SUCHETA DALAL ON:

THE FOURTH GOING CHEAP: THE JALAN REPORT:

ESTATE EXPOSED INDIA FOR SALE A COMPLETE LETDOWN
Personal Finance Magazine 16 December 2010 Rs 25

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Volume 5, Issue 21
3 December – 16 December 2010
Debashis Basu
Editor & Publisher
editor@moneylife.in
Sucheta Dalal
Managing Editor
suchetadalal@yahoo.com
Editorial Consultant
Dr Nita Mukherjee
Editorial, Advertisement,
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Premises, Off Veer Savarkar Marg, Shivaji
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E- mail: mail@moneylife.in
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Pune
Jitendra Garsund
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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
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st
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Hyderabad
C/o Rajnidev,
15- 2- 16,1st Floor, Shop No.9,
(Beside Ramdas Paper Mart),
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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
MONEYLIFE | 16 December 2010 | 4
Letters.indd 2
Letters to the Editor
SILENT SPECTATOR
The interview with G Srinivasan, chairman and managing director, United
Insurance, “Cost of Insurance Should Come Down with PPN” (Moneylife, 4
November 2010), has thrown up an interesting point. Mr Srinivasan says that
during the tariff era,
health insurance was being The only investment that
Write to the Editor!
Win jewellery
cross-subsidised by fire, enhances your face value. worth Rs1,000!
engineering and other
insurance covers. But after
de-tariffing, they are facing
a lot of pressure with
regard to health insurance
premiums. This shows
that there is more to the
Congratulations Tarun Agarwal from Bareilly!
restrictive stand taken by Your letter to the Editor wins a Surat Diamond gift
the public health insurers worth Rs1,000. Keep writing! Keep winning!
on cashless benefits with big
hospitals. Insurers initially said, for health insurance, they are suffering from under-
recoveries; the claims outgo was estimated at 1.3 times the premium collection.
According to these companies, this was causing them huge losses. The reason being
attributed to this outgo was fraudulent and expensive claims being submitted by the
insured and larger hospitals charging more for people with existing health insurance
covers.
However, it is obvious that the real reason for under-recoveries and huge claims is
the fact that companies have stopped cross-subsidies. It was purely a commercial
decision taken by the companies earlier, for which they are projecting the patients
and the hospitals now as the villains in this saga.
While it may be true that insured patients are being charged more by hospitals,
why should patients suffer? Are they not customers of health insurance companies?
Even if the cost of various medical procedures across hospitals is standardised and
maximum caps are enforced, would a patient who has taken a policy for say, Rs4
lakh, not expect better treatment in a bigger hospital compared to someone who
has taken a policy for only Rs2 lakh? This whole exercise of standardisation of cost
of treatment is a farce, as health insurance is still a personal choice and not a retail
product where you can set a maximum retail price (MRP). Sadly, IRDA and the
government have remained mute spectators. Neither is willing
to take the patients’ case forward d with insurance
companies.
Legally, insurance is a binding
contract between a company
and an individual, and no
one can change the terms mid-
way during the validity of the
contract. I am surprised that the
new norms were not only enforced ceed on
customers going in for new policiesciies and
renewals, but they were also imposed
posed on
existing policyholders. ``
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 LETTERS
` Even the option of providing premium policies (where
the patient is entitled to larger and better hospitals)
as suggested by a few insurance companies might not
work. These will be new policies with fresh terms &
conditions and waiting periods. Benefits from any
existing policy from an insurer will not be rolled over
to the new one. Again, larger hospitals will neither
suffer any loss—nor will they bend to the companies’
demands of lowering treatment costs. Unfortunately, it
is only the middle class which will suffer. The regulator
and the government will continue to watch from the
sidelines.
Tarun Agarwal, 489-B, Sahukara, Bareilly 243003,
by email
CAN’T TRUST THEM
I had invested in UTI Infrastructure Advantage Fund-
Series I on 3 December 2007—the lock-in period is
three years. But the Fund’s performance has been below
par. Recently, I approached UTI Asset Management
Company for redemption of my units, and the AMC
asked me to submit a written request in the common
transaction form along with a cancelled cheque and a
copy of my permanent account number (PAN) card.
The AMC also insisted that my signature should be
attested by a manager from a nationalised bank. I fail
to understand why the AMC insisted on signature
attestation, when I have not yet submitted my
redemption request.
Again, the question of signature attestation should
arise only if my signature
does not tally with
the one available with
them. No private sector
mutual fund company
insists on submission of
documents—including
a copy of the PAN card
and a cancelled cheque—
for redemption. Also,
signature attestation by
a bank manager costs
around Rs120. When I
have not gained a single
paisa from my investment
in the Fund for the past three years, why should I
spend another Rs120 or more for redemption?
I am a senior citizen; I am not in a position to pay
anything more for receiving lesser money than what
I had initially deposited in the Fund. Why can’t UTI
follow the same rules that are followed by other
mutual fund companies?
MONEYLIFE | 16 December 2010 | 6
Letters.indd 4
Will the concerned authorities look into the
irresponsible statements being sent out by those
who deal with UTI’s day-to-day affairs? How can
government companies hope to compete with private
companies, if such unreasonable demands are made
that harass the common man?
VS Venkataraman, Flat 553, O Block, Tarapore
Towers, Oshiwara, Andheri (West), Mumbai 400053,
by email
IMPROVING LIFE
I thank the Insurance Regulatory and Development
Authority (IRDA) chairman J Hari Narayan for his
commendable work in cleaning up the life insurance
industry. After IRDA
cracked its whip, life has
become a lot better for
policyholders. Products
are efficient, with higher
coverage. But mortality
charges are still outside
the purview of regulatory
control. With the
minimum sum assured
rising to approximately
15 times the premium
amount, higher mortality
charges will eat into
growth and nullify the
cap on charges. Mortality charges should be
mandated.
Insurers are also constantly hiking their sales targets.
The sales force from various companies will come
under more strain. There should be a few regulations
to protect employee interests.
Mr Narayan has rightly said that even traditional
products will come under the scanner. No charges
should be cast in stone; they should be constantly
reviewed. Sales brochures (including proposal forms,
policy bonds, etc) should be standardised across all
insurance companies. All policyholders should be given
an option of direct credit facility in the proposal form
(by the submission of a cancelled cheque) so that there
is no delay (typically 7-10 days) in physical delivery of
a cheque.
Name withheld on request, by email
ABSOLUTE POWER
This refers to “Getting More Corrupt” in Crosshairs
(Moneylife, 18 November 2010). The most corrupt
state, where power rules (and where power corrupts
absolutely), is Delhi. It is strange that some other states ``
11/27/2010 5:23:52 PM
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 LETTERS

` are ahead of Delhi as I thank Dr Mukherjee

per some press reports. for connecting us to
Mahesh Kumar, B-49, such a prestigious media
Gulmohar Park, New organisation.
Delhi 110 049, RN Tikot, CEO &
by email founder, Vidya Poshak,
by email
COMING TO TOWN
I receive regular TABLES TURNED
mails from Moneylife I am an avid reader of
Foundation regarding Moneylife. Could you
free seminars conducted on various interesting topics. please tell me when and where you add new scrips to
Moneylife readers like me would be happy if you could your Stockgrader? Even in the latest issue (4 November
conduct seminars in cities like Chennai. 2010) none of the three tables has any new stocks and,
Jerome Fernandes, Chennai, by email hence, I am a bit confused. The last addition that I can
see in these tables was in August 2010. Am I missing
GROUND REALITIES something? Or does this need to be read along with
The latest scam related to the Adarsh Housing Society, Street Beat?
Colaba (Mumbai) has hurt everyone. Don’t our Radhakrishna Karanth, by email
politicians and builders have a conscience? Why are
they playing with the lives of our Kargil heroes and These Stockgraders are to be read with the table. Any
war widows? Don’t they have their own families? This new entry or exit is always mentioned in the text. We
is sad and people should bring changes in the stocks in the grader when their
not forget these scams grade changes or if we feel it is necessary to make the
easily. Land and property changes. — Editor
have become the hallmark
of corruption, especially
in Delhi and Mumbai. HELP US TO HELP YOU
Only the media can stop Moneylife offers its readers a unique service—helping
these scams and expose redress grievances on a best-effort basis. However, we
the corrupt. We should have limited resources to devote to this effort and can
control the flow of black only pursue complaints that come to us by email. We
money. request readers to please send us crisp complaints, with
Everyone knows that all the facts on email (not as an attachment) and send
the Mumbai real-estate us the supporting documents, only if we ask for them.
sector is based on black We cannot handle physical letters. — Editor „
money and thrives on
corruption. There is not a single building which has got
a clearance without having given bribes to babus. Why HOW TO REACH US
do the Central Bureau of Investigation (CBI) and the Letters to the Editor can be emailed to editor@moneylife.in or
police take action only after a media exposé? can be posted to: The Editor, Moneylife Magazine, Unit No. 315,
3rd Floor, Hind Service Industries, Off Veer Savarkar Marg, Dadar
Vijay Mantri, by email (W), Mumbai 400 028 or faxed to 022-24442771. Letters must
include the writer’s full name, address and telephone no. and may
GROUND REALITIES be edited for clarity or space.
I went through the article “To Nurture Knowledge” New Subscription & Customer Service
For new subscription requests, complaints about current
published in Moneylife (2 December 2010). It has subscription and books, write to subscribe@moneylife.in or
extensively covered almost everything about our to Subscription Manager, Unit No. 315, 3rd Floor, Hind Service
organisation—Vidya Poshak. Industries, Off Veer Savarkar Marg, Dadar (W), Mumbai 400 028
Through the efforts of Dr Nita Mukherjee and or call 022-24441059-60 or fax to 022-24442771.
Advertising
Moneylife, I wish more and more people would be
For information and rates, email us at sales@moneylife.in or call
joining our mission. We are circulating this article to 022-24441059-60.
all our volunteers and well-wishers of Vidya Poshak.

MONEYLIFE | 16 December 2010 | 8

Letters.indd 6 11/27/2010 5:24:08 PM

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 LETTER ISSUE CONTENTS
FROM THE 16 December 2010
EDITOR
Will Skill

F or ages, we thought a Will is necessary only

for the rich. No more. Changing family
structures, economic development, which has
hugely increased self-earned assets of middle
class families (as opposed to joint family assets),
and nuclear families, have all meant that Indians
are having to think seriously about what to do
with their money after they are no more. They
are having to seriously consider making a Will.
This was evident from the huge response
that our affiliate non-profit organisation,
Moneylife Foundation, received for three
separate workshops on Wills and inheritance
26 Pass
Cover Story
It on Smoothly
Proper Will and Nomination is a must for transmitting your
laws. Encouraged by the overwhelming response assets. Sucheta Dalal tells you all that you need to know about
to these workshops and the diverse questions this vital but ignored area of personal finance
of the participants, our Cover Story this time
argues that everybody needs to make a Will and
discusses some key issues that you need to keep
in mind when writing it.
12 Current
Account
Although the law does not prescribe any - Why have realty stocks crashed, when realty prices are high?
special format for it and a valid Will can be - SEBI wants to probe insider trading in the bank-realty scam
- The dark side of banks, brokers and big investors
made without legal assistance, it’s not so simple.
- Beware! Your credit scores are not updated fast
There are some basic precautions you can take - Equity schemes may no longer be sold like variants of soap
to ensure that after your passing away, the - Make way for India—the world’s top shoplifting nation
passing on of your wealth is smooth. As far as
we know, this is the first time that the issue of
Wills is being tackled extensively by a personal
finance magazine, or even a business publication. 17 LOOSE
CHANGE
This issue is packed with diverse matters of Moneylife Quiz; Soundbites
importance to all citizens. We discuss the Niira
Radia tapes, which have been blocked out by
the mainstream media (that preferred to hold
panel discussions without even publishing or 18 PR-Mediagate; Radia’s Agenda & Modus Operandi;
Privacy & Other Issues
broadcasting the tapes), but were released by
Open and Outlook magazines. We also have
an analysis on the partisan and retrograde
Bimal Jalan committee report which seems to
have been written with the sole purpose of
20 Different
Strokes
perpetuating the monopoly of the National The Bimal Jalan committee has delivered a report whose sole
beneficiary is the National Stock Exchange
Stock Exchange.
Disclaimer: Moneylife has a policy of not allowing its editorial staff to
Debashis Basu „ buy and sell stocks that are written about in the magazine. All personal
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 16 December 2010 | 10

Content.indd 2 11/27/2010 5:11:24 PM

 CONTENTS
TRAVEL

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at Morocco
Exclusive News Morocco is a mystical country which
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Our leading analysts and columnists dissect
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Moneylife magazine articles and join in for

54 Clearance
discussions

Daily Market Forecast

Keep track of short-term market movements
Sale
and long-term trends to know what’s coming The surge in auto sales in October
was simply the outcome of heavy
discounts from dealers who had been
holding large inventories
POLITICS

22 Dilli
Durbar
And the Winner in the Telecom Scam
Is…; Media Blanks Out Barkhagate;
Another Shock for Chavan; No PC
Please
STOCKGRADER 41 EARNING CURVE

58 Learn
FUNDS
Momentum
M t the Basics of
24
Dish TV gains 4%; Bajaj Auto
Fund rises 2%; Cadila Healthcare falls Savings and Investing
Pointers 2%; Yes Bank tumbles 12%
- Mood Investing?
A non-trending and volatile market Medium Term - Having Enough
favours SIPs Crompton Greaves introduces a - Anchored to Price
new transformer; Dr Reddy’s is
STOCKS
finalising an American foray ML FOUNDATION EVENTS

36 Street
Beat
Aditya Birla Chemicals (India) is a
low-priced scrip; Elgi Equipments
plans to expand its business
significantly; JB Chemicals has
recorded strong growth for the
September quarter
Long Term
Shri Lakshmi Cotsyn gained
2%, while Hyderabad Industries
declined 14%
62 Home
Truths
An expert on property matters,
Vimal Punmiya shared his insights
on matters pertaining to co-operative
housing societies, and more
COLUMN

46
BEYOND MONEY
Nest
Eggs
Don’t depend only on your bank for
66 Overcoming
Learning Difficulties
financial products; do your homework A not-for-profit organisation, MDA is
and choose a good advisor; AMCs & committed to securing the rights of
Their Strange Ways children with dyslexia

INSURANCE

DEPARTMENTS
48
WHICH WAY
Insurance
40 The
Hand
Invisible Trends
- Online Insurance Is Convenient
Letters ............................ 4
Random Numbers .............. 16
Book Review .................... 60
Often, what you don’t see is more - Co-pay—Burden-sharing
important - Accident Policy, Mass Protection Money Facts .................... 63

Content.indd 3 11/27/2010 5:11:43 PM

 CURRENT ACCOUNT
INVESTING
Scrip & Trip
Why have real- estate stocks crashed again,
even when real- estate prices are high?
R
eal-estate prices are high all across the country.
Flats are getting sold at exorbitant prices not
just in Mumbai but in every market. Real-
BRICK OR BY TRICK?
From 8 January 2008
PVP Ventures
Prajay Engineers
Lok Housing
-89% -88% -84%
-95% -95%
INVESTOR INTEREST
Wake-up Stall
SEBI wants to probe insider trading in
the bank- realty scam. It can start with the
repeated instances of price manipulation
that we have highlighted for two years now
A fter the prices of government-owned banks
and realty companies started crashing and the
venerable Life Insurance Corporation’s name got
dragged into the muck, a senior official from the
market watchdog Securities and Exchange Board
of India (SEBI) was quoted as saying: “SEBI has
enhanced its surveillance for possible violations of
rules prohibiting trading based on prior and inside
information.” SEBI apparently has come across “over
two dozen instances of major suspected violations
MONEYLIFE | 16 December 2010 | 12
Current Account.indd 2
estate stocks should do well, right? How come the
high real-estate prices are not getting reflected in the
prices of real-estate stocks? In fact, in the third week
of November, they crashed. Some stocks are still down
80% from their highs three years ago. Which set of
prices is giving you the real picture? Real-estate prices
or stock prices of real-estate companies?
First, some facts about real-estate stocks. Since
6 October 2010, realty stocks are down by a massive
23%. Stocks across the entire universe of realty ty
yhhave
ave
av
l- taken a severe beating. The freefall h has been
as b
as een led by ``
From 6 October 2010
Unitech
Arihant Foundations
DB Realty
Orbit Corp
Unitech
HDIL
IVRCL Assets
-35% -34% -33%
-43% -40%
of insider trading norms during the recent rally to
new record levels above 21,000 level (sic) and the
subsequent correction last week.”
While it is extremely heartening that SEBI has
woken up to this menace, readers of Moneylife know
that we have been constantly highlighting cases of
insider trading and price manipulation for over two
years now. But no action has been taken against these
companies which have wilfully thrown regulatory
norms to the winds. It is well within the regulator’s
purview to have taken suo moto action against the
cases that we have been repeatedly highlighting in
“Unquoted”, a part of our Street Beat section. For
instance, in our issue dated 11 February 2010, we
had reported the unnatural rise in Supertex Industries
(4,140%). But the silence has been deafening.
Interestingly, our work has not gone unnoticed.
ML Bhakta from Kanga & Co has written to Moneylife
articulating what a number of investors would feel:
“I still wonder whether SEBI will ever wake up to the ``
11/27/2010 5:14:28 PM
 CURRENT ACCOUNT
` DB Realty, which lost a whopping 43% within a span of less than
two months. It is followed by Orbit Corporation (down 40%),
Unitech (down 35%), Housing Development & Infrastructure
(down 34%) and IVRCL Assets & Holdings (down 33%).
However, this precipitous fall is not just a recent trend. Ever
since the market peaked in January 2008, realty stocks have
been on a relentless downward spiral. PVP Ventures and Prajay
Engineers Syndicate (down 95% each) have suffered the most.
They are followed by Lok Housing & Constructions (down 89%),
Unitech (down 88%) and Arihant Foundations & Housing (down
84%).
Isn’t that strange? For the past two years, real-estate companies
and foreign real-estate brokers have been arguing in favour of a
solid recovery taking shape in the sector. When the stock markets
turned around after March 2009, some people prematurely
assumed a reversal in the fortunes of the realty sector. Developers
stubbornly refused to slash high property prices and binged on
credit, clinging on to hazy hopes of demand revival. So, how does
one explain the fact that real-estate prices have not fallen at all?
In late November, it appeared that realty companies have
been liberally helping themselves with loans from public sector
companies and LIC Housing Finance. The Central Bureau of
Investigation launched a probe that gave us a glimpse of how real-
estate companies are managing to keep themselves afloat—getting
funded by hook or by crook.
So, a scam and sham recovery have combined to make sure
that real-estate stocks are down. Mounting debt, coupled with
the backlash from the ongoing investigation into the housing loan
scam, will ensure that realty stocks find it to hard to climb up—
unlike real-estate prices. „
` problem faced by unsuspecting investors—the sudden rise in prices
of unknown scrips without any logic or reason, particularly when
Moneylife is repeatedly pointing out instances of such cases.”
SEBI’s unidentified senior official told reporters: “While the
suspicious trading activities have been noticed in SEBI’s routine
surveillance of market activities, the regulator has decided to probe
further into these cases and enhance its oversight.” Well, this rings
hollow. If SEBI had, indeed, noticed anything, where is the action?
As per SEBI’s ‘Prohibition of Insider Trading Regulations’,
an ‘insider’ is defined as any person “who is or was connected
with the company or is deemed to have been connected with
the company, and who is reasonably expected to have access to
unpublished price-sensitive information in respect of securities
of a company, or who has received or has had access to such
unpublished price sensitive information.” The regulator supposedly
has systems in place to monitor unusual stock trends; suspicious
activities are supposed to be probed further for violations of
norms—including those regulating insider trading. Most of these
expensive systems, we gather, are lying idle. By the looks of it, the
free-for-all insider trading will continue. „
Current Account.indd 3
SCAM
Money Shatters
The dark side of banks,
brokers and big investors
O n 24th November, Moneylife broke
a scandal involving Money Matters
Financial Services Ltd which was being
investigated by the Central Bureau of
Investigation (CBI). This revelation opened
up a can of worms from which maggots
are still crawling out. In our first report, we
revealed how with no pedigree to write
home about, Money Matters managed
to raise Rs445 crore from renowned
institutional investors like Morgan Stanley,
Fidelity and GMO—proving that even the
most seasoned experts are just as prone to
making wrong judgements as anybody else.
Even the investment bank involved in
the Rs445-crore deal with the international
institutional investors, India Infoline, might
not have done proper due diligence, but it
pocketed fat fees anyway. India Infoline has
always been known for sharp practices.
After the investors and intermediary,
the third kind of players to stand exposed
were the public sector financiers. In the
aftermath of our exposé, it was revealed
how Money Matters managed to give hefty
bribes to senior officials of public-sector
banks and housing finance institutions
for facilitating big-ticket loans to property
developers.
Just a few weeks ago everybody was
celebrating the great new dawn for India.
Now, the reality is hitting home. „
13 |16 December 2010 | MONEYLIFE
11/27/2010 5:14:43 PM
 CURRENT ACCOUNT
BORROWINGS
Overdue Credit
Beware! Your credit scores
are not updated fast
Y ou may have made all your
loan repayments in time. But
don’t be surprised if your credit
score is not reflecting it. This is
because the Credit Information
Bureau of India Ltd (CIBIL) is
falling behind in updating your
credit condition. According to a
senior bank manager, the credit
bureau takes six weeks or more
to even rectify records. This is a
violation of the Credit Information
Companies (Regulation) Act
according to which credit bureaus
must rectify data within 30 days of
receiving it from members.
When we contacted CIBIL about
this, their spokesperson said, “We
update our records within one week
from the date of receipt of the data
from the lenders. This is a regular
and disciplined process.”
CIBIL caters to about 300
lenders (banks, co-operative
banks and non-banking financial
MONEYLIFE | 16 December 2010 | 14
Current Account.indd 4
companies. It holds information
of around 160 millions loan
accounts and about 95 million
customers—individuals and
businesses. The credit data gets
updated automatically every month
with the information received
from members. CIBIL has started
providing a credit information
report (CIR) to individuals through
its website. But since there is no
separate mechanism to verify the
identity of an individual, it is using
postal services to send these reports.
It says that the reports are delivered
in about a week. One borrower
who tried calling the CIBIL helpline
was told to call back during
working hours (10am to 6pm). He
had called on a working Friday at
2pm! „
MUTUAL FUNDS
No Fancy NFOs
Equity schemes may
no longer be sold like
variants of soap
P erturbed by the increasing
complexity of new mutual fund
schemes waiting for its approval,
market watchdog Securities and
Exchange Board of India (SEBI) has
asked several asset management
companies (AMCs) to simplify their
new fund offers (NFOs). SEBI is
especially critical of capital protection
oriented schemes, structured schemes
and ‘guaranteed NAV’ schemes. It
believes that these schemes are
either too complex for the average
investor or their strategies involve
substantial risk. SEBI has also objected
to names of certain schemes that
could potentially create confusion
in the minds of
investors.
Moneylife
believes that it
is high time the
regulator took a
close look at NFOs.
We have been pointing out, ever
since this magazine was launched in
2006, that NFOs are a marketing tool
designed to gather assets. What else
would explain the names of funds like
Hi-Fi Fund, Special Situations Fund,
Progressive Themes Fund, etc?
So, SEBI’s move has been long
overdue. AMCs were actively
attracting money into their kitty
through NFOs during the boom of
2005-07. Much of the money not
only came by offering schemes that
bear fancy names but were also
pushed through with the help of fat
commissions to distributors. While
SEBI remained mum during this
period, thousands of investors have
taken the bait. „
11/27/2010 5:18:10 PM
 CURRENT ACCOUNT
RETAIL
Quick Flick
Make way for India—the
world’s top shoplifting
nation
A ccording to the ‘Global Retail
Theft Barometer Survey’, India
records the highest shrinkage in
retail stock with the main
reason being shoplifting. In
the country, about Rs9,295
crore or $2.32 billion worth
of retail stock has ‘shrunk’
between June 2009 and June
2010—which accounts for
2.72% of total sales—against
the global average of 1.3%.
Even last year, India topped
the list, reporting a loss of
3.20% of total sales.
Shoplifting accounts for
47.3% of the loss; employee theft
contributes a generous 26.4% of
this. The rest may be attributed to
pricing or accounting mistakes and
thefts by vendors and suppliers.
Current Account.indd 5
BOTTOMLINE BY MORPARIA
On an average, retail crimes added
Rs6,631 to an Indian family’s
shopping bill this year. But, there
is some comfort. Apparently,
Indian employees are more honest
than their counterparts in the US,
Australia and Canada. Again, the
global employee theft ratio stands
at a much higher 35.3%, compared
to India’s.
Countries like the US, Canada
and Japan have recorded greater
losses, but no country shows a loss
of such a high percentage of sales.
India beat runners-up Morocco
and Brazil (both at 1.64%) by a
wide margin. Taiwan and Hong
Kong, recording a respective loss
of 0.87% and 0.91% of total retail
stock, rank at the bottom of the
list of 42 countries. Total global
shrinkage has been $107.3 billion
(Rs9,295 crore) and retail crime
rates have increased. Retailers
apprehended a jaw-dropping 6.2
million store thieves in 2010. Most
stolen items are apparel, fashion
accessories, perfumes and alcohol.
Experts in the field say that with
more people frequenting retail chain
stores, it becomes difficult to spot
all culprits. Shoplifters hide small
objects or foldable items in
their dresses and handbags,
and yes… a majority of them
are women.
Is there a silver lining?
Well, maybe. Shrinkage
declined from last year by
5.6% and India performed
much better than it did in
2009. According to the
survey, this improvement
has been noticed at a time
when many regional economies
are recovering after the near-
collapse of 2008. Retailers have
started investing in loss-prevention
strategies with increased vigilance
and staff training. „
15 | 16 December 2010 | MONEYLIFE
11/27/2010 5:16:24 PM
 RANDOM NUMBERS

3 crore pending accident It takes 5 years from the time of the mishap for 85%
of compensation.*
There are
Indian courts.* of accident victims to receive payment
insurance cases in various

Crash Course It takes at least 2 years

for a majority of accidents to be reported
this time increases to 3 years.*
. In
case of death due to vehicle accidents,

Almost 550 Indians dents each day.#

get
killed in road acci

About
wor
200,000 people
get killed every year on Indian
ld’s road fatalities, despite the
roads. This represents 15% of the the world’s motor vehicles.#
fact that the country has only 1% of
*Source: ‘Third Party Claims’, by IRDA
Safety, by WHO
#
Source: Global Status Report On Road

Cash Stash
h
Out of Body
$462,000,000,000
00,0
000
0,0
000 A study by Science magazine says that minds
That was the amount of money illegally wander, even from demanding tasks, at least
siphoned out of India between 1948 and 2008.
That is 40% of the country’s GDP. 30% of the time.
People spend ‘half
their waking hours
Source: Global Financial Integrity

12x
$462 billion is nearly
12 times the size of the
estimated loss to India due
to the 2G spectrum scam.
11.5%
Illicit financial flows
daydreaming’, but daydreaming ‘does
out of India have not make you happy’.
grown at this rate
every year.

Danger Investors embraced riskier assets, notably equities and commodities, after the resumption of
quantitative easing (QE) but a correction could be nearing, according to the BofA Merrill Lynch survey
Ahead of fund managers for November 2010. A synopsis of the survey:

Global economy to Inflation will rise in Asset allocators Asset allocators

strengthen in the next the next 12 months overweight on overweight on
one year equities commodities
48%
40% 35% 50% 50%
41% 25% 21%
30% 40% 40% 20% 17%
30% 27% 30% 27% 15%
20% 15% 20% 20% 10%
10% 10% 10% 5%
0% 0% 0% 0%
Oct-10 Nov-10 Oct-10 Nov-10 Oct-10 Nov-10 Oct-10 Nov-10

MONEYLIFE | 16 December 2010 | 16

Random Numbers.indd 1 11/25/2010 8:22:29 PM

 LOOSE CHANGE
Surprise Gift for Quiz winners from:

Moneylife Quiz - 90 Sound

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.,
Bites
“The IMF says
your name, address and telephone number before temporarily trying to
13 December 2010.
have capital controls
may be advisable.
1. For which city did Aston Martin win the contract for designing and Now, why should
manufacturing city buses? capital controls
a. London b. Bangkok be controlling only the inflows?
c. Mumbai d. New York Why shouldn’t they control the
outflows? Why should it be only
2. In which year was the Maharashtra Dyslexia Association formed? for developing countries; why not
a. 2000 b. 2005 for developed countries?”
c. 1996 d. 1990 – YV REDDY, FORMER RBI GOVERNOR,
on CNBC-TV18
3. Who wrote the book A Random Walk Down Wall Street?
a. Richard Lehman b. Aaron Chaze “The US and China are the two
c. Steven Davidoff d. Burton Malkiel governments that are causing the
biggest distortions in the private
4. As per the Bimal Jalan committee, what is the cap on aggregate markets. While expressing it in
anchor investor holding? different ways, they both have the
a. 30% b. 51% same policy: our currency, your
c. 20% d. 40% problem” – ED DEVLIN, PORTFOLIO
MANAGER, PIMCO, on www.pimco.com
5. Where does Gabriele Lepori work as a researcher?
a. Copenhagen Business School b. The University of Oxford
“Indian curators,
c. Harvard Business School d. London School of Economics
who dish out flat
decks like the
6. Which company has launched ‘Smart Life’ plan?
ones at Motera
a. Aegon Religare b. MetLife
and Hyderabad,
c. ICICI Prudential d. Future Generali
should be rewarded
with contracts to build national
7. Aditya Birla Chemicals (India) was formerly known as—
highways” – HARBHAJAN SINGH, INDIAN
a. Hindalco Industries b. Chambal Fertilisers
OFF-SPINNER, in The Times of India
c. Bihar Caustic and Chemicals d. Tata Chemicals

8. What is the term used for a person who dies without leaving a Will? “Instead of banning teaser rates,
a. Testator b. Intestate we can have independent experts
c. Legatee d. Witness who can prescribe them like
doctors prescribe steroids. My view
The answers to Moneylife Quiz-89 are: is that we can have a professional
• 1-c. Turin • 2-a. 37% • 3-c. 1,200tpa • 4-b. Beagle Channel body which will have a right to say
• 5-d. 6 years • 6-a. 20% • 7-d. Nurturing Education • 8-b. $25 million whether you are making a good
In all, 22 readers got all the answers right last time. The winner of
judgement or not” – KAUSHIK BASU,
Quiz-89 is Sai Narayanan from Ahmedabad. Congrats Sir! You will CHIEF ECONOMIC ADVISOR, GOVERNMENT
get a surprise gift from Surat Diamond Jewellery. OF INDIA, in Indian Express

17 | 16 December 2010 | MONEYLIFE

Loose_change.indd 3 11/27/2010 5:20:08 PM


Exclusive news, the stories behind the headlines
and the truth between the lines by Sucheta Dalal
PR-Mediagate
S ometime in the middle of
November, Outlook and Open
magazines released sensational
audio recordings that sent
tremors through the media and
corporate world. These recordings
of conversations between Niira
Radia, a top corporate lobbyist,
with top industrialists, journalists
and others, were part of a public
interest litigation (PIL) filed by
advocate Prashant Bhushan on the
2G spectrum allocation scam.
Ms Radia’s phones were tapped by
the income-tax (I-T) department’s
intelligence unit in 2008 and 2009.
The existence of these tapes was
known for a while; bits and pieces
have appeared in the media and
blogs since April 2010. However,
the audio recordings now available
are sensational because they
expose the powerful network
of media-business-bureaucrats
and lobbyists who are able to
purchase or influence decisions
regarding powerful ministerial
berths, ‘manage’ public perception
and dictate national policy over
allocation of natural resources or
large projects.
Many of us in the media have
a ringside view of how the wheels
MONEYLIFE | 16 December 2010 | 18
CROSSHAIRS.indd 2
z PR-Mediagate
z Radia’s Agenda & Modus Operandi
z Privacy & Other Issues
of government are greased by this
cabal of fixers; but these tapes are
a revelation for the aam admi,
especially those who believe in the
images built by television.
Consequently, although the
mainstream media blacked out the
tapes, heavy Internet traffic crashed
the Open magazine website in a few
hours. For those who are still in
the dark, Niira Radia is among the
most powerful corporate lobbyists;
Niira Radia
Mukesh Ambani and Ratan
Tata are among her two biggest
customers. She also set up a think-
tank packed with a bunch of top
bureaucrats, who apparently give
her access, intellectual firepower
and a roadmap to the inner
working of government.
Barkha Dutt and Vir Sanghvi,
Ratan Tata, Manoj Modi, Mukesh
Ambani and a string of journalists
from The Economic Times and
CNBC are among those whose
personal conversations expose how
Ms Radia uses them all to achieve
her goals. Not only journalists,
Ms Radia tells Mr Tata that she
has got analysts of UBS, Kotak
and Macquarie to do reports on
power and telecom against Anil
Ambani’s companies. Ms Radia’s
conversations explain why Ratan
Tata was persuaded to issue a
rare press statement saying, “The
Tata group has had a long and
fruitful association with Vaishnavi
Corporate Communications...”
A Wikipedia post explains the
fruits of this association—how
the Tatas have benefited through
Pradip Baijal’s stints as secretary
(disinvestment ministry) and as the
telecom regulator. Mr Baijal is now
part of a think-tank set up by
Ms Radia along with other
powerful retired bureaucrats such
as former finance secretary
CM Vasudev.
Yet, Ratan Tata’s statement
claimed that all of Ms Radia’s
interactions with government
have been in keeping with the
Tata values and never involved
payouts or seeking undue favours.
It’s funny how her conversations ``
11/26/2010 7:36:32 PM
 Privacy & Other Issues
W riting in the Indian Express,
Dr Pratap Bhanu Mehta has
correctly discussed the implications
of notoriously corrupt government
investigating agencies being allowed
to tap and leak private conversations
at will. “But we should worry
about this. Often, well-intentioned
attempts to combat corruption
enact the very instrumentalism that
they seek to decry. First of all, there
now seems to be virtually no check
on the state in terms of what private
conversations it can record, under
what pretext. The state becomes
even more deeply corrupt when it
gives up the principles that should
regulate its conduct; when in the
name of pursuing investigations
it gives itself carte blanche to do
virtually anything.” This is true
in principle. But, as the Outlook
magazine says, “It is not just the
2G spectrum but the entire Republic
of India that seems to be up for sale,
with the dealers being a group of
powerful telemarketers—corporate
` about Uddhav Thackeray suggest
otherwise. No wonder, there are no
statements of support from Mr Tata
this time around.
Radia’s Agenda & Modus
Operandi
W ith Reliance Industries and
the Tata group—two of
India’s biggest corporate accounts
—under her belt, Niira Radia’s
areas of interest were clear—
telecom and natural gas. Her brief
(at the time of the tapes) was
twofold. Ratan Tata needed her
to ensure that Dayanidhi Maran
did not get the telecom portfolio.
Her hectic lobbying through
Kanimozhi or ‘Kani’ (daughter of
DMK supremo Karunanidhi and
a member of parliament) and the
apparent interventions of Barkha
Dutt and Vir Sanghvi (who were
liaising with the Congress Party)
CROSSHAIRS.indd 3
houses, lobbyists, bureaucrats and
journalists.” This cosy nexus needed
to be exposed. The media plays
a big role in influencing public
opinion and ‘influenced’ journalists
are effectively used by their political
mentors to build or destroy careers
and put a lid on gross corruption
involved in large government
purchase or infrastructure contracts.
Putting them up for scrutiny is not
on behalf of A Raja, were clearly
successful. A grateful Mr Raja, who
could always be asked to ‘behave’
by the friendly ‘Kani’, was great for
the Tata group.
Mukesh Ambani’s main concern
those days was the allocation of
natural gas which was fought all
the way to the Supreme Court.
Ms Radia successfully ensured the
right media coverage by controlling
access to her big clients or smoothly
hinting at withholding advertising.
She even dictates the line and
length of a proposed interview with
Mukesh Ambani to Vir Sanghvi.
His subsequent articles clearly
demonstrated Ms Radia’s influence.
In one conversation, she discusses
instigating the Shiv Sena and Raj
Thackeray to organise a protest
against Anil Ambani’s power
project.
Interestingly, both her powerful
clients had a common problem—a
mere voyeurism—it is part of a
much needed clean-up of society.
For their service and advice to
political parties, journalists have
been rewarded with Rajya Sabha
nominations, important government
posts and directorships. They
soon launch alternate careers as
permanent experts on television
talk fests. It would be a travesty
of justice to invoke the right to
privacy only when this small and
powerful group of influence-
peddlers is exposed in a rare
situation that lays bare the cosy
nexus between netas, babus and
top opinion-makers in the media.
In civil society, the right to privacy
and freedom from harassment by
petty officials for bribes must be
the norm. In fact, this is the time to
debate systemic change, protection
for whistleblowers and a crusade
against the loot of the nation
through the nexus between business
and politics. It is only when we have
a cleaner and less corrupt society,
that we must work to tighten the
laws of privacy.
man called Anil Ambani. Mukesh
was involved in a fight to deny
him natural gas and her other big
client, Ratan Tata, was fighting him
in power and telecom. Ironically
enough, telecom minister A Raja,
who owed his Cabinet post to
Ms Radia’s lobbying, was ‘won’
over by Anil Ambani on the
spectrum allocation issue. But
she quickly worked at creating a
common front against Anil Ambani
by enlisting the support of Sunil
Mittal of Bharti Airtel.
Then there is her claim that civil
aviation minister Praful Patel has
pocketed a whopping Rs10,000
crore on purchases for Air India
and Indian Airlines and that his sole
intention was to strip the airlines
which would help Jet Airways and
Kingfisher Airlines. All in all, a
stinkball of sleaze and corruption
that gives the public a dose of
reality. „
19 | 16 December 2010 | MONEYLIFE
11/26/2010 7:36:51 PM
 DIFFERENT STROKES
Jalan Protects NSE
T
he Bimal Jalan Committee was
appointed in February 2010 to
deliberate on governance, ownership,
listing of bourses and other issues. The result
seems to be a ‘special purpose report’ (SPR)
that appears to be aimed at helping the
National Stock Exchange (NSE) retain its
The Bimal
monopoly for the next five years at least
Jalan and also work at permanently eliminating
committee any competition. Its only rival, the Bombay
has delivered Stock Exchange (BSE), will soon be starved
a report of funding and become inconsequential while
whose sole the report’s recommendations will ensure
beneficiary is that MCX Stock Exchange (MCX-SX) is
the National not allowed to enter the equity space. While
Stock paying some lip-service to the propensity of
Exchange entrenched bourses to use anti-competition
strategies against potential rivals, its solution
is to eliminate competition altogether and
perpetuate existing monopolies. It also
disfavours listing of exchanges which further
puts paid to all the plans and ambitions of
BSE and MCX.
This is probably the first committee that
is so overwhelmingly packed with regulatory
officials and just two regulated entities. The
result is a set of recommendations that is
devoid of any vision to develop or deepen the
capital market. Here are some of the bizarre
recommendations.
The Jalan committee says banks and
financial institutions with Rs1,000-crore+ of
net worth can qualify as anchor investors and
hold up to 24% (as against 15% today) for a
maximum period of 10 years. The objective of
the committee is clear. Keep private corporate
entities (read MCX-Financial Technologies
group) out of the capital market space. But
did the committee spend a few minutes
Sucheta Dalal is the debating who these investors would be?
Managing Editor of
Why would any institution invest 24%
Moneylife. Subscribers
get free help in in a bourse to get a fixed return, unless
resolving their directed by the government? Wouldn’t it
problems with select have been simpler for the committee to
providers of financial recommend nationalisation of bourses with
services. She can be
a single monopoly exchange? This would be
reached at suchetadalal
@yahoo.com in line with the committee’s other view—that
MONEYLIFE | 16 December 2010 | 20
DIFFERENT STROKES.indd 2
exchanges are natural monopolies. So, the
BSE, once it is nearly dead can be quietly
merged into the NSE (in fact, this is already
being discussed in certain quarters). Probably
the only reason why the Jalan committee
has not suggested nationalisation is that
institutional directors on the NSE may also
suggest that managing director (MD) Ravi
Narain, deputy MD Chitra Ramakrishna,
and the company secretary, who take home
gross salaries of Rs6.7 crore, Rs4.5 crore
and Rs2 crore, respectively, would have their
salaries brought on par with chairmen of
banks or public sector companies.
Instead, the committee slips in a
recommendation that sneakily protects the
salaries of NSE’s top brass but not those of
the BSE. It recommends “No variable pay
or stock options” for the top bosses of stock
exchanges (SEs). This hits at the top brass of
the BSE which is struggling to survive.
Ironically, the committee also suggests
a 51% cap on aggregate anchor investor
holding. The committee says there must be a
cap on profits of stock exchanges and this must
be linked to yields on 10-year government
bonds after taking into consideration risks
faced by market infrastructure institutions
(MIIs) including equity risk premium and
liquidity risk due to non listing of MIIs. This
recommendation, if accepted, should cause
investors, especially those who have acquired
NSE’s equity expensively, to scramble for the
exit door. Surely, Wipro’s Azim Premji (13.5
lakh shares), Rahul & Shrenik Baldota (2.25
lakh shares), S Gopalakrishnan of Infosys
(1.71 lakh shares) did not invest in a ‘fixed-
income instrument’ of the NSE. Each of them
has paid a hefty premium. If the NSE and the
BSE were listed entities, their stock would
have probably hit the lower circuit after the
release of the Jalan committee report. The
only reason private investors would stay on
is if NSE convinces them that ‘risk premium’
is just a euphemism to ensure there is no real
cap on profits or dividends, once NSE is a
monopoly. ``
11/26/2010 7:34:47 PM
 DIFFERENT STROKES

` On the other hand, BSE members, who started packing boards with retired IAS
agreed to demutualisation of bourses (and officers and this trend will only accelerate
conversion of their membership rights to after the Jalan-Krishnan-Bhave (all former
equity) in the hope that their holdings would bureaucrats) recommendations are accepted.
soar on listing, would be badly hurt. The SEs cannot hold more than a 24% stake in
Exchange seems sure to sink and there is depositories because they have now become
independent and self-sufficient entities. The
little chance it will be able to run a business
with returns slightly higher than those from ostensible reason is that management of an
fixed-income securities. Considering that exchange may misuse its majority holding
nobody other than NSE’s well-paid and to get surveillance-related information. If
well-entrenched top management is opposed accepted, this recommendation will force
to listing, the committee’s recommendation the BSE to reduce its recently increased
seems wholly influenced by the monopoly stake in Central Depository Services Ltd
exchange. (CDSL) from 54% to 24%. This will again
affect BSE’s valuation. This
The recommendations reveal would have upset BSE’s
how committees packed with top management, since
yes- men come up with ideas their variable pay depends
that destroy rather than develop on the SE’s performance.
markets With turnover dwindling
everyday, the BSE brass
The Jalan committee’s recommendations could justify bigger bonuses only by showing
stem from the ridiculous notion that neither higher valuations. If the Jalan committee’s
stockbrokers nor management can be trusted recommendation on capping variable pay is
to construct robust Chinese walls that also accepted, this becomes a non-issue.
prevent them from accessing and misusing The recommendations reveal how
surveillance-related information or trading committees packed with yes-men come
positions. It says, no trading and clearing up with ideas that destroy rather than
member “should be allowed to be on the develop markets. The committee mentions
board” of any stock exchange. Independent deliberations with several entities and
directors on the board, “shall at least be individuals. Many of them say that their
equal to the number of shareholder directors views find no mention in the report. While
without trading or clearing interest.” The they are hugely agitated, few have bothered
chairman of SEs should be approved by to respond publicly, because they hope that
the Securities and Exchange Board of India the committee and its findings will die a
(SEBI) and not paid any commission or natural death, once there is a new chairman
remuneration. Trading members will be at SEBI. Funnily, the committee itself gives
relegated to advisory boards to use their its recommendations only a five-year shelf
“rich practical experience.” SEBI has already life. „

21 | 16 December 2010 | MONEYLIFE

DIFFERENT STROKES.indd 3 11/26/2010 7:35:01 PM

 Dilli
Durbar
And the Winner in the Telecom
Scam Is…
Nothing happens in politics that is not planned. So the
big question doing the rounds in power circles in Delhi
is: Who has been leaking the details of the telecom
scam? To answer that question, you have to ask
another question: Who was the target or who would
benefit from the unfolding of independent India’s
biggest financial scam? On 12th November, when CNN-
IBN broke the story that the loss to the nation was not
Rs60,000 crore as earlier estimated but Rs1,70,000
crore, the obvious target was telecom minister A Raja
of the DMK.
The channel quoted the figure from the final report
of the Comptroller and Auditor General of India
(CAG) four full days before it was tabled in Parliament
and released publicly (16th November). The telecom
scam has been rearing its head every now and then
since 2008; but the government has always managed to
wriggle out without much action or explanation. This
time it was different. It exploded with a ferocity not
seen before because the scam figure, although notional,
was astounding even for a country that has got used to
scams getting bigger and bolder with each passing day.
Mr Raja was forced to resign on 14th November.
For two days after that, it seemed like he was the only
villain. It was being repeated ad nauseum that even the
prime minister’s office was kept in the dark by
Mr Raja. As if on cue, we don’t know whose,
bureaucrat after former bureaucrat spoke openly,
castigating Mr Raja for not heeding the PM’s advice.
The CAG had anyway ‘cleared’ the prime minister
saying that Mr Raja had disregarded his advice. Things
seemed to be going okay for the PM. Obviously,
somebody didn’t like that. So, on the night of
16th November, CNN-IBN broke another story: a
letter to the prime minister by Mr Raja’s predecessor
MONEYLIFE | 16 December 2010 | 22
Delhi Darbar.indd 2
BV Rao
Dayanidhi Maran. In the letter (written in 2006),
Mr Maran is making a pitch that the issue of spectrum
pricing should be dropped from the terms of reference
of the group of ministers (GoM). The prime minister,
who was thus far seen as a helpless bystander, suddenly
became the person who deliberately left the safe open
to help the looters. Coupled with the Supreme Court’s
strictures for the delay in responding to Subramanian
Swamy’s petition seeking sanction to prosecute
Mr Raja, this leaked letter sucked Manmohan Singh
into the corruption whirlpool. For three full days, as
the PMO grappled with screaming banner headlines
about the sins of his commission and omission, the
Congress Party and Sonia Gandhi inexplicably kept
mum. Nobody sprang to Manmohan’s defence until
20th November when Kapil Sibal went channel-hopping
in defence of the prime minister. What will happen
from here on is difficult to guess, but it is easy to figure
out the winners and losers of this round.
The biggest loser has been the prime minister.
His personal integrity might not be in question but
his moral integrity as the leader of the nation, whose
job it is to save every taxpayer-rupee, has taken a
severe beating. The DMK has come out a big loser
having been painted as a party that doesn’t stop even
at mortgaging the interest of the nation for personal
pelf. The winner is obviously the one who gains from
the pain of the prime minister and the DMK. Sonia
Gandhi. She has managed to remind Manmohan—who
has, of late, been comparing himself to Jawaharlal
Nehru and Indira Gandhi and repeatedly asserting that
he will complete his full term—that he is in office at
the pleasure of the Congress president.
Simultaneously, she has demonstrated that the
DMK needs the Congress more than the Congress
needs the DMK. Now, when they discuss the next
election in Tamil Nadu, the DMK will remember to
be a little more accommodating. So, the leaks did help
Sonia. ``
11/24/2010 7:43:33 PM
 DILLI DURBAR
` Media Blanks Out Barkhagate
Another gory story was playing on the sidelines of the
telecom scam. Barkha Dutt, group editor of NDTV
English news, and Vir Sanghvi, advisory editorial
director of Hindustan Times, were at the vortex of
this unseemly story. Open and Outlook magazines
published transcripts and uploaded taped conversations
these two worthies had with Niira Radia, head of
Vaishnavi, a corporate lobbying group. Ms Radia is
such a force in the lobbying universe that she represents
the Tatas and Mukesh Ambani, two groups at opposite
ends of the corporate moral spectrum.
Recorded between 2009 May and August, the
tapes reveal how Ms Dutt and Mr Sanghvi are making
themselves willing couriers for Ms Radia as she tries to
influence the Union Cabinet formation to ensure that
the telecom portfolio does not go to Dayanidhi Maran.
The Tatas wanted A Raja to get the telecom ministry
(which he finally got). Ms Radia wanted Barkha and
Vir to carry messages to the Congress top brass from
the DMK side during the height of Cabinet formation
for UPA-II. Vir even discussed exactly what Ms Radia
wanted him to write in his popular Sunday column
(‘Counterpoint’) in Hindustan Times, and wrote exactly
that.
Both of them protested that as journalists they have
to talk to all types of people for news-gathering and,
occasionally, indulge them out of professional necessity
and personal courtesy. The tapes are still out there on
the websites of these two publications. Listen to them
and make up your mind on whether these two top
editors were just playing the ‘nice guys’ in the dirty
gang-wars of politicians and corporate houses or were
active participants in foisting one of the biggest scams
Delhi Darbar.indd 3
on the nation.
But, more importantly, ask yourself this question:
Why have you not seen this story on any channel or
any newspaper (Mail Today in Delhi being the only
exception). Can you trust a media that shrieks and
shouts at every indiscretion of everybody else and
blanks out the story on the questionable conduct of its
own stars? What a shame!
Another Shock for Chavan?
Ashok Chavan, who was forced to resign as chief
minister of Maharashtra in the wake of the Adarsh
Housing Society scam, might be in for a shock. The
Election Commission of India will soon be taking
a call on the paid news case against Mr Chavan. In
the 2009 Assembly elections, Mr Chavan had shown
only Rs5,000 as his campaign expenditure whereas
the BJP, which has lodged a case against him in the
Commission, has been able to show that tens of crores
were spent by him on paid news.
Paid news is the phenomenon where politicians
pay newspapers and channels to run stories favourable
to them. Basically, this is an advertisement that is
camouflaged as news amounting to betrayal of the
reader’s trust. Since evidence against Mr Chavan is
undeniable, the penalty could be as harsh as annulling
his election. That will mean Mr Chavan will lose his
MLA-ship along with chief minister-ship. Forget about
being too clever by half; this is being too clever by
nothing!
No PC Please
There were seven people at the head table for the prime
minister’s dinner for president Obama. The Singhs, the
Obamas, the Gandhis and Pranab Mukherjee. All the
other 11 tables seated eight persons each. So there was
space for one more seat at the head table. Obviously,
home minister P Chidambaram was deliberately
kept away from the power table. The American side
suggested that some other senior Cabinet member
could be seated at the high table but the Indian side
refused.
Obviously, the prime minister has not taken kindly
to the projection of Mr Chidambaram as a prime
ministerial candidate. Digest that, Mr Chidambaram. „
BV Rao has wide experience across print, TV and
digital media. He was group editor at ZEE News
and senior editor with DNA and Indian Express.
23 | 16 December 2010 | MONEYLIFE
11/24/2010 7:44:01 PM
 MUTUAL FUNDS POINTERS

SIPping Pays, Sometimes works out in different market cycles.

Between January 2008 and March
2009, stocks got beaten down
A non- trending and volatile market favours SIPs severely. The HDFC Equity Fund
(non-SIP) delivered -44.07% returns

W
ould you invest a lump period? The HDFC Equity Fund in this period. Its SIP equivalent,
sum amount in an equity has delivered non-SIP annualised however, managed to keep losses
fund when the market is returns of 10.88% over this period. somewhat lower at -32.75%.
hovering around the 20,000 mark? Comparatively, the SIP return of the Reliance Growth Fund also yielded
Most would hesitate to take the Fund is a whopping 43.95% over the -48.78% returns over this period,
plunge. But does that mean you same period! Take another popular when the SIP return was -38.53%.
should wait for a sunnier day to scheme—Reliance Growth Fund. Now, let us see where SIP got
make your move? If you do, you While the non-SIP investment has investors during the rally that began
could lose out on a strong rally. yielded 3.54% annualised returns in March 2009. HDFC Equity Fund
To address this dilemma there are during this period, the annualised (non-SIP) managed to deliver 96.05%
systematic investment plans (SIPs). SIP returns are 35.55%. How did returns during this period, while the
Under a SIP, you invest a fixed the SIP route work out so much SIP in the same Fund clocked only
small amount of money at regular better? As the market was falling 61.67%. DSP BlackRock Top 100
intervals in a mutual fund of your rapidly, your SIP process was buying (non-SIP) yielded 57.47% whereas
choice. The minimum amount can be more and more units at lower and its SIP equivalent delivered 35.92%.
as small as Rs500 and the frequency lower prices every month. By the SIP helps to minimise losses during
of investment may be daily, monthly time the market a downturn but underperforms
or quarterly. What is the difference woefully in a stock market rally. For
between a SIP and non-SIP return? SIP investment to work, one should
If the market is volatile and non- had touched rock-bottom, give it at least three to five years.
trending the difference can be huge. in March 2009, the SIP had Staying invested only for a year may
The Sensex went into free-fall purchased substantial units in the affect your returns, as happened
starting January 2008, plunging Fund at the lowest price, allowing it during the past one year. Fund
from a high of nearly 21,000 to a to take advantage of the steep rise in performance analysis over a period
low of around 8,000 by March
2009. From this point, the Merits of SIP
Sensex staged a phenomenal Fund Name Returns (%)
rally, rising to touch the Jan-08—Oct-10 Jan-08—Mar-09 Mar-09—Oct-10
21,000 mark again by SIP Non-SIP SIP Non-SIP SIP Non-SIP
October 2010. ICICI Prudential Discovery Fund 47.59 10.19 -36.37 -49.49 63.13 103.78
How did equity funds HDFC Equity Fund 43.95 10.88 -32.75 -44.07 61.67 96.05
perform during this Sundaram BNP Select Midcap 43.08 3.75 -44.87 -55.34 63.77 102.85
Reliance Growth Fund 35.55 3.54 -38.53 -48.78 51.20 82.13
Fidelity Equity Fund 35.16 5.76 -30.40 -42.45 50.19 73.91
Principal Large Cap Fund 34.54 0.95 -37.61 -49.66 46.94 78.95
Canara Robeco Multi Cap 33.05 2.13 -39.60 -49.19 47.78 79.80
SBI Magnum Multiplier Plus 32.20 0.76 -31.11 -45.07 46 70.46
Franklin India Prima Plus 28.79 3.01 -30.38 -41.43 40.48 64.53
DSP BlackRock Top100 Equity Fund 27.16 3.63 -26.10 -38.16 35.92 57.47
Source: Value Research

prices thereafter. However, investors
having made a one-time investment
in January 2008 got nowhere as the
market only moved sideways over
this two-year period.
Now, let us understand how SIP
of five years proves that SIP holds
an investor in good stead, ironing
out the market volatility during the
period. However, do keep in mind
that it will not always help you if
you select a poor mutual fund. „

MONEYLIFE | 16 December 2010 | 24

Fund pointer.indd 2 11/24/2010 7:31:39 PM

Covers.qxp 8/4/2007 3:39 PM Page 1

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 COVER STORY
PASS it on
smoothly
I
nheritance battles seem the norm for the rich
and the famous, whether or not there is a Will
involved. For want of a Will, Dhirubhai Ambani’s
sons fought one of the bloodiest succession battles,
although his fortune was vast enough to provide
for several generations of Ambanis.
On the other hand, Priyamvada Birla, the lady who
shot to fame after her death, made a Will. But the fact
that the widow of industrialist MP Birla stunningly
bequeathed a Rs5,000-crore estate to RS Lodha (also
deceased now), a financial advisor and auditor to the
entire Birla group, set the cat among the Birla pigeons.
The angry clan ganged up to contest the Will, even
though the group had previously partitioned their assets.
DH Ambani did not make a Will and it created a
problem. Priyamvada Birla made a Will and it still created
a problem. But, by and large, a well-drafted, properly-
executed Will ensures that your wishes are honoured,
sometimes after a bitter battle among your heirs, various
claimants to your estate and some tweaking by the court.
MONEYLIFE | 16 December 2010 | 26
Cover Story.indd 2
Given that a lot of Indians
are si ng on significant
wealth, especially
from stocks and real
estate, proper Will and
Nominations are a must.
Sucheta Dalal tells you all
that you need to know
about this vital but ignored
area of personal finance
Wills of the rich and the famous almost inevitably
land in court but that’s because they have money to
spend. For us, it is a good idea to create a document
which spells out what you wish, rather than have your
estate distributed under various laws of inheritance. If
you do it well, it won’t be easily contested. How should
you go about it?
Why Make a Will?
Before we get into that, many Indians think making a
Will brings bad luck, says Dr SD Israni, corporate law
expert. He talks of a client, who prepares a Will and
updates it frequently, but has not signed the documents
for years, probably fearing bad luck.
Changing family structures and growing prosperity is
forcing Indians to realise the importance of a Will. For
instance, until recently, a significant part of the assets
of middle-class families comprised the family home
and some land; inheritance was decided by the laws of
succession. Daughters got their share of family assets by ``
11/26/2010 7:06:52 PM
 COVER STORY
` way of dowry or streedhan.
Today, middle class senior citizens have significant self-
acquired assets and want a say in their bequest. Among
the younger generation, there are multiple marriages,
inter-caste and inter-religious marriages and children
from different spouses, which increase the importance of
writing a Will, to avoid confusion over which succession
law would apply. Increased awareness about the need for
a Will is evident from the huge response to Moneylife
Foundation’s three seminars on Wills.
Elders in traditional patriarchal Indian families,
especially women, would bequeath their jewellery orally.
It wasn’t unusual for the matriarch to say, “My (gold)
bangle set will go to my elder daughter; my daughter-in-
law will get the diamonds and my layered gold chain will
go to my second daughter.”
Today, with nuclear families and children scattered
across the globe, a wish list, even a written one, can
never substitute a proper Will.
Corporate law expert Dr SD Israni speaking
at Moneylife Foundation event on Wills
The authors of a well-known book called Trial &
Heirs write about how Princess Diana made the mistake
of leaving a ‘letter of wishes’ asking her executors to
divide her personal property at their discretion but to
give one-quarter to her godchildren. The executors
apparently went to court against this ‘wish list’ and
finally handed out peanuts to the godchildren. The
lesson: “Don’t undermine your Will or trust by taking
shortcuts,” say the authors. Instead, make sure you have
a legally valid Will which is very specific about how cash
and assets will be distributed.
Vimal Punmiya, an eminent tax, accounts and
property law expert, says, “Making a Will is especially
important if all your children are not all equal—
financially or in terms of physical and emotional well-
Cover Story.indd 3
being. A person with a dependent widowed daughter, or
a physically-challenged child, may want to make special
provisions for them through a Will, over children who are
better-off. This can only be done through a Will, because
inheritance laws would treat all children equally.”
The inheritance laws applicable to you differ according
to your religious affiliations. The Hindu Succession Act,
1956, applies to Hindus, Buddhists, Jains and Sikhs. The
Indian Succession Act, 1925, is applicable to Christians
while Zoroastrians and Muslims have different laws
of inheritance based on their religious texts. Shias and
Sunnis have different laws and Muslims are the only ones
who can make an oral Will. If you want these laws not to
apply to your case, you have to make a Will.
For some people, the big worry about making a Will
too soon is, “What if I change my mind?” Well, you can
change your Will as many times as you want to. The last
one will be the one that is held valid on your death. But
if you are in the habit of changing the Will frequently or
to use your Will as an instrument to ensure your family’s
devotion, then be careful to ensure that it’s complete
each time.
How To Go about It?
Let’s start with some basics. At the core, it is a simple
statement of your wishes. It must have your name,
address, age and a declaration that you are in a sound
medical state; it must be signed and attested by two
witnesses in the presence of each other and the testator
(the person making the Will).
Jayesh Desai, an associate at the law firm Singhi &
Company, says, “The law does not prescribe the form
or content of a Will. It can be handwritten or typed on
plain paper. And you do not even need a lawyer to make
a valid Will.”
Further, a Will does not require payment of stamp
duty and registration. However, when it comes to actual
transfer of your assets, large institutions and share-
transfer agents prefer to depend on the Will that is
registered.
Having said that, it is important that a ‘homemade’
Will is legible and comprehensive. It must have a
complete list of your assets and liabilities and details of
their distribution in simple, straightforward and easy-
to-understand language. This is often easier said than
done. Trial & Heirs narrates the story of a US Supreme
Court judge who believed in such brevity that he wrote
a Will that was just 176 words. His family was forced
to spend thousands of dollars to have his Will clarified
by a probate court. As the authors Danielle and Andrew
Mayoras point out, even a judge does not necessarily
have domain knowledge; so it makes sense to get a Will ``
27 | 16 December 2010 | MONEYLIFE
11/26/2010 7:13:46 PM
 COVER STORY
` reviewed by a lawyer who specialises in the subject.
When it comes to a homemade Will, “The tricky
part,” says Mr Punmiya, “is when you want to favour
particular persons (say a neighbour or your favourite
library) or disinherit a daughter who married against
your wishes. In such situations, it is important that
the Will provides full explanation for your wishes and
action, just in case there is a battle over your assets.”
Key People in the Process
While planning to make a Will, you need to start thinking
about the key people, other than your heirs, who are
crucial to the process. First, you need to think carefully
about whom to appoint as executor to your Will. It must
be a person whom you trust and who is rational and
will have your best interest at heart. At the same time,
if the executor is one of the beneficiaries, remember his
position is compromised.
Again, Trial & Heirs provides a dramatic story to
show how important it is to choose the right executor.
Claudia Cohen, the divorced wife of millionaire Ronald
Perelman, chairman of cosmetic giant Revlon, chose
to appoint her ex-husband as the executor of her Will.
When she died, Perelman dragged her old and paralysed
father Robert Cohen to court, demanding a larger share
of his estate. In doing it, he spent a few million dollars of
his ex-wife’s money to sue her father!
Claudia Cohen had specifically requested that
Perelman should not strain the relationship between
the daughter and her father, but he ignored that too. All
this suffering because she made the dreadful mistake of
appointing Perelman as the executor of her Will.
Apart from avoiding executors who may turn nasty or
greedy, a commonsense approach is to choose an executor
who is capable and familiar with legal formalities and is
younger than the testator and has a higher probability
of outliving him. The same is true of witnesses. While
any two persons can be witnesses, ensure they are people
who will turn up and vouch for your mental soundness
if there is a dispute.
As Dr Israni says, it makes practical sense to select
your witnesses carefully; for instance, a doctor’s opinion
on your mental soundness is less likely to be contradicted
and a lawyer or a chartered accountant would ensure
correct legal procedure. It is also a smart idea not to have
your heirs or beneficiaries as witnesses, because they get
discredited if there is a dispute. While it is a good idea for
your witnesses or executors to be confidants and know the
content of your Will, it is not necessary for you to inform
them. But again, learn from Vimal Punmiya’s client,
who did not even tell his family that he had executed
a Will and given it to Mr Punmiya for safekeeping. It
MONEYLIFE | 16 December 2010 | 28
Cover Story.indd 4
was discovered only by chance, several months after the
client’s death. So keep someone informed.
Learning from Disputes
Mr Punmiya recounts the story of a man who gave away
big chunks of his estate to his daughters and planned
on leaving the family home to his son, but died without
making a Will. As it happened, the sisters immediately
staked a claim to the home and the father ended up
leaving a pile of woes for his son.
Greedy and unfair relatives are a problem the world
over. In the US, grandchildren of the hotel heiress Leona
Helmsley disputed her decision to leave $12 million to
her dog and very little to them. The courts cut down the
dog’s inheritance to just $2 million. The famous Frank
Sinatra added what is called a ‘No Contest Clause’ to
his Will. It said that anyone who contested his Will
would be completely disinherited. We learn there was
still a litigation over the Will—not about the bequests
Vimal Punmiya, an eminent tax, accounts and property
law expert speaking at Moneylife Foundation event on
property, Wills and nomination
but because his last wife was needlessly delaying the
distribution of his assets.
One of Mr Punmiya’s clients, from a royal family, was
so certain that her relatives would question her Will and
soundness of mind that she went to enormous lengths to
record the process on videotape. From her signing of the
Will to the entire entourage going over to the registration
office to have it duly registered, everything was recorded.
If the Will is challenged, it would require a probate.
Probate means getting a copy of the Will validated by
a court. The process and rules differ from one state to
another; but, in a nutshell, it is simply the act of getting
the seal of a court on the contents. Typically, this simple
act (where there are no disputes) has turned into a ``
11/26/2010 7:13:59 PM
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 COVER STORY
` nightmare because of clogged courts and corruption.
In November 2010, Uday Dandavate, son of the
former socialist leader and railway minister, the late
Madhu Dandavate, finally went public about how the
Bombay High Court had delayed the probate of his
father’s Will for five years and how his lawyers hinted
that it wouldn’t happen unless he paid a bribe. In an email
Some Important Terms
Will: A legally-valid document that enables you to choose
who gets your self-earned assets a er your death.
Testator: A person making the Will.
Legatee: A person who inherits under the Will.
Intestate: Person who dies without leaving a Will.
Law Applicable to Intestate Succession: For Hindus,
Buddhists, Jains and Sikhs, the laws of inheritance have been
codified in the Hindu Succession Act, 1956. For Christians, the
Indian Succession Act, 1925, is applicable. Zoroastrians have a
different law of inheritance. Similarly, Muslims have their own
law. That has, however, not been codified in any legislation
but is based on their religious
Know More
texts. There are two major sects of
Muslims—Shias and Sunnis. Both
have different laws of inheritance.
Who Can Make a Will: A person who
About Wills
is not a minor and is of sound mind.
Finality of Will: A Will can be revoked
any time and updated as many times,
under the Indian Succession Act.
Codicil: Changes to a Will or explain
certain provisions, without rewriting
the entire Will. Must be signed by the testator and attested
by two witnesses.
Other Benefits of a Will: Wills can be made for appointing
executors, for creating trusts and for appointing testamentary
guardians of minor children.
Testamentary Guardian: A guardian appointed through a
Will. Single parents usually appoint testamentary guardians
to take care of minor children, if something were to happen
to the parents.
Executor: An executor is a person appointed by the testator
to administer his/her Will. It is important that an executor
agrees to perform this role, because otherwise the court
appoints an administrator.
Registration: Registration is not mandatory but it provides
strong legal evidence of proper execution of a Will.
Probate: It is the copy of a Will certified by a court, usually
a er checking, if other heirs have objections.
Nomination: A person can be nominated to take charge
of assets such as bank accounts, insurance and flats in co-
MONEYLIFE | 16 December 2010 | 30
Cover Story.indd 6
to Moneylife, he says, “I am not budging. He (his father)
led his life without taking any illegitimate money.”
For middle-class Indians, legal experts can often
guide you on how to leave your assets without needing
a probate. This can be done by using the nomination
facility effectively.
However, as Ch Viswanath of Karvy Investor Services ``
operative societies by filling the prescribed forms. A nominee
is not necessarily the heir or beneficiary but only has the right
to receive the asset.
Essential Components of a Will
* A Will has to be in writing.
* Only Muslims can make a valid oral Will. The law allows
members of the armed forces engaged in actual warfare/
expeditions and mariners at seas to make an oral Will. This is
known as a ‘Privileged Will’.
* The law does not prescribe a format for a Will. It can be on
plain paper and can be handwritten (ensure it is legible).
* A Will must list and document
all your movable and immovable
assets and clearly specify your
bequests. It can be updated
through a Codicil or can contain
a ‘residual clause’ to cover
assets that are not specifically
mentioned or acquired later.
* You can only bequeath what you
own. Providing proof of ownership
of assets avoids disputes.
* A Will must be signed in the presence of at least two
witnesses. Every page of the Will must be signed by the
testator and initialled by the witnesses in each other’s
presence.
* The Will must contain the name, address of the testator as
well as those of the Witnesses. If an executor is appointed,
he/she must be clearly identified to avoid ambiguity or
confusion.
Kinds of Wills
Conditional or Contingent Will: They come into effect only
if a certain event happens. A conditional Will is invalid if the
condition imposed is invalid or contrary to law.
Joint Will: A joint Will by two persons is intended to take
effect a er the death of both; it will not be enforceable
during the lifetime of either.
Mutual Will: Two testators confer reciprocal benefits—either
of them constituting the other as his/her legatee. These are
usually made by husband and wife.
11/26/2010 7:14:22 PM
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 COVER STORY
` told Moneylife at a seminar in Pune, “Companies prefer
a Will that is registered or sometimes require a probate.”
The transmission of immovable property also requires
a probate (which is why court officials make money by
threatening delays). But, in Maharashtra, co-operative
societies allow transmission of apartments through
nomination as well.
What Is Nomination?
‘Nomination’ has different meanings depending on
whether the asset is property, shares, insurance or bank
accounts. In most cases (except shares, discussed later)
nomination does not lead to ownership. A nominee
gets a charge of the assets and acts as a trustee but will
have to hand them over to the heirs if there is a Will. A
nominee can also be an heir, but not necessarily. Most
often, though, you nominate a person who you intend
to be the beneficiary of a bank account, insurance policy
or asset.
Mr Punmiya points out that the Supreme Court of
India ruled in 1984 that “A nominee is a mere trustee
with whom the (co-operative) society can initially deal
after the death of a member. All the legal heirs of the
MONEYLIFE SURVEY
Will Issues
While the respondents to our survey knew
the basics, lack of deeper awareness was
widespread
We conducted a survey of Moneylife readers to gauge their
awareness of various aspects of Wills. Their informaƟon
level on the basics of a Will was high (probably because
1. Is it mandatory to have a doctor/ lawyer as a witness?
Yes-25% One out of four respondents
considers it is necessary to have
No-75% a doctor/lawyer as a witness.
2. Does a Will have to be registered?
Yes-40% More than one-third (40%) of
the respondents think that a
No-60% Will needs to be registered.
MONEYLIFE | 16 December 2010 | 32
Cover Story.indd 8
deceased member have a right of succession to the
property of the deceased member and a nominee cannot
exclude the other legal heirs.”
If you hold shares in demat accounts, then remember
the recent Bombay High Court judgement which held a
nominee’s rights to be higher than those of an heir. Legal
expert Dr Israni says that the wording of the amended
Section (109A) of the Companies Act (dealing with
nomination for shares) is such that the Bombay High
Court judgement will probably be upheld by other courts
as well, unless the government amends the badly-worded
Section.
Section 109A (3) reads: “The nominee shall, on the
death of the shareholder/s or holder/s of debentures of the
company become entitled to all the rights in the shares or
debentures… to the exclusion of all other persons.”
A Will is not something we think of. Even the rare
few who are tracking their wealth are not thinking of
it, though this number is growing, as our survey shows.
But a Will is an essential component of your personal
finance, especially since a lot of average people have
become wealthy, thanks to the rising value of their
financial assets and real estate. Make a Will now. „
they are Moneylife readers). As many as 96% (of the 740
respondents) believed that it is important to make a Will;
only 2% said it invites bad luck to make a Will or that a Will
cannot be changed, once made. However, lack of awareness
was widespread on many other issues. For instance, 25%
believe that it is mandatory to have a doctor as a witness
(wrong) and 30% felt that nominaƟons were a subsƟtute
for Wills (wrong). Also, as many as 46% are unaware of
the landmark judgement of the Bombay High Court that a
nominee menƟoned in the demat account becomes the
owner of shares. „
3. Do you think nominations are a good substitute to
making Wills?
Yes-30% One in three respondents thinks
that nominations are a good
No-70% alternative to making a Will.
4. Does a nominee become a owner in case of shares?
Yes-54% 54% of the respondents say
that a nominee becomes the
No-46% owner in case of shares.
11/26/2010 7:14:37 PM
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BLANK PAGE
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Stock letter new.indd 3 11/26/2010 12:02:14 PM

 STOCKS STREET BEAT
Unbiased & Methodical Stock Picking that Works!

Right Equation
Aditya Birla Chemicals is a low- priced scrip tio n
and a growing organisation St or ies of Pr ice Ma nip ula

A
ditya Birla Chemicals (India) (ABCIL), formerly known
as Bihar Caustic and Chemicals, was set up in 1976,
as a joint venture between the Aditya Birla group and
the Bihar State Industrial Development Corporation, to supply
caustic soda to Hindalco Industries.
Caustic soda is critical to many industries such as paper,
textiles, soaps & detergents, bleach, petroleum products,
aluminium and chemical processing.
Currently, ABCIL is one of the leading chlor-alkali
manufacturers in India. Its product range includes caustic soda
Explicit Financee (Rs17)
(Rs17
Mumbai-based Explicit Finance deals
in shares and securities. The stock has
jumped 269% between 24 June 2010 and
16 November 2010. Its operating profit was
Rs21 lakh on revenues of Rs85 lakh in the
March 2009 quarter. The September 2009
quarter saw revenues increase to Rs1.99
(Rs)

lye, liquid chlorine, hydrochloric acid, sodium hypochlorite, 30

compressed hydrogen gas, aluminium chloride and stable Explicit Finance
25
bleaching powder.
The term chlor-alkali refers to the two chemicals (chlorine 20

and alkali) which are produced as a result of the electrolysis of 15

a salt solution. The most common chlor-alkali chemicals are 10
chlorine, hydrogen gas and sodium hydroxide (caustic soda).
5 269%
Further processing can create a variety of chemicals, including
alkyl chloride, hydrochloric acid, sodium hypochlorite, etc. 0

For value-addition and effective utilisation of chlorine, Jun-10 Aug-10 Nov-10

the company had commissioned a 12,000 tonnes per annum

(tpa) aluminium chloride plant in 2007 and a 17,500tpa stable
bleaching powder plant in 2008. Stable bleaching powder is
marketed under the brand name Shaktiman and is used in textile
mills for bleaching, sanitation, sewage systems, tanning process,
organic synthesis and other applications. The company’s caustic
soda lye capacity is around 105,000tpa.
ABCIL’s manufacturing process is energy-efficient. It uses
environment-friendly membrane-cell technology. To meet its
uninterrupted power-supply requirement in power-starved Bihar,
the company has a 30MW captive power plant. ABCIL plans to
expand its aluminium chloride plant’s capacity from 25 tonnes
per day (tpd) to 50tpd by installing additional reactors based
crore and operating profit to Rs26 lakh.
Revenues in the March 2010 quarter fell to
Rs1.97 crore and the company’s operating
loss was Rs33 lakh. Explicit’s operating loss
in the June 2010 quarter was marginally
lower at Rs32 lakh while revenues declined
to Rs1.23 crore. It recorded an operating
profit of Rs124 lakh on revenues of
Rs1.72 crore in the June quarter. Clearly, the
unusual rise in the stock price has little to
do with its financial performance. „
``

MONEYLIFE STOCK IDEAS Recommended Price Rs55

THAT WORK Moneylife Issue 30 July 2009

Current Price Rs173

162%* On 26 November 2010

( KNR Constructions ) * Annualised returns

MONEYLIFE | 16 December 2010 | 36

Stock-Streetbeat1.indd 2 11/26/2010 7:15:58 PM

 STOCKS STREET BEAT
Unbiased & Methodical Stock Picking that Works!

` on the latest technology, with a capital investment of Rs12.40

crore. The additional capacity will be commissioned by the end
of the current financial year. The company is also exploring
expansion of its caustic soda plant by another 150tpd for which
it has received clearance
from the ministry of
environment & forests.
The coal linkage for the
proposed power plant
has also been sanctioned
by the ministry of coal in
January 2010. The cost of
this expansion is expected
Caustic soda to be around Rs325 crore.
Mar-10 Jun-10 Sept-10 For FY09-10, its net
sales were Rs221.86 crore
Sales* 57.84 59.07 62.76
compared to Rs204.07
OP* 19.96 23.25 25.64 crore in the previous
Y-o-Y Sales Growth 4% -1% 5% year. Net profit was up
tio n
St or ies of Pr ice Ma nip ula
Shree Nath Commercial
mercia & Finance (Rs63)
Shree Nath Commercial & Finance is
supposedly engaged in the commercial
finance business. The stock soared 1,698%
between 1 February 2010 and 16 November
2010. The company’s revenues in the March
and June 2009 quarters stood at Rs1 lakh
while its operating profit in the same period
(Rs)
75
Shree Nath Commercial & Finance
60

Y-o-Y OP Growth -5% 0% 12% by 31.81% from last 45

OPM 35% 39% 41% year—to Rs60.74 crore

OP: Operating Profit, Y-o-Y: Year on Year, OPM: Operating Profit Margin
from Rs46.08 crore in the 30

* Figures in Rs crore last fiscal. The average 15

1,698%
production of caustic soda
Positive Reaction and chlorine for FY09- 0
(Rs) 10 has been recorded at Feb-10 Jun-10 Nov-10
150 the highest-ever level of
Aditya Birla Chemicals
135
286tpd of caustic soda was nil. Revenues in the December 2009
and 191tpd of liquid quarter rose to Rs24 lakh and operating
120
chlorine. For the quarter profit was Rs9 lakh. Shree Nath posted an
105 ended September 2010, operating loss of Rs1.12 crore in the June
ABCIL’s standalone net 2010 quarter while its revenues jumped to
90
profit rose 28.10% to Rs3.31 crore. The company’s revenues in the
75 Rs16.70 crore from September 2010 quarter surged to
May-10 Aug-10 Nov-10
Rs13.03 crore in the Rs10.01 crore and its operating profit stood
corresponding quarter at Rs2.11 crore. Clearly, the poor and erratic
last year, due to a 5.14% rise in net sales to Rs62.75 crore from financial performance has nothing to do
Rs60.05 crore. with the humungous rise in its stock price.
Its EPS increased 27.96% to Rs7.14 from Rs5.58 in the ``

MONEYLIFE STOCK IDEAS Recommended Price Rs110

Moneylife Issue 4 June 2009
THAT WORK
Current Price Rs300
116%* On 26 November 2010

( Sesa goa ) * Annualised returns

37 | 16 December 2010 | MONEYLIFE

Stock-Streetbeat1.indd 3 11/26/2010 7:16:19 PM

 STOCKS STREET BEAT
` corresponding period last year. Its
market-cap to sales and operating
profit ratios are 1.41 and 3.45,
respectively, which are quite
attractive, especially since its
RoNW (return on net worth) for
March 2010 was 18%. One can
buy the stock around Rs134. „
Global Vision
Elgi Equipments plans
to expand its business
significantly
E lgi Equipments makes
compressors and other
related equipment used in mining,
transport, pharmaceuticals, power,
oil, food, plastics, etc. Besides
serving the domestic market, Elgi
has a presence in all major markets
across the world covering Europe,
North America, Latin America,
Africa, Australia, Middle East, Asia
and the Far East.
Elgi is exploring various organic
and inorganic growth opportunities
in various geographies.
In FY09-10, Elgi acquired a
French compressor company, Belair,
as a wholly-owned subsidiary
which will be a gateway for
spreading the business into Europe.
On its international plan, the
company has said, “Export markets
have started recovering from the
recessionary trend only during the
MONEYLIFE STOCK IDEAS
THAT WORK
( everest industries )
MONEYLIFE | 16 December 2010 | 38
Stock-Streetbeat1.indd 4
Unbiased & Methodical Stock Picking that Works!
second half of the financial year. company will be expanding its
The recovery is sporadic and slow. business significantly.”
Operations in China are stabilising The demand for vehicle-
and (are) expected to pick up servicing is bound to increase as
the population of cars keeps on
increasing. Many manufacturers
are launching new models of cars
in the small segment which will
fuel growth in car sales, which, in
turn, will strengthen and increase
servicing networks.
All this will increase the
requirement of garage equipment.
As part of its domestic expansion,
Elgi has finalised the land for
Mar-10 Jun-10 Sept-10
building a new facility. The
Sales* 175.82 172.17 207.93
OP*
Y-o-Y Sales Growth
20.78
49%
27.07
52%
40.89
50%
company is also working on a
plan to set up its own foundry to
support the critical needs of high-
Y-o-Y OP Growth 20% 44% 58% quality components and casting.
Elgi Equipments reported
OPM 12% 16% 20%
50% growth in sales in the
OP: Operating Profit, Y-o-Y: Year on Year, OPM: Operating Profit Margin
* Figures in Rs crore September 2010 quarter over the
corresponding year-ago period,
Heavy Duty while operating profit in the same
(Rs) period rose by a superb 58%. The
210 operating profit margin was a hefty
Elgi Equipments 20%. The company’s market-cap
185
to sales, based on the September
160
quarter results, was 1.95 times,
135 while annualised market-cap to
operating profit was 9.93 times.
110
It is not cheap, especially since its
85 EoNW (Earnings on Net Worth) for
May-10 Aug-10 Nov-10 the year ended March 2010
was 15%.
during the coming year. Procedural But the stock enjoys great
formalities for establishing the growth momentum and can be
Brazil outfit are complete and the bought around Rs186. „
Recommended Price Rs130
Moneylife Issue 31 December 2009
Current Price Rs199
58%* On 26 November 2010
* Annualised returns
11/26/2010 7:16:42 PM
 STOCKS STREET BEAT
Unbiased & Methodical Stock Picking that Works!

Potent Drug CNS (central nervous system)

drugs. CNS drugs are one of the
increasing number of cardiac and
diabetic patients, JBCPL is pursuing
major growth drivers in the world plans to launch a division in
JB Chemicals has recorded with high level of R&D activities cardiology and diabetics segments.
strong growth for the channelled in this segment. The cardiovascular and anti-
September quarter diabetic markets together are worth
about Rs2,000 crore ($445 million)

J B Chemicals & Pharmaceuticals

(JBCPL), established in 1976,
has a strong presence in various
and are growing at double-digits.
Around 52% of the company’s
revenue comes from exports,
therapeutic segments that include thanks to its experience of over two
lifestyle management therapy, such decades of international marketing.
as cardiovascular drugs & anti- It exports drug intermediates,
ulcerants, and acute therapy such as bulk drugs and formulations
pain management & anti-infectives. to the US, Europe, Africa, CIS
It enjoys a brand leadership status Mar-10 Jun-10 Sept-10 (Commonwealth of Independent
in most of these segments. States) countries, Middle East and
To consolidate its position in the Sales* 170.09 163.21 237.47 South East Asia. To accelerate
Indian pharma market, JBCPL is OP* 29.65 31.02 56.15 growth in the domestic market, it
setting up various strategic business Y-o-Y Sales Growth 6% 18% 36% plans to increase its field force from
units (SBUs) to optimise the Y-o-Y OP Growth 141% 48% 42% 450 to around 800 by the end of
product mix. It hopes to leverage this fiscal and to 2,000 by the end
OPM 17% 19% 24%
its low-cost manufacturing and of next financial year.
OP: Operating Profit, Y-o-Y: Year on Year, OPM: Operating Profit Margin
marketing. Recently, JBCPL has * Figures in Rs crore With these initiatives, the
entered new contracts with British, company is expected to clock
Australian and South African Sweet Pill a CAGR (compounded annual
companies for supply of lozenges; it (Rs) growth rate) of 19% over FY10-
expects to start these supplies this 135 13E, above the industry growth
fiscal. JB Chemicals & Pharmaceuticals rate of 13%-15% and strengthen
120
The company is aggressively its position in the domestic market.
exploring opportunities for new site 105
The company recorded superb
transfers and contract research and growth in sales (36%) and
manufacturing services (CRAMS) 90 operating profit (42%) for the
projects, though the company September 2010 quarter over the
remains conservative on the growth 75 corresponding year-ago period.
May-10 Aug-10 Nov-10
prospects for CRAMS. Operating profit margin for the
With a strong base of 11 reporting quarter was a solid
manufacturing units (including Awareness of neuro-psychiatry- 24%. Annualised market-cap
three US Food and Drug related problems has also increased to sales based on the September
Administration-approved tablet & over time, throwing open enormous 2010 quarter was 1.20 times while
bulk drug plants) and two R&D growth opportunities. For this, annualised market-cap to operating
centres, the company has entered JBCPL has launched ‘Zephyr’, its profit is 5.09 times. For the fiscal
a dynamic phase of expansion neuro-psychiatry division. This ending March 2010, return on net
into newer and faster-growing makes it its first foray into niche worth was 16%. The stock makes
therapeutic segments, such as marketing through focus on a a good buy at the current market
anti-diabetics, and respiratory selected specialty. With the ever- price of Rs119. „

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 9% below the purchase price. This is called stop loss. However, if the market price is running above the purchase price, exit if the stock falls by 20% from the highest daily closing
price. This is called stop profit. Source: Centre for Monitoring Indian Economy’s Prowess database.

39 | 16 December 2010 | MONEYLIFE

Stock-Streetbeat1.indd 5 11/26/2010 7:17:00 PM

 STREET BEAT WHICH WAY
The Invisible Hand
Often, what you don’t see is more
important
T
he French economist Frédéric Bastiat penned
an essay, ‘That Which Is Seen, and That Which
Is Not Seen’. He wrote: “In the department of
economy, an act, a habit, an institution, a law, gives
birth not only to an effect, but to a series of effects. Of
these effects, the first only is immediate; it manifests
itself simultaneously with its cause—it is seen. The
others unfold in succession—they are not seen…
This difference is enormous, for it almost always
happens that when the immediate consequence is
favourable, the ultimate consequences are fatal, and
the converse… It often happens, that the sweeter
the first fruit of a habit is, the more bitter are the
consequences.” What does this have to with investing?
Traders look at price. Investors look at earnings and
valuation.
At least that’s what the objective is of all the stock
research that goes on. But hardly any investor is
bothered about hidden issues that could potentially
derail growth. No investor has ever
believed that massive corruption,
low productivity and low skills
in India have anything to do with
investing. And the scams (Adarsh
Society, Commonwealth Games, the
media-neta-babu-lobbyist nexus, the
real-estate scam) that are suddenly
surfacing? India’s super growth will overcome it all.
But, if corruption is too large, it can easily lead to
misallocation of capital which would lead to even lower
productivity and falling revenues.
At this point, I leave India and turn Medium-term: —
to a renowned value investor Vitaliy
Long-term:
Katsenelson whose book Active Value
investment that is
not subject to market risks
MONEYLIFE | 16 December 2010 | 40
Which way.indd 1
Debashis Basu
Investing I had reviewed a couple of years ago. Vitaliy
was born in a malfunctioning Soviet Union and was sent
to the US to get a better life. He believes that China is
headed for a bust and he uses a lot of arguments of
the ‘unseen’ kind that Bastiat (a staunch anti-socialist)
would approve. His recent interview to The Casey
Report on China is worth reading and referring to from
time to time. Vitaliy argues, “The conventional wisdom
says that the government is very, very smart, and
therefore they can do a very good job in steering the
economy in the right way. (The) Chinese government
may have the best intentions, its leaders may have
IQs of 250 each on a bad day, but it is impossible to
centrally manage an economy of China’s size… the
Chinese government was able to pull the economy
out of the recession remarkably fast, basically by fire-
housing the stimulus package that was equivalent
to 12% (of) GDP… The only problem is that these
kinds of short-term advantages come with long-term,
painful consequences… For example, when you have
a huge government presence in the economy, you also
have a huge bureaucracy, and bureaucracy brings
corruption… Corruption breeds misallocation of
capital, because the capital flows not to the best use,
but it basically flows to whatever the political
connection or whatever the bribe is directed
to… China has huge excesses… they
are likely to be much greater than
we can measure today as they are
covered up by robust economic
growth. The true magnitude of these
excesses will come to the surface once the
economy slows down. The growth you see today in
China is there, but it’s not a sustainable growth. It’s not
a growth that you’ll see a few years from now.”
I don’t know whether high costs, low productivity
and high corruption could lead to
unsustainable growth in India. It’s worth
thinking about.
Up
(Feedback at editor@moneylife.in) „
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
11/26/2010 6:42:37 PM
 STOCKGRADER MOMENTUM

Festive Sparks 45%

Compounded
Annual Return
Dish TV gains 4%; Bajaj Auto rises 2%;
Yes Bank tumbles 12%; Cadila Healthcare falls 2%

Gainers: The festive season spruced up the sales play an active role in further augmenting investment
numbers of DTH service providers, with nearly two flows in the Indo-Japanese corridor. With this tie-up,
million subscribers added in a month. This is nearly Yes Bank and Shinsei Bank are expected to leverage
double the number of monthly acquisitions recorded their combined expertise, local knowledge and
by the sector in the first half of the year. Dish TV corporate relationships to jointly pursue mergers
India, which had on offer a value pack at Rs990 for & acquisitions, joint venture and merchant banking
two months of content and an ‘e-platinum’ pack opportunities. However, Yes Bank ended 12% lower
at Rs1,490 for four months of content (packages in the fortnight. Titan Industries fell 10%. Healthcare
include installation charges), added over half a experts estimate that 5%-15% of the Indian population
million subscribers. Salil Kapoor, CEO of Dish living in urban areas suffer from respiratory problems.
TV said, “In the first week of November, we had World Health Organization data show that India has
an incremental share of 40% of the market. The about 30 million asthmatics and about 14.9 million
festive offers played a strategic role in converting people with chronic obstructive pulmonary disease
fence-sitters and attracting subscribers.” Dish TV (COPD). By 2020, the number is predicted to rise to
gained 4% in the fortnight. Bajaj Auto has a massive 80 million, while COPD cases are likely to jump by
distribution network expansion plan to meet robust 50% in the next six years. The respiratory segment,
growth targets, adding 130 new dealerships and like diabetes and heart ailments, is fast becoming a
upgrading 1,100 service centres by the next festive crucial area for pharma companies which are looking
season. New dealers, mainly in small towns, would at introducing more products in this category. Cadila
take the total number to more than 600 dealerships Healthcare, which has a presence in this segment, fell
across India, the company said. Bajaj Auto was up 2% 2% in the fortnight.
in the fortnight. Exit: We are recommending an exit from LIC Housing
Losers: Yes Bank, a private sector Indian bank Finance. „
and Shinsei Bank, a diversified Japanese
financial institution, have signed a memorandum 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
of understanding to advise Indian and Japanese
from new stocks added are counted after one issue.
companies on cross-border deals. The alliance will

RS Funda Final Entry RS Funda Final Entry

Company Return* Company Return*
Grade Grade Grade Date Grade Grade Grade Date
Titan Industries A A A 16 Apr-10 74% OBC B B B 29 Apr-10 24%
Bajaj Auto A A A 29 Apr-10 55% Shree Renuka Sugars B B B 06 Aug-10 13%
Dish TV India A A A 06 Aug-10 31% Yes Bank B B B 29 Apr-10 5%
Cummins India A B A 16 Apr-10 43% Bank of Baroda B C B 29 Apr-09 174%
Cadila Healthcare A B A 12 Nov-10 -2% Axis Bank B C B 29 Apr-09 139%
GSK Consumer A C A 29 Apr-09 174% Andhra Bank B C B 01 Apr-10 47%
EID-Parry A C A 12 Nov-10 -9% HDFC B D B 15 May-09 77%
Himatsingka Seide A C A 12 Nov-10 -11% Shree Cement B D B 12 Nov-10 -13%
Hindalco Industries B B B 23 Jul-10 27% — — — — — —

*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.

41 | 16 December 2010 | MONEYLIFE

Momenterm.indd 2 11/26/2010 7:52:24 PM

 STOCKGRADER MEDIUM TERM

Greaves Grooves 62%

Compounded
Crompton Greaves (up 5%) has introduced a new Annual Return
transformer; Dr Reddy’s (up 2%) is finalising an
American foray
Gainers: Tibotec, a Johnson & Johnson subsidiary, has penicillin-containing anti-bacterial market segment.
sued Lupin in the US for allegedly violating patent DRL was also in news for launching generic asthma
coverage of HIV drug Darunavir (Prezista). The US drug, Zafirlukast tablets, in the US in bottles of 60 counts
government has also separately sued Lupin, as the in 10mg and 20mg strengths DRL rose 2%. Infosys
patent for this drug is originally owned by the US Technologies rose 2% while Unichem Laboratories rose
government and is exclusively licensed to Tibotec. 1% over the fortnight.
Lupin was up 5% during the fortnight. Crompton Losers: In spite of good September quarter results, JVL
Greaves (CGL) has come out with a 1,200-KV capacitive Agro Industries fell 17% over the fortnight. Its sales and
voltage transformer, becoming the first company in the operating profit grew by 87% and 53%, respectively,
world to develop such a high-range power product. CGL over the corresponding year-ago period. Seshasayee
has dispatched this product to the ultra high voltage Paper and Suprajit Engineering fell 13% and 11%,
research station of Power Grid Corporation of India at respectively. Suprajit Engineering reported a net profit
Bina in Madhya Pradesh. CGL was up 5%. Dr Reddy’s of Rs7.82 crore and a sales turnover of Rs76.85 crore for
Laboratories (DRL) has signed an agreement to buy the quarter ended September 2010.
GlaxoSmithKline’s (GSK) oral penicillin facility and Exits: We are recommending an exit from LIC Housing
product portfolio in the US. GSK will transfer its plant Finance and Oil and Natural Gas Corporation. „
in Bristol, Tennessee, and rights for selling Augmentin
and Amoxil brands in the US to DRL. But, the American Note: Please read our changed methodology for grading stocks (given below). We have
company will retain the rights for these brands outside also added a column showing returns since the stock’s appearance in the table. Returns
the US. This acquisition allows DRL to enter the US from new stocks added are counted after one issue.

RS Funda Final Entry RS Funda Final Entry

Company Return* Company Return*
Grade Grade Grade Date Grade Grade Grade Date
Bank of Baroda A A A 29 Apr-09 174% Nestlé India A C A 29 Apr-09 121%
Titan Industries A A A 01 Apr-10 96% Infosys Technologies A C A 29 Apr-09 103%
Bajaj Auto A A A 27 May-10 55% HDFC A C A 29 Apr-09 101%
JVL Agro Inds A A A 27 May-10 36% CRISIL A C A 29 Apr-09 97%
Suprajit Engineering A A A 11 Nov-10 -5% Sun Pharmaceutical A C A 29 Apr-09 84%
Whirlpool of India A A A 11 Nov-10 -9% TCS A C A 10 Jun-10 36%
Lupin A B A 29 Apr-09 244% Siemens A C A 27 May-10 7%
Punjab National Bank A B A 29 Apr-09 148% Petronet LNG A D A 29 Apr-09 122%
Jain Irrigation Sys A B A 29 Apr-09 127% HDFC Bank A D A 29 Apr-09 111%
State Bank of India A B A 29 Apr-09 121% Dr Reddy’s Lab A D A 27 May-10 33%
GAIL (India) A B A 29 Apr-09 90% Seshasayee Paper A D A 01 Apr-10 24%
Unichem Laboratories A B A 29 Apr-09 57% HCL Technologies B B B 29 Apr-09 198%
Supreme Petrochem A B A 27 May-10 41% Union Bank of India B B B 29 Apr-09 108%
Andhra Bank A B A 27 May-10 26% Axis Bank B C B 29 Apr-09 142%
Balkrishna Industries A B A 11 Nov-10 -1% Power Finance B C B 29 Apr-09 106%
Shriram Transport A C A 29 Apr-09 250% GSPL B C B 01 Apr-10 20%
Crompton Greaves A C A 15 May-09 240% Dabur India B C B 01 Apr-10 19%
*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 | 16 December 2010 | 42

Medium Term.indd 2 11/26/2010 7:27:56 PM

 STOCKGRADER LONG TERM

A Good Yarn 62%

Compounded
Annual Return
Shri Lakshmi Cotsyn gained 2%, GSK Pharma
fell 5% and Hyderabad Industries declined 14%

Gainers: During the fortnight, Kanpur-based textiles
manufacturer Shri Lakshmi Cotsyn gained 2%. The
company’s net profit for the September 2010 quarter
rose 16% to Rs23.2 crore from Rs20 crore in the
corresponding period last year. Jain Irrigation Systems
rose 6%, while Lupin increased 5%.
Losers: GlaxoSmithKline (GSK) Pharmaceuticals fell
5%. Its parent company GlaxoSmithKline Plc has sold
its US penicillin business to Dr Reddy’s Laboratories
as part of a strategy to focus on its new drugs. GSK will
transfer ownership of its penicillin manufacturing site
in Bristol, Tennessee, to Dr Reddy’s, plus the US rights
to the antibiotics Augmentin (amoxicillin clavulanate)
and Amoxil (amoxicillin). GSK will retain the rights
for selling the brands elsewhere. Lead-acid battery
firm, Exide Industries fell 5%. For the quarter ended
September 2010, Exide Industries reported an 18%
year-on-year growth in net sales to Rs1,127 crore and
an adjusted growth of 17% in net profits to Rs166 crore.
Karur Vysya Bank has revised the rates of interest
offered on its domestic deposits in November. Karur
Vysya Bank fell 1%. Hyderabad Industries, a flagship
of the CK Birla group, dipped 14%. Ambuja Cements
fell 12%, while the Haryana-based maker of refrigerant
gases SRF Ltd fell 10%. Public sector lending institution
Canara Bank fell 13%. The Bank, which is in its 105th year
of operations, has opened 100 new branches and 100
new ATMs in November 2010.
Exits: We are replacing Solvay Pharma, LIC Housing
Finance, Container Corporation and Hyderabad
Industries with Orchid Chemicals, Hindustan Unilever
and Crompton Greaves. „
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 Funda Final Entry RS Funda Final Entry

Company Return* Company Return*
Grade Grade Grade Date Grade Grade Grade Date
Ador Fontech A A A 29 Apr-09 311% State Bank of India A C A 29 Apr-09 121%
Bajaj Auto A A A 01 Apr-10 63% Nestlé India A C A 29 Apr-09 121%
SRF A A A 27 May-10 60% Infosys Technologies A C A 29 Apr-09 103%
Shree Renuka Sugars A A A 05 Aug-10 25% CRISIL A C A 29 Apr-09 97%
Asian Paints A A A 27 May-10 20% Aarti Industries A C A 29 Apr-09 81%
Birla Corporation A A A 01 Apr-10 0% GSK Pharmaceuticals A C A 29 Apr-09 81%
Canara Bank A B A 29 Apr-09 246% Cairn India A C A 29 Apr-09 69%
Lupin A B A 29 Apr-09 244% ITC A C A 27 May-10 23%
Exide Industries A B A 29 Apr-09 199% Karur Vysya Bank A C A 10 Jun-10 1%
Bank of Baroda A B A 29 Apr-09 174% Orchid Chemicals A C A 25 Nov-10 —
Jain Irrigation Sys A B A 29 Apr-09 127% Hindustan Unilever A C A 25 Nov-10 —
Union Bank of India A B A 29 Apr-09 108% Adani Enterprises A D A 29 Apr-09 234%
Power Finance A B A 29 Apr-09 106% HDFC Bank A D A 29 Apr-09 111%
GAIL (India) A B A 29 Apr-09 90% Sun Pharmaceutical A D A 29 Apr-09 84%
Shri Lakshmi Cotsyn A B A 29 Apr-10 -1% HDFC A D A 01 Apr-10 25%
Crompton Greaves A B A 25 Nov-10 — Ambuja Cements A D A 19 Aug-10 11%
TCS A C A 29 Apr-09 228% Sterlite Technologies B B B 11 Nov-10 -11%
Axis Bank A C A 29 Apr-09 142% — — — — — —
*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.

43 | 16 December 2010 | MONEYLIFE

Long Term.indd 2 11/26/2010 7:20:18 PM

 “You Can’t Time the 18-31 Jan ‘08
20,900
Market.” Maybe. 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 cannot time the
market. You will get vivid descriptions of the past everyday “The huge over-speculation...
from business channels and the next day from newspapers. should now lead to some
You will get sensible and occasional predictions from only one painful correction...”
6 -19 Jun ‘08
source. You know what’s more valuable “Time for a Break?”
2-16 Aug ‘07
9-22 Nov ‘07
17-3

17,175
15 Feb-1 Mar ‘07

“Time to Go Neutral”
“The market may correct “We don’t have a forecast”
10%-15% before the next “A new d
move up” star
“If the government moves to slay
23 Apr-7 May ‘06 the monster of inflation, stocks
will suffer collateral damage” 28 Mar-10 Apr ‘08

31 Aug-13 Sept ‘07

13,450
“Is the market due
for a fall?” “A short-term bottom may
be very near”
16-29 Mar ‘07
“A Rally Now?”

4-17 August ‘06 “The panic looks

done for now”
9,725

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

6,000
Apr-06 Jun-07 Aug-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 11/26/2010 7:41:13 PM

 13-26 Aug'10
18-31 Dec‘09 23 Apr-6 May'10

4-17 Dec‘09

Time To Sell?
The Coming Short-term Top?
19 Jun-2 July ‘09 Decline
17-31 Jul ‘08
Headed Down?

“Is the market about

“A new downleg may to crack?”
6 Nov-19 Nov ‘09
start soon” 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

“Weakness has resurfaced”

“A Breakdown?”

30 Jan-12 Feb ‘09 13-26 Mar ‘09

“A weak rally now” “Another weak rally”

Aug-08 Sept-09 Nov-10

Moneylife Stock Analysis

KNOW WHAT’S COMING

Sensex.indd 3 11/26/2010 7:42:11 PM

 SMART MONEY R BALAKRISHNAN

Nest Eggs
I
was at my bank for some work. At the selling non-banking products. He said that
next table, a pretty young 20-something ULIPs were the preferred ones, since they
(PYTS) was sitting tight-lipped, anxious fetched the highest commissions.
and eager. She was from the bank. Across Also, clients were easy on ULIPs as
her was a client (an NRI, since he had his opposed to mutual funds. The bank’s staff
passport, etc, with him and had that NRI does not offer any mutual fund product
Don’t depend look) who was trying to fill up a form. My unless the client asks for it. Selling is restricted
only on your ears perked up when I heard familiar words to insurance products. And, naturally, they
bank if you like ‘NAV’, ‘SIP’, ‘Guaranteed’, etc. The don’t ‘sell’ term insurance. ULIPs are the
want to shop PYTS was explaining: way to go. Once in a while, when the
for any financial “Sir, you can choose seven years or associate fund house launches a new fund
product. Do your fifteen years.” offer (NFO), the relationship managers get
homework and Client: “What if I want to discontinue?” targets on those. Apart from that, there is no
choose a good PYTS: “Sir, if you pay for at least five but effort to sell mutual funds.
advisor too make it seven, you will get the highest NAV.” Of course, the one exception is the
Client: “What if I stop after five years?” systematic investment plan (SIP). The
PYTS: “Then you will not get highest relationship manager said that they push this
NAV. Seven years and you get highest NAV.” because most clients are happy to have three
Client: “Less than five years?” to four accounts in SIPs of equity mutual
PYTS: “Then you won’t get highest funds. Here, he said that the preferred push
NAV.” is based on schemes the asset management
The conversation went along these lines companies (AMCs) are making available at a
as the client filled up the form, sorted out particular point in time. Upfront commission
issues regarding adding his newly-wedded is important. The bank is not bothered about
spouse’s name to the account, etc. As the trail commissions. It does not give any credit
client finally affixed his signature, the relief to the employee for trail commission the
for the PYTS was bank may net!
obvious. Fortunately Selling is restricted to To me, the eye-
opener was the refusal
for her, the client was
engrossed in something insurance products. of the bank to give credit
else, so the PYTS And, naturally, they for ‘trail’ commission
merely exchanged a don’t ‘sell’ term to its employee! In the
‘golden’ days for the
conspiratorial grin
with an assistant who insurance. ULIPs are distributor, upfront
was holding the papers. the way to go commissions used to be
One more ULIP 2%-3% (excluding the
(unit-linked insurance plan) sale notched up. NFOs for which it used to be 6%). Trail
I got speaking to my relationship manager commissions for equity schemes used to be
and asked about the PYTS. Found out that 0.5% per annum. Today, upfront commission
she had gone through an ‘intensive’ one- has come down to anything between 0.5%-
week course on insurance. 1.5% and the trail commission is going up
Of course, she had not passed any exam to 1% per annum. To earn the same level of
to sell mutual funds or insurance. My upfront commissions, the sales guy has to
relationship manager mentioned that only sell three to four times the amount of funds.
The author can
be reached at
one person from the branch had cleared The distributor’s thrust on upfront
balakrishnanr@gmail. the exams, but everyone was selling. Each commission leads to employees churning
com relationship manager had a stiff target on the same asset over and over again. This ``

MONEYLIFE | 16 December 2010 | 46

column_Balakrishnan.indd 2 11/24/2010 2:43:07 PM

 SMART MONEY R BALAKRISHNAN
` mangles the client’s returns, but the sales
guy is not bothered with that. For him,
his monthly salary and commission are
the driving force.
As a result, the distributor is not able
to build on his total asset base, since he
will lose the client and the employee at
some time. And, with the client gone,
the trail commission will disappear as
well, since the market regulator Securities
and Exchange Board of India (SEBI) has
mandated that when a client moves away
from a distributor, neither the old nor the
new distributor gets the trail commission.
A number of sales employees I have
talked to say that they understand this,
but the pressure to perform overwhelms
most of them. They not only end up
losing clients, but also end up being
forced to change jobs.
Is there a better alternative to this
state of affairs? There has to be a
realisation among all concerned that a
selling agency will get paid 1% per
annum as all-inclusive revenue from
the producer. They have to charge the
customer separately for advice. Yes, the
client will be a reluctant payer, but he
has to come around. It is possible that
this structure will make all distributors
and independent financial advisors (IFAs)
focus only on clients with a certain
minimum level of financial assets. So, the
small investor will be left to the fly-by-
night operators and suffer.
Or he has to get financially savvy
and do his own thing, which is virtually
impossible, given the fact that he is
unlikely to acquire the skills or have the
time to understand complex products like
ULIPs.
The best way is for the investor to
become more financially aware. Spend
time on understanding the products and
their risks. And, understand that there
is no free lunch. Choose a good advisor
and pay him/her a fair sum for advice.
The times are changing. The sooner you
realise it, the better. Otherwise, you will
be a victim of mis-selling at the hands of
those who you think you can trust—your
bankers. „
column_Balakrishnan.indd 3
AMCs & Their
Strange Ways
L arge distributors (euphemis cally called
‘channel partners’) submit large applica ons
of high networth individuals (HNIs) which do
not comply with the requirements that ordinary
mortals have to comply with. Only their PAN
(Permanent Account Number) card copies are
provided.
No address proof is given. The address
given in the form is a ‘care of’ address of the
distributor! This prac ce has been maintained
by AMCs, since it is these large distributors who
run the game.
Distributors fear that once the details get
into the domain of the registrar & transfer agent
(RTA), the AMC and compe ng distributors
would get hold of the addresses and contact
the clients directly. There is clearly an issue of
uniformity in compliance.
SEBI had directed that un l there is
compliance in full, AMCs cannot pay distribu on
commission on these investments. Substan al
sums are involved and distributors have been
pressuring AMCs to release their commissions.
AMCs cannot afford to displease the
distributors. Some have paid the amounts
from the AMC itself, while the fund schemes
have not yet been debited. AMCs have tried to
use the AMFI (Associa on of Mutual Funds in
India) route to get this commission payments
released, but a couple of mes that AMFI
recommended the release on some pretext or
the other, the regulator came down heavily.
The compliance deadlines are at hand.
For over a year, since the regulator first
no fied AMCs for compliance, there has been
no progress. Now the industry is seeking
an extension for compliance (just means
comple ng the address and contact details).
The regulator is si ng firm on its deadline. In
case of non-compliance with the direc ves,
AMCs are likely to be penalised heavily. Fund
houses have a dilemma on their hands. Once
again, this is an example of the hold that
the large distributors have on fund houses
who simply cannot afford to have their own
distribu on network in place. „
47 | 16 December 2010 | MONEYLIFE
11/24/2010 2:43:22 PM
 Insurance
Trends
New products, regulations, features and
options, interpreted from your perspective
ONLINE INSURANCE
It’s Convenient
But you should consider these
other factors as well
T he convenience of buying
insurance online needs no
elaboration. There are times when
one needs to buy insurance for tax
savings before the end of a financial
year. If you are running out of time
or need savings on premium, you
can go online. But convenience
is not the reason for choosing an
insurance policy. How good an
insurance policy is, depends on
how claims are settled. Before
buying a life cover online, you need
to enquire in detail about the claim-
settlement process of the insurer.
According to Vipin Anand,
chief–corporate communications,
Life Insurance Corporation of India
(LIC), “Younger customers look for
a policy that offers the convenience
of buying through mobile
(telephony). The most important
aspect of life insurance is claim
settlement. LIC has the lowest
percentage of claims repudiation.”
The online insurance space for
term-life policies is witnessing the
entry of several players. Future
Generali has just launched its
‘Smart Life’ plan. The product
aims to tap into the market of
young, technologically-savvy Indian
MONEYLIFE | 16 December 2010 | 48
Insurance.indd 2
customers by providing financial
security and protection at a click.
Other insurers offering online term
life insurance covers are Aegon
Religare, ICICI Prudential, MetLife,
and Kotak Mahindra Old Mutual
Life.
The process is quite simple.
Details about employment, income,
insurance history, lifestyle, family
history and medical history
need to be filled in. In case the
insurer determines that you
need a medical test, your online
purchase of term life insurance
will not be completed. Once the
test is completed and evaluated by
underwriting, the policy is issued.
ICICI Prudential’s iProtect life
insurance scheme asks a person
to go for a medical test if he/she
already has a life insurance cover.
This is because the risk perception
is higher when you are buying a
second policy. For first-timers,
no such test is required. But the
company decides whether a medical
test is required, on a case-to-case
basis.
Aegon Religare’s iTerm Plan has
policies for three situations. One, if
the total sum assured (even if it is
through different policies) is Rs50
lakh and above. Two, if the age of
the insured is above 40. And three,
if the applicant has an existing
medical problem.
Future Generali’s Smart Life
plan offers sums assured ranging
from Rs10 lakh to Rs50 lakh. For
policyholders buying large sum
assured levels, a large discount/
rebate is available for sum assured
between Rs25 lakh and Rs50 lakh.
The brochure does not clarify
whether medical examination is
required.
The regulator allows insurance
companies to charge differential
premium for online and offline life
products. If you have purchased
the product through a branch or
agent, they will take up the task of
helping your dependents for filing
claims.
In case of an online policy,
dependents may have to approach
the centralised claims cell
directly. This may be a cause of
inconvenience for some, due to lack
of personal connect. That apart,
most online term policies are not
comprehensive as they either do not
offer any rider options or the ones
offered fall short compared to those
available with offline term policies.
The thumb rule is that
life insurance cover should be
minimum 10 times your annual
salary. It will also depend on your
expenses, number of dependents,
etc. Online purchase of insurance
will make you forego any advice a
financial planner can offer you. In
case you are dissatisfied with your
policy, you can surrender it within
the 15-day ‘free-look’ period.
11/26/2010 7:32:30 PM
 INSURANCE TRENDS
COͳPAY
Burden-sharing
Share your costs with the insurer
‘C o-pay’ simply means that the
policyholder pays a certain
percentage of medical costs while
the rest is paid by the insurer.
The percentage can vary between
10 and 30 in most cases. If your
co-pay is 20% and the claim
amount is Rs1 lakh, you will shell
out Rs20,000—while the insurer is
liable to pay the balance. Co-pay
has been prevalent in the US for a
long time and is also included in
group insurance provided by Indian
insurers.
Considering the potential
benefits of cost-cutting through
co-pay, it is not surprising that the
concept has found its way into
individual mediclaim policies as
well. It forces policyholders to pay
a part of the bill and, hence, makes
them more careful about medical
bills. The policyholder will also
question a doctor/hospital about
any tests or treatment because he is
liable for a part of the costs.
The co-pay clause is applied in
different ways by insurers. Some
may apply it when a policyholder
gets treatment in a non-PPN
(preferred provider network)
ACCIDENT POLICY
Mass Protection
Affordable protection for
everyone
T his is an excellent low-
premium product from
Oriental Insurance. ‘Nagrik
Suraksha Policy’ is a combination
Insurance.indd 3
hospital. In some cases, co-pay
may be applied only to certain
ailments specified in the policy or
medical expenses related to pre-
existing conditions. Others may
insist on co-pay if the policyholder
undergoes treatment in certain
metropolitan cities.
The main advantage of co-pay
to the policyholder is a lower
premium. Higher co-pay may lower
the premium. Unfortunately, the
co-pay clause is more prevalent in
senior citizens’ mediclaim where
premiums are not low. It means
that at the age when you need
medical facilities the most is when
you will also have to bear the
burden of hospital bills partially.
Star Health’s Senior Citizen Red
Carpet policy has 50% co-pay for
pre-existing diseases/conditions and
30% co-pay for all other claims.
of personal accident cover and
medical insurance.
Its unique feature is that the
policy provides personal accident
insurance and hospitalisation
expenses on account of an
accident. Of the total insurance
cover, 80% is for personal
accidents while the remaining
20% is for hospitalisation due to
an accident. The minimum sum
The other trend that will
surface sooner or later in India
is ‘deductibles’. It is popular in
the US. The policy starts paying
after a prefixed deductible amount
is paid by the policyholder for
medical services. For example, a
deductible of Rs5,000 would mean
that a policyholder pays the initial
Rs5,000 in a year before he starts
claiming from the policy. If the
deductible amount is not reached in
a year, the policy will pay nothing.
This is, today, prevalent in overseas
mediclaim policies sold by Indian
insurance companies to people
travelling abroad. An equivalent
concept of deductible has arrived
in Indian mediclaim through ‘Top-
up’ and ‘Super Top-up’ policies.
For these policies, payments kick in
after a threshold amount has been
spent. „
assured is Rs1 lakh while the
maximum is Rs5 lakh.
The policy period ranges from
one year to four years. It is a good
option for travellers outside India
because the cover is also provided
for travel abroad, but the claim
settlement is done only in Indian
currency. The premium per
Rs1 lakh coverage is just Rs90
every year. „
49 | 16 December 2010 | MONEYLIFE
11/26/2010 7:32:15 PM

SPENDING TRAVEL
Located in North Africa, Morocco is a mystical country which attracts
over 10 million tourists every year. Jaideep Mukerji explores the
fascinating culture and history of this beautiful country
H E R E ’ S LO O K I N G AT
MOROCCO
M
orocco is just 15% the size of India,
but the number of international
visitors to Morocco is over twice
the number of international visitors
coming to our country every year. So
what is it about Morocco that attracts over 10 million
tourists every year?
Apart from its proximity to Europe and year-round
abundance of sunshine and largely pleasant weather,
it is Morocco’s incredible variety of landscapes—from
high snow-covered mountains to miles of unspoilt
beaches, different ethnic groups and ancient history—
that draws travellers looking for an unusual destination
that enriches, entertains and informs.
Although there are flight connections linking
India via the Gulf or the Middle East to Casablanca,
Morocco’s commercial capital, my late decision to spend
a week in the country after a travel conference in Italy
saw me flying Britain’s low-cost carrier EasyJet from
Milan to Casablanca for less than a 100-euro return
trip. Morocco’s largest and busiest airport, some 30km
south of Casablanca city, has recently been renovated
MONEYLIFE | 16 December 2010 | 50
Travel.indd 2
A view of the Moroccan Kasbah
extensively and is now of international standards.
Customs and immigration clearance was efficient and
within less than an hour of landing, I was in an airport
taxi on my way to a city hotel. As we drove further
into Casablanca’s city centre, the French influence in
architecture, town-planning and language was obvious;
although the street names are Moroccan, directions and
signs are in French with the older buildings mostly of
colonial French style, painted in white.
On a tight schedule, I had arranged for a car with a
Moroccan driver-guide to accompany me for the week.
Khalid, a friendly middle-aged gentleman, phoned me
that evening to introduce himself and we decided to meet
early the following morning and start on our journey.
Apart from the heart of Casablanca city which
merits a drive past, I found the King Hassan II Mosque
located beside the sea to be an impressive building,
definitely worth a visit. Non-Muslim visitors may enter
the mosque on guided tours which are conducted several
times a day in English. The most distinctive character of
the mosque is its spectacular location—on a platform
jutting out into the Atlantic Ocean. ``
11/26/2010 6:43:50 PM
 Moroccan spices Village children Middle Atlas village Moroccan ‘tagine’

` Uniquely, part of the Mosque’s floor is made of
glass so worshippers can kneel directly over the sea. An
automated sliding roof opens on special occasions to
the heavens so the faithful of Casablanca can, indeed,
contemplate God’s sky and ocean.
It was a drive of about 100km to Rabat, Morocco’s
third-oldest Imperial City and modern capital. Without
much time on hand, Khalid drove me past the Palais
Royal, home of the royal family in Morocco, before
taking me to the Museum of Antiquities where some
of the richest archaeological treasures in Morocco are
displayed.
A late afternoon drive eastwards for 120km through
flat countryside brought us to Meknes, Morocco’s
youngest Imperial City and a World Heritage Site.
For dinner that evening, I wanted to explore what
Moroccan cuisine had to offer. I had heard of the
Moroccan ‘tagine’—named after the special clay pot
in which it is cooked slowly on charcoal—as being the
national dish and wanted a first-hand experience. The
tagine combines ginger, saffron, olive oil with dates,
prunes, apples and vegetables, with or without meat.
At a traditional restaurant filled with locals, Khalid and
I sat on floor cushions around a small centre table as
steaming pots of tagine accompanied with loaves of local
flat bread were served.
Meknes was expanded and a number of impressive
monuments built by the 17th century ruler Moulay
Ismail who put a massive army of slaves, Moroccan
and Christian sailors captured at sea, to work. Leaving
Meknes the next morning, we drove through the
countryside dotted with whitewashed tombs of local
Muslim holy men, on our way to the impressive Roman
site of Volubilis.
Situated on the ledge of a long plateau, the dramatic
site was once one of the Roman Empire’s most remote
Western outposts and an administrative city for this
part of Roman Africa. The grain produced in this fertile
region was exported to Rome. Unlike many other Roman
cities, Volubilis was not abandoned after the Romans
lost their foothold in this part of Africa in the 3rd century.
Even the Latin language survived for centuries and was ``

ESSENTIAL
FACTS

Why Go There: Getting There: Where To Stay: Visas:

For a relatively small Casablanca, Morocco’s Although you may be able to Tourist visas are easily
country, Morocco has main gateway city, is book Moroccan hotels online, it is available from the
an amazing variety connected by KLM Royal strongly recommended that you Moroccan Embassy in
of attractions and Dutch Airlines, Alitalia, go through a reputed Moroccan New Delhi.
landscapes; its people Lufthansa and Air France. tour operator who will be able
are friendly; the food Emirates, Etihad, EgyptAir to provide you with guides,
is superb. What more and Qatar Airways offer transportation and hotel bookings
can one ask for, on a connections from India in a country where language can
trip to a less known via the Gulf and the be a problem in the smaller towns
destination? Middle East. located far from the main cities.

Foot of the Atlas Mountains

51 | 16 December 2010 | MONEYLIFE

Travel.indd 3 11/24/2010 7:34:13 PM

 SPENDING TRAVEL
` not replaced, until the Arabs conquered North Africa in
the late 7th century.
For an hour that morning, I wandered through the
silent arches, paved streets, mosaic floors and columns
of Volubilis thinking about the sounds of workers,
horse-drawn carriages, busy citizens going about their
daily chores, bustling marketplaces and the everyday
clatter that would have brought this place alive in its
beautiful setting on a plateau surrounded by plains with
hills in the far distance.
The honking of Khalid’s car brought me back to the
present and we set off for the short 40-km drive past
olive groves to Fes (or Fez), another World Heritage Site,
a former capital and another one of the country’s four
imperial cities, the others being Rabat, Marrakech and
Meknes. Fes is also Morocco’s second largest city after
Casablanca, with a population of just over a million.
The city is made up of three very distinct parts, Fes
el Bali (the old, walled city), Fes Jdid (new Fes) and Ville
Nouvelle (the French-built new section of Fes). The
historic city straddles the traditional trade route from
the Sahara to the Mediterranean. For centuries, the
political centres in Morocco were Fes and Marrakech,
two cities linked by their immense power and rivalry.
Fes is still seen as the spiritual and cultural capital of
Morocco with one of the largest historic medinas (old
walled towns) full of monuments reflecting the different
periods of Morocco’s imperial past.
Entering the old city through the impressive
‘Blue Gate’, Khalid guided me through the
labyrinth of alleys and lanes lined with
shops, mosques, homes and schools where
everything—from food to clothing—can be
purchased. Fes is known for its traditional
leather industry and I was taken to a nearby
rooftop to see the rows of vats, several
centuries old, where leather is tanned using
ancient techniques.
A walk through Fes’ medina provides
an amazing view of the life of an average
Moroccan person that has changed little,
over centuries.
In the heart of the medina is the
Kairaouine Mosque, the second-largest
in Morocco and the country’s spiritual
centre. Built in the year 857 by a wealthy
woman from Tunisia, its minaret, dating
back to 956, is Morocco’s oldest. Non-
Muslims are not permitted to enter the
Kairaouine Mosque but nobody seems to
object to tourists peering in through the
MONEYLIFE | 16 December 2010 | 52
Travel.indd 4
gates and taking photographs of its impressive interior.
All too soon, it was time for Khalid and me to
undertake the long drive of six hours to Marrakech—the
last on my list of Morocco’s Imperial Cities. Heading
southwest, we were soon at the foothills of the Middle
Atlas driving through the town of Ifrane located at
about 5,500ft, developed as a hill resort by the French
colonial rulers exactly as Shimla and Darjeeling were in
India. With cedar and oak forests covering the nearby
slopes and leafy, tree-lined avenues sheltering large
homes, it is no wonder that Ifrane attracted a large
number of European settlers earlier in the 20th century.
With the High Atlas Mountains in parallel, we
drove along the fertile northern edges of the mountain
range where most of Morocco’s agriculture is based.
Marrakech’s beauty lies in the atmosphere and the
spectacular location with the snow-covered peaks of the
Atlas Mountains as a spectacular backdrop.
The highlight of Marrakech is a visit to the famous
Djemaa el Fna in the centre of the city. The Djemaa el
Fna is like nowhere else in North Africa and is a must-
see when visiting Morocco. In the busy square, you can
see musicians, snake-charmers, acrobats, storytellers,
henna artists, witch doctors, quack dentists, clowns,
monkeys and every type of tradesperson and entertainer
imaginable.
The enticing smells of Djemaa’s food stalls, piled
high with platters of local cuisine—including a dozen or
more varieties of kebabs—are hard to resist.
The following morning, Khalid and I walked to
the tower of the Koutoubia Mosque, a Marrakech
landmark nearly 230ft high and built in classic
Moroccan design. The Ethnographic Museum
located in an excellent old palatial home in the
medina has artefacts from all over Morocco and
is also very interesting. The decorated Saadian
Tombs, where I saw the graves of the rulers that
made this city so important, is well worth a visit.
I bid farewell to Khalid and took the
evening air-conditioned fast train from
Marrakech back to Casablanca before taking
a taxi to the airport for my return flight.
— With Veeresh Malik „
King Hassan II Mosque
11/24/2010 7:34:55 PM
 free
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 PERSONAL BUSINESS AUTO
Clearance Sale
The surge in auto sales in October was simply the outcome of heavy discounts
from dealers who had been holding large inventories, says Veeresh Malik
D
uring the last week of October and early
November, there was a sudden surge in
automobile sales across India. Popular
logic puts it down to festival demand.
Dig deeper and the truth is revealed.
Many dealers were holding 60-90 days of inventory
of some slow-moving models and hefty discounts were
the norm. Barring one
manufacturer, Tata
Motors, which
announced
a price
Tata Nano
increase for the Nano and, therefore, saw sales tumble,
the rest were on clearance sales.
This clearance sale, incidentally, may not carry
on through the end of this year, since vehicles carried
forward from the manufacturing year 2010 will require
a separate strategy. If there is a domestic slowdown,
export orders for fuel-efficient vehicles to developed
countries may come in handy, since vehicles shipped
abroad are sold in the destination country by registration
date and not manufacturing date.
Either way, in rupee terms, it looks as though the
cost of owning and maintaining automobiles is going
to rocket upwards next year. The cost of oil is another
factor, not just basic crude oil prices, but the incredible
rise in the cost of transporting and refining it to cleaner
oils.
MADE IN INDIA
Keep a close eye on the components industry in
India. There have been record turnovers, for sure,
but what’s the reality? In some cases, especially
where new technology is concerned, it seems to have
MONEYLIFE | 16 December 2010 | 54
Auto.indd 2
become a case of importing knocked-down components
and sub-assembly kits from China or other countries,
go with the screwdriver technology part of setting
things up, repackage them as ‘Made in India’ and sell to
manufacturers.
A chance visit to an inland container depot revealed
that the same games that were played in the heyday of
the great Indian brand television industry—remember
Weston, Televista, Beltek or Texla—are now set to be
played out in the automobile industry as well.
How does one spot all this by balance-sheet analysis?
One doesn’t. But customs import data is freely available
and it’s about time that financial analysts started wading
through it. A lot can be found there, especially in this
day and age of computerised data, with all customs
houses linked up too.
MAKE THEM PAY
Environment minister Jairam Ramesh recently took on
sports utility vehicles (SUVs) and other large private
vehicles which benefit from the diesel subsidy and
pollute more than they should. Yes, there is a case for
levying higher taxation and penalties on these vehicles.
These are two different, though related, issues and
any solution, therefore, must take both aspects into
account, as well as a few more aspects like the higher
environmental cost at the time of manufacture as well as
scrapping since so much raw material goes into making
some of these monsters.
In addition, they tend to occupy a lot more space on
our already congested roads, and sociological impacts,
like secondary smoke, are negatives too.
Recent advancements in diesel-engine technologies
have changed the
rules of the
game from ``
Toyota Fortuner
11/24/2010 2:38:56 PM
 PERSONAL BUSINESS AUTO
` what they were, say, a decade or so ago. However, if
manufacturers want us to believe that putting two-three
tonnes worth of metal on the road with thick rubber is
not really causing environmental harm, especially when
it is used to transport one or two human beings, then
they have a problem—because they insult our common
sense.
On that ground alone, these huge diesel or petrol
cars, whether SUVs or otherwise, need to be taxed and
penalised so that the prospective owners realise that it’s
not just simply economically stupid, but also socially
incorrect to own and operate these symbols of waste.
More so, because these gas-guzzlers are rapidly
becoming unpopular in their own countries of origin,
and cleaner big vehicles seem to be the order of the day.
Each one of the manufacturers named by the minister
has new-generation SUVs that run on alternate fuels
and technologies that are available. In some cases, they
already sell these in other Asian countries. So, if most
of the SUVs in India are going to be driven only in
the cities, then there is a good case to tax those which
operate on liquid fuels in such a way that selling and
using the cleaner options, running on batteries or fuel
cells, becomes a more attractive choice.
CAN’T SELL OLD WHEELS
Delhi has been blessed with two new Metro lines
in the past few weeks—one to Gurgaon and the
other to Badarpur (on the Faridabad border). In
addition, there has been a deluge of low-floor buses,
both air-conditioned as well as standard. The Bus
Rapid Transport System (BRTS) has also attained
public acceptance. Gurgaon and Badarpur are supposed
to have the highest automobile sales in the country.
More than one automobile manufacturer, however, has
observed how these two areas are falling back in sales
growth. In addition, resale values of used vehicles from
these locations have dropped to a point where used-car
dealers in the area are reportedly asking sellers to go
elsewhere. Or accept rock-bottom distress sale prices.
So the cycle starts—can’t sell old wheels, won’t buy new
replacement wheels, and use Metro oftener.
Meanwhile, Aston Martin, bespoke manufacturer
of super-cars to James Bond, has won the contract for
designing and manufacturing city buses in London.
Likewise, Tata Motors, which now owns and operates
very profitably the Jaguar marquee (more super-cars), is
going full steam ahead with all sorts of well-priced state-
of-the-art buses in India. The low-floor ones in Delhi,
for example, are available at a fraction of the cost of
similar Volvo buses used elsewhere in India.
There is a lesson here—it doesn’t matter what kind
Auto.indd 3
of brand value and association a vehicle has. Whether
it is a super-car, ordinary car, two-wheeler, bus or
truck. It just has to deliver what a particular market
needs at a particular time. And predicting that is what
differentiates the winners from the losers.
DECENT 4WD, INDECENT PRICE
At the launch of the Skoda ‘Yeti’ in Delhi recently, we
saw most motoring media reacting incredulously at the
prices. The Rs16 lakh-Rs17 lakh ex-showroom price
for something that is just about slightly bigger than
a Maruti Gypsy, and much smaller than the slightly
costlier Toyota Fortuner, is something which even
the rainmakers at Volkswagen (VW) were unable to
confidently push forward at the media function.
The Skoda Yeti is a perfectly decent four-wheel drive
(4WD), which has a spec-sheet close to what a costlier
VW or Audi 4WD SUV of similar size would offer, and
it is a joy to drive
too. But it does
not satisfy the
Skoda Yeti
essential criterion of SUVs in India—that of being big—
and so it may end up as yet another on the long list of
also-rans.
In addition, the cost of ‘luxury’ itself is notching
down fast, as we said a few columns ago, in context
with the BMW 3-series Executive Edition. The new EMI
benchmark is Rs20,000, now being matched by the
Audi A-4 and Mercedes Benz C-Class, though the down
payment and lock-in does make it much costlier.
The much-awaited Skoda Yeti is a great car, but
simply too expensive when viewed against its own
stable-mates as well as against the rapidly-changing
Indian automobile market. The brand, sadly, does not
matter here anymore. „
Veeresh Malik started life as a seafarer, and
in the course of a work life, founded and
sold Pacific Shipping and Infonox Software,
to return to his first love—writing.
55 | 16 December 2010 | MONEYLIFE
11/24/2010 2:39:21 PM
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BEHAVIOURAL FINANCE
Mood Investing?
What has your movie-watching
got to do with your investment
results?
H ow many times have you
bought or sold a particular
stock at a point of time, only to
realise later that you made the
wrong call? What prompted
you to take that course of
action at that time? More often
than not, it is the mind that
plays tricks with your decision-
making abilities.
Investing has as much to do
with an individual’s state of mind
as anything else. Though we won’t
admit it, our emotions and moodss
do sway our decisions. They tend
to affect our decision to buy or
sell, even though the mood may
be the result of matters unrelated
to investment. Modern finance
is built around the assumption
that investors are rational in their
decision-making and unbiased
about their outlook for the future.
However, this is far from the
truth. We are rational beings, but
we are emotional as well. Our
feelings, even subconscious ones,
play on our investing acumen. In
fact, an entire field of study has
emerged dedicated to understanding
MONEYLIFE | 16 December 2010 | 58
Earning curve.indd 2
Learn the
basics of
savings and
investing
Earning
Curve
the role of human psychology in
influencing investment decisions—
behavioural finance. Several studies
have established this.
One such recent study
suggests that what we do over
the weekend may play a crucial
role in determining our investing
impulse. The finding, according
to Gabriele Lepori, a researcher at
Copenhagen’s Business School, is
’t
that when a blockbuster comedy
movie is released, markets often
stumble on the next trading day!
Mr Lepori found that, in general,
when people went to the movies—
any movie—they tended to take
more risk. But when the theatres
filled for blockbuster comedies,
the result was quite the opposite.
He charted several portfolios and
found that value-weighted returns
fell between 0.07% and 0.34%.
Risk-taking decreased. The author
argues that the results conflict
with the classical assumption
that the markets are efficient and
individuals are rational.
“An increase in comedy movie
admissions during the weekend
generates a corresponding wave
of mood enhancement across the
population. In turn, the latter
factor may influence the marginal
investor’s risk-taking behaviour
and the investment decisions she
assesses over the weekend,” the
study concludes.
Whether you are an ardent
follower of movies or not, it has
been found that people in high
spirits tend to be more risk-averse.
The study opines, “Changes in
comedy movie attendance generate
sizable mood fluctuations across
the population and, more in detail,
the data lend support to the theory
that people in good moods tend
to behave more cautiously in risky
situations, especially when potential
losses are real and salient, as they
lo
try to protect their current good
tr
emotional state.”
Another experiment by
Eugene M Caruso and Eldar
Shafir, titled ‘Now That I Think
About
A It, I’m In the Mood for
Laughs: Decisions Focused on
L
Mood,’ reports the result of
M
four studies which examined the
fo
impact thinking about mood made
im
on people’s choices. In Study 1,
o
participants who were asked to
suppose they were in good, bad,
or neutral moods were more likely
to choose a silly comedy movie
over an otherwise more attractive
drama, compared to others who
had not thought about mood.
Similar patterns were observed
when people thought about
how they felt before making a
hypothetical choice (Study 2) or an
actual choice (Study 3). In Study 4,
participants who pursued mood-
relevant information chose to see
a comedy play more often than ``
11/26/2010 7:30:17 PM
 EARNING CURVE
` those who had not focused on such
information.
Thinking about their own mood
appears to increase decision-makers’
concern with the pleasurable
consequences of decisions, thereby
promoting mood regulatory
activities and altering preference,
possibly in favour of less optimal
outcomes.
RETIREMENT
Having Enough
How to avoid running out of
your life savings
Y ou would have worked on a
financial plan to work your
way towards retirement and provide
for you and your family in the
golden years of your life. You are in
the process of building a substantial
nest egg that would help you
fulfil some of your long-cherished
dreams—a trip to an exotic island
or a cosy bungalow far removed
from the hustle-bustle of city life.
INVESTING
Anchored to Price
Should you redeem mutual
fund units now?
T he mutual fund industry is
witnessing a bit of turmoil
right now; asset management
companies (AMCs) are trying
to cope with the myriad
regulatory changes since last year.
Compounding the problems of the
AMCs is the relentless outflow of
funds from the equity schemes.
This steady drain of funds is partly
due to profit-booking by unit-
holders as the market has surged
to the near highs of late 2007 and
Earning curve.indd 3
But alas, such plans and dreams
often take a knock or two along
the way, sometimes brutal. A long-
term illness or spiralling debt can
deal a fatal blow to your financial
plan. You may even be stripped of
your entire life savings, finding little
to survive on for the rest of your
life. You may end up becoming a
financial burden on your loved ones
or compromising heavily on your
standard of living. To avoid such
a situation, one needs to put some
simple fail-safes in place.
Low Borrowings: Some people
have the habit of taking loans for
simple purchases. They reason that
if banks are willing to lend, why not
take advantage? Credit cards are
the biggest culprits, accounting for
the most purchases. But sky-high
interest rates on credit cards and
too much leverage can leave your
finances in a mess.
Emergency Fund: A good way to
protect yourself from the occasional
crisis situations of life is to create
an emergency fund, one that will
provide for contingencies without
early 2008 when a lot of people
invested in stocks. Investors who
had entered the markets through
this route in late 2007 found their
portfolio value erode dramatically
after January 2008. Now that
the valuations have regained
the earlier levels, investors have
pounced on the opportunity to
book whatever profits they have
affecting your overall financial
health. Allocate a small sum of
money regularly towards this fund.
Insurance Cover: Words cannot
perfectly emphasise the importance
of having an insurance safety net. Be
it life or health, insurance protection
is a must. Do not cheat yourself by
taking a low-premium-based plan—
take enough cover that makes sense
for you and your family.
Goal-oriented Investments: You may
be looking at providing for some
necessary expenses—like children’s
education, marriage, vacation, etc,
by way of investments. Ensure
that allocations towards these are
separate from those towards your
longer-term goal of building your
retirement kitty.
Save Money, Little by Little: Last,
but not the least, save as much
as you can, until whenever you
can. Ideally, start early and let
your money work its magic over
time. Invest in growth-oriented
instruments like equities to avoid
inflation ravaging your lifelong
savings. „
gained. It appears that the trauma
of 2008 has a lot to do with the
redemption spree. Investors are
fearful of another market crash
that will send their investments
tumbling again. But the question
you should ask is: Did you enter
the market hoping to exit after
three years? If not, you may be
falling in a behavioural trap that
is called anchoring. This refers to
a situation where investors stay
anchored to a rupee value, in this
case, the purchase price. If you
have not invested to create wealth
over just three years, don’t have
the time to learn market-timing
and don’t need the money, ask
yourself: Why do you need to exit
now? „
59 | 16 December 2010 | MONEYLIFE
11/26/2010 7:30:55 PM
 BOOKS
Set Rules
The cookie- cutter approach to financial
planning
B
urton Malkiel is famous for his book A
Random Walk Down Wall Street which brought
to the average investor the distilled wisdom
from academic research on
investing—efficient markets
and benefits of portfolio
diversification. While that book
keeps its reputation intact as
one of the best-known books
on markets and investing, it
was more focused on concepts.
It did not offer the readers a set
of do’s and don’ts.
Malkiel argues that investing
THE RANDOM WALK
isn’t complicated. He simplifies
GUIDE TO INVESTING
the approach by dealing with
BURTON MALKIEL
just four key categories of
Viva Books
assets—cash (savings accounts),
Pages 202; Rs250
stocks, bonds and real estate.
Interpreting Patterns
The stock market is not random; and you can profit from the patterns
I n Far from Random, Richard Lehman, an instructor
in finance, tries to counter the belief that stock market
movement is unpredictable. He says, the market moves
in well-defined and, often, predictable ways. Market
trends exist and can be anticipated before they are
formed. One needs to understand investor behaviour
and trend analysis to forecast market movement.
Technical analysis is one of the tools to interpret the
impact of human behaviour on stock prices. Fundamental
analysis of companies, which involves studying their
financial performance, is important; but it cannot
explain sudden changes in stock price movements.
One source of information for investors is what their
brokers tell them. Lehman criticises brokerage firms by
saying that they make money through transaction fees,
sales commissions, mark-ups, or investment management
fees. He compares them with ‘airplanes’ that are built to
fly only in one direction. They only have a ‘forward
gear’ as they only have a method of collecting stocks
without saying whether it’s a good time to buy the stock
MONEYLIFE | 16 December 2010 | 60
Book Review.indd 2
Cash and bonds are relatively safe ways to hold
money but they don’t offer returns that beat inflation.
Stocks and real estate offer potentially high returns, but
can lose value sharply. They are risky. Therefore, says
Malkiel, it is important to understand the relationship
between risk and reward. Stocks are highly volatile and
risky over the short term but not over the long term.
To make your money grow over time, Malkiel advises
you to start saving now. The earlier you start saving, the
longer you’ll have the power of compounding work for
you. He advises you to set up an automatic investment
plan, develop a clear budget, and evaluate your lifestyle
to eliminate unnecessary expenses. Along the way, keep
some cash reserves (i.e., an emergency fund) on hand
to deal with unexpected trouble, but have insurance in
case some disaster occurs. For insurance, stick to term
policies because insurance isn’t a great investment; if you
invest your money well, you may not need life insurance
at all.
Malkiel’s next piece of advice is: match your asset
mix to your investment personality. He wants you to
ask yourself how much risk you feel comfortable with.
For many people, a fixed deposit is the best avenue for
all their investing.
On the other hand, stocks and equity funds, generally, ``
or not. Many stocks are ‘buys’, because many of them
are companies with which brokerage firms have an
investment banking relationship.
On the random nature of stock prices, the author
refers to the classic on finance,
A Random Walk Down Walll
Street, by Burton Malkiel, an
American economist. Malkiel
describes the random nature off
individual stocks but makes no
distinction between individual
stocks and the market.
‘Random walk’ hypothesis
is an orthodoxy among
financial economists but has
been discredited repeatedly. FAR FROM RANDOM
Sometime in the 1990s, the RICHARD LEHMAN
behavioural finance approach Bloomberg Press
started evolving. It treats the Pages 235; $39.90
market as generally efficient ``
11/24/2010 2:40:36 PM
 BOOKS

` offer better returns but they can give you nightmares as well. A 60%
loss, as happened in 2008, will make everybody’s stomach churn. If
Seek Peek
you can’t stand this, stick to cash and bonds. Or, you can be half in
stocks and half in bonds—or any other proportion you are comfortable Want to know all about
with. In any case, it is essential to diversify to spread the risk. Google? Your search ends here
Malkiel follows this with some simple rules to take care of your
debt. He correctly advises: pay off all high-interest credit-card debt
before you invest. Paying off a high-interest debt is like making an
investment that returns 19% a year, because if you don’t pay it off,
K en Auletta (Googled: The End of
the World As We Know It, Virgin
Books; £12.99; Pages 384) manages to
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Also, keep your investment costs low, for which you should choose world’s most influential companies—
low-cost index funds. As someone who believes that markets are an organisation that has redefined the
efficient, it is not surprising that Malkiel would suggest that you should meaning of ‘disruptive technology’—the
not even try to routinely beat the market, because you can’t. So many technology giant Google. Founders Larry
smart people are playing the game that even the smartest lose regularly. Page and Sergey Brin make a fascinating
Malkiel offers some sample asset-allocation models, based on study and Auletta delivers a compelling,
conventional ideas such as having some investment in stocks, some in exhaustive and, often, racy account of the
cash, and some in bonds. As you age, the proportion of your money company that has become the face of the
kept in stocks goes down. new media industry.
The final chapter looks at some behavioural traps that investors The author has managed to peer
fall into, such as following the herd and investing in whatever the hot behind the veneer of Page and Brin, both
new thing comes up, or selling in panic. The Random Walk Guide to notoriously secretive founders. Unlike
Investing is a guide for beginners. other writers—numerous books come to
But there is nothing new in it. In fact, ideas such as self-assessment mind—who have just about managed to
of risk are not practical. — Debashis Basu „ skim the surface of the working of this
technology giant, Auletta’s book could
probably be the last word on Google—at
` and for the most part random but with identifiable imperfections that least on the developments so far.
are caused by the imperfect behaviour of the participants. While the Though one can detect that the writer
movement of individual stocks supports random hypothesis in the holds a not-too-secretive admiration
short term, the market exhibits decidedly non-random characteristics for the company that changed the very
in both the short and long term. definition of Internet search, he does
It is possible that the movement of individual stocks is primarily not shy away from exposing the many
random, while predictable patterns exist at the market level. This led potential pitfalls that lie ahead, if Google
some to conclude that the stock market is ‘far from random’. Lehman, has to continue on its path of explosive
thus, differs significantly from Malkiel and the random walk theory. growth. Page and Brin have admitted
He says that efficient market hypothesis and random walk theory are Auletta to some closed-door meetings, so
generalised theories that describe the stock market. But, when it comes the reader at least gets to dip a finger into
to stocks, it is unlikely that random walk hypothesis provides an exact Google’s secret success ‘sauce’.
description of the behaviour of the stock prices. This book does not shy away from
Lehman says that the stock market is not random. It is the function asking some hard-hitting questions—has
of aggregate psychology and behaviour of the participants. The market Google become complacent because of its
can be understood through an analysis of price charts, using techniques success; is it resting on the many laurels
such as trend channel analysis (TCA). The market always moves back that it has achieved; are Page and Brin
and forth in a channel, even during extreme market volatility. TCA is getting used to sipping some Kool-Aid?
a powerful technique for reading market behaviour and forecasting As an aside, the book’s title looks
not just the direction but also potential lows, highs and turning points. like Auletta is laying the ground for a
To make the book comprehensive for a reader, who may lack full-length movie, in the near future.
technical skills, Lehman begins with the very basics of technical The ingredients are all there in this
analysis (such as bar graphs) and then moves on to the concept of book for a film script. Keep an eye
TCA. The book is an interesting read that puts technical analysis in the on YouTube for more on this front.
overall context of market theory. — Dolly Mirchandani „ — Devarajan Mahadevan „

61 | 16 December 2010 | MONEYLIFE

Book Review.indd 3 11/24/2010 2:40:24 PM

 ML FOUNDATION EVENTS
Vimal Punmiya from Vimal Punmiya and Co
O
n 16th November, Moneylife Foundation
conducted a seminar in Mumbai on one of
the most contentious subjects in the city—
co-operative housing society rules.
Vimal Punmiya, a chartered accountant with more
than 34 years of experience and an expert on property
matters, shared his extensive knowledge on four main
topics with regard to co-operative housing societies—
bye-laws, stamp duty charges and registration rules,
income-tax laws and accounting provisions, along with
norms related to wills, nominations and transmission.
For a matter as important as housing, the laws in
India are in complete disarray and Maharashtra is no
exception. Laws—especially those governing co-operative
housing societies—are extremely arbitrary, constantly-
changing and subject to innumerable interpretations.
Mr Punmiya helped to clear the fog. But even the
marathon 120-minute session was not enough, and the
audience kept asking the obliging expert for much more.
It is really a matter of concern that the country’s
mass media has almost never touched upon the topics
that Moneylife Foundation along with Mr Punmiya,
managed to highlight.
Explaining the basic concept of a co-operative
housing society, Mr Punmiya said, “Under a co-operative
housing society, you are much superior to tenants (as far
as your title is concerned) but inferior to the landlord.
The society is the owner of the property and members
only have a certain share of the society.” This means that
despite having a clear title to property, residents of co-
operative societies are often left in limbo whenever any
dispute crops up.
On the current scenario with regard to co-
operative societies in the state, Mr Punmiya said, “In
Maharashtra, there are 60,000 housing societies, out
of which 35,000 are in Mumbai. And, of these 35,000
societies, for about 28,000 societies, builders have not
(properly) conveyed the property to the societies.” He
also pointed out how society laws have been frequently
MONEYLIFE | 16 December 2010 | 62
Event.indd 2
Home Truths
An expert on property matters,
Vimal Punmiya shared his
insights on almost every matter
pertaining to co- operative
housing societies, and more
An attentive audience takes in Mr Punmiya’s insights
amended in the past, and ran the audience through the
difference between the old bye-laws and new bye-laws.
“Under old bye-laws, housing societies, which were
formed up to 1984, had rights to make their own laws.
However, after 1984, new bye-laws were introduced.
Societies that don’t want to frame their own bye-laws
can adopt the new bye-laws. Societies formed before
1984 can also follow the new bye-laws. In 2001, the
new bye-laws were introduced,” Mr Punmiya said. He
also explained the rules under the new bye-laws. “Joint
ownership is recognised in the new bye-laws,” he said.
Mr Punmiya also fleshed out issues relating to stamp
duty and registration and explained the importance of
conveyance of property.
He talked about stamp duty on lease agreements
and leave & licence agreements. He also explained the
process of property registration and guided the audience
on wills, nominations and transmission of property in
co-operative housing societies.
Mr Punmiya’s exhaustive session was followed by an
extensive and interactive question & answer session—
where numerous questions were asked, and in-depth
answers were given by the speaker in his inimitable style.
Mr Punmiya has written a number of books on
subjects like transfer of flats, stamp duty, registration,
and capital gains. Moneylife Foundation will continue to
host such seminars on topics which affect the life of the
common citizen. „
11/26/2010 8:04:08 PM
 MONEY FACTS STOCKS

INDIAN MARKET TRENDS FUND FLOWS

The market ended with a steep decline in the fortnight; the Foreigners: Foreign institutional investors were net
Sensex and the Nifty lost 4% each. The ML Mid-cap, ML sellers but pumped in small amounts on three days
Micro-cap and ML Small-cap indices tumbled 8% each, the of the fortnight. „
ML Large-cap and ML-Mega-cap indices fell 7% and 5%. „
400

140
20
Share Prices, May 2010 =100
-360
130
-740 FII Net Investments
(Rs Crore)
-1,120
120
-1,500
15 Nov-10 25 Nov-10

110 Indians: Domestic institutional investors were net

buyers, but in small amounts. Two days of the
fortnight witnessed outflows from this segment. „
100
May-10 Aug-10 Nov-10 1,600

ML Mid-cap ML Small-cap Nifty ML Micro-cap 1,260

ML Large-cap ML Mega-cap Sensex DII Net Investments
920 (Rs Crore)

580
Index 12 Nov 25 Nov +/(-)

Sensex 20,156.89 19,318.16 - 4% 240

Nifty 6,071.65 5,799.75 - 4%

-100
15 Nov-10 25 Nov-10
ML Mega- cap Index 121.98 116.24 - 5%
ML Large- cap Index 126.67 118.38 - 7%
ML Mid- cap Index 130.52 120.21 - 8% GLOBAL MARKET TRENDS
ML Micro- cap Index 117.42 107.88 - 8% 37,000

ML Small- cap Index 118.89 109.00 - 8%

35,600
Mega-cap Gainers/Losers 12 Nov 25 Nov Change Mexico IPC
34,200
Bharti Airtel 306.05 335.85 10%
32,800
Unitech 81.45 63.00 - 23%
31,400
Large-cap Gainers/Losers 12 Nov 25 Nov Change
30,000
Dish TV India 62.85 67.60 8% May-10 Aug-10 Nov-10

DB Realty 401.05 235.25 - 41%

The Nikkei and Nasdaq Composite gained 4% and
Mid-cap Gainers/Losers 12 Nov 25 Nov Change 1%, respectively. On the other hand, the Hang Seng
lost 5%. Mexico IPC index is making new highs. „
Murli Industries 85.70 111.20 30%

Orbit Corporation 113.35 80.65 - 29% Index 12 Nov 25 Nov +/(-)

Nikkei 9,725 10,080 4%
Small-cap Gainers/Losers 12 Nov 25 Nov Change
Nasdaq Composite 2,518 2,543 1%
Orient Abrasives 31.95 35.95 13%
Korean Composite 1,913 1,928 1%
SEL Manufacturing 39.30 25.70 - 35% Taiwan Weighted 8,316 8,350 0%

Micro-cap Gainers/Losers 12 Nov 25 Nov Change Dow Jones Ind Avg 11,193 11,187 0%
Bovespa 70,367 69,362 - 1%
GG Dandekar Machine Works 72.80 79.10 9%
FTSE 5,797 5,699 - 2%
Agro Dutch Inds 26.15 16.10 - 38%
Shanghai Composite 2,985 2,898 - 3%
(All Prices in Rs) Hang Seng 24,223 23,055 - 5%

63 | 16 December 2010 | MONEYLIFE

Money Fact.indd 2 11/27/2010 5:37:05 PM

 MONEY FACTS STOCKS

What’s H T ML SECTORAL TRENDS

5
Stocks of some telecom companies emerged unscathed from the downturn
across industries. Bharti Airtel soared by 10% while Idea Cellular remained flat
Telecom and automobiles managed
to put on a brave front in a bleak
market scenario. Real estate,
over the fortnight. Other telecom stocks were beaten down severely. „
printing & publishing, paper & paper
Companies 12 Nov 25 Nov +/- products, petrochemicals and plastics
ML Telecom Service Index witnessed heavy selling. „
Bharti Airtel 306.05 335.85 10%
1,100

Idea Cellular 69.55 69.45 0% ML Sectoral Trend

1,030
Telecom Services 1% Real Estate - 16%
Tata Communications 302.15 266.45 - 12%
960
Auto 0% Printing & Publishing - 12%
MTNL 62.75 55.30 - 12%
890 Pharma - 2% Pap & Paper Prod - 11%

Tata Teleservices 22.20 19.25 - 13% Cons Products - 2% Petrochemicals - 11%

820
Education - 3% Plastics - 11%
RCom 169.95 137.90 - 19%
750
May-10 Aug-10 Nov-10
(All Prices in Rs)

INSIDER TRADES
5

What’s N T Parimal Chaudhari bought

4,00,000 shares in Praj
Industries (stake up to 4.38%).
Real-estate stocks were hammered during the fortnight. DB Realty (down
Arvind Rao bought 5,93,121
41%) tanked the most while Orbit Corporation (-29%), HDIL (-24%) and
shares in OnMobile Global
Unitech (-23%) also took a beating. „
(stake up to 4.79%). Mansi
P Shah and Kishore C Shah
Companies 12 Nov 25 Nov +/-
bought 1,42,645 and 20,000
DB Realty 401.05 235.25 - 41% ML Real Estate Index shares, respectively, in Man
Orbit Corporation 113.35 80.65 - 29% 4,500 Infraconstruction (stake up
HDIL 244.10 186.45 - 24% to 21.51% and 12.07%,
4,300 respectively). Wellington
Unitech 81.45 63.00 - 23%
Management Company, LLP,
Prajay Engineers 27.00 20.90 - 23% 4,100 bought 8,75,049 shares in
PVP Ventures 13.85 10.80 - 22% Educomp Solutions (stake up
Ansal Prop & Infra 86.15 67.80 - 21%
3,900
to 8.33%). Bhavook Tripathi
bought 2,46,536 shares in
IB Real Estate 195.25 154.40 - 21% 3,700
R Systems International
IVRCL Assets 105.35 85.60 - 19%
(stake up to 7.007%). Ekta
3,500
Vijay Shanthi Bldrs 37.55 30.85 - 18%
May-10 Aug-10 Nov-10
Kapoor bought 50,000 shares
(All Prices in Rs) in Balaji Telefilms (stake up
to 15.07%). Mavi Investment
Fund Ltd sold 41,50,000 shares
BULK DEALS of Ruchi Infrastructure (stake
Date Company Buyer Seller Rs Cr down to 7.16%). CVCIGP II
Client Rosehill and CVCIGP
23 Nov- 10 Monsanto Ind Monsanto Holdings Pvt Bretco Holdings (Mau) 70.24
II Employee Rosehill sold
18 Nov- 10 Rainbow Pape (BSE Indonext) Orient Newsprint Niyati S Agrawal 3.19 10,21,194 and 5,71,932 shares,
24 Nov- 10 Sangam India Splendor Vanijya Pvt Swagatam Marketing Pvt 1.98
respectively, of Jindal Drilling
& Industries (stake down to
22 Nov- 10 Resurgere Runwell Steel Pvt Parshwa Stonex Pvt 1.60 5.98% and 3.49%, respectively).
25 Nov- 10 Shiva Cement Preeti Gupta Usha Gupta 1.59 Gujarat Venture Capital - Fund
1995 sold 3,18,071 shares of
26 Nov- 10 Resurgere Runwell Steel Pvt Parshwa Stonex Pvt 1.44 20 Microns (stake down to
26 Nov- 10 Camson Bio Clairvoyance Energy Pvt Viraj Mercantile Pvt 1.17 7.66%). „

MONEYLIFE | 16 December 2010 | 64

Money Fact.indd 3 11/27/2010 5:37:19 PM

 MONEY FACTS COMMODITIES

INDEX TRENDS COMMODITY TRENDS

MCX Commodity Indices Crops

U
Particulars 12 Nov 26 Nov Change 52- Week High 52- Week Low
ntimely and excess rainfall is
Energy 2,798.95 2,799.47 0% 2,865.62 2,377.39 likely to affect Maharashtra’s
Agri 2,706.83 2,692.34 - 1% 2,737.21 2,110.09 contribution to the country’s kharif
Comdex 3,142.35 3,115.32 - 1% 3,175.64 2,486.35 output. Maharashtra produces onions,
grapes, vegetables (like tomatoes) and
Metal 4,017.74 3,954.32 - 2% 4,103.61 2,912.01
kharif pulses. It also produces cotton,
soybean and sugarcane. About 10
COMMODITY FOCUS lakh hectares of kharif crop has been
damaged in the state. In the Konkan
Natural Gas region, more than one lakh hectares
(Rs/mmBtu) of rice crop has been damaged.
210
Rainfall is continuing across the state,
even after Diwali. „
195

180
Seafood

A
165
revival in the US consumption
150 of seafood has helped India’s
seafood exports to rise in H1 FY10-11.
According to Marine Products Export
135
Oct-10 Oct-10 Nov-10
Development Authority (MPEDA),
seafood exports
At the end of November, natural gas prices bounced back to Rs200 in the September
per mmBtu at the Multi Commodity Exchange of India (MCX) due 2010 quarter
to strong demand in the western region ahead of changed weather stood at 2,74,663
tonnes worth
conditions. Natural gas prices climbed to Rs205 per mmBtu after
Rs5,065 crore, up
testing the bottom at Rs1`60 in earlier months. It recovered all the
4% in volume,
losses as the price bounced back from lower levels on bottom-fishing
16% in rupee
activity. For the near term, natural gas futures look positive, currently.
realisation and 23% in dollar terms.
They are expected to climb up to Rs210-Rs215 in the coming weeks. „ MPEDA hopes to achieve exports
of $2.5 billion during FY10-11 with
MCX PRICE TRENDS volumes rising 15%. „
Particulars Active 9 Nov 23 Nov Change High Low
Contract 2010 2010 %
Paprika oleoresin
Global Commodities
Silver Rs/kg
Gold Rs/10gm
Dec- 10
Dec- 10
42,652
20,527
42,026
20,512
- 1.47
- 0.07
43,174
20,569
26,770
19,260 A n increase in paprika oleoresin
production in China may result
in India losing as the top producer
Crude Oil Rs/barrel Dec- 10 3,925 3,763 - 4.13 3,979 3,506
of paprika. In 2009, about 35% of
Copper Rs/kg Nov- 10 395.75 373.85 - 5.53 399.40 291
India’s total oleoresin exports (Rs708
Zinc Rs/kg Nov- 10 114.25 95.35 - 16.54 116.35 93.40 crore) came from paprika. India uses
Nickel Rs/kg Nov- 10 1,095 990.90 - 9.51 1,127.60 957.90 byadgi chilli which, unlike Chinese
Lead Rs/kg Nov- 10 116.10 98.70 - 14.99 116.75 97.50 paprika, has some pungency that
Natural Gas Rs/mmBtu Nov- 10 185.60 192.90 3.93 216.70 162.80
is removed for paprika oleoresin.
Since China’s production of paprika
Others
is higher, Indian oleoresin exporters
Mentha Oil Rs/kg Nov- 10 1,233.70 1,191.40 - 3.43 1,305.80 1,136.90 have started importing paprika
CPO Rs/10kg Nov- 10 492.80 485.10 - 1.56 505.70 388 oleoresin from China for refining
Potato Rs/100kg Mar- 11 616.70 667.70 8.27 699.80 508.10 and re-exporting. Since a shortfall
Cardamom Rs/kg Dec- 10 931.30 1,049.40 12.68 1,197 849.90
is expected in Indian crop as well,
India may not be able to sell at lower
Ref Soy Oil Rs/10kg Dec- 10 578.55 567.95 - 1.83 591.15 488.30
prices. „

65 | 16 December 2010 | MONEYLIFE

Money Fact.indd 4 11/27/2010 5:39:29 PM

 BEYOND MONEY
overcoming
learning difficulties
I
A not-for-profit t was Vinita Pandit, a respected
principal of Arya Vidya Mandir,
organisation, MDA
who was instrumental in bringing
is committed to together parents of children who faced
securing the rights problems in school. Initially, it was a
of children with meeting place for parents to seek emotional
dyslexia, reports and professional support for their children
Shukti Sarma and to create a community. Soon, other
activists and professionals lent support
to the cause. In 1996, they formed the
Maharashtra Dyslexia Association (MDA).
Now, MDA has three centres in Mumbai.
It has a team of psychologists, special
educators and other professionals, offering
various services. MDA is a global partner of
International Dyslexia Association. It holds
workshops in schools and colleges; offers
therapy and career counselling; provides
teacher training; undertakes research; and
holds meetings with educational institutes.
Dyslexia, literally ‘difficulty with words’,
is a specific learning difficulty which
affects a person’s ability to read, spell and
understand language while speaking or in
writing.
Children with learning difficulties
are taken to MDA by their parents or
are referred to MDA by their teachers.
Kate Currawalla, president, MDA, said,
“Dyslexic children are as intelligent
as others, but cannot perform in class
because it is a language-based disability.
They can give correct answers orally, but
have difficulty in writing. Often, parents
have unrealistic expectations from them. It
results in confusion and erodes the child’s
MAHARASHTRA
self-esteem because he fails to understand
DYSLEXIA
why his friends sail through academics
ASSOCIATION
while he is left behind. We show the parents
003, Amit Park, that their IQ levels are quite high and make
423, Lala Jamnadas, them understand where the difficulty lies.”
Gupta Marg, At MDA, children go through tests.
Deonar Farm Road, These are often a revelation for the
Mumbai 400088 struggling children as they learn about their
Tel: (022) 25565754 strengths and weaknesses. Children and
mda@dyslexiaindia.com their parents are counselled on dyslexia.
www.mdamumbai.com An MDA representative said, “It is equally
MONEYLIFE | 16 December 2010 | 66
Beyond_money.indd 1
important for the parents to undergo
counselling to keep track of the children’s
development. The focus is not only on
achieving academic competence at school,
but also to develop self-esteem and help
them with their personal and emotional
issues.”
Project coordinator Sunita Pagedar
talked about a 13-year-old boy who
came a year ago with multiple problems.
He had trouble with concepts, planning
and evaluating his own activities
and had attention deficiency and poor
communication skills. He was enrolled
for Level-1 of the instrumental enrichment
programme. After a year, he has moved to
Level-2. “Now, he is able to communicate
better and has a fair knowledge of his
abilities. He is more confident and his
performance has improved in school. He
has become more receptive and looks
forward to coming to our centre,” she said.
MDA also organises workshops and
conducts training programmes throughout
the year, for continuing education for
professionals in this field and for qualified
interns. It also offers the only dyslexia
therapist training programme in the
country and coordinates an advocacy cell
that brings together leading professionals
to push for the rights of children with
learning disabilities.
2010 was a big year for MDA, when
they participated in the Mumbai Marathon
for the second time, in the Dream Run
category. The children and their families
participated enthusiastically, along with
their teachers and the volunteers. It was
the perfect platform to raise awareness
about the cause and boost the children’s
self-esteem. Ms Currawalla, said, “About
60 members are participating in the coming
year, including children and our staff.”
You can contribute financially or by way
of professional support to the team. There
is a corpus fund for advocacy and research
programmes. Treatment and therapy for
dyslexia is expensive; sponsoring a child
helps the organisation provide treatment
to more students. Donations for office
equipment and the library are also
welcome. „
11/27/2010 4:45:10 PM
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