and you will be transported to a different era. The architect Henry Irwin, who built the Viceregal Lodge, designed the Theatre building that opened in 1887, Queen Victoriaâ&#x20AC;&#x2122;s Golden Jubilee. The history of the Shimla Amateur Dramatic Club that once performed here goes back to the times when theatre was looked upon as a serious source of entertainment and a cultural necessity for the English elite who spent the summers in Shimla. The Gaiety Theatre now has a wonderful gallery with stunning arches and exhibits paintings and sculptures ``

MONEYLIFE | 30 June 2011 | 60

Travel.indd 2

6/6/2011 7:03:38 PM

SPENDING TRAVEL

` from well-known artists and lesser known

India. Drive further from Shimla, past the tourist hotspot ones. of Kufri and rural Himachal Among the leading personalities who have begins to unfold. Past the town been connected with the Shimla Amateur of Narkanda, a steep descent Dramatic Club are: the famous poet and through apple orchards brings author Rudyard Kipling, the chief of scouts, you to the Sutlej Valley and the Colonel Baden-Powell, and film personalities town of Rampur, once the seat of like KL Saigal, Prithviraj Kapoor, Shashi the Rampur Bushair rulers. This Kapoor, Raj Babbar, Anupam Kher, and busy market town is the largest in Naseeruddin Shah. this narrow valley and has a busy Take a taxi for the short drive to bazaar that is well worth a stop. Observatory Hill to visit the Viceregal Nearby is the wood & stone-built Lodge now known as the Indian Institute Rampur Palace, once home to the of Advanced Study. The Viceregal Lodge THE TRIPURA local rulers and a curious blend of was essentially the seat of British power SUNDARI TEMP A CLASSIC EX LE AMPLE OF A RE several architectural styles. in India. It is the only building in Shimla CTANGULAR STONE AND DE ODAR WOOD - BUILT PAGODA STYLE TEMPLE Travelling further past the that occupies an entire hill. Back in 1888, massive hydroelectric projects of the Viceregal Lodge the Sutlej Valley, you will arrive at had electric lights Jeori where a sharp right turn takes you when nobody else on a narrow road that winds 11km up in Shimla did and a series of hairpin bends to the village had huge kitchens; of Sarahan and the temple of Bhimakali separate rooms for located in a spectacular setting. storing table linen, an With its unusual architecture and enormous wine cellar wealth of wood carvings, the Bhimakali and boilers for central Temple at Sarahan is a major structure heating and running duplicated nowhere else in the hot & cold water in the Himalayas. Dedicated to the mother bathrooms. The Viceroy EATRE E THE THEATR , goddess Bhimakali, the presiding deity ED hosted lavish parties and SHIMLAâ&#x20AC;&#x2122;S GAIETYDTH OR ST AND NEWLY RE NING ARCHES IN 1887 AN Y WITH STUN ER LL of the rulers of the former princely entertained royal princes, OPENAED GA L ERFU HAS WOND SCULPTURES state of Rampur Bushair, Sarahan is visiting heads of State and EXHIBITS PAINTINGS AND located at about 180km nawabs in style. Several from Shimla. The decisions that were turning points in town of Sarahan is also the history of the Indian subcontinent considered the gateway were taken in this building including to the part of Himachal the decision to partition India and known as Kinnaur. Hotel carve out the state of Pakistan. Shrikhand, named after After Independence, the Lodge the imposing 17,000-feet remained the summer retreat of the high Shrikhand mountain President of India until the early peak that it faces, has 1960s when the president of India, 15 rooms, a comfortable Dr S Radhakrishnan, a leading CRAF D W ITH CARE cottage with two bedrooms, philosopher and writer, and the then A SILVETE RSMITH AT BH IMAKALI GIVE HIS WORK OF S TH and a fully-equipped prime minister, Jawaharlal Nehru E FIN AL TOUCHES ART TO kitchen; it is conveniently decided to make it a scholarsâ&#x20AC;&#x2122; den located right across the where the best minds in India could meet and study. temple entrance. Visit the bookstore and gift shop located near the The Bhimakali Temple, believed to be about 800 entrance to the Viceregal Lodge and see the books that years old, is dedicated to Goddess Durga, known locally document the fascinating story of colonial Shimla and as Bhimakali. There is a newer temple, next to the the important, if little-known, role that the Viceregal original, built about 200 years ago. Bhimakali, known `` Lodge has played in shaping the history of modern

61 | 30 June 2011 | MONEYLIFE

Travel.indd 3

6/10/2011 7:51:36 PM

SPENDING TRAVEL

` for its slanted pagoda-style slate roofs,

golden tower and the stunning carved silver & brass doorways, exhibits a temple architecture style that is a mix of Tibetan and local Himachal (Pahari) styles with strong Buddhist and Hindu influences both in the structure and in the bronze statues within the shrines. Travel to the scenic Kullu Valley and head east from the town of Bhuntar and you will enter the Parvati River valley. The narrow and winding road passes through the riverside village of Kasol before ending in the temple and gurdwara town of Manikaran known for its abundant sulphurous smelling hot springs. Manikaran has an experimental geothermal energy plant generating electricity from natural heat. The wide trail further up the valley passes a series of mountain villages surrounded by stunning scenery. Pulga, one of the larger villages, deep within the Parvati valley, has a forest rest house dating back to the 1930s. Request the resthouse keeper to show you the original visitor’s book and you will see entries that date back to more than 75 years ago. Travel back to Kullu town and, instead of taking the main road to Manali, opt for the parallel route known as the ‘left bank road’ that passes through the villages of Katrain and Jagatsukh before reaching Manali. Naggar, a few kilometres above Katrain, is located on the left bank of Beas River about 22km from Kullu and almost mid-way between Kullu and Manali. Naggar commands spectacular views of the Beas valley. The Naggar Palace (now Castle Hotel run by Himachal Tourism) was built during the reign of Raja Sidh Singh when Naggar was the capital of the Kullu state. The Palace—much like the Bhimakali Temple at Sarahan—is a fine example of earthquake-resistant traditional timber-bonded buildings of the Western Himalayas. The Palace

was used as a royal residence and state headquarters until the 17th century when the capital was transferred to Kullu. It continued as a summer palace until the British arrived in 1846, when it was sold to Major Hay, the first assistant commissioner of Kullu district, who modernised part of the structure—fitting staircases, fireplaces and plumbing. Jagati Pat, a granite slab kept in a small temple within the Naggar Castle Hotel premises, attracts local deities who were brought here to protect the local population during times of drought or famine. Naggar’s other attraction is the imposing pagoda-style temple of Tripura Sundari made of deodar wood with a great resemblance to the betterknown Hadimba Temple in Manali. The Tripura Sundari Temple is a classic example of a rectangular stone & wood built pagoda-style temple with successive wooden roofs one on top of the other ending in a pinnacle crowned by a chhatra. One of the other major attractions of Naggar town is the Uruswati Himalayan Folk Art Museum and the Nicholas Roerich Art Gallery that preserves paintings made by Nicholas Roerich and by later Indian and Russian artists. The Museum and Gallery are dedicated to the works of Roerich, a Russian-born artist whose paintings, of which there are thousands around the world, explore the mythic origins, the natural beauty, and the spiritual striving of humanity and of the world. Outside the house there is an open air temple dedicated to the local god Guga-Chohan (and his mythological family) set up by the Roerichs themselves under an old deodar tree. Every morning, an old priest chants mantras, smears the statues of GugaChohan and his divine family with sandalwood paste, and blows a conchshell… it is a tradition that has never been interrupted since the Roerichs’ times. — With Veeresh Malik

ESSENTIAL NTIAL FACTS S THE NICHOLAS ROERICH ART GALLERY YOU CAN EXPLORE THE MYTHIC ORIGINS, NATURAL BEAUTY AND SPIRITUAL STRIVING OF HUMANITY HERE

When To Go: A culturally rich and visually stunning part of northern India, a trip to Himachal and the Iesservisited valley will give you an insight into the local hill traditions that flourish in the small towns and villages of this mountain landscape of fertile green valleys, glacier-fed mountain rivers and high snow peaks.

Getting There: The easiest route is to fly to Shimla or Kullu airports from Delhi, and then hire a local car with a driver for touring. Alternatively, take the fast train to Kalka and then the historic Kalka-Shimla mountain rail for a leisurely journey up the Himalayas.

Where To Stay: Hotel accommodation and local travel arrangements are best arranged online with Himachal Tourism. A list of hotels is available on the official Himachal Tourism website: http://hptdc.nic.in/. Local transport can easily be booked either through your hotel or the local central taxi-stand.

MONEYLIFE | 30 June 2011 | 62

Travel.indd 4

6/9/2011 7:32:52 PM

MONEY FACTS STOCKS

INDIAN MARKET TRENDS

FUND FLOWS

The Sensex and the Nifty gained 1% each during the fortnight. The ML Mid-cap Index, the ML Large-cap Index and the ML Small-cap Index rose by 3% each. The ML Mega-cap Index and the ML Micro-cap Index increased 2% each.

Foreigners: Foreign institutional investors were net buyers of stocks (Rs2,799.70 crore) in the fortnight. They sold stocks worth Rs20,242.30 crore.

Share Prices, December 2010 =100

1,270

FII Net Investments (Rs Crore)

930

110

590 250 100

-90 -430 30 May-11

9 Jun-11

Indians: Domestic institutional investors were net sellers of shares (Rs964.40 crore). They were buyers of stocks worth Rs6,610.53 crore in the fortnight.

80 Dec-10

Mar-11

ML Mid-cap ML Large-cap

ML Small-cap ML Mega-cap

Index ML Mid- cap Index

Jun-11

Nifty Sensex

ML Micro-cap

27 May

9 Jun

190

-10

+/(-)

-210

95.14

97.93

ML Large- cap Index

100.19

102.94

ML Small- cap Index

90.76

93.14

ML Mega- cap Index

97.26

98.88

ML Micro- cap Index

87.28

88.71

GLOBAL MARKET TRENDS

5,476.10

5,521.05

9,200

18,266.10

18,384.90

Nifty Sensex Mega-cap Gainers/Losers

27 May

9 Jun

Change

Reliance Capital

487.75

541.35

11%

Sun TV Network

388.35

305.35

- 21%

-410

-610

DII Net Investments (Rs Crore) 30 May-11

9 Jun-11

9,020 8,840 8,660

Large-cap Gainers/Losers

27 May

9 Jun

Change

UTV Software Communications

629.30

745.55

18%

65.50

- 10%

27 May

9 Jun

Change

Ineos ABS (India)

509.85

675.15

32%

Ess Dee Aluminium

468.80

413.75

- 12%

Sanwaria Agro Oils Mid-cap Gainers/Losers

Small-cap Gainers/Losers

27 May

9 Jun

Change

Sabero Organics Gujarat

81.25

127.05

56%

Vikash Metal & Power

24.10

15.05

- 38%

27 May

9 Jun

Change

Micro-cap Gainers/Losers Vimta Labs

23.25

36.85

58%

Cubex Tubings

14.01

12.45

- 11%

(All Prices in Rs)

Taiwan Weighted

8,480 8,300 Dec-10

Mar-11

Jun-11

The Taiwan Weighted rose 2%. The Nasdaq Composite fell 4%, while the Hang Seng slipped 2%. The Shanghai Composite remained unchanged. Index

27 May

9 Jun

+/(-)

Taiwan Weighted

8,810

9,001

Shanghai Composite

2,710

2,703

Nikkei

9,522

9,467

- 1%

64,295

63,469

- 1%

Korean Composite

2,100

2,071

- 1%

FTSE

5,939

5,856

- 1%

Hang Seng

23,118

22,610

- 2%

Dow Jones Ind Avg

12,442

12,124

- 3%

Nasdaq Composite

2,797

2,685

- 4%

Bovespa

63 | 30 June 2011 | MONEYLIFE

Money Fact.indd 2

6/11/2011 3:43:35 PM

MONEY FACTS STOCKS

What’s H

ML SECTORAL TRENDS

Shares of sugar companies were sought after in the fortnight. Kesar Enterprises and Shree Renuka Sugars jumped 11% each, Uttam Sugar Mills climbed 8%, Oudh Sugar Mills gained 6% and Bajaj Hindusthan rose 4%. Companies

27 May

9 Jun

+/-

11%

Shree Renuka Sugars

58.75

65.20

11%

Uttam Sugar Mills

33.30

36.05

38.80

65.55

70.55

ML Sugar Index

Kesar Enterprises

3,050 2,810

Triveni Engineering Dwarikesh Sugar Inds

2570

Oudh Sugar Mills

2,330

27.80

Dhampur Sugar Mills

2,090 1,850 Dec-10

Mar-11

Jun-11

29.45

53.20

55.95

Bannari Amman

560.10

587.80

EID- Parry (India)

212.70

222.25

Bajaj Hindusthan

65.45

68.30

Shares of media companies were hammered. Sun TV Network plunged 21%, Deccan Chronicle Holdings declined 6%, Television Eighteen India skidded 5%, DB Corp and Shree Ashtavinayak Cine Vision fell 3% each. 27 May

9 Jun

+/-

388.35

305.35

- 21%

68.65

64.50

- 6%

- 5%

103.85

98.90

- 5%

Sun TV Network Dec Chron Holdings Television Eighteen Den Networks Ibn18 Broadcast

89.45

85.35

- 5%

DB Corp

239.05

231.70

- 3%

Hathway Cable

113.90

110.90

- 3%

Shree Ashtavinayak Network 18 Media

5.34

5.20

- 3%

156.35

154.90

- 1%

12.35

12.30

Euro Multivision

ML Media Index 370 350 330 310 290 270 Dec-10

Odds

13% Media

- 4%

Petrochemicals

10% Oil & Gas

- 4%

Sugar

6% Auto

Building Material

6% Office Equipment

- 3% - 1%

Transport & Log

5% Non- Ferr Metals

- 1%

INSIDER TRADES

N T

Companies

Ml Sectoral Trend

All Prices in Rs

What’s

Shares of odds surged 13%, petrochemicals jumped 10%, sugar companies climbed 6% and transport & logistics stocks gained 5%. Media and oil & gas tanked 4% each, auto stocks lost 3%, office equipment companies and non-ferrous metals shed 1% each.

Mar-11

Jun-11

All Prices in Rs

BULK DEALS Date

Company

Buyer

Seller

Rs Cr

07 Jun- 11

Asian Oilfield

Matangi Trds & Invts Pvt

Pasha Finance Pvt

0.50

30 May- 11

Camson Bio- $

Mahavirsingh B Rana

Sanatan Herbal And Nat

0.97

08 Jun- 11

CIL Nova Petro

Chiripal Exim Llp

Nandan Exim

0.87

06 Jun- 11

CIL Nova Petro

Chiripal Exim Llp

Nandan Exim

1.92

01 Jun- 11

Frontline Securities Rakesh Kumar Jain

Frontline Capital Serv

1.21

31 May- 11

Jaihind Syn

Sachin Kumar Garj

Indra Singhal

0.03

31 May- 11

Tata Chemicals

Tata Sons

Tata Global Beverages

Pearl Apartments bought 75,000 shares in Pearl Polymers (stake up to 1.93%). Leela Lace Software Solutions Pvt Ltd bought 1,76,678 shares in Hotel Leelaventure (stake up to 4.69%). Durgamba Investment Pvt Ltd bought 10,000 shares in KCP Sugar and Industries Corporation (stake up to 37.18%). Rajshree Himatsingka, wife of DK Himatsingka—managing director, bought 1,00,000 shares in Himatsingka Seide (stake up to 5.26%). Rolta Shares & Stocks Pvt Ltd bought 25,000 shares in Rolta India (stake up to 4.97%). Vinay Kulkarni, vice president of Geometric, bought 10,000 shares in the company. MP Ramachandran, CMD of Jyothy Laboratories, bought 30,000 shares in the company (stake up to 43.14%). IDBI Bank sold 50,63,918 shares of Lloyds Steel Industries (stake down to 0.83%). Life Insurance Corporation of India sold 37,69,692 shares of ACC (stake down to 12.80%). Janhit Seva Trust sold 30,00,000 shares of McNally Bharat Engineering (stake down to 2.40%). Urmiladevi Chiripal sold 5,00,000 shares of CIL Nova Petrochemicals (stake down to 1.85%). Berjis Desai sold 1,00,000 shares of Berjis Desai.

156.43

MONEYLIFE | 30 June 2011 | 64

Money Fact.indd 3

6/11/2011 3:43:45 PM

MONEY FACTS COMMODITIES

INDEX TRENDS

COMMODITY TRENDS

MCX Commodity Indices

Wheat

Particulars

27 May

10 Jun

Change

52- Week High

52- Week Low

Agri

2,599.37

Energy

3,224.81

2,587.44

2,989.16

2,120.50

3,184.75

- 1%

3,585.96

Comdex

2,434.89

3,507.45

3,444.79

- 2%

3,739.05

Metal

2,621.80

4,594.88

4,477.99

- 3%

4,926.75

3,222.29

COMMODITY FOCUS MCX Crude Oil Futures (Rs/barrel) 5,200 5,020

he International Grains Council (IGC) in its Grains Report has lowered its global wheat production forecast for 2011-12 to 667 million tonnes (MT) as crop prospects in countries like the EU and US are not bright due to unfavourable weather. Earlier, in April, IGC had pegged global wheat output at 672MT this year compared to 649MT output last year. The use of wheat for ethanol is growing less quickly than expected, while greater use of alternative feeds, including barley, is expected to cut the feeding of wheat in Russia.

4,840

Cotton

4,660

4,480 4,300 Jan-11

Mar-11

Jun-11

World oil prices rallied in the second week of June after Saudi Arabia failed to confirm agreement over an OPEC (Organization of the Petroleum Exporting Countries) output boost. The OPEC on 8th June kept its official output target at 24.84 million barrels per day, where it has stood since January 2009. Kuwait, Saudi Arabia, Qatar and the UAE had called for a increase of 1.5 million barrels to the ceiling. However, OPEC rejected the idea, fearing that an increase would cause oil prices to fall, denting their income.

MCX PRICE TRENDS Particulars

Active Contract

24 May2011

7 Jun2011

Change %

High

Low

Global Commodities Silver Rs/kg

Jul- 11

55,051

55,572

0.95

74,560

31,500

Gold Rs/10gm

Jun- 11

22,596

22,622

0.12

23,148

20,181

Crude Oil Rs/barrel

Jun- 11

4,468

4,408

- 1.34

5,192

4,266

Copper Rs/kg

Jun- 11

403

411.50

2.11

471.75

386.80

Nickel Rs/kg

Jun- 11

1,043.10

1,024.20

- 1.81

1,255

1,010.10

Zinc Rs/kg

Jun- 11

98.95

102.05

3.13

118.95

92.90

Lead Rs/kg

Jun- 11

112.85

115.30

2.17

133.30

98.45

Natural Gas Rs/mmBtu

Jun- 11

199.40

215.10

7.87

218.20

187.90

Others CPO Rs/10kg

Jun- 11

526.80

522.50

- 0.82

538.40

498

Mentha Oil Rs/kg

Jun- 11

881.70

886.60

0.56

975.30

853.20

Cardamom Rs/kg

Jun- 11

847.50

746

- 11.98

1,149.90

715.10

Sugar M Kol Rs/100Kg

Jun- 11

2,654

2,492

- 6.10

3,130

2,484

Potato Rs/100kg

Jun- 11

522.60

522.20

- 0.08

622

512.50

inners in Gujarat have welcomed the Centre’s decision to allow exports of an additional 10 lakh bales of cotton during the current season ending September. The Saurashtra Cotton Ginners’ Association (SCGA) demanded that exports be allowed under open general licence as it will help farmers because prices of cotton will go up. Exports of 55 lakh bales (170 kg each) had been allowed for the 2010-11 season, the bulk of which has already been shipped out.

Rice

he rice crop in the kharif season (2011-12) is expected to surpass 90MT due to an expected normal monsoon, efforts of the farmers and government policies, the agriculture ministry said. Rice is grown in kharif and rabi seasons but a major part of the output comes from the kharif season. Kharif sowing begins with the start of the southwest monsoon in June and is harvested from October. As per the third advance estimate, rice production in the kharif 2010-11 season is expected at 80.38MT, while total output in the 2010-11 season is expected at 94.11MT. 65 | 30 June 2011 | MONEYLIFE

Money Fact.indd 4

6/11/2011 3:44:00 PM

BEYOND MONEY

eye OPENERS Shukti Sarma discovers Retina India, an organisation which helps people with retinal disorders, and brings them on a common platform with physicians, researchers, counsellors and other specialists

RETINA INDIA Ridhi Sidhi Bhawan, 2nd floor, 2/12, Babu Genu Road, Mumbai 400 002 Tel: 022 2205 2308 www.retinaindia.org info@retinaindia.org

ndia hosts the largest blind population in the world—24 million blind people and 52 million more who suffer from other forms of visual impairment. By 2020, it is estimated that the blind population will be 31.60 million. With most government schemes and NGOs dedicating themselves to treatment of preventable corneal diseases like cataract, little attention is given to the incurable diseases that pertain to the retina. That’s why Retina India was founded in 2009 by a group of doctors and patients suffering from retinal disorders. A foundingmember, Arvind Bhartiya, a Mumbai-based chartered accountant, belongs to the latter group. “We were an informal group, trying to help other people who were suffering from retinal defects and diseases. In 2009, ophthalmologist Dr Rajat N Agrawal took the initiative to form this organisation to reach out to many more,” says Mr Bhartiya. Retina India is an umbrella organisation of people with retinal disorders, their families and friends, which brings them on a common platform with experts such as physicians, researchers, counsellors, low-vision & mobility experts, and other specialists. Retina India sponsors research and maintains a database of people suffering from retinal disorders. “Unfortunately, medical science hasn’t discovered a cure for most retinal disorders but global research is on for management of retinal disorders by stem cells, gene therapy and implanting artificial retina. Our mission is to increase awareness of retinal diseases, champion the cause of patients, and increase research efforts for treatment,” says Mr Bhartiya. “A disease doesn’t limit itself to any class—we don’t limit our services to a particular group. Anyone suffering from a retinal ailment can avail our services,” he says. Retina India also provides advice and counselling to patients and families, through meetings and by a helpline. It coordinates

with other NGOs and institutions that help blind people in developing their skills. Volunteers/members of the organisation regularly visit hospitals, medical institutions and other forums to publicise their organisation. It is not only doctors who refer patients to Retina India, but even friends and relatives of the patients, after reading their pamphlets. Dealing with retinal disorder can be hard. “These disorders are degenerative and incurable; we come across many who lose hope and go into depression when they realise their fate,” Mr Bhartiya says. He recalls the case of a girl whose parents had stopped sending her to school when it was diagnosed that she would eventually lose her sight. “The parents didn’t think that educating her was necessary, because she would not be able to see anyway. After much counselling, we could convince them to let her learn—lack of education would be more crippling than blindness. The girl is in computer training, and doing very well now,” he says. Retina India organises regular health workshops and conventions, where patients come in contact with doctors from all over the country. “We are planning for a convention called ‘retinAware’ in September 2011 at New Delhi. This national convention will have leading national and international doctors and other experts speaking with patients and their families in an easy-to-understand language,” says Mr Bhartiya. The organisation plans to expand and reach out to more people over the next few years. However, shortage of funds has proved to be a hurdle. “Treatment of retinal disorders, professional counselling and research is expensive. Till now, we have been talking to individual donors or corporates. We plan to organise a largescale fund-raising drive soon to tackle the problem,” says Mr Bhartiya. Any patient, his friends or relatives, doctors, counsellors and volunteers can be a part of Retina India, or can be a part of their e-group. One can also donate to the organisation by cheque, money order or cash. All donations are eligible for exemption under Sec 80(G) of the IncomeTax Act.

MONEYLIFE | 30 June 2011 | 66

Beyond_money.indd 1

6/9/2011 7:24:44 PM

Toll free 1800-300-11111 | SMS â&#x20AC;&#x2DC;GOLDâ&#x20AC;&#x2122; to 561617 | www.reliancemutual.com

Reliance Gold Savings Fund (An Open Ended Fund of Fund Scheme): The investment objective of the Scheme is to seek to provide returns that closely correspond to returns provided by Reliance Gold Exchange Traded Fund (RGETF). Asset allocation Pattern: Units of RGETF - 95 to 100%, Reverse repo and /or CBLO and/or short-term fixed deposits and/or Schemes which invest predominantly in the money market securities or Liquid Schemes* - 0 to 5%. *The Fund Manager may invest in Liquid Schemes of Reliance Mutual Fund. However, the Fund Manager may invest in any other scheme of a mutual fund registered with SEBI, which invest predominantly in the money market securities. Load Structure: Entry Load - Nil. Exit Load - 2%- If redeemed or switched out on or before completion of 1 year from the date of allotment of units, Nil thereafter. Terms of issue: The NAV of the Scheme will be calculated and declared on every Working Day. the Schemes provide sale / switch - in & repurchase /switch - out facility on all Business Days at NAV based prices. RGETF is an open-ended Gold Exchange Traded Fund that tracks the domestic prices of gold through investments in physical Gold.) The investment objective is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold (and Gold related securities as permitted by Regulators from time to time). However, the performance of the scheme may differ from that of the domestic prices of Gold due to expenses and or other related factors. Asset Allocation Pattern: Physical Gold or Gold Related Instruments as permitted by regulators from time to time - 90 to 100%, Money Market instruments, Bonds, Debentures, Government Securities including T-Bills, Securitised Debt & other debt securities as permitted by regulators from time to time - 0 to 10%. Load Structure - Entry Load & Exit Load - Nil. Terms of Issue - As the units of the scheme are listed on the Exchange, subsequent buying or selling (trading) by Unit holders can be made from the secondary market on all trading days. The minimum number of Units that can be bought or sold on the exchange is 1 (one) unit. Statutory Details: Reliance Mutual Fund has been constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882. Sponsor: Reliance Capital Limited. Trustee: Reliance Capital Trustee Company Limited. Investment Manager: Reliance Capital Asset Management Limited (Registered Office of Trustee & Investment Manager: "Reliance House" Nr. Mardia Plaza, Off. C.G. Road, Ahmedabad 380 006). The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs.1 lakh towards the setting up of the Mutual Fund and such other accretions and additions to the corpus. Risk Factors: Mutual Funds and securities investments are subject to market risks, and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the securities market. Reliance Gold Savings Fund and Reliance Gold Exchange Traded Fund are only the names of the Schemes and do not in any manner indicates either the quality of the Scheme; its future prospects or returns. Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. The Mutual Fund is not assuring that it will make periodical dividend distributions, though it has every intention of doing so. All dividend distributions are subject to the availability of distributable surplus in the Scheme. The NAV of the Scheme may be affected, interalia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. Being a Fund of Fund Scheme, it may be noted that the investors are bearing the risk and the recurring expenses of RGETF also. For detailed risk factors, please refer to the Scheme Information Document & Key Information Memorandum, which is available at all the DISC, Distributors and www.reliancemutual.com. Investors can also call at our call centre 1800-300-11111 (toll free) for more details. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

Advertisements.indd 8

6/10/2011 6:19:50 PM

REGISTERED WITH THE RNI UNDER NO. MAHENG/2006/16653. POSTED AT PATRIKA CHANNEL SORTING OFFICE MUMBAI 400001. Postal Registration No: MH/MR/WEST/184/2009-2011

Advertisements.indd 3

6/9/2011 7:06:46 PM