CONTENTS
LETTER
ISSUE CONTENTS
FROM THE
11 August 2011
EDITOR Pen Power
A
re you not tired with various media outlets falling over themselves to claim credit (with screaming headlines and even louder anchors) for the same exposés? But not all journalists are the same. Read about the struggle of an editor from Pune, who preferred not to unsheathe her pen, but instead used the RTI (Right to Information) Act to create civic awareness to keep eco-vandalism in check. There’s more inside this Moneylife issue about how the credibility of the Fourth Estate has been shattered recently, thanks to the politician-tycoon-media terrible troika. Our readers are aware that our markets suffer from poor participation, loose regulation and brazen manipulation. The number of instances of fraudulent manoeuvring that we have highlighted over the past five years are too numerous to be recounted here. And nothing has changed over half a decade—the situation actually seems to have taken a turn for the worse... but that only strengthens our resolve to keep unearthing situations where investors are left in the lurch. Of course, just writing about these issues that affect investors is not enough. The Moneylife Foundation held another seminar to spread consumer awareness in Bengaluru. And this event was our first attempt to reach a global audience as it was streamed live over the Internet. Apart from the 300 or more attendees, this event was watched by over 4,000 viewers. And the breaks that we had were for Q&A sessions, not advertisements. The Foundation also held its fourth seminar on the RTI Act—the focus of this event was to educate the participants on Section (4) of the Act, which involves suo moto disclosure of information by public authorities. We are also in the process of forming a Voluntary Experts Group and I invite readers to write in if they can help in pro bono work to further the activities of the Foundation. Our next stop is Chennai—another foray outside Maharashtra. Glamorous stocks grab the headlines everywhere and investors seem to be drawn to them again and again. But they will leave you with a hole in your portfolio. Read our Cover Story to know how. Debashis Basu
MONEYLIFE | 11 August 2011 | 10
DIFFERENT STROKES
on 22 Check Misgovernance
Foundation 51 Moneylife Seminars
India needs to encourage proxy services to check corporate misgovernance, but ensure that conflict, regulation and compensation issues are addressed right now
• “Beware of Pyramid Schemes” • “Implement Section (4) of the RTI
SMART MONEY
with 24 Bond the Best Option A few alternatives for investors who cannot directly invest in bonds either through their brokers or through other financial intermediaries FUNDS
30 Cover Story
Glamour Stocks, Ugly Returns
It is easy to fall for the stocks of glamorous sectors, promoters or companies, especially since they figure prominently in the popular media all the time. This is a recipe for disaster, as Moneylife Research Desk shows
13
19 LOOSE CHANGE Moneylife Quiz; Soundbites
20
26
Fund Pointers
– Buying sector funds is a bad idea. But if you must buy one, which should you go for? – Several funds are benchmarked to proprietary indices, making it impossible to measure their performance
Current Account
– Veritas Research has created history. It has alleged that Reliance Communications has been cooking its books – There is a lot of capital for the education business but student loans are elusive – The Fed Chairman thinks that the yellow metal is useless. It has stirred a huge debate – Researchers claim that googling for information affects memory – Sterling Holidays is on yet another fund-raising drive – A group of disparate entities have come up with a “superaerodynamic time trial bike”
Fourth Estate? Our media is a paper tiger; Vaswani’s Stock: Manipulation, time & again; Ashika Escapes: SEBI ignores machinations
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.
EVENTS
Act Correctly”
LEGALLY SPEAKING
STOCKGRADER 41 Momentum
Prime Focus jumped 18% and EID Parry climbed 2%, while Orchid Chemicals plunged 8%
Medium Term
Supreme Petrochem jumped 9%, while Shoppers Stop fell 5% and Asian Paints lost 2%
Long Term
Amara Raja Batteries jumped 5%, while Cadila Healthcare tumbled 7% and TCS fell 4%
36 Street Beat Supreme Infra: Strong backward integration model; Ajanta Pharma: Growth drivers for the company are firmly in place; Andhra Petro: Better capacity & latest technology
The doctrine of ‘buyer beware’ applies to any transaction. You have legal recourse if you are cheated, but always keep this adage in mind before any purchase SAVING AND INVESTING
55 Earning Curve Never invest in something you don’t understand TRAVEL
INSURANCE
46 Insurance Trends – Guaranteed returns from Bharti AXA Monthly Income Plan: just 2.5% a year! – Birla Sun Life Protector offers higher sum assured – Future Generali Bima Advantage costs a packet for enhanced cover – Fine Print: Motor insurance for diesel engine cars may be hiked; SBI Life fined Rs70 lakh
STOCKS
Emptor Holds 54 Caveat Good: In all cases
& Nature’s 60 Mankind Grand Creations Visited by millions of people, Las Vegas and the Grand Canyon represent the grandest of spectacles that mankind and nature can provide
POWER OF ONE
48
Crusading Beyond the Printed Word
When governance breaks down, it is critical to empower and inspire the ordinary, faceless person, says Vinita Deshmukh based on her own experience
BEYOND MONEY
66 ANewBraveLife
Kripa Foundation helps people afflicted with chemical dependency and HIV infection to get back on their feet, says Disha Shah
WHICH WAY
40 Follow the Price? There are too many conflicting scenarios and we know little about them—or beyond
AUTO
50
Showrooms with a View
Customer-oriented car firms? It’s the Japanese, finds Veeresh Malik
DEPARTMENTS Letters............................. 4 Book Review..................... 56 Money Facts..................... 63