30-Nov,2010 - Money Mantra Magazine

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                                                                                                                                      EDITOR’S NOTE

                                                                   A big hand
                                                                   for saintly
           Year : 02
                                  Issue : 26
                                                                        He is a senior bureaucrat with Central Board of Direct Taxes (CBDT). He is
                                                                   known for his integrity. He has been preserving bank deposit slip counterfoils
                                                                   since he joined Indian Revenue Services (IRS). Till date, he has managed to fill three
        EDITORIAL TEAM                                             deluxe type suitcases with such counterfoils. This is a testimony to his honesty.
        Kanchan Dass, Senior Sub editor                            But when Diwali comes, he accepts sweets and gifts. Would it be termed corrupt
        Shilpy Arora, Senior Sub editor cum correspondent
        Alok Dwivedi, Sub Editor cum correspondent                 practice? Once I asked him this. And his reply convinced me. He clarified that
        Harish Kumar, Sub Editor cum correspondent                 there is always a thin line between ‘gift’and ‘bribe’. For an official earning Rs 65,000
        Renu Baliyan, Sub Editor cum correspondent                 a month, a sweet box or decorative piece worth Rs. 500 falls under the gift cate-
                                                                   gory and anything above that may be termed as ‘bribe’. Are you convinced with
                                                                   this demarcation between gift and bribery?
        Harikrishan Pal                                                 Let me introduce you to another bureaucrat. He is from the same service. He
        Arun Sharma                                                is located in Delhi itself. He is proud of his corrupt services. He has set a target to
                                                                   earn 100 crore through bribery. He claims that he spends 20% of his ‘corrupt’
        PHOTO                                                      earnings for the welfare of the downtrodden. And it is the blessings of the deprived
        Ravi Girota                                                beneficiaries that save him from agencies like Anti-Corruption Bureau. The bureau-
        CIRCULATION                                                crat says if he won’t take bribe, he would not be able to provide for their welfare.
        K K Pandey                                                 In a way, he is trying to wash away his sins through his ‘charitable deeds’. This
        9350246321                                                 man has organised several free treatment camps, donated more than one lakh
                                                                   blankets and funded education of almost 5000 students. Should we give a big
        ADVERTISEMENT                                              hand to such saintly corruption?
        Kamal Sharma
        Subhash Chaudhary
                                                                        You must be wondering as to why I am talking about corruption in the edit. It
                                                                   is because corruption erodes your portfolio as well. The tips of stock market ana-
        HEAD OFFICE                                                lysts, the research report of brokerage houses and the NAV of mutual fund units
        C- 125, Sector- 19                                         gets affected by corruption. The stock market analysts, mostly visible on TV screens,
        Noida                                                      take a different view on the stock when it comes to their own portfolio. Research
        Uttar Pradesh
                                                                   reports are paid for and thus are meaningless. Institutional brokerage houses are
        Phone: 0120- 4710700                                       making millions through such reports. Suppose an industrial house is looking for
        Fax: 0120-4710728                                          a stake sell or bring an IPO. It will always like to get its stock price boosted. It
        www.                                     will follow a well defined strategy. The house will approach the research arm of
                                                                   an institutional brokerage house having maximum number of mutual fund clients.
                                                                   The research wing will prepare detailed reports with colorful charts and graphs to
                                                                   mesmerize the fund manager subscribing to these reports and he, in turn, will
                                                                   place orders for the stock. The stock will start rising to the delight of the industri-
                                                                   al house. Isn’t this corruption? Now if you talk about mutual fund industry, things
        Published by Jyoti Narain for
                                                                   are not very good here too. Nobody seems to be bothered if time stamping machine
        Pearls News Network Pvt. Ltd.from C-125,                   is being tampered with. I am well aware of certain mutual fund houses permitting
        Sector- 19, Noida,                                         their fund managers, dealers to carry cellphone in dealing rooms. Who is both-
        Uttar Pradesh and Printed at MP Printers,                  ered whether dealing room recording system is working or not? When reputed
        B- 220, Phase- II, Noida- 201305                           fund houses like TATA and HDFC are found to be indulging in malpractices like
        Disclaimer: Money Mantra is a personal finance             front-running, we get afraid about the genuineness of NAV. Front-runners claim that
        magazine and the financial solutions provided by           their malpractice is feeding several families of brokers and investors, as the afore-
        different experts in this magazine are only sug-                                           said IRS officer claims. But would you buy this argu-
        gestive in nature. Readers should take advice
        from their financial advisors before taking a final                                        ment? Think over and write to us. Till then read our
        call. In no case, Money Mantra team or manage-                                             cover story on TV waale Baba.
        ment can be held responsible for financial loss                                                With best wishes,
        caused to readers.
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          CONTENTS                                                          News Track                                Investment
          November 16-30, 2010                                            08 RBI hikes rates, tightens

           Volume 26
                                                                             home loan norms
                                                                          08 Coal India IPO, a massive hit
                                                                                                                     Stock & Commodity Banking
                                                                          09 Brokers responsible for pur-            18 Sluggish US economy                        50 Bank at your doorstep
             ON THE COVER                                                    chase, redemption: SEBI                 to boost appeal for gold                      Doorstep banking is a like a blessing
                                                                                                                                                                   as bank agents visit rural areas, twice
                                                                          09 First time HNIs must invest             QE2 by the Fed should weaken USD
                                                                             minimum Rs.5 lakh: SEBI                                                               or thrice a month with swap machines
                                                                                                                     further and it is expected that emerg-

                   TV WALE BABA
                                                                                                                                                                   and cash. They issue smart cards to
                                                                                                                     ing countries will increasingly shift to
                                                                                                                                                                   their customers.
                                                                                                                     gold from the dollar.

                                                                                                                     21 Nifty to remain between                    52 NBFC fixed deposits:
                                                                                                                     5900-6400 in November                         Risk to earn
                   Business channels are always abuzz with activity.                                                                                               Generally NBFCs offer higher rates of
                                                                                                                     After the fantastic rise in the last cou-
                   News, views, analysis and umpteen number of dis-                                                  ple of months, a short term correction        interest compared to scheduled banks
                   cussions are run to keep the investors hooked to                                                  cannot be ruled out. But the bull mar-        but deposit insurance facility is not     Special Report
                   the TV screens. What viewers eagerly wait for is the                                              ket is here to stay for some time.            available for NBFC depositors.
                   expert advice and their tips, depending on which                                                                                                                                          14 Rs.2 lakh, enough to
                   they decide about their step of action. But are        10 Consumer court clarifies                                                              Mutual fund                               buy an IPO
                                                                             mediclaim renewal norms
                   the expert advices worth believing?               36   10 Principal Mutual Fund's                                                              58 Preparing for third party
                                                                                                                                                                                                             In its recent meeting, market regulator
                                                                                                                                                                                                             has retained its investor friendly image
                                                                             scheme revised                                                                       cheque changes                             with increasing the maximum applica-
                                                                          11 EPFO may increase life                                                               Third party cheques have been misused      tion size to Rs.2 lakh for retail
                                                                             cover to Rs. 6.5L                                                                    and investors have been cheated out        investors.
                                                                          11 ICICI Bank reintroduces                                                              several times. To protect the investors’
                                                                             special home loan                        Scrips on Radar                             interest third party cheques will not be   Insurance
                                                                                                                                                                  accepted from November 15.
                                                                          12 Online fund transfer limit             23 Cadila Healthcare
                                                                             increased to Rs 2 lakh                                                                                                          60 Difficult to get insured
                                                                                                                    The company has adopted inorganic                                                        Insurance companies are always ready
                                                                          12 SBI MF announces dividend              route to enter European markets by
                                                                             for various schemes                                                                                                             to sell policies to customers, but there
                                                                                                                    acquiring Alpharma in France and                                                         are situations when insurers deny selling
                                                                          13 NABARD may regulate                    Laboratorios in Spain.                                                                   the same.
                                                                          13 Coal India employees may               24 Solar Industries
                                                                                                                    Solar Industries is planning to increase                                                 62 Cut the cost of life insur-
                                                                             get some compensation                  capacity of the high margin small                                                        ance
                                                                                                                    diameter cartridge explosive as well as                                                  While going for insurance, it is impor-
                                                                          Financial Planning                        detonators and detonating fuse in the                                                    tant to note that one should buy only as
                                                                                                                    country.                                                                                 much as he/she needs. Also, one should
                                                                                                                                                                                                             keep on reviewing his insurance needs
                                                                                                                    25 Crompton Greaves
                                                                                                                                                                                                             after every three years.
                                                                                                                    During 2HFY2011, the industrial seg-
                                                                                                                    ment is likely to register 15% growth
                                                                                                                    with incremental order inflow from
                                                                                                                    the cement, sugar and steel segments.

                                                                                                                    26 OnMobile
                                                                                                                    Content cost for the company, except
                                                                                                                    for one of Q4 FY10, has been con-
                                                                                                                    tained at about 20% of sales in the          66 Count children before
                                                                                                                    past six quarters.                           buying the dream home
                                                                          68 Dr. Menon’s Clinic                                                                  Buying a home is not a child’s play.
                                                                          Tina, a 29 years old management profes-   29 Essar Oil
                                                                                                                                                                 Before zeroing in for a dream house
                                                                          sional, is earning handsome amount. She   Looking technically, the stock’s over-       one should first of all count his chil-
                                                                          wants to buy a home and a car. Besides,   all formation is positive. The scrip is      dren and then proceed further.
                                                                          she wants medical cover for her mother    trading around 155 with good volumes
                                                                          and fund for her sister’s study.          coming in.
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                                                                                                                                                                                                                                                     Cartoon Mantra
        READER                  Mail

                                                                        “        Happy Diwali to Money Mantra team!
                                                                                 Could you people tell me which God
                                                                         you worshipped on Diwali - Laxmi ji or
                                                                         Saraswati ji? I think Goddess Saraswati, the
                                                                         deity of learning and intellect. It’s very much
                                                                         required to bring out a magazine like Money
                                                                         Mantra. But your intellect must have brought
                                                                         you good fortune this Diwali, because Money
                                                                         Mantra was the first to hit the stands as far
                                                                         as Diwali issue of financial magazines is con-
                                                                         cerned. Anyway, the issue was very interest-
                                                                         ing. From editorial to Bachat Singh, all the
                                                                         write ups were soaked in Diwali flavour. Well
                                                                         done friends.
                                                                                                       - Hareram Pandey, Delhi

               True Diwali Gift                                                                   Stock market wisdom                         Finish your lunch in 1 hour!                                                             We will complain!
                    I am a stock broker running                                                       I want to do online trading.                                                                                                         We will complain as much as pos-
               mid-size broking house in                                                          Kindly guide me in this regard                   The normal two-hour lunch break which was reserved for Hong Kong's equi-            sible before bidding adieu to the world.

                                                                                                                                                                                                                                                                                    Content: Renu Baliyan, Illustration: Rajkumar Singh
               Lucknow. By nature, we buy all the                                                 since I have zero knowledge in this         ty traders may soon be shortened. As much as by 1 hour. Honk Kong Exchange               Old age is full of woes when it comes
               financial newspapers and maga-                                                     field. Please also tell if I require        and Clearing chief executive, Charles Li realised that they were lagging behind          to pensioners' complaints. When com-
               zines to keep ourselves updated.                                                   to do any short term course or train-       China's financial market. Not only China, even Shanghai and Shenzen gave them            pared youngsters complaints with old
               Your magazine made a place in our                                                  ing and from where? Is it possible                                      a hard time as they took less time in reacting to            pensioners it has literally halved,
               list from its first issue itself. But the                                          through internet. Kindly guide me                                             the market news. The news has not gone down            according to a RBI release. Pensioners
               Diwali issue with the cover story                                                  completely.                                                                   well with many bankers because they will have          lodged approximately 4,831 com-
               ‘Catch Her on Diwali’was superb.                                                           -S K Panjwani, by e-mail                                             to settle for a sandwich now instead of ostrich         plaints in banks as against 2,196 in
               The get up gave a feel as if the                                                                                                                                and pigeon in their lunch. Now Hong Kong may            the corresponding year. On the other
               content was wrapped up as a gift            tour…”(MM November 15, 2010).          It’s time to be web-wise                                                    have to start trading half an hour earlier to            hand, depositors' woes seemed to have
               pack. It was the first financial mag-       The custom of exchanging gifts             I liked one of the articles on                                          remain in competition with a one-hour or one             reduced to half from a whopping 6,708
               azine to hit the stands on Diwali.          with good wishes on the occasion       your website and wanted to "vote"                                           and a half hour break. And, the trading will close       to 3,681. Banking ombudsmen
               As usual, the editorial made an             of Diwali has led to a corrupt way-    in the feedback section. I success-                                          at 4 pm. With this move the daily trading will          received around 79,266 complaints as
               interesting reading. It was a curtain       as most gifts by businessmen to        fully did that. I was curious to                                             be increased by 90 minutes.                             against 69,117 in the previous year.
               raiser to the content of the maga-          people in high position is to please   know whether I would be allowed                                                                                                      In order to improve customer service,
               zine. I must congratulate you for           them, get their work done              to vote second time. Initially that                                                                                                  it may be required to tie up customer
               developing a new style of editori-          favourably and not on merits. Also     was not possible. Next I just                                                                                                        experience outcomes to regulatory
               al writing, wherein the editor              tips to lower class government offi-   "refreshed" the page and tried              Save goats and get loan!                                                                 capital. According to KC Chakrabarty,
               appears as a story-teller and con-          cials are given with the same          again. I succeeded. A magazine,                  Lalu Prasad Yadav's buffalo made quite a mark a few years back on national          a customer service rating based
               veys complex financial juggleries           motive. The spirit behind Diwali       especially one dealing with money           television. Now, it's UP goat's turn to do the same. Depositing goats in your bank       approach with quantitative parameters
               in fascinating style. Congrats to the       festival is no more what it should.    matters, ought to be more careful           account and taking goat as loan may sound a crazy thing? But, not in Lucknow.            ultimately linked to its capital can
               entire team of Money Mantra.                It now simply serves the business      about such potentially crucial              Raising them can be a fruitful idea if you happen to be in Mirzapur district, Lucknow.   serve such a purpose.
                    -Mahesh Sharma, by e-mail              motive. Such Diwali gifts are          things. How can we rely on the              One can actually raise capital by depositing the goats in the bank account and the
                                                           legalized bribery! This pious fes-     existing rating of an article if the        bank will take care of their medical needs. Most of the people used to
               Gifting corruption                          tival must not be corrupted this       same person can potentially vote            crush stones for a living prior to the arrival of this
                  Refer to Editors note “When              way.                                   a million times?                            bank. And the need for such a bank was voiced by
               Laxmi    ji   proceeded     on                    -Mahesh Kumar, by e-mail                -Narendranath, by e-mail             women of the village. The bank has more 600
                                                                                                                                              members now who assist their folks by rais-
                                                          SEND YOUR LETTERS & EMAIL:                                                          ing two to three goats. The effort of the bank
                                             Address: Editror, Money Mantra C- 125, Sector- 19 Noida                                          is that every member should have a capi-
                                                      Email:                                                     tal of 20 goats in order to become financial-
                                                                                                                                              ly independent.

           6    MONEY MANTRA     16-30 November, 2010                                                                                                                                                                                     16-30 November, 2010   MONEY MANTRA   7
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           News Track
                                                                                                                                                   Brokers responsible for
           RBI hikes rates, tight-                                                                                                                 purchase, redemption
                                                                                                                                                                                                             REVIEW UNVEILED

           ens home loan norms                                                                                                                     Giving relief to mutual fund houses, SEBI has
                                                                                                                                                   said brokers would be responsible for sale and
                                                                                                                                                   redemption of units being bought by investors from
                        mid its war against               housing loans is 100 per cent, irre-          to 125 per cent, without taking into       the secondary market. "Payment of redemption

           A            inflation, the Reserve
                        Bank of India (RBI)
                        has raised key repo and
                        reverse repo rates by 25
           basis points each to 6.25% and
           5.25% respectively. At the same
           time, RBI said that the probability of
                                                          spective of the loan amount.
                                                          Therefore, the central bank proposed
                                                          to raise the risk weight for residential
                                                          housing loans of Rs.75 lakh and more

                                                          GONG GONG
                                                                                                        account the LTV ratio. Also, risk
                                                                                                        weights on residential loans have been
                                                                                                        raised as provisions laid down for
                                                                                                        teaser loans.
                                                                                                                                                   proceeds to the broker/clearing members by
                                                                                                                                                   MF/AMC shall discharge MF/AMC of its obliga-
                                                                                                                                                   tion of payment to individual investor. Similarly,
                                                                                                                                                   in case of purchase of units, crediting units into bro-
                                                                                                                                                   ker/clearing member pool account shall discharge
                                                                                                                                                   MF/AMC of its obligation to allot units to indi-
                                                                                                                                                   vidual investor," SEBI said in a circular. Till now
           further actions on interest rates is                                                                                                    asset management companies had to communicate
           unlikely in the near future barring                                                                                                     with the investors regarding the redemption
           unexpected shocks.                                                                                                                      amount as also for the allotment of units to individ-
               Experts believe the rate hikes are                                                                                                  ual investors. It would relieve the fund houses of
           expected to affect growth, adding                                                                                                       the tedious work of dealing with each investor.
           that the negative impact on growth
           rate will be minimal. On the other
           hand, bankers don't foresee an                                                                                                          LIC to issue pre-paid cards                                RBI Governor Dr. D Subbarao announcing 2nd Quarter review of the Monetary
                                                                                                                                                                                                              Policy at RBI headquarters in Mumbai on November 2. Deputy Governors
           immediate hike in loan rates though                                                                                                                                                                Usha Thorat, Shyamala Gopinath and Dr. Subir Gokarna are also seen.
                                                                                                                                                   LIC has got RBI nod to issue pre-paid cards for
           they conceded that the rate hikes
                                                                                                                                                   which clients would get policy benefits. LIC can
           would have an impact after a few
                                                                                                                                                   issue pre-paid instruments to its customers for
                                                                                                                                                   credit of both one-time and periodic payments.
                                                                                                                                                                                                              Pre-payment penalty unlikely
               However, RBI has imposed a                                                                                                                                                                         RBI doesn't see the pre-payment of a loan an unfair affair. Banks
                                                                                                                                                   As per RBI, the pre-paid instruments can be
           ceiling on the Loan to Value (LTV)                                                                                                                                                                 seem to lose battle for penalty on loan pre-payment. Pre-payment
                                                                                                                                                   loaded by the bank by debiting to LIC's bank
           ratio for banks' home loan exposures                                                                                                                                                               is done by the customers to bring down their cost of funds. It is
                                                                                                                                                   account. Maximum limit for a single card holder
           and proposed that LTV ratio for                                                                                                                                                                    said that RBI has cut policy rate over five percentage points in
                                                                                                                                                   is Rs 50,000. Pre-paid cards besides saving trans-
           housing loans should not be more                                                                                                                                                                   last two years. But most banks offered lower cost only to new cus-
                                                                                                                                                   fer cost would also help LIC to make a card cus-
           than 80 per cent. Currently, the risk                                                                                                                                                              tomers, not to the existing customers. In some cases, new borrow-
                                                                                                                                                   tomer base. Pre-paid cards offer more comfort to
           weights on residential housing loans                                                                                                                                                               ers were offered loans at eight per cent, while existing customers
                                                                                                                                                   the customers as they can be issued even to those
           with LTV ratio up to 75 per cent are                                                                                                                                                               paid around 11 per cent. Banks feel the pre-payment penalty is
                                                                                                                                                   who don't have a bank account. At present, LIC
           50 per cent for loans up to Rs.30 lakh                                                                                                                                                             imposed to counteract the impact of interest rate risk and asset
                                                                                                                                                   provides gold and silver cards that are 'life time'
           and 75 per cent for loans above                                                                                                                                                                    liability mismatches of loans. However, RBI argues that floating
                                                          Bollywood/Hollywood actor Anil Kapoor hammering the "Gong" of Muhurat Trading on Laxmi   free for those who apply before March 2011. The
           Rs.30 lakh. If the LTV ratio is over           poojan with the entire star cast of upcoming film "NO PROBLEM" with officials Eros
                                                                                                                                                                                                              rates are applicable for most loans and pre-payment won't cause any
                                                                                                                                                   cards are managed by Corporation bank and the
           75 per cent, the risk weight of all            International Media Ltd., at Bombay Stock Exchange (BSE), in Mumbai.                                                                                loss to the banks.
                                                                                                                                                   payment service provider is the Visa.

           NEWS BRIEF
           Coal India IPO, a massive hit                India likely to open Multi-brand retail                       Delhi Metro plans IPO        Rs.5 lakh investment must                     SBI enters merchant acquiring                  No credit insurance
           Since there has been a sharp rise in         The government sounds positive for opening multi-             To raise fund for its        SEBI has instructed first time High Net-      SBI is going to facilitate payment via        IRDA bans credit insurance by
           shares of Coal India, the government         brand retail to Foreign Direct Investment (FDI) in the        expansion, the Delhi         worth Individuals (HNIs) to put in at         debit or credit card at its retail outlets    non-life insurance companies in
           has advised investors to stay with the       country. The Indian government is considering a policy        Metro Rail Corporation       least Rs 5 lakh. Some portfolio man-          which is called merchant acquiring            view of the claims of up to Rs.
           company to multiply prospects. The IPO       shift after two key government departments favoured           (DMRC) plans a market        agers accept funds or securities of less      business. The bank is in process to           400 crore faced by state-owned
           is expected to give more returns than        the reform. Currently, foreign investment is not per-         listing within a year.       than Rs 5 lakh from clients and open          settle down shareholding pattern with         insurer Oriental Insurance on a
           gold which is regarded as the best           missible in multi-brand retail in India. Only multina-        DMRC didn't offer any fig-   their accounts on the assurance that          foreign partners. As much as 1.50             cover granted to Paramount
           long-term investment instrument.The          tionals can invest up to 51 per cent in single-brand          ure on the size of IPO. If   the clients would bring in total amount       lakh Point of Sale (POS) terminals for        Airways. According to the regula-
           company has witnessed as much as             retail. The move has come after an intense lobbying           current turnover is to be    i.e. Rs 5 lakh soon. SEBI has also asked      debit and credit card payments have           tor, marketing and pleading of all
           43 per cent rise in first two days and       by an American retailer, Wal-Mart and Germany's               taken into consideration,    the managers to reveal their clients'         been set by SBI across the nation.            credit insurance policies are
           ended at Rs. 349.65 a share on the           Metro. Opening up retail sector to foreign players            IPO of DMRC will be the      portfolios over the past three years.         Moreover, it plans to deploy six lakh         banned. The order is applicable to
           Bombay Stock Exchange as against the         would ease massive supply bottlenecks due to which            largest by an infrastruc-    Moreover, it has also told portfolio man-     POS terminals in the first five years of      all insurance companies, except
           issue price of Rs. 245 a share.              inflation rate remains high in India.                         ture company in India.       agers not to name their investment            its operations.                               the state-owned export credit and
                                                                                                                                                   portfolio as 'schemes'.                                                                     guarantees corporation.

           8   MONEY MANTRA   16-30 November, 2010                                                                                                                                                                                                16-30 November, 2010   MONEY MANTRA   9
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           News Track
                                                                                                                                               TATA MF under scanner                          EPFO may increase
               Is Sensex Expensive?
                                                        Court clarifies medi-                                                                       The Securities and Exchange Board
                                                                                                                                               of India is investigating Tata Mutual Fund
                                                                                                                                                                                              life cover to Rs. 6.5L
                                                                                                                                                                                                   The Employees' Provident Fund
                                                        claim renewal norms                                                                    for suspected front-running.SEBI has
                                                                                                                                               sought information and data in this
                                                                                                                                               regard from the AMC and the investiga-
                                                                                                                                                                                              Organisation (EPFO) intends to raise the
                                                                                                                                                                                              life cover 100 times the basic salary from
                                                                                                                                                                                              next fiscal. At present, the scheme pro-
                                                                   onsumer court sees an                                                       tion is still on. Tata Mutual, the tenth-      vides free life cover of 20 times the basic

                                                        C          influx of insurance cus-
                                                                   tomers complaining about
                                                                   medical insurance policy
                                                        renewal norms of the companies. A
                                                        range of exclusion, fine print limita-
                                                                                                         SC ON MEDI-CLAIM
                                                                                                                 Policy renewal refers to
                                                                                                                 replication of the original
                                                                                                                 policy. The terms & condi-
                                                                                                                 tions must be same as that
                                                                                                                 of original policy.
                                                                                                                                               largest mutual fund with nearly Rs 22,000
                                                                                                                                               crore worth of assets under management,
                                                                                                                                               confirmed the investigation and said it
                                                                                                                                               is cooperating with the regulator. "We
                                                                                                                                               had given a complete list of all dealing
                                                                                                                                                                                              salary with a ceiling of Rs 6,500. Let's
                                                                                                                                                                                              understand it with the help of the follow-
                                                                                                                                                                                              ing example- if new rule gets implement-
                                                                                                                                                                                              ed, those having a basic salary of Rs 6,500
                                                                                                                                                                                              (which is upper limit for such cover) will
                                                        tions and subjective refusals are driv-                                                and fund management personnel's land-          get life insurance of Rs 6,50,000.
                                                        ing patients and their families crazy.                    An insurance company         line as well as mobile numbers for their       However, under the current dispensation,                            As far as
                                                                                                                  can't deny mediclaim for
                                                            Take for instance the recent case
                                                        of a lady Sail Malhotra who was
                                                                                                    2008          pre-existing diseases.
                                                                                                                                               records and further investigation,’’ a
                                                                                                                                               spokesperson of the company said.
                                                                                                                                                                                              employees who get Rs 3,000 as basic
                                                                                                                                                                                              salary get life insurance of Rs 60,000.
                                                                                                                                                                                                                                                      India is concerned,
                                                        denied her mediclaim on the grounds                      Company can’t change
                                                                                                                                                                                                                                                        India is not in the
                                                        that her disease was not included in                     the terms and conditions                                                                                                            business of stealing
                                                        the renewed policy. Malhotra had
                                                        bought a mediclaim policy from New
                                                                                                     2009        and exclude diseases
                                                                                                                 mentioned in the original
                                                                                                                                               JOINING HANDS
                                                                                                                                                                                                                                                        jobs from the US.
                                                        India Insurance company in 1992 and                                                                                                                                                        Outsourcing industry,
                    ...when I go back to                was asked to renew it in 2004. The
                                                        company exculded few diseases in the            In a similar case in 2007, Supreme                                                                                                          I believe, has helped
               the U.S., a part of the rea-
               son that I advertised these
                                                        renewal policy. In 2007, when               Court said the renewal of mediclaim                                                                                                               to improve the pro-
                                                        Malhotra was hospitalised, the com-         policies should not change the terms
               50,000 jobs is I want to be              pany denied her claim saying the dis-       and conditions of the original policy                                                                                                          ductive capacity and
               able to say to the American              ease was not covered in the renewed         and that the diseases mentioned in the                                                                                                                 productivity of
               people when they ask me                  policy. Following this, Malhotra            initial contract can't be excluded. The
               why are you spending time                approached consumer forum that              decision came after an individual who
                                                                                                                                                                                                                                                   American industries.
               with India when they are                 made it clear that the insurance com-       got mediclaim in 1999 was asked to
               taking our jobs. I want to               pany can’t change the policy in the         renew it in 2004 and a few diseases,
               be able to say they actually             name of renewal. It's an unfair prac-       including heart diseases, were exclud-
                                                        tice. Also, company is asked to pay Rs      ed from the policy on the grounds that                                                                                                                    DR. MANMOHAN SINGH
               created 50,000 jobs.                                                                                                                                                                                                                  said while addressing joint press con-
                                                        2L for her medical expenses within          he suffered a heart attack in 2003.                                                                                                                 ference with US President Barack
               BARACK OBAMA,                            four weeks failing which the compa-             The decision of court not only                                                                                                                             Obama on Nov 8, 2010.
               PRESIDENT, USA                           ny has to pay interest to Malhotra at       clarifies the policy renewal norms to
                                                        the rate of 8% per annum from the           the companies but its strict action
               said at a joint press conference
                                                        date of denial. Besides, the compa-         would go a long way to help insurance      The Prime Minister Dr. Manmohan Singh and the US President Mr. Barack Obama, at Joint Press
               in New Delhi on Nov 8.
                                                        ny will have to pay a fine of Rs 5000.      customers.                                 Conference, in New Delhi on November 08, 2010.

          NEWS BRIEF
           CESC plans Rs.1,000 cr PE:                      banks. It could lead to instability in    in equity and in money market and         Highest rating to SBI MF:                      tomers. The bank is going to offer             which bonds are traded at off-market
           CESC, a power utility intends to raise          the financial system. A report reveals    debt instruments. The amendment is        Three schemes of SBI MF have got               8.5% for first year and 9.25% for              prices to conceal losses.
           up to Rs.1,000 crore through Private            that the MF investment by banks           applicable from Nov 1, 2010.              highest rating from Crisil. The                second year. Floating rates will be
           Equity (PE) for its new entity, Haldia          jumped by 42.8% by Mar 2010 as                                                      schemes are SBI short horizon                  applicable thereafter.                         No transaction with Iran:
           Energy Co. It would fund its Haldia,            against 2009. The investment is           Hedge funds worried: Asian                Debt Fund (Retail), SBI short hori-                                                           India's largest bank SBI has
           Chandrapur (Maharashtra) and                    22.5% of the overall investments.         hedge funds and Private Equity firms      zon Debt Fund (Institutional) and              Ban on 3 foreign banks: RBI                    instructed its overseas branches to
           Talcher (Orissa) projects of                                                              may have to comply with new EU            SBI Magnum Insta Cash Fund.                    banned 3 foreign banks from trading            discontinue transactions with
           Rs.12,900 crore. The projects are               Scheme features revised:                  rules on compensation and leverage,       Crisil has given Rank 1 to all three           in government bonds. The banks are             Iranian companies. The decision
           expected to generate 2,500 MW of                Principal Mutual Fund’s Principal         Proposed rules say any fund manager       schemes.                                       Standard Chartered, Societe                    has come after few cases whe re
           electricity.                                    Child Benefit - Career Builder Plan is    having EU clients need to attain a                                                       Generale and Credit Agricole CIB (also         Iranian companies tried to break
                                                           now named as Principal Conservative       passport and the passports will be        ICICI Bank reintroduces                        known as Calyon). The                          firewall of the bank come into light.
           RBI Concerned: Reserve Bank of                  Growth Fund. And the objective is to      given to those who have similar regu-     special loan: Private lender                   move has come after an investigation           It is done to purchase US dollars to
           India (RBI) seems worried over grow-            offer long term capital appreciation      latory structure in the home jurisdic-    ICICI bank has re-introduced spe -             that revealed the foreign banks had            fund their business which is an
           ing investment in mutual funds by               and regular income with investment        tion.                                     cial home loan scheme for all cus -            indulged in circular trading in                offence.

          10    MONEY MANTRA   16-30 November, 2010                                                                                                                                                                                             16-30 November, 2010   MONEY MANTRA    11
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           Farm Fresh
           Online fund transfer limit                                                                                                                          MARKET PERFORMANCE
                                                                                                                                                                Best Performers in group ‘A’ vs Nifty
           increased to Rs 2 lakh                                                                                                                                               (from 22-10-2010 to 08-11-2010)
                      ow you can transfer amount of Rs 2 lakh via elec-

           N          tronic fund transfers using Real Time Gross
                      Settlement (RTGS). The transfer will be absolute-
                      ly free. Reserve Bank of India (RBI) has increased
           RTGS transaction limit from the present limit of Rs 1 lakh
           to Rs 2 lakh.
                                                                                                           RBI has said that NPAs remain an area of
                                                                                                           concern particularly due to the likelihood of
                                                                                                           deterioration in the quality of restructured
                                                                                                           advances. The gross Non-Performing
                                                                                                           Assets (NPAs) ratio showed an increase
                                                                                                           from 2.25 per cent in 2008-09 to 2.39 per
               Also, the central bank revised the rates of service charges                                 cent in 2009-10. Moreover, there was an                                                                                                              You buy my
           applicable on the transactions of more than Rs 2 lakh.                                          increase in the proportion of doubtful and
           According to the revised rates, banks will charge Rs 25 as                                      loss assets in 2009-10. The increase in
                                                                                                           gross NPA ratio coupled with a decline in
                                                                                                                                                                                                                                                           turbines, and I'll
           service charge for transactions ranging from Rs 2 lakh to                                       the (outstanding) provisions to gross NPA                                                                                                       take care of the
           Rs 5 lakh and Rs 50 as service charge for transactions above                                    ratio in 2009-10 at the aggregate level,
                                                                                                           underlined the need for further strengthen-
           Rs 5 lakh. At present, service charge of Rs 25 is applicable                                    ing of provisions by banks.                                                                                                                   outsourcing issue.
           for transaction of more than Rs1 lakh.                                                                                                                                                                                                              The GEs, the
               Moreover, a new value band has been introduced for
           National Electronic Funds Transfer (NEFT) transactions.                                                                                                                                                                                             Boeings, the
           According to RBI, the service charge on transactions of Rs                                                                                                                                                                                    Caterpillars, all of
           1 lakh to Rs 2 lakh will be Rs 15 as compare to the the pres-
           ent charge of Rs. 25. The revised rates are applicable from                                 Revised Rates                                       NABARD to regulate microfinance                                                               which have struck
           November 15.                                                                                    RTGS                                                                                                                                            deals with India
               Rates are revised to promote electronic transactions             Amount to be transferred          Service charge                               The government is working aggressively on the proposed bill to reg-
           among customers. As per a report of RBI, as much as 70,000           Rs. 2L                            No charge                                ulate micro-lenders. The bill is expected to treat microfinance as a sepa-                    that will generate
           branches of 98 banks across the country got involved in the          Rs. 2L-Rs. 5L                     Rs 25                                    rate business and also make Nabard responsible for regulation of non-prof-
           NEFT system by the end of July 2010. By September 2010,              Rs. 5L and above                  Rs. 50                                   it microfinance institutions such as trusts, mutual benefit societies, coop-
                                                                                                                                                                                                                                                       jobs back home will
           an overwhelming increase has been seen in the volume of                                         NEFT                                            eratives etc. It is to prevent over-regulation of states to protect the sec-                  manage the politi-
           transactions via the NEFT system. The transaction volume             Amount to be transferred          Service charge                           tors that help promote financial inclusions. Currently, micro-lenders fol-
           reached around 9.83 million and Rs 61,620 crore in terms                                                                                        low the relevant sector law, depending on the way they are made. The deci-
                                                                                                                                                                                                                                                             cal blowback.
                                                                                Less than Rs. 1L                  Bank charges applicable
           of amount.                                                                                     CABLE                                            sion to fast-track the bill follows the October 15 ordinance, or emer-
               On the other hand, transactions via the RTGS system              Rs. 1L- Rs. 2L                    Rs. 15                                   gency law, issued by Andhra Pradesh. The ordinance imposed strict restric-                                       RON SOMERS,
           stood at Rs 41 lakh crore by Septmeber 2010. Report for                                                                                         tions and debt reformation obligation on lenders in view of suicides that                      President, US-India Business Council
                                                                                                                                                                                                                                                      said on the sidelines of a conference on
           the execution of the new RTGS system has been submitted              India, Punjab National Bank, ICICI Bank and HDFC Bank.                     were blamed micro-lenders who allegedly pressurize people to recover
                                                                                                                                                                                                                                                                         Corporate co-creation
           by a working committee comprising of RBI executives and              The implementation of the next generation RTGS system will                 their money. The bill is put on priority list in winter session of the par-
                                                                                                                                                                                                                                                                             on 8th Nov. 2010.
           executives from few commercial banks i.e. State Bank of              take at least next two year.                                               liament by the Finance Minister Pranab Mukherjee.

           NEWS BRIEF
           CB raises base rate:                            MS announces dividend:                    Rs. 1.50/unit with record date Nov 4.                 UTI MF declares dividend: UTI               Offer (NFO) price of Rs. 10 per unit.     the company are found at fault, they
           Corporation Bank (CB) has                       Dividend for Morgan Stanley A.C.E.                                                              MF announces dividend for Retail &          The new issue is open for subscription    would get some sort of compensa-
           announced to raise its base rate by             Fund and Morgan Stanley Growth            Bonus by Tata MF: Tata MF                             Institutional Plan of UTI Fixed Income      from November 15 to November 29,          tion. It is expected that the compen-
           50 bps to 8.25 per cent. The base               Fund is declared by Morgan Stanley        declares bonus under its scheme - Tata                Interval Fund - Monthly Interval Plan II.   2010.                                     sation could be monetary payment so
           rate is a minimum rate below which a            (MS) MF. The quantum of dividend of       Young Citizens Fund. The quantum is in                It is declared on the face value of Rs.                                               as to allow affected employees to buy
           bank is not allowed to provide loans.           A.C.E. Fund and Growth Fund is 1%         the ratio of 1:3 with record date Nov 12.             10 per unit. The record date for divi-      Employees bereft of jewel:                shares at the current market price.
           It is applicable from November 8.               and 1.5% respectively. The record                                                               dend is November 9, 2010.                   Coal India Ltd has announced to
                                                           date is Nov 4.                            SCUF plans housing fin arm:                                                                       investigate as to why some bids pro-      Promote e-payment: RBI has
           Axis Gold ETF: Axis Mutual Fund                                                           Shriram City Union Finance (SCUF) will                ICICI regular saving scheme:                posed by its employees in its IPO got     advised some of the top bank execu-
           has come out with an ETF, Axis Gold             SBI MF declares dividend:                 float a housing finance subsidiary. The               A new fund, ICICI Prudential Regular        rejected. CIL Chairman P. S.              tives to promote electronic transac-
           ETF. The minimum investment in NFO              SBI MF announces dividend for its         loan ticket size is around Rs. 20 lakh                Savings Fund is launched by ICICI pru-      Bhattacharyya stated that if the regis-   tions among customers. Banks are
           of the ETF is Rs 5,000 and it is listed         scheme- SBI Blue Chip Fund. The           and subsidiary will be operational by                 dential Mutual Fund. It is an open          trars, the banks handling the demat       instructed to educate customers
           on the National Stock Exchange.                 quantum of dividend for distribution is   Mar 2011.                                             ended income fund with New Fund             accounts, or some department within       about RTGS and NEFT services.

           12   MONEY MANTRA   16-30 November, 2010                                                                                                                                                                                                  16-30 November, 2010   MONEY MANTRA   13
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                                                                                                                                  ers/promoter group sells shares in the     Announcement by                           sion will enable issuers to have more
                                                                                                                                  previous      six      months,     the     company for filling DOD                   flexibility in raising capital through
                                                                                                                                  promoter/promoter group would be               To elicit timely remarks, the         various instruments.
                                                                                                                                  ineligible for preferential allotment.     issuer company needs to make a
                                                                                                                                      Earlier promoters used to come         simultaneous public announcement          Financial statements in
                                                                                                                                  out with preferential warrants but         for filing Draft Offer Document           offer documents
                                                                                                                                  avoid converting them to equity            (DOD). DOD refers to offer docu-              Sometimes, companies propos-
                                                                                                                                  shares when there are unfavorable          ment in draft stage. The DOD is filed     ing public issues acquire an entity
                                                                                                                                  market prices. In fact, some promot-       with SEBI, at least 21 days before        immediately after the end of the lat-
                                                                                                                                  ers used to sell their shares ahead of     filing the offer document with            est financial year. Such acquisition
                                                                                                                                  the declaration of the preferential        ROC/SEs. SEBI can make changes in         or restructuring makes certain com-
                                                                                                                                  allotment and buy shares after the         the DOD and the issuer or the lead        panies direct or indirect subsidiaries
                                                                                                                                  announcement of allotment. It was          merchant banker shall carry out such      of the issuer company. SEBI, there-
                                                                                                                                  done through warrant route to buy          changes in the draft offer document       fore, mandate the inclusion of a pro-

                                          RETAIL IPO LIMIT                                                                        shares at cheaper price.
                                                                                                                                  IPO limit Rs 2L for retail
                                                                                                                                      SEBI doubles the investment
                                                                                                                                                                             before filing it with ROC/SEs.
                                                                                                                                                                             News reports in line with
                                                                                                                                                                             offer doc
                                                                                                                                                                                 To ensure that information
                                                                                                                                                                                                                       forma financial statement in offer
                                                                                                                                                                                                                       documents only if the acquisition
                                                                                                                                                                                                                       is material for the issuer company.
                                                                                                                                                                                                                       It helps clarify the financial impact
                                                                                                                                                                                                                       of such acquisition/restructuring on
                                                                                                                                  limit for retail investors in an initial   appearing in media is consistent with     the financial statements of the issuer
                                                                                                                                  share sale to Rs 2 lakh. It also permits   the disclosures made in the offer doc-    company.

                                                                                                                                  investors of all categories to buy         ument, SEBI decides that the mer-
                                                                                                                                  shares as retail investors. The board      chant bankers may submit a compli-        QIB Status to Postal Life
                                                                                                                                  proposed to raise the investment limit     ance certificate as to whether the con-   Insurance Funds
                                                                                                                                  in August this year. In 2005, it raised    tents of the news reports appearing           SEBI also decides to accord QIB
                                                                                                                                  the limit from Rs.50 thousand to Rs.1      after filing the DOD are supported by     status to insurance funds set up by
                                                                                                                                  lakh for public issues.                    disclosures in the offer document or      Department of Posts such as Postal
                                                                                                                                                                             not. It is applicable for news reports    Life Insurance Fund (PLIF) and
                                                                                                                                  Fixed pay date                             and advertisements appearing in           Rural Postal Life Insurance Fund
                                                                                                                                      SEBI makes it mandatory for            newspapers stipulated in ICDR,            (RPLIF).
                                                                                                                                  companies to specify the date of the       major business magazines and print
                                                                                                                                  dividends so that the shareholders get     and electronic media controlled by        Amendments to SEBI
                                                                                                                                  to know as and when they will get          the media group that has a private        (FVCI) Regulations
                                                                                                                                  their dividends. Pre-announcement of       treaty/shareholders' agreement with           The board approves amend-
                                                                                         and      Accounting       Standards      fixed pay date for dividend payment        the issuer company or promoters of        ments to the SEBI (Foreign Venture
                                                           SEBI doubles the

                MM Bureau                                                                (SCODA), the board makes some            enables investors to manage                the issuer company.                       Capital Investors) Regulations,
                          s SEBI decides to                                              additional disclosures mandatory for     cash/securities flows and enhance                                                    2000, regarding the registration

           A              increase the maximum
                                                           investment limit for retail   insurance companies such as disclo-      process of transparency. Similarly,        Uniform payment option                    procedure for Foreign Venture
                          application size for             investors in an initial       sure of risk factors, broad headings     the company has to announce the date       for all                                   Capital Investors (FVCIs). The key
                          retail investors to Rs.2         share sale to Rs 2 lakh. It   under each company, an overview of       for credit of bonus.                           SEBI decides to give only one         amendments include furnishing
                          lakh across all issue, it                                      the insurance industry, formats for                                                 payment option to all investors i.e.      firm commitment letter from
           retains its retail investor friendly            also permits investors of     disclosure of financial information      Disclosure norms for IDRs                  either (i) part payment on application    investor for investing at least $1
           image. The decision has put an end              all categories to buy         as specified by the Insurance                Now, companies have to attach          with balance money to be paid in          million and furnishing copies of
           to a long wait of market participants.                                        Regulatory       &     Development       additional information required as per     calls or (ii) full payment on appli-      financial statements & email
           The verdict came after a board meet-            shares as retail investors.   Authority (IRDA) and glossary of         Indian law along with right issue of       cation. If issuers opt for part pay-      address of both company and
           ing of Securities and Exchange                                                terms used in the insurance sector.      Indian Depository Receipt (IDRs).          ment, it shall be incumbent on them       investor.
           Board of India (SEBI) took place in
                                                           The board proposed to                                                  Disclosure requirements for style          to obtain approvals. SEBI's decision          No doubt, with above decisions
           October in Mumbai. The board dis-               raise the investment limit    Strict norms for                         IDR rights would more or less be in        is expected to ensure uniform treat-      SEBI continues to maintain a
           cussed some crucial issues and came                                           preferential allotment                   line with requirements applicable for      ment for all investors in rights          reformist role in the securities mar-
           out with few decisions. Let us have
                                                           in August this year. In           To tighten the preferential allot-   domestic rights issues. The issuers        issues.                                   ket. But the much-awaited takeover
           a look at these decisions one by one:           addition, SEBI makes it       ment framework, SEBI decides that        in compliance with the continuous
                                                                                                                                                                             Minimum promoters'
                                                                                                                                                                                                                       norms, recommended by the
                                                                                         if any promoter or promoter group        listing requirements can avail the                                                   Achuthan Committee are again put
           More disclosures                                mandatory for companies       fails to exercise the previously sub-    facility of filing the offer document      contribution in FPOs                      on hold. SEBI has decided to discuss
           required by insurance                           to specify the date of the    scribed warrants of the company, the     on fast track basis. Recently, Standard        SEBI decides that the require-        the proposals in next board meeting
           cos                                                                           promoter or promoter group will be       Chartered Bank had come out with           ment of promoters' contribution is        as it requires more time to study.
               SEBI spells out disclosure norms            dividends so that the         ineligible for preferential allotment    a rights issue in which IDR holders        not applicable to FPOs if equity          The Achuthan Committee submitted
           for the life insurance companies that           shareholders get to know      of equity shares or convertible war-     were unable to subscribe to an             shares of the issuer are not infre-       a detailed report to SEBI in July sug-
           sell shares to the public through                                             rants for the period of one year from    account because of the absence of          quently traded in a recognised stock      gesting many changes in the
           Initial Public Offer (IPO). Besides             as and when they will get     the date of expiry of the currency or    SEBI guidelines. An IDR is an instru-      exchange for three years and the          takeover norms including better
           approving the recommendations of                their dividends.              cancellation of the existing warrant.    ment for foreign companies to allow        issuer has a track record of dividend     terms to minority shareholders and
           the SEBI Committee on Disclosures                                             Also, if any member of the promot-       Indian investors to buy their shares.      payment for three years. The deci-        more disclosures by companies.

           14   MONEY MANTRA   16-30 November, 2010                                                                                                                                                                         16-30 November, 2010   MONEY MANTRA   15
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                                                                D   STREET


           16   MONEY MANTRA   16-30 November, 2010                     16-30 November, 2010   MONEY MANTRA   17
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                C JUNCTION

           Sluggish US economy to
           increase gold appeal
                Anjani Sinha                                                                              rally, gold's fundamentals remain pos-
                                                         A new round of QE

                                                                                                          itive. According to the World Gold
                  GOLD & SILVER                          measures by the Fed                              Council, China's gold demand may
                                                                                                          double to 800-900 metric tons in 10
                          Market Review                  should weaken USD further                        years' time as driven by investment
                    (21st Oct to 5th Nov 2010)           and it is expected that                          and jewelry demands. In fact, the
                Gold rallied to a new record high                                                         Chinese government is also advised
           of $1398 in the fortnight which was           emerging countries, which                        to increase its gold holdings in curren-
           the biggest gain since March 2010. It         usually hold huge amounts                        cy reserves so as to diversify from its
           was mainly driven by renewed selling                                                           ample holdings of US dollar. As of the
           pressure in USD and anticipated               of dollar-denominated                            end of June 2010, the reserve holds
           impacts of QE2. At COMEX Gold                 assets, will increasingly                        $2.4543 trillion, making it the highest
           December contract gained by USD                                                                foreign exchange reserve in the world,
           49.60/Toz while COMEX Silver                  shift to gold from the                           followed by Japan as a distant second.
           December contract gained heavily by           dollar.                                              It is known that midterm election
           270.20 cents/Toz. MCX Gold                                                                     in US has stronger correlation
           December gained Rs.349/10 gram                                                                 between elections and equities.
           and Silver December contract gained           may exceed 50 metric tons in October.            History is also that USD did rise short-
           by       Rs.3247/Kg.       At    NSEL,        Buying has been driven by the Hindu              ly after elections when Congress
           Ahmadabad spot Gold gained                    festival of Diwali on November 5.                changed control: from Democrats to
           Rs.150/10 gram and Silver gained by               Outlook:Apart from QE-induced                Republicans in 1980, 1984 and 1994.
           Rs 1482/Kg. NSEL Demat E-Gold
           gained by Rs. 34.90/gm while NSEL                                              Gold MCX continuous
           Demat E-Silver gained by Rs. 283.00/
           100 gm.
                It's probably one the most impor-
           tant fortnight in the US, as well as
           financial markets. Apart from the
           FOMC meeting, the midterm election
           held on November 2. Financial mar-
           kets continued to be buoyed by Fed's
           QE program. USD weakened across
           the board, driving commodities high-
           er. Gold traded higher as USD
           plunged against major currencies as
           unexpected rate hikes by central
           banks in Australia and India, The
           RBA hiked the cash rate, by +25 bps,
           to 4.75% for the first time after a 6-
           month pause. Policymakers believe
           inflation will rise over the next few
           years as moderation of general price                                      SPOT MARKET PRICES
           levels over the past 2 years is 'now          Commodity Market                  Price           Open      Close       Prev. Net
           close to ending'. Meanwhile, the RBI                                            Quote                                 Close Change
           (the Reserve Bank of India) raised the        Gold           NSEL Amd           Rs. /10 gm. 19540         19708       19558 +150
           repo and reverse-repo rates by +25bps         Silver         NSEL Amd           Rs./kg.     35708         37167       35685 +1482
           each to 6.25% and 5.25%, respective-
           ly, in order to curb inflation which has                                FUTURES MARKET PRICES
           been growing at the second fastest            Market   Commodity-       Unit         Open      High      Low       Close   Prev.   Chg
           pace.                                                  Contract                                                            Close
                Meanwhile, physical demand has           MCX      Gold-Dec-10      Rs/10 gm.    19543     19895     19260     19878 19529 +349
           provided a cushion for price.                 COMEX    Gold-Dec-10      $ / Troz     1348.20   1398.70   1315.70   1397.70 1348.10 +49.6
           According to the Bombay Bullion               MCX      Silver-Dec-10    Rs/kg.       35620     39040     34613     38926 35679 +3247
           Association, gold imports to India            COMEX    Silver- Dec-10   Cents/Troz   2401.50   2691.30   2284.30   2672.70 2402.50 +270.2

           18   MONEY MANTRA   16-30 November, 2010
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           Democrats currently control both
                                                                                      Silver MCX continuous
           houses of Congress. If history repeats
           this time, we may see temporary
           strength in the dollar. Hence, gold
           (and other commodities) may decline
           as a result. Yet, the impact should not
           affect the long-term uptrend for gold.
           As economists on the street expect,
           US economy will remain sluggish for
           an extended period, thus, increasing
           the appeal for gold and a safe haven
           and a store of value. On the other
           hand, a new round of QE measures by
           the Fed should weaken USD further
           and it is expected that emerging coun-
           tries, which usually hold huge
           amounts of dollar-denominated
           assets, will increasingly shift to gold
           from the dollar.
                                                                                        Refined Soy oil MCX
                 REFINED SOY OIL
                         Market Review
                  (21st Oct to 5th Nov 2010)
                The Refined soya oil prices exhibit-
           ed positive trend during the fortnight on
           bullish international market and good
           physical buying support due to fresh fes-
           tive buying. Robust oil meal export
           demand-indicated by rise in export in
           September-gave underlying support to
           the market. MCX near month contract
           closed at 527.70/10 kg.
                According to The Solvent Extractors'
           Association of India the export of
           oilmeals during October 2010 is report-
           ed to 498,159 tons compared to 309,886
                                                           Market   Contract       Open       High       Low       close       Prev.      Net
           tons in October 2009 i.e. up by 61% and
                                                                                                                               close      change
           the overall export of oilmeals for April-
           October 2010 is reported at 1,874,368           MCX      Nov' 10        529.90     550.40     527.45    549.30      527.70     +21.6
           tons compared to 1,543,847 tons i.e. up        of the current oil year, which ends in       has estimated soybean production at
           21%. Export of Soybean Meal jumped to          October, India has already imported          10.13 million tons much higher than the
           nearly doubled compared to October             80.42 lakh tonnes edible oil, while up       forecast to Solvent Extractors
           2009, due to gradual improvement in            to eight lakh tonnes is on the anvil in      Association. Soybean output in the cur-
           market in last 2 months and due to             the current month taking the tally to over   rent is season is projected to increase by
           draught in Russia coupled with bullish         88 lakh tonnes. In the year, 2005-06,        4.2% to 10.13 million tons while the
           October USDA report picked up the              India had imported 44.16 lakh tonnes         yield is expected touch 6.73 million tons
           export of oilmeals from India. This            edible oils, which rose to 47.14 lakh        in Madhya Pradesh through the
           helped the India to liquidate the most of      tonnes in 2006-07, then 56.08 lakh           September.
           carry over stock of soybean too.               tonnes in 2007-08 and 81.83 lakh tonnes          USDA estimated 2011 world major
                In a latest report India's edible oil     in 2008-09 oil year.                         oils end stocks at 103 Lakh tons which
           imports are reported to have surged to             Crushers bought soybeans from the        are lowest of six years. Brazil which is
           double in past four years on the rising        spot and futures market to meet their oil    a major edible oil exports is believed to
           demand-supply mismatch in the edible           meal export deals signed for November        have substantially less soy oil stocks.
           oil sector. In the year, 2009-10 the India's   and December delivery. Spot market           World edible oil consumption is expect-
           edible oil imports are pegged at 88 lakh       prices witnessed a rise during the fort-     ed to increase sharply.
           tonnes. USDA estimated India's soy oil         night on strong demand amidst rise in            On the other hand unconfirmed
           import at 12 LT for 2011. India made high      fresh arrivals. The crush margin is com-     reports said world's largest edible oil user
           edible oil import during August.               ing onto positive, which may also sup-       China is all set to resume soyoil imports
                Solvent Extractors' Association           port the prices to trade higher. The         from Argentina, the world's largest sup-
           reported that, in the first eleven months      Soybean Processors Association of India      plier, after a six-month ban. Lifting of

                                                                                                             16-30 November, 2010   MONEY MANTRA   19
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                C JUNCTION
           the ban was seen by traders as a politi-      practice.                                    Extractors Association of India, oil
           cal gesture and large imports may not             Outlook: Bumper crop expectation         meal export in September rose 53%
           come in immediately because of unat-          for India is also major factor for like-     Y/Y and 45% M/M. This prompted
           tractive prices and less supplies avail-      ly to lower imports. World oil and           crushers to buy soybeans from spot and
           able from the South American suppli-          oilseeds market are passing through          futures market on speculation that
           er. China effectively barred imports of       tough stage as weather aberration in         demand will remain higher in coming
           the edible oil from Argentina at the end      many countries is posing threat to the       months. So they are buying at higher
           of March amid a wider trade dispute,          standing crop and delaying sowing of         level to meet up export commitment and
           restating quality standards that traders      new crop which will support higher           hence the price is likely to remain
           described as impossible to meet in            price. According to the Solvent              positive.

                        COTTON                                                         Cotton futures (ICE)
                         Market Review
                 (21st Oct to 5th Nov 2010)
               The international cotton prices
           rebounded during this fortnight on
           strong Chinese demand as the market
           continued its push toward fresh highs.
           China, the world's largest producer and
           consumer, needs to import more than
           normal because of crop-damaging rains
           earlier in the year, and has been buy-
           ing cotton at historically high prices.
           With Pakistan's harvest hurt by flood-
           ing, much of the export demand falls
           to the U.S., and traders have continued
           moving prices upward as a result. The
           ICE cotton future for December deliv-
           ery settled higher by 27.84 cents, or by
                                                          Market          Contract     Open      High     Low     close     Prev.      Net
           24.37%, at $1.421 a pound.
                                                                                                                            close      change
               The recent firm increase in cotton
           prices is mainly the result of strong mar-     ICE (Cents/lb) Dec 10        139.90    144.60   138.55 142.10     114.26     +27.84
           ket fundamentals rather than specula-         applications equivalent to the quantity      a smart recovery to reach 504 kg per
           tion. World cotton stocks fell by 24%         earmarked for this season that is 5.5 mil-   hectare although it falls of the 554 kg
           to 9.0 million tons in 2009-10. This          lion bales. The price of cotton has been     reached in 2007-08.
           marked the end of a five-year period          increasing in recent months but it is            Outlook: The Global cotton price is
           of high stocks. World cotton production       expected to stabilise in the coming          bullish over the last few months. Few
           is expected to rebound by 16% to 25           weeks. Currently, the cotton prices in       factors that are responsible are difficul-
           million tons in 2010-11, encouraged           the domestic market are ruling over 85       ties to source cotton in the transition
           by the significant rise in prices experi-     per cent higher than Rs 22,800 (per          period between the two seasons, the
           enced last season. Global cotton mill         candy) in the same period last year. The     drop in Pakistan's production estimate
           use should continue to recover, how-          per day arrivals are reported around         due to devastating floods and the small-
           ever more slowly than in 2009-10 due          2,00,000 lakh bales comprising of            er-than-expected Chinese production,
           to limited available supplies and high        35000 to 40000 bales in Northern             restrictions on shipments from India and
           prices of the fiber.                          States, 50,000 to 52,000 bales in            the weakening of the U.S. dollar. The
               In India, cotton prices firmed with       Maharashtra, 55,000 to 57,000 bales          U.S., world's No. 1 exporter, and India
           moderate transaction. The cotton prices       in Gujarat, 15000 to 17000 bales in          likely signaled the end of worries about
           have jumped by Rs 1800 per candy. The         Madhya Pradesh, 2,500 to 3000 bales in       acute shortages. The new crop arrivals
           Shankar -6 prices quoted Rs 42,300 to         Karnataka and around 35,000 to 37,000        have already commenced in Northern
           42,700 per candy across the Gujarat           bales in Andhra Pradesh. As on 30th          States as also in Maharashtra, Gujarat,
           state. While in Maharashtra the price         October2010, the progressive arrivals        Madhya Pradesh, Karnataka and
           stood at Rs 42,200-42,500 a candy.            are 21.07 lakh bales as against 17.15        Andhra Pradesh which contain moisture
           Cotton prices were quite due to firm          lakh bales in previous year. The progress    up to 12 to 15%. There is likelihood of
           selling mode of ginners continued             of cotton seen during the first decade       higher arrival but international funda-
           demand from domestic mills and spin-          of this century is being sustained dur-      mentals will be the major factors to
           ners. Mostly buying has been from lead-       ing the second decade also. For instance,    watch out in the coming days. In the
           ing local mills that were active in the       area has touched a new record of 109.6       domestic cotton prices may remain
           market. The Textile Commissioner has          lakh hectares and production has also        steady to weak in the coming week.
           recently suspended cotton exports reg-        reached a new high of 325 lakh bales              (Writer is MD, National Spot Exchange
           istration saying they have received           in 2010-11. Productivity has also made                                     of India Ltd.)

           20   MONEY MANTRA   16-30 November, 2010
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           Nifty to confine in the range
           of 5900-6400 in November
              Ashish Kapur                              After the stupendous rise                  are plenty of stocks beyond the large

                                                                                                   cap universe which are still available
                Markets so far, have managed to         in the last couple of                      at very reasonable valuations. So go
           surprise us with its speed and momen-        months, a short term                       ahead and adopt a stock specific
           tum. With a terrific listing of Coal                                                    approach. There are still plenty of
           India IPO, we saw a good amount of           correction cannot be ruled                 money making opportunities though
           liquidity coming back to the second-         out. But we are confident                  selection of stocks in the mid and small
           ary market. This is helping in retaining                                                cap universe requires a lot of research
           the market buoyancy and thereby,             that the bull market is here               and patience.
           reducing the risk of a major correction.
                The festivities have also rubbed off
                                                        to stay for some time. From                 TECHNICAL ANALYSIS
           on the stock market with the indices         here till the budget in                        October month witnessed rather
           consolidating their gains and getting                                                   upbeat start with CNX Nifty opening
           ready for the next big move upwards.
                                                        February next year, one can                above 6000 levels on the first day and
           Sparkling Q2 numbers and continuous          expect the indices to                      quite well managed to close 110 points
           rush of money from FIIs helped the                                                      higher at 6143.4. Index crossed 6200
           indices to touch new highs in the pre-       gradually inch higher and                  mark in the very first week and scaled
           mahurat trading session.                     cross the all time high                    a high of 6284 in the middle of the
                According to latest data, the FIIs                                                 month. However, second half of the
           have already done net purchases of           before the important policy                month was a bit slow as bears pulled
           around Rs.1.2 lakh crores (year to           announcement.                              the index to the` bottoms nearing
           date) and moving ahead, we expect a                                                     5937.1.
           further inflow on the back of second         caps with only a few mid caps deliv-           The Put call ratio for October has
           round of Quantitative Easing by US.          ering strong returns. However with         marginally decreased to 1.36 from
           This inflow, along with an expected          retail participation likely to increase    1.57 a month earlier. It signifies posi-
           increase in retail participation will help   and large caps becoming very expen-        tivism amongst investors as open inter-
           the market trend to remain positive.         sive one can expect mid and small caps     est in the calls has increased as per
           Though, after the stupendous rise in         to start participating in a big way. The   the ratio. However, PCR being a con-
           the last couple of months, a short term      good news for investors is that there      trarian indicator usually suggests neg-
           correction cannot be ruled out.
                However, the long term trajecto-                                         NIFTY INDEX
           ry indicates an upside as the develop-
           ing Indian economy has a lot of steam
           left. The dazzling Q2 results confirm
           a strong earnings momentum and on
           the back of these stellar corporate
           numbers and possibility of retail
           investors coming back to the markets,
           we are confident that the bull market
           is here to stay for some time. From here
           till the budget in February next year,
           one can expect the indices to gradu-
           ally inch higher and cross the all time
           high before the important policy
                Sectors like automobile and bank-
           ing which are leading the rally can be
           accumulated on declines. Along with
           these, money can also be invested in
           sectors like Sugar, Textile, Paper,
           Power and Logistics which are turning
           around and are available at attractive
                Market so far has been led by large

                                                                                                        16-30 November, 2010   MONEY MANTRA   21
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          D STREET
                               PUT CALL CONCENTRATION (Nov)                                         call and 6300 call with ~51 lakh and
                                                                                                    ~50 lakh shares outstanding respec-
                                                                                                    tively. However, 6000 strike put con-
                                                                                                    tinues to witness highest open inter-
                                                                                                    est with ~69 lakh shares outstanding.
                                                                                                    Also, heavy build up is seen at 5800
                                                                                                    put and 5900 put with ~52 lakh shares
                                                                                                    and ~47 lakh shares outstanding
                                                                                                        The Nifty open interest put-call
                                                                                                    ratio for November series is close to
                                                                                                    ~1.4. A Put Call Ratio of 1.4 suggests
                                                                                                    that for every one call option, 1.4 put
                                                                                                    options are being bought.
                                                                                                        Overall bullish bias prevails and
                                                                                                    the data suggests that investors are
                                                                                                    looking at 5800 levels of Nifty as a
                                                                                                    strong support in the near term and
                                                                                                    6500 as strong resistance. The above
                                                                                                    data suggests a trading range of 5800-
                                                                                                         (Writer is CEO, Investshoppe India Ltd.)

           ative bias for Nifty in immediate
           future.                                                                 OPTION STRATEGIES
               Besides, NSE's Volatility Index             BUY 5 LOTS OF 6300 CALL @ `99; SELL 15 LOTS OF 6400 CALL
           VIX closed at 21.58 indicating the per-         @ `54, SELL 15 LOTS OF 5700 PUT @ `5, and BUY 5 LOTS OF 5800
           centage by which the underlying basis           PUT@ `8.
           is expected to move in the next 30                   For investors who believe the Nifty will remain in uptrend but confin-
           days. VIX hasn't changed much since             ing itself in range may initiate this strategy. This strategy will give an inflow
           the last month.                                 of ~`17000 and a fixed return of ~1.8% between 5800 and 6300. At 5700
               On the charts, On Balance Volume            and 6400 levels, the maximum gain is ~4.5%. Below 5620 and above 6480
           (OBV) started treading slightly down-           the strategy will incur losses.
           wards since beginning of the month
           which eventually had its impact on
           the price trend as Nifty went down to
           touch 5950 levels later in the month.
           Besides, Relative Strength Index (RSI)
           cooled off sharply from the over-
           bought zones and has confined itself in
           a range since then. 9-Day signal line
           has crossed MACD line from the bot-
           tom signifying correction on the
               However, the six month long trend
           line is still strong. The Nifty has
           already witnessed a strong opening
           this month. It appears Nifty will con-
           fine itself in the range of 5900-6400
           in the November month.
                                                           BUY 5 LOTS OF 5500 NOVEMBER PUT @ `2.85, SELL 10 LOTS OF
           PUT CALL                                        DECEMBER 5700 PUT @ `27, and BUY 5 LOTS OF NOVEMBER
           CONCENTRATION                                   5900 PUT @ `13.
               The Nifty VIX has lowered down                  The above strategy will be most beneficial for the investors who think
           to ~20% from 23% in the last 15 days            that the market will be inching towards new highs from the current level.
           indicating overall stability in the mar-        The above strategy will completely protect the investor. This strategy will give
           kets.                                           an inflow of ~ `9500 and a fixed return of ~3% till 5500 level and above
               Total Open interest of option seg-          5900 levels. Between 5500 and 5900; the maximum gain is ~19% at 5700
           ment is ~7.8crores. Heavy action is             levels. The strategy involves buying of near month put options and selling
           seen at 6500 strike call with ~71 lakh          of far month puts. The investor will benefit as near month options time
           shares outstanding followed by 6400             value will decay faster.

           22   MONEY MANTRA   16-30 November, 2010
EP 18-35- alok.qxd    11/10/2010      6:50 PM      Page 7

           Cadila                              BUY                  CMP: Rs.740.70                   TARGET: Rs.890

           Increasing visibility of business
           from Hospira JV to add force
              Ashish Kapur                                                 Cadila: 3 months performance
                Cadila Healthcare is a pharma com-
           pany involved in the business of man-
           ufacturing and marketing of pharma-
           ceutical products, both active pharma-
           ceutical ingredients and finished dosage
           formulations. Its operations are in
           Indian and several other generics mar-
           kets across the globe. Company is also
           engaged into research and development
           in the areas of new molecular entity
           (NME), novel drug delivery systems
           (NDDS) and generic product develop-
           ment. It is 5th largest player in the
           Indian formulations market. Cadila has
           strong brands like EverYuth,
           SugarFree, Nutralite under its separate
           listed subsidiary- Zydus Wellness.
                                                       focusing on prescription markets like         maintaining the growth momentum.
           Investment Rationale                        France and Spain in Europe. It has            The company is also targeting new ther-
           Bolstering Exports                          adopted inorganic route to enter these        apeutic segments to increase the scale
               Currently Cadila is getting ~40% of     markets by acquiring Alpharma in              and scope of its operations in India. In
           revenues from formulations exports. It      France and Laboratorios in Spain. The         healthcare segment company functions
           entered the US market 5 years ago and       company has forayed into Japan mar-           in three segments namely "Sugar sub-
           in this short span of US operations, it     kets by acquiring Nippon in 2007 and          stitutes," "Skin-care," and "Margarine"
           has been able to grow its US sales at       has successfully entered Taiwan last          which are separately under a 72% sub-
           CAGR of 91% from FY06 to FY10 and           year and with that it has become the first    sidiary called "Zydus Wellness." It is
           currently contributes 19% of gross rev-     Indian company to start operation in          growing @ CAGR of 34% since last 4
           enues. The company plans to launch 12-      highly regulated but promising markets.       years. It is a market leader in Peel off
           15 ANDAs annually. Cadila is also           It has plans to enter Thailand soon           segment with 98% market share and in
           making foray in high value generics like    which is looking attractive given the         Scrubs with 75% market share under
           pulmonary, transdermal, oncology, hor-      branded generics characteristics and          "Skin care segment." Also, it is the
           mones, and topical products which is        low competition of the markets. Cadila        largest player in "Margarine" segment.
           $180 billion plus opportunity in near       has done some JVs with renowned play-         It has recently launched "Menz" under
           to mid-term period.                         ers like Hospira (anti- cancer                "Skin care segment" for men.
           Inorganic Rack-Up                           injectibles), Nycomed, Bharat Serum.
               Cadila is not looking at tender based   It provides revenue visibility and
                                                                                                     Outlook and valuations
           markets like Germany and is mainly          improves its know-how which reduces                The strong traction in the domes-
                                                       risk for the company. Together these          tic and export businesses and the
            Key Indicators (As on Nov 08, 2010)        JVs are contributing ~5% to revenues.         increasing visibility of business from
           Face Value (Rs.)        5                   Strong Domestic Presence                      Hospira JV will add force to Cadila's
           Closing Price (Rs.)       740.70                 It is a leader in cardiovascular, gas-   continued path towards growth.
           52 week H/L(Rs.)          757.75/390
                                                       tro intestinal, women's healthcare, and       Further, backed by the licensing deals,
                                                       respiratory segments in the covered           the monetization of its strong R&D
           Market Cap (Rs. Crore)    15008
                                                       market. Domestic formulations con-            pipeline and the early success in trans-
           EPS (Rs.)                 31.09             tributed 40% to gross revenues in FY10        dermal and oncology segments would
           BV per Share (Rs.)        60.21             with 95% coming from branded formu-           act as a trigger going forward. The stock
           P/B                       12.17             lations portfolio. It is having a run-rate    is trading at 22.0x for FY11E and 17.5x
           P/E                       23.58             of around 60 launches (including line         for FY12E earnings and has decent
                                                       extensions) in the domestic market thus       upside potential.

                                                                                                           16-30 November, 2010   MONEY MANTRA   23
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            BROKER’S PICKS
           Solar Industries                               BUY                  CMP: Rs. 599                     TARGET: Rs. 665

           Mining may spur demand
                HDFC Research Team                                     Solar Industries : 3 months performance
           Since being established in 1995, Solar
           Industries India (SIIL) (formerly
           known as Solar Explosives Limited)
           has been a leader in the specialized
           industry of explosives. SIIL manufac-
           tures a complete range of industrial
           explosives and explosive initiating
           devices. Its product range includes car-
           tridge explosives, bulk explosives, det-
           onators and detonating fuse etc. SIIL
           has a licensed capacity of 2,50,450 MT
           of explosives (76,590 MT of cartridge
           explosives and 1,73,860 MT of bulk
           explosives), 140 mn detonators and 75
           mn mtrs of detonating fuse, which is the
           highest licensed capacity in India.
               Triggers: 1. Due to stringent reg-
           ulators and lengthy licensing proce-
           dures to set up new explosives plant, the           3. With the Government’s thrust on        SIIL’s revenues to grow at a CAGR
           entry barriers in the explosives industry      power, we expect the demand for coal           of 21.89% over FY10-FY12 (E). PAT
           are quite high. As a result, we expect         to increase sharply. Further, the devel-       is expected to grow at a CAGR of
           SIIL, who is a market leader (23-24%           opment of infrastructure in the coun-          18.5% over the same period.
           market share in India) to be a key ben-        try is also leading to increase in steel and   Operating margins are expected to
           eficiary of the increase in explosive          cement demand. These are key posi-             expand to 16.8% in FY11 and 17.3%
           demand in the country.                         tives for the growth of the explosive          in FY12 due to higher proportion of
               2. Other than ammonium nitrate,            industry.                                      Africa revenues and lower proportion
           SIIL is backward integrated for all other           3. SIIL has set up operations / is in     of ammonium nitrate trading. Interest
           raw materials and components. This             the process of setting up plants in            costs are expected to increase to Rs.
           gives the company an edge over the             Zambia (operational), Nigeria (Jan             15.8 cr in FY12 while depreciation
           competition and leads to stable margins.       2011) and Tanzania (could be opera-            costs will also move up in line with the
           Also, SIIL has entered into contracts,         tional by July / Aug 2011). This not only      capex planned by the company. At the
           which contain price escalation clauses         helps the company diversify geograph-          CMP of Rs. 555.40 SIIL is quoting at
           for ammonium nitrate and diesel with           ically, it also aids in boosting exports       13.7x its FY11 (E) and 11.7x its FY12
           most customers that also aids in protect-      of detonators and detonating fuse and          (E) EPS of Rs. 40.5 and Rs.47.5.
           ing margins.                                   capitalizing on the growing African                 Outlook and Valuations: SIIL is
            Key Indicators (As on Nov 08, 2010)           market.                                        the largest player in the explosives
           Face Value (Rs.)        10                          4. SIIL is planning to increase           industry. Capacity expansion in met-
                                                          capacity of the high margin small diam-        als, power and cement industries along
           Closing Price (Rs.)          599
                                                          eter cartridge explosive as well as det-       with the Government’s thrust on infra,
           52 week H/L(Rs.)             605/342           onators and detonating fuse in India.          which are among the major users of
           Market Cap (Rs. Crore)       1030.59           The company plans to spend capex of            coal, is expected to heighten coal min-
           EPS (Rs.)                    26.36             Rs. 100 cr over the next 2 years on these      ing operations. Increased mining
           BV per Share (Rs.)           111.01            initiatives.                                   activity would in turn spur
                                                               5. SIIL has integrated forward and        demand for explosives. Further,
           P/B                          5.36
                                                          acquired a strategic interest in two           SIIL has set up / is in the process of
           P/E                          22.57
                                                          coalmines in Chhattisgarh through a            setting up plants in Africa which is
            Shareholding Pattern (in %)                   subsidiary and a joint venture. While          expected to add a fillip to its growth.
            (As on Sep 30, 2010)                          this is yet in the early stages, it could      We think SIIL could trade at 13.5-14x
            Promoters                   74.60             yield benefit over the medium term.            its FY12 (E) EPS. We recommend a
            FIIs                         1.16                  SIIL reported a topline of Rs. 557.4      buy on the stock at the CMP (add on
            DIIs                        15.49             cr in FY10 (up 14.3% y-o-y), operat-           declines to the Rs. 510-Rs. 530 band)
            Others                       8.75             ing margins of 15.9% and PAT of Rs.            for sequential price targets of Rs. 641 &
            Total                       100.0             58.6 cr (up 32.7% y-o-y). We expect            Rs. 665.

           24    MONEY MANTRA   16-30 November, 2010
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                                                                                                      BROKER’S PICKS
            Crompton Greaves                           BUY              CMP: Rs.325.60                   TARGET: Rs.375

           Growth in power sector to give impetus
                 John Perinchery
                                                                 Crompton Greaves: 3 months performance
           As one of the world`s leading engineer-
           ing corporations, Crompton Greaves
           (CG) provides end-to-end solutions,
           for effective use of electrical power and
           increase in industrial productivity with
           sustainability. CG was established in
           1937 in India; and, since then the
           Company has been a pioneer and has
           retained its leadership position in the
           management and application of elec-
           trical energy. It’s diverse portfolio
           ranges from transformers, switchgear,
           circuit breakers, network protection
           & control gear, project engineering,
           HT and LT motors, drives, lighting,
           fans, pumps and consumer appliances
           and turnkey solutions in all these areas;
           thus enhancing the many aspects of
           industrial and personal life. This port-
           folio has been structured into 3 SBUs       dated basis. On the back of revival in    the segment fell by 110bp to 17.5%.
           - Power Systems, Industrial Systems         the construction of wind farms in         Management expects deliveries to nor-
           and Consumer Products.                      Europe and the ensuing demand for         malise during 2HFY2011. Revenues of
               Crompton Greaves (CG) reported          distribution transformers, the overseas   the industrial segment grew 17.6%
           better-than expected results for            power systems segment registered          yoy, while EBIT margins dropped by
           2QFY2011. On a consolidated basis,          23% yoy growth. However, adjusted         110bp to 20.5%. Going forward, man-
           CG posted revenue growth of 9.5%            for the Euro depreciation, the segment    agement expects the segment to reg-
           yoy to 2,398cr (2,189cr), while PAT         reported 6.8% yoy growth. On the          ister 15% growth with incremental
           increased 10.5% yoy to 214cr (193cr).       domestic front, revenue growth was led    order inflow from the cement, sugar,
           We are revising our estimates upwards       by the consumer products segment,         oil & gas and steel segments during
           and upgrade the stock from Neutral to       which reported strong 23.9% yoy           2HFY2011.
           Buy.                                        growth, while the power and industri-     Outlook and Valuation: Revival in
           Riding high on demand revival: The          al segments registered 6.6% and 17.6%     the overseas power systems coupled
           power systems segment after reporting       yoy growth, respectively. On a con-       with expected growth in the domestic
           negative growth for the last four quar-     solidated basis, CG reported 9.5% yoy     power sector, industrial capex and the
           ters bounced back in 2QFY2011 reg-          growth in revenues to 2,398cr, while      growing consumer durables segment
           istering 6.8% yoy growth on consoli-        EBIDTA and PAT grew 8.6% and              augur well for CG. Management con-
            Key Indicators (As on Nov 08, 2010)        10.5% yoy to 333cr and 214cr, respec-     tinues to maintain its revenue and
           Face Value (Rs.)        2                   tively.                                   profitability guidance for FY2011
                                                       Consumer products segment drives          despite remaining cautious on the
           Closing Price (Rs.)       325.60
                                                       domestic business: The growth in the      revival in wind farm constructions in
           52 week H/L(Rs.)          341/207           domestic business was led by the con-     Europe and the uncertain outlook for
           Market Cap (Rs. Crore)    21499.59          sumer products segment, which report-     the American markets. We have
           EPS (Rs.)                 10.40             ed strong 23.9% yoy growth, while         revised our revenue and earnings esti-
           BV per Share (Rs.)        27.28             the power and industrial segments         mates upwards and expect the com-
                                                       recorded 6.6% and 17.6% yoy growth,       pany to register top-line and bottom-
           P/B                       12.29
                                                       respectively. Management expects the      line CAGR of 11.7% and 4.2% respec-
           P/E                       32.23             consumer product segment to maintain      tively, over FY2010-12. At the cur-
            Shareholding Pattern (in %)                the growth rate during 2HFY2011as         rent price, the stock is quoting at 23.3x
            (As on Sep 30, 2010)                       well on the back of better margins and    and 20.2x FY2011E and FY2012E
            Promoters                   40.92          does not foresee any pricing pressures,   EPS, respectively. We recommend a
            FIIs                        20.36          going forward. The power systems seg-     Buy on the stock, with a target price
            DIIs                        22.22          ment recorded subdued growth dur-         of Rs.375.
            Others                      16.50          ing 2QFY2011 due to deferred off-take            (Writer is associated with Angel
            Total                       100.0          at the customer end. EBIT margin of                                       Broking)

                                                                                                       16-30 November, 2010   MONEY MANTRA   25
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            BROKER’S PICKS
           OnMobile    BUY                                          CMP: Rs.335.20                               TARGET: Rs. 391

           Riding on Telefonica & Vodafone
                Amar Ambani                                                  Onmobile: 3 months performance
           OnMobile is one of the largest white-
           labeled Data and Value Added Services
           [VAS] companies for Mobile, Landline
           and Media Service Providers.
           OnMobile touches over 86 million
           users across 28 countries every month.
           It generates top line revenue of 1 Billion
           USD for over 92 customers globally.
           OnMobile offers innovative array of
           products in M-commerce, entertain-
           ment, media portals & interactive tel-
           evision programming, mobile market-
           ing, user-generated content & social
           networking, mobile utility, data & 3G,
           and information & network products.
           OnMobile’s products span all mobile
           access channels such as Voice, SMS,
           WAP, USSD, On-Device Portal & Web.                                             Valuation summary
           Incorporated in the year 2000,
           OnMobile is the first Indian telecom           Y/e 31 March (Rs m)              FY09         FY10        FY11E          FY12E
           VAS Company to go public. The com-             Revenues                         4,064        4,544       5,409          6,956
           pany’s shares are listed on the Bombay         yoy growth (%)                   55.2         11.8        19.0           28.6
           Stock Exchange (BSE) and the National          Operating profit                 1,281        831         1,147          1,468
           Stock Exchange (NSE) as on March 31,           OPM(%)                           31.5         18.3        21.2           21.1
           2010. OnMobile is headquartered in
                                                          Pre-exceptional PAT              852          424         754            954
           Bangalore, India where it has a large
           R&D centre and network operations              Reported PAT                     852          428         754            954
           centre. With over 1200 employees               yoy growth (%)                   39.5         (49.8)      76.2           26.5
           worldwide, OnMobile has offices
           around the globe, including London,            (valid for a period of 5-7 years) and non-        Controls ~33% of domestic non-
           Paris, Silicon Valley, Miami and Seattle.      exclusive market rights to deploy sev-        SMS VAS market: OnMobile has firm-
                Telefonica deal to ramp up rev-           eral of its VAS products. These include       ly ensconced itself in the leadership posi-
           enues beyond FY11: In June’ 09,                RBTs, Music Radio, Soccer Portal etc          tion as the dominant VAS provider to
           OnMobile signed an agreement with              in Telefonica operated 13 Latin               majority of domestic telcos. We reckon
           Telefonica, amongst the world’s largest        American countries. OnMobile is like-         OnMobile FY10 domestic revenues
           mobile operators, for an exclusive             ly to complete roll out by Mar’-Apr’          accounted for ~33% of the addressable
           Key Indicators (As on Nov 08, 2010)            11. As of Q2 FY11, company has gone           VAS market (ex-P2P SMS & non-aggre-
           Face Value (Rs.)       10                      live in 3 countries including Mexico, the     gator share of revenues) worth Rs10-
                                                          first large-scale deployment. Real            11bn.
           Closing Price (Rs.)    335.20
                                                          impact of Telefonica deal would be felt           Robust ~49% EPS CAGR under-
           52 week H/L(Rs.)       543.30/256.8            from FY12 as rapid revenue ramp up            pins our BUY: OnMobile is set to report
           Market Cap (Rs. Crore) 1960.2                  occurs from next fiscal.                      increased traction in revenues driven by
           EPS (Rs.)                    11.83                 OPM recovery seen on stable con-          leadership in domestic business and
           BV per Share (Rs.)           123.24            tent cost: Content cost, except for one       upsides from Telefonica and Vodafone
           P/B                          2.71
                                                          of Q4 FY10, has been contained at about       deals. It would incur a capex of Rs700-
                                                          20% of sales in the past 6 quarters. In our   800mn and pay Rs1.7bn in deferred lia-
           P/E                          28.23
                                                          earlier discussion with the company,          bility to Telefonica in the current fis-
            Shareholding Pattern (in %)                   management has indicated that content         cal, comfortably supported by Rs1.5bn
            (As on Sep 30, 2010)                          cost may not deviate materially from          in operating CFs. We project
            Promoters                   50.11             current level, despite the ongoing            revenue/EPS CAGR of ~24%/49%
            FIIs                        24.02             Telefonica deployment. Also, as rev-          over FY10-12 coupled with improved
            DIIs                         6.02             enues kick in from international deals,       OPM.
            Others                      19.85             benefits of operating leverage could help                     (Writer is Head of Research
            Total                       100.0
                                                          expand OPM by ~280bps over FY10-12.                                    with India Infoline)

           26    MONEY MANTRA   16-30 November, 2010
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                                                                                                      BROKER’S PICKS
           Axis Bank                   OUTPERFORMER               CMP: 1556.60 TARGET: Rs.1850 (12 months)

           Growth momentum to sustain
              Pathik Gandotra                                          Axis Bank: 3 months performance
           Axis Bank delivered a net profit growth
           of ~38% yoy to Rs7.4bn in Q2FY11,
           marginally ahead of our estimate of
           Rs7.1bn. NII grew by 41% yoy to
           Rs16.2bn in Q2FY11, ahead of our esti-
           mate of Rs15.8bn. Margins remained
           flat qoq at 3.7% as rise in costs of
           deposits (14bp qoq) was partly compen-
           sated by an increase in yield of
           advances. Margins were also aided by
           93bp qoq increase in yield on invest-
           ments to 7.52% in Q2FY11.
               Asset quality remains steady qoq:
           Slippages amounted to Rs4.5bn in
           Q2FY11 (1.6% of advances annualized)
           – as against Rs4.2bn in Q1FY11. Bulk
           of the slippage is indicated to emanate   expectations. Coverage ratio (excluding      has sequentially expanded by 140bp to
           from the retail and SME portfolios. The   write-offs) has increased to 70% from        41.6% led by 9% qoq (35% yoy) growth
           management indicated that while delin-    69.2% in Q1FY11 (80.2% including             in savings deposits and 12% qoq growth
           quencies from the retail unsecured book   prudential write-offs). Going forward,       in current deposits (28% yoy). Though
           appears to have peaked, slippages from    we see concerns on Axis Bank’s asset         higher growth in total deposits (36%
           SME loans remain a key monitorable.       quality abating as buoyant economic          yoy) has led to 115bp decline in CASA
           Gross NPAs have remained stable qoq       growth, which along with an elevated         ratio on a yoy basis, it continues to
           at 1.12% as against 1.13% in Q1FY11       coverage ratio would lead to decline in      remain one of the best in the industry.
           - a rise of Rs215m qoq in absolute        provisions in H2FY11.                            Operating expenses grew by 28%
           terms. Net NPAs have also remained             Sluggish credit growth – in line        yoy in Q2FY11: While employee
           stable at 0.34%. The bank restructured    with the industry: AXSB’s credit             expenses increased by 33% yoy to
           Rs600m of additional loans during the     growth was muted at 1.8% qoq to              Rs4.1bn, other operating expenses
           quarter, and overall restructured loans   Rs1106bn. Loans to the large and mid         increased by 25% yoy. The bank added
           declined by ~12bp qoq to 1.69% of total   corporate segment increased by 6% qoq        53 branches and 372 ATMs in Q2 and
           loans.                                    and 59% yoy driven by infrastructure,        the management aims to add 200-250
               Provision expenses under leash:       IT, cement and metals during the quar-       branches in FY11.
           Provision expenses came in at Rs3.8bn     ter. However, retail and SME advances            Well capitalized for growth: Tier
           in Q2FY11, a 24% yoy decline and 14%      remained flat qoq, while that for the agri   I capital for the bank stands at 9.77%
           qoq rise, marginally higher than our      sector declined by 14% qoq.                  (10.68% including H1FY11 profits) vs.
            Key Indicators (As on Nov 08, 2010)           Traction in fee income: Fee             10.32% in Q1FY11. Overall, CAR
           Face Value (Rs.)        10                income grew by 18% yoy (on higher            stands at 13.68% as against 14.5% in
                                                     base due to accounting change) and           Q1FY11. The bank is well capitalized
           Closing Price (Rs.)      1556.60          14% qoq to Rs8.5bn in Q2FY11.                to sustain the growth momentum in the
           52 week H/L(Rs.)         1608/919.20      Excluding the impact of accounting           near term.
           Market Cap (Rs. Crore)   63709.63         change (pro-rata of commission income            Outlook: Owing to higher-than-
           EPS (Rs.)                70.79            over the life of guarantee) implement-       expected NII growth, we expect the
           BV per Share (Rs.)       392.04           ed from Q4FY10, fee income has reg-          bank to sustain the earnings momentum
                                                     istered a robust 23% yoy growth. The         at 31% CAGR over FY10-12. The stock
           P/B                      3.97
                                                     traction has been primarily driven by fee    is currently trading at 3.4x FY11E and
           P/E                      21.98            from large and mid corporate credit (up      2.8x FY12E adjusted book value. In
            Shareholding Pattern (in %)              54% yoy), and treasury & debt capital        view of the bank’s consistent delivery
            (As on Sep 30, 2010)                     markets (23% yoy). Treasury gains            on earnings and RoA, we see it emerg-
            Promoters                   37.51        came in at Rs1.1bn with gains on fixed       ing as a ‘best-in-class’ franchise and
            FIIs                        37.24        income securities at Rs320m.Overall,         expect the current valuation discount of
            DIIs                         5.53        other income increased by 3% qoq to          ~30% with respect HDFC Bank to nar-
            Others                      19.72        Rs10.3bn.                                    row.
            Total                       100.0             Elevated CASA ratio: CASA ratio            (Writer is associated with IDFC-SSKI)

                                                                                                       16-30 November, 2010   MONEY MANTRA   27
EP 18-35- alok.qxd     11/10/2010         6:50 PM      Page 12

            BROKER’S PICKS
           Dish TV      BUY CMP:                                        Rs.67 TARGET:                     Rs.74 (12 months)

           Soaring on subscriber base
                Karan Mittal                                                 Dish TV: 3 months performance
           Dish TV is a division of Zee Network
           Enterprise (Essel Group Venture). EGV
           has national and global presence with
           business interests in media program-
           ming, broadcasting & distribution, spe-
           cialty packaging and entertainment. Zee
           Network incorporated Dish TV to mod-
           ernize TV viewing. Dish TV is India’s
           first direct to home (DTH) entertain-
           ment service. By digitalizing Indian
           entertainment, this enterprise brought
           best television viewing technology to
           the living room. It not only transmits
           high quality programmes through satel-
           lite; but also gives a complete control
           of selecting channels and paying for
           them. Dish TV imparts DVD quality                                                         Rs 475 crore. Altogether, the compa-
           picture and stereophonic sound effects                Technical Outlook                   ny has raised ~ Rs 1615 crore in the past
           to the customers. It promises to change           The stock has broken out of sym-        year. We believe the company is well
           the experience of TV viewing with its            metrical Triangle pattern above          funded for growth in the next two years.
           uninterrupted transmission service. The          Rs.47 early August’09. Then it ral-      Furthermore, the management has
           endeavour enters next level of enter-            lied up to Rs. 60 levels and now is      taken board approval to raise $200 mil-
           tainment with futuristic features, such          consolidating for the past eight         lion.
           as EPG (Electronic Programme Guide),             weeks.                                       Strong margins could lead to
           parental lock, games, 400 channels,              Measuring implication of the price       early profitability: The Company has
           interactive TV and movie on demand.              pattern projects targets of Rs. 72-      been improving its efficiency and is
           dishtv also brings exclusive national            74 levels over the medium term.          delivering healthy EBITDA margins
           and international channels for the first         Although the share price pulling         QoQ. Dish TV has contracted for the
           time in India.                                   back to the breakout area may not        programming cost with the broadcast-
                Strong subscriber addition: Dish            be ruled out, it could be consid-        ers on a fixed basis rather than on a per
           TV is the market leader in the DTH               ered as a buying opportunity.            subscriber basis, leading to huge cost
           industry with a healthy market share                                                      saving. This cost alone accounted for
           of 31%. It has a total subscriber base         past, the DTH industry has grown at a      ~60% of the total cost and is expect-
           of 8.3 million at the end of Q2FY11.           faster than expected pace, adding about    ed to reduce to 53% by FY12E.
           The subscriber base for the company            5.3 million subscribers in H1FY11.         Healthy subscriber addition and strong
           has grown at 31.9% CAGR (FY07-10)              Given the festive season in Q3 and the     EBITDA margin could lead to earlier
           to 6.9 million subscribers. In the recent      Cricket World Cup to follow in Q4, we      than expected profitability for the
                                                          expect even stronger traction in sub-      company.
            Key Indicators (As on      Nov 08, 2010)
           Face Value (Rs.)             1                 scriber growth. Dish TV being the              Valuation: Given the healthy sub-
                                                          industry leader and with 26.6% share in    scriber addition in the industry and
           Closing Price (Rs.)          67
                                                          new additions in H1FY11, would gain        high share of Dish TV in net adds at
           52 week H/L(Rs.)             70.90/34.90
           Market Cap (Rs. Crore)       7146.18
                                                          immensely from this subscriber out-        26.6% in H1FY11, we have revised our
           EPS (Rs.)                    -2.47
                                                          burst. Dish TV is expected to add 2.9      subscriber estimates for both the indus-
           BV per Share (Rs.)           -5.51
                                                          million and 3.0 million subscribers in     try and the company for FY11E and
                                                          FY11E and FY12E, respectively.             FY12E. However, we have also tapered
           P/E                           -28.16
                                                              Funding for growth: Dish TV has        down our ARPU estimates in light of
            Shareholding Pattern (in %)                   raised sufficient funds in the last fis-   lost collections in the quarter. Assuming
            (As on Sep 30, 2010)                          cal to take care of future expansion       revenue CAGR of 26.6% over FY11E–
            Promoters                   64.80             needs. The company has raised Rs           FY20E and terminal growth of 4.5%
            FIIs                         8.14             1140-crore through a rights issue in       thereon, we have arrived at a target price
            DIIs                         6.09             October last year. The company also        of Rs 74/share.
            Others                      20.97             diluted 11% equity to US based Apollo                        (Writer is associated with
            Total                       100.0             management in the form of GDRs for                         

           28    MONEY MANTRA   16-30 November, 2010
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                                                                                                           BROKER’S PICKS
           Essar Oil                     BUY                    CMP: Rs.154                    TARGET: Rs.174/190

           Set to fly after turned around profits
              Rajesh Jain                                               Essar Oil Ltd.: 3 months performance
           The Asian markets like Hang Seng &
           Nikkei are in an up- trend and consid-
           ering the current move the momentum
           should continue for the coming weeks
           as well. The recent visits of the Chinese
           & American state heads should give
           boost to the domestic markets as well.
           Nifty Future registered a new high of
           6349. All these factors point out to that
           the markets will remain positive in the
           short term. Thus we would prefer to buy
           instead of short selling the stocks. Essar
           Oil is expected to give a rally as it did
           not participate in the recent run-up and
           Grasim Industries which is cement
           major and cement sector on the whole
           is looking attractive.                       private companies permitted to market         increase of 14%)
           Essar Oil Limited is engaged in pre-         petroleum products in India. The com-         The stock’s overall formation is posi-
           liminary activities relating to bidding      pany posted a turned around profits in        tive. It is trading at 155 with good vol-
           for Oil & Gas fields as well as advis-       Q2FY11. Net profit of the company             umes coming in at these levels. Traders
           ing the Energy. EOL deals with its three     raises to Rs130crore in comparison to         can accumulate between the levels of
           segments of business, such as                the loss of Rs94 crore in Q2FY10. Net         140-150 with a closing stop loss of 130
           Exploration & production, the Refinery       sales of the company increased from           for a near term target of 174 and a final
           and Marketing. EOL is one of the few         Rs 9754crore to Rs 11119crore (an YoY         target of 190.

           Grasim Industries                                  BUY                 CMP: Rs.2427                   TARGET: Rs.2800

           Expansion to boost profitability
           Grasim Industries is the largest viscose              Grasim Industries Ltd.: 3 months performance
           staple fiber (VSF) company and lead-
           ing cement company in India. The com-
           pany has reported 5% fall in the net sales
           at Rs.4503 crore and 59% dip in the
           net profit at Rs.323 crore in the
           Q2FY11. The profits were hit mainly on
           the back of erosion in the cement busi-
           ness revenues and profits. However, the
           VSF business has reported improve-
           ment in revenues, but reported de-
           growth in the profits. In order to scale
           up its presence in the cement sector,
           the company has earmarked brown field
           expansions aggregating to 9.2 million
           TPA at Chhattisgarh and Karnataka
           units with related grinding units and
           bulk terminals with a capex of Rs.5,600      tive thermal power plant, modernization       buy between 2300-2400 levels with a clos-
           crore. An additional capex of Rs.4,500       and completion of existing projects.          ing stop loss of 2200 for a target of 2800
           crore has been allocated for the augmen-     The stock has given a fresh break-out above   and above in the coming weeks.
           tation of the grinding and evacuation        2400 levels. From here we can expect fresh                (Writer is EVP, Retail Research,
           facility, logistics infrastructure, cap-     buying coming in. Traders are advised to                              Religare Securities)

                                                                                                           16-30 November, 2010   MONEY MANTRA   29
EP 18-35- alok.qxd     11/10/2010         6:50 PM       Page 14

           Reaping benefits by investing in E-Gold
                Anjani Sinha                                                            Cost of Purchase (Reference
                                                                                                Place Mumbai)
                With the rising Gold and silver prices       Particular                           E-GOLD                     E-SILVER
           globally, investors have benefited by             Min. Delivery Unit                   1 gram (1 Unit) E-gold     100 gram ( 1 Unit) of E-
           investing in this asset class. Gold has got                                            Demat Receipt              Silver Demat Receipt
           demand from individuals for jewellery,            No. of Unit                          1                          1
           as investment options for retail and insti-       Purchase rate                        2019.7                     3905.3
           tutional investors and as a currency by the       Transaction Cost( ` 10 per lakhs)* 0.201                        0.390
           central banks of different countries. So in       Brokerage @ ` 5/Unit**               5                          5
           general Gold as a commodity is valued             Stamp Duty @ ` 1/- per ` 1 Lakh of 0.020                        0.039
           in multiple ways. There have been sev-            transaction #
           eral innovations in Gold based savings            Service tax @ 10.30%                 0.515                      0.515
           and investment instruments all across the         Total Cost on purchase (` per unit) 5.74                        5.94
           globe. India being the largest consumer
           and importer of gold is at forefront on           structured in a way that allows them to         E-gold, buying gold in quantities as small
           such innovation. Investors are always             offer very low transaction costs to             as 1 gram is possible. Investment in E-
           looking for the investment options which          investors and this is one of their most         gold allows the investor to buy more units
           are very easy and risk free. National Spot        attractive characteristics. Because E-          when the price of physical gold is low and
           Exchange Limited looking at the vari-             gold is traded on exchanges it also allows      lesser units when the price is high. Hence,
           ous needs of gold buyer has come out              investors who would not easily have             over a period of time, there is huge accu-
           with E-Gold; the exchange traded prod-            access to certain investments the oppor-        mulation of units with different prices
           ucts which are available in demat form.           tunity to easily buy and sell a security that   each month and hence the average cost of
                Launch of E- gold by NSEL has made           directly mirrors the movement of that par-      acquiring each unit of E-gold gets con-
           investment in physical bullion easy.              ticular investment.                             siderably reduced in the long term. In
           These are called E-series products which               There are certain inherent advantages      contrast, buying physical gold each
           get accumulated in the demat account of           of E-gold in comparison with physical           month for a small amount may not be pos-
           the investors. E-series has various other         gold. They are:                                 sible practically.
           advantages when compared to direct                     Purity: This is one of the most impor-          Liquidity: In the Liquidity aspect,
           holding of physical gold for the invest-          tant factors why one should go in for E-        both physical Gold and E Gold could not
           ment purpose. In the last one year, E-Gold        gold. While buying physical gold, the           be treated at par as E-gold can be sold
                        have emerged as one of the           buyer can never be 100% sure about the          in the market at any time during 10.00 am
                             best investment instru-         purity of the gold being offered. There         to 11.30 pm while physical gold can be
                                ment for the retail          is always a risk of cheating, mixing, phys-     sold only between 10.00 am to 7.00 pm.
                                  investors as it has        ical and chemical impurities, etc. In case      However, selling physical gold in the
                                   provided return of        of E-gold, the problem of quality concern       market may involve burden of wastage
                                    nearly 18.75% to         does not arise because the gold is in its       charges of around 10 % to 15% arises
                                        the     investors    purest form. There are banks that offer         on account of re-moulding to be borne
                                        which closely        certified gold, but the banks charge a          by the seller. e gold has got not no such
                                      corresponding to       premium of nearly 10% for the coins they        impediments.
                                      the returns provid-    sell. In contrast, in E-Gold investors will          Demographic Variations: The pric-
                                     ed by physical          be paid the market value for the pure Gold      ing of gold tends to vary from vendor to
                                  Gold.                      accumulated in their demat account on           vendor and place to place. But with E-
                                       For those wanting     the date of redemption.                         gold, there is uniformity in pricing across
                                    to own physical               Storage: The most important concern        the country.
                                      gold                   for the buyer of physical gold is storage.           It might be very difficult to change
                                                    with-    The first and foremost thing to do is to        the fixed perception and fixation of
                                                    out      search the right place to store the pur-        Indians to buy gold in the physical form
                                                   storing   chased gold. It usually is a person's home      as they have been doing it for centuries
                                               it, E-Gold    or a bank locker. But the risk of theft         together. But when something so simple
                                     is great alternative.   always looms large. But in case of E-gold,      and safe option for investment in gold
                                      The basic premise      since the gold is stored electronically,        is available in the market, it is worth
                                  behind           E-gold    there is no need to worry about the theft       investing in the E-Gold and see the won-
                                 launch is to give           of gold.                                        ders it has to offer. E-gold can change
                               investors a quick, easy,           Ease in quantity purchase: It is not       the way gold is bought and sold in India
                             and low cost way to             always practically possible to buy small        and it makes perfect sense to capitalize on
                           place a bet on investment         quantities of gold, say 1 gram from the         it as soon as possible to build up a huge
                              in real gold. E-gold is        physical market. But with the advent of         corpus in the long run.

           30   MONEY MANTRA    16-30 November, 2010
EP 18-35- alok.qxd   11/10/2010   6:50 PM   Page 15

                                            Technical Report
            Stocks                 Close                S2         S1    Pivot                 R1                 R2

            SENSEX                 20894              20494      20694   20805              21005              21117
            NIFTY                   6282               6166       6224    6257               6315               6348
            ABB                      862                848        855     864                871                879
            ACC                     1088               1056       1072    1086               1102               1115
            AMBUJACEM                152                147        149     151                154                155
            AXISBANK                1544               1529       1537    1546               1554               1563
            BHARTIARTL               326                321        324     328                330                334
            BHEL                    2525               2491       2508    2522               2539               2552
            BPCL                     760                751        756     762                766                773
            CAIRN                    329                324        326     329                332                334
            CIPLA                    350                347        348     351                352                354
            DLF                      355                348        351     354                358                360
            GAIL                     495                487        491     493                497                500
            HCL TECH                 412                400        406     411                417                422
            HDFC                     740                710        725     734                749                759
            HDFC BANK               2389               2350       2370    2387               2407               2425
            HEROHONDA               1841               1799       1820    1853               1874               1907
            HINDALCO                 226                217        222     225                230                233
            HINDUNILVR               299                292        296     299                302                306
            ICICI BANK              1266               1230       1248    1259               1277               1289
            IDEA                      67                 66         67      67                 68                 68
            IDFC                     215                205        210     213                218                221
            INFOSYSTCH              3077               3013       3045    3065               3097               3117
            ITC                      177                174        176     177                178                179
            JINDALSTEL               719                708        714     717                722                726
            JPASSCIAT                128                121        125     127                131                134
            KOTAK BANK               490                479        485     490                496                501
            LT                      2172               2122       2147    2180               2205               2238
            M&M                      778                749        763     780                794                810
            MARUTI                  1508               1488       1498    1506               1516               1524
            NTPC                     195                193        194     195                195                196
            ONGC                    1368               1306       1337    1360               1391               1414
            PNB                     1370               1304       1337    1358               1391               1412
            POWERGRID                102                 98        100     102                104                106
            RANBAXY                  607                595        601     606                612                617
            RCOM                     182                179        180     182                183                185
            RELCAPITAL               831                811        821     830                840                849
            RELIANCE                1105               1064       1084    1096               1116               1128
            RELINFRA                1050               1034       1042    1050               1057               1065
            RPOWER                   165                157        161     164                168                171
            SAIL                     196                193        194     196                197                198
            SBIN                    3433               3227       3330    3390               3493               3552
            SIEMENS                  837                826        831     840                846                855
            STER                     181                172        177     180                185                188
            SUNPHARMA               2242               2207       2225    2249               2267               2291
            SUZLON                    58                 56         57      58                 59                 59
            TATAMOTORS              1234               1155       1195    1217               1257               1279
            TATAPOWER               1398               1378       1388    1396               1406               1415
            TATASTEEL                622                612        617     620                624                627
            TCS                     1069               1053       1061    1070               1078               1087
            UNITECH                   90                 88         89      90                 91                 92
            WIPRO                    437                432        435     437                440                442

                                                                                 16-30 November, 2010   MONEY MANTRA   31
EP 18-35- alok.qxd    11/10/2010         6:50 PM      Page 16

                      Quarterly GDP growth                                  Inflation

                                 G-Secs yield                              M3 grwoth

                                   CRR, Repo                    IIP and Six Key Infra Ind. growth

           32   MONEY MANTRA   16-30 November, 2010
EP 18-35- alok.qxd   11/10/2010   6:50 PM   Page 17

                           Trade deficit              Current account deficit

                                  FDI                   RBI forex reserves

                          Fiscal deficit               Currency movement

                                                                16-30 November, 2010   MONEY MANTRA   33
EP 18-35- alok.qxd    11/10/2010           6:50 PM       Page 18


                                 Trade cautiously in second
                                   fortnight of November
                                    Kundli 16 Nov 2010, Time: 9:00 am, Place: Mumbai
                                            Rahu                   Sun, Venus

                                              9                         7        6
                                                        Mercury               Saturn
                                      10                   Mars
                                            Jupiter                      5

                                                                       Ketu                                                Pt. Jai Govind Shashtri
                                                                                                                      e mail :

                                                                                                                        Good                                Normal
                                                                                                                      day for                               trade
                                                                                                                      markets.                              expect-
                               Better                                                                                 Bank,                                 ed.
                               day for                                           FIIs to                              Insurance                IT,          Power,
                               Educatio    Rumours                               dominate                             ,                        Telecom,     Infra,
                                                                                 the mar-                Rumours
                               n, IT,      may          FIIs to                              Realty,                  Educatio                 Bank,        IT,
                                                                                 kets.                   may
                               Bank,       affect the   decide                              Power,                    n,                       Insurance    Pharma
                                                                     Dull        Trade in                affect the               Rumours
                               Aviation,   move-        the direc-                          Energy,                   Pharma,                  , Pharma     and
                                                                     trade       line of                 move-                    may
                               Insurance   ments of     tion of                             Infra and                 FMCG                     and          Enginee
                                                                     expected.   market.                 ments of                 affect the
                               , Heavy     market.      markets.                            Engineer                  and Auto                 Educatio     ring sec-
                                                                     Better                              market.                  move-
                               Industry    Trade        Caution                             ing sec-                  Sector to                n sector     tors to
                                                                     day for                             Selling is               ments of
                               and com-    with cau-    is neces-                           tors to do                perform                  to do bet-   perform
                                                                     realty                              expected.                market.
                               modity      tion.        sary as                             well,                     better.                  ter.         better.
                               sector.                               sector.                                                      High
                                                        one can't                           markets
                                                        negate                                                                    volatility
                                                                                            will face
                                                        one side                                                                  expected
                                                        move-                                                                     in after-
                                                        ment.                                                                     noon.

                               16 Nov      17 Nov       18 Nov       19 Nov      22 Nov     23 Nov       24 Nov       25 Nov      26 Nov       29 Nov       30 Nov

           34   MONEY MANTRA   16-30 November, 2010
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           TV WAALE
           36   MONEY MANTRA   16-30 November, 2010
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                                                       Alok Dwivedi & Harish Kumar

                                                           unning the business of business

                                                   R       channels is getting tougher day
                                                           by day. Surviving the channel
                                                   war and staying ahead amid stiff com-
                                                   petition are the biggest challenges. To
                                                   beat the heat, channels try all the for-
                                                   mula to stay in the game. Top tips and
                                                   top picks by experts is a time-tested
                                                   method that all the biz channels adopt
                                                   to keep the investors glued to their tel-
                                                   evision screens. Their views, analysis
                                                   and recommendations are watched and
                                                   followed religiously by some investors.
                                                   But how true and how correct these
                                                   expert advices are? Should investors
                                                   bank on the experts' suggestions blind-
                                                   ly? Given that the 'disclaimer' provides
                                                   the experts an escape route in case their
                                                   predictions go awry, it is a million dol-
                                                   lar question that these biz pundits are
                                                   actually guiding or misguiding the
                                                   investors. And if investors place their
                                                   bets going by the advices of the experts
                                                   and end up burning a hole into their
                                                   pockets, responsibility then would lie
                                                   with whom - the channel or the expert?
                                                   None of them as the disclaimer pro-
                                                   vides them enough breathing space.
                                                   Here we would take a dig into how the
                                                   channels zero in on an expert, what is
                                                   the selection criteria, how much money
                                                   do they offer to rope in on the experts
                                                   for the shows and the accuracy of their

                                                   tips, among others. It's all about the
                                                   TV waale Baba.
                                                   Choosing an expert
                                                       Channels do not have any set pat-
                                                   tern for choosing an expert. Ideally,
                                                   experts are chosen on the basis of their
                                                   expertise on a subject, their experience
                                                   and their popularity among viewers.
                                                   Those experts are preferred who have
                                                   an academic background of CA, CFA,
                                                   MBA, or at least has a commerce
                                                   degree. There are few television experts
                                                   who hold a certificate from BSE or
                                                   NSE. Channels go for those biz pundits
                                                   who have a minimum experience of
                                                   three years in capital markets. Besides,
                                                   if any expert appears on a channel and
                                                   boosts TRP of that show, competing
                                                   channels try to poach him at any cost.
                                                   Popularity matters.
                                                   Important is brand
                                                       Brand name is what channels crave
                                                   for. Generally, big broking houses are
                                                   considered a brand in the market but

                                                        16-30 November, 2010   MONEY MANTRA   37
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            - Partner, Rare Enterprises
                Rakesh Radheshyam Jhunjhunwala
                is no less than a star in the share
                market industry. It his charm that a
                lunch date with him attracted the
                highest bid of Rs.14.02 lakh on
                online marketplace eBay.
                Jhunjhunwala hardly gives any tips
                for a particular share, but whenever
                market finds that he has invested in
                any particular stock, its share price
                automatically shoots up by a
                minimum of 4- 5%. He is a brand in
                himself. JhnunJhunwala is a CA by
                qualification but an investor/trader
                by profession. In 2010, Forbes rated
                him India's 51st and the world's
                1062 richest man with wealth of
                $100 crores. He is a famous equity
                investor in India and manages his
                own portfolio as a partner in his
                asset management firm, Rare

           then there are those experts also who            to be a technical expert depending on         Tulsian, Prakash Gaba and Vijay
           have made a name for themselves over             the three words -- stop loss, target and      Bhamwani are faces for CNBC Awaz,
           the years. Gul Tekchandani, SPTulsian,           trigger. It is also seen that these experts   though they might appear on other chan-
           Shankar Sharma and Rakesh                        even change their own recommenda-             nels. The executive editor of CNBC TV
           Jhunjhunwala are some of those brand             tions (targets and stop loss) thrice in a     18, Udyan Mukharjee, himself has
           names for whom channels shell out any            single trading day gauging the market         become a brand for the channel.
           amount of money. Television channels             movements. However, it is very risky to       However, channels prefer turning only
           also hire big and known names from               trade depending on technical analysis.        those faces into a brand who are from
           broking firms for expert views. But              There are also few experts who do not         outside the organisation.
           there can be no denying the fact that            hold any big degree, do have not ade-
           channels even consider those people              quate experience and nor do come from         Channels have exclusive
           an expert who earlier used to write ana-         any big firms. Still their accurate three,    experts panel
           lytical columns in newspapers only.              four trading calls have helped them               Exclusive group of experts have also
           Now, they can be seen giving recom-              make a reputation in the market. Sayings      come up due to cut-throat competition
           mendations on TV. Also, renowned                 like investment in short term, medium         between business channels. These
           faces too restrict themselves to only one        term, long term and are you buying            groups enter into an agreement with the
           or two channels for they believe too             stocks for investing or trading etc bring     channels concerned and appear on their
           many appearances on TV reduces their             any investor close to these experts.          programmes only and are not visible on
           craze among viewers. Jhunjhunwala                Important here is that for different          shows being run by their rivals. CNBC
           does not prefer appearing on any chan-           experts, definitions of short, medium         Awaaz, Zee Business, CNBC TV18, ET
           nel other than CNBC TV18 and ET                  and long term are different.                  Now, Bloomberg UTV and NDTV
           NOW.                                                                                           Profit all have their expert panels. For
                                                            How many appearances on                       instance, Tekchandani and Tulsian have
           Not only Fundas                                  a channel?                                    entered into a pact with CNBC Awaaz
               Nowadays only fundamental ana-                   How many times a single expert can        for an exclusive programme 'The Gul
           lysts do not serve much purpose. The             appear on a channel? There are no cri-        Tulsian show. An expert on Reliance,
           24x7 running channels hire technical             teria for fixing the limit. Channels jos-     Tulsian's first views on affairs related to
           analysts too to help them. Fundamental           tle with each other to bring in everyday      the company could be sought on CNBC
           analysts are those who recommends on             those experts who are a brand in the mar-     Awaaz only. Also, Rajesh Tambe, who
           the basis of fundamentals like growth,           ket. But for general experts, channels        was once the blue-eyed boy of CNBC
           PE, order book etc. On the other hand,           exercise caution that they are repeated       Awaaz, has shifted loyality towards Zee
           technical analyst analyses any stock on          frequently. It is also kept in mind to        Business. On the lines of the agree-
           the basis of share price movements.              repeat those experts who have become          ment formula, CNBC has roped in
           There is a big group of those who claim          a face of the channel. For example,           Mitesh Thakkar for its programmes.

           38    MONEY MANTRA   16-30 November, 2010
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                   How much important is the advice of experts?

             1. Experienced means people with more than
             two ears experience in stock market.
             2. Novice means people with less than two
             years experience.

             SP TULSIAN
            - Financial advisor,
             S P Tulsian is a well known name in
             the investing fraternity. He is much
             sought after fundamental analyst. For
             the past 33 years, investing and advis-
             ing about the stock market has been
             his passion and profession. Tulsian
             is best known for his expertise over
             matters related to 'Reliance'. Other
             than Reliance, he has a strong knowl-
             edge base of sugar sector.
                 Tulsian is a CA and also a CS.
             His command over the fundamentals
             of markets has made him a frequent
             face on the various business chan-
             nels and publications. He started a
             weekly        tabloid,        Premium
             Investments, as its Editor and publish-
             er and realised his panache for giv-
             ing frank and forthright advice on
             investments. Donning the cap of CEO
             and Editor, he now runs his own
             investment advice portal.

                                                          16-30 November, 2010   MONEY MANTRA   39
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            -Joint Managing Director, Motilal Oswal Financial Services.
                Raamdeo Agrawal has his expertise in
                equity research. He is the Co-Founder
                and Joint MD of Motilal Oswal
                Financial Services. He is the man
                behind the research capability at
                Motilal Oswal Securities and has been
                associated with various boards. A
                B.Com from ACA, Agrawal has been
                writing the annual 'Motilal Oswal
                Wealth Creation Study' since its
                inception in 1996. He is an associate
                member of 'The Institute of Chartered
                Accountants of India' and member of
                the National Committee on Capital
                Markets of the Confederation of Indian
                Industry too. Agrawal was awarded the
                'Rashtriya Samman Patra' by Central
                Board of Direct Taxes for being
                amongst the highest Income Tax
                payers in the country for a period of 5
                years from FY95 to FY99.

                How many invest on the basis of expert’s advice?

                                                           1. Experienced means people with
                                                           more than two ears experience in stock
                                                           2. Novice means people with less than
                                                           two years experience.
           40   MONEY MANTRA   16-30 November, 2010
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                                      Importance of expert’s advice

           1. Youngster
           means people below the age of 35.
           2. Matured means people with above the age
           of 35.

            DEVANG MEHTA
            - VP & Head-Equity Sales, Anand Rathi Financial Services.

              Devang Mehta is known as a research-
              oriented, detail-driven professional having
              11 years of experience in the areas of equity
              advisory, portfolio management, client
              relationship management and business
              development. He has in depth knowledge of
              the research processes, valuation methods
              and dynamics of the market. After doing his
              MBA from Jamnalal Bajaj Institute of
              Management Studies, Mehta started his
              career as a management trainee at Harsh
              Investments. He soon tried his chances as an
              independent business owner at Latin
              Manharlal Securities. Before joining Angel
              Broking as AVP, Investment Advisory, he had
              a dealership of Energy Conservation
              Equipment at Shepherd Transformers
              Industries. Prior to his current job, he worked
              as AVP, Equity Sales at Anand Rathi
              Securities. In recognition to his skills, Mehta
              was bestowed with the Star Performer Award.

                                                                        16-30 November, 2010   MONEY MANTRA   41
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            ASHWANI GUJRAL
            -CEO, Ashwani Gujral Investment and Portfolio Management (P) Ltd.
                    Ashwani Gujral is a technical
                analyst, author, commentator and
                trainer. He follows both Indian and US
                markets. Gujral writes regularly for the
                leading US specialist magazines and
                journals. He is in the exclusive panel of
                CNBC and also a Technical Analysis
                Consultant with Reuters India Ltd. A
                BE in Electronics and Communications
                from Manipal University and an MBA
                in Finance from Georgetown
                University (US), Gujral enjoys the best
                of both worlds. He recently published a
                revised edition of his book "How to
                Make Money Trading Derivatives: An
                Insider's Guide". His new book "How
                to Make Money Trading with Charts" is
                also available in the market. Gujral
                offers two services to his clients called
                Callin Service and Daily Newsletter

                How many invest on the basis of expert’s advice?

                                                       1. Youngster means people below the
                                                       age of 35.
                                                       2. Matured means people with above
                                                       the age of 35.

           42   MONEY MANTRA   16-30 November, 2010
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                           Exp. less than Exp. more than Total                               Age below 35 Age above 35 Total
                           2 yrs in mar-  2 yrs in mar-                                      years        years
                           kets           kets

           How much        Very Imp-      Very Imp-      Very Imp-20%        How much        Very Imp-20%    Very Imp-20%       Very Imp-20%
           important is    37.5%          8.33%          It’s ok-45%         important is    It’ ok-60%      It’s ok-30%        It’s ok-45%
           the advice of   It’s ok-50%    It’s ok-41.67% Immaterial-         the advice of   Immaterial-     Immaterial-        Immaterial-
           experts?        Immaterial-    Immaterial-50% 35%                 experts?        20%             50%                35%

           Faith on your Too much-        Too much-0% Too much- 5%           Faith on your Too much-         Too much-0% Too much- 5%
           broker        12.5%            It’s ok-41.67% It’s ok- 50%        broker        10%               It’s ok-50% It’s ok- 50%
                         It’s ok-62.5%    Little-58.33% Little- 45%                        It’ ok-50%        Little-50%  Little- 45%
                         Little-25%                                                        Little-40%

           Investment on Yes-75%          Yes-0%          Yes- 30%           Investments     Yes-50%         Yes-10%            Yes- 30%
           the basis of  No-25%           No-100%         No- 70%            on the basis    No-50%          No-90%             No- 70%
           broker's                                                          of broker's
           advice                                                            advice

           Money according to                         Once it so happened that a basis of technical charts.

           reputation                                                            How do investors think?
                                                      Hindi channel decided to
                Those experts who have made a                                        These expert tips have an impact
           name for themselves are being paid         measure the accuracy of    on the investors, especially retail
           good money by channels. On the other       the tips provided by the   investors as on many occasions they
           hand, there are a few experts who want                                invest relying on these only. Now the
           to be visible on different channels to     experts. The results were  question is - how effective the advices
           make themselves a known face. The lat-     very disappointing at the  are? The answer varies from investor
           ter category of experts does not get any                              to investor. But according to Money
           money. For them, getting publicity is      end of the week with only  Mantra survey, experience of investor
           the sole motive. Earlier the situation     around 10 per cent         plays a vital role. Much experienced
           was different. At that time experts did                               retail investors give less importance to
           not use to charge any money for mak-       advices being right. Tips  the advices of stock market experts.
           ing appearances. But the growing pop-      given on the basis of      On the other hand, lesser experience
           ularity of experts and the stiff compe-                               in the market leads to dependency on
           tition have made channels pay big bucks    fundamentals performed     the advices given by experts. According
           to the 'branded experts'. But how much     better than technicals.    to the survey, 37.5 per cent investors
           these experts, who help people make                                   who have less than two years of expe-
           money by giving tips, charge for their                                                 rience in the market give more impor-
           appearances is not disclosed either by                                                 tance to these suggestions. Not only
           themselves or by the TV channels.          Whether the tips are right or wrong,        this, 75 per cent of such investors put
           According to sources, if an expert         television channels can't afford to avoid   their hard earned money on the basis
           comes for shows rarely, then neither       the experts. They are bound to invite the   of experts' advice. On the other hand,
           he/she asks for money nor do channels      experts if they have to run stock-relat-    only 8.33 per cent investors who have
           pay them, until they are big shots. But    ed programmes. Once it so happened          more than two years of experience in
           there have been instances where experts    that a Hindi channel decided to meas-       the market give more importance to
           have charged for single appearance too.    ure the accuracy of the tips provided       these advices. Half of the investors
           When it comes to charging amount,          by the biz experts for a week. The plan     falling into this category give less impor-
           experts who come for shows regularly       of action was to jot down all the tips      tance to these tips. Not only this, no
           are paid Rs 5000-10000 per show or         given by stock market experts who           investor in this group puts his/her hard
           Rs 50,000-1,00,000 for a month.            appeared on the channel during the          earned money on the basis of expert's
                                                      week and check whether these were           advice.
           Accuracy of advices                        right or wrong. The results were very            The survey also shows that retail
              When it comes to new experts,           disappointing at the end of the week        investors are more dependent on tele-
           channels make an effort to measure the     with only around 10 per cent advices        vision channels and stock market experts
           accuracy of the tips given by them.        being right. One more thing was clear-      in the initial stages, but as the time pass-
           However, the story is different with       ly visible that tips given on the basis     es their dependency reduces slowly and
           brand names where no effort is made        of fundamentals performed better in         gradually. They start taking into consid-
           to crosscheck the tips provided.           comparison to the advices given on the      eration other sources of information

                                                                                                        16-30 November, 2010   MONEY MANTRA   43
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                SHARDUL KULKARNI
            - Sr. Technical Analyst, Angel Broking
                Having extensive knowledge of
                technical analysis, Shardul Kulkarni
                joined Angel Broking as a Regional
                Manager, Marketing, where he had
                been instrumental in revenue and
                income growth of the Pune Region.
                Based on his performance and fine
                ability to track and time the markets, he
                got a key role in the company's technical
                research team at Mumbai. Here,
                Kulkarni has been given the prime
                responsibility to analyse, conduct market
                research and interact heavily with the
                team, formulate plans and create
                strategies for innovative investment
                research. He has also been conducting
                several technical analysis workshops
                across the country. Kulkarni has
                achieved a Bachelors degree in
                Mechanical Engineering from Pune
                University and is currently pursuing his
                CFA degree.

           also for taking investment decisions.                                                       details of companies while offering
                                                           A stock market expert,

                                                                                                       their valuable advice. The poor investor
           Age matters                                                                                 has to bear the brunt of such tips. But
                                                           having expertise on
                Dependency on television experts                                                       it is seen that in spite of giving wrong
           reduces with the increasing age, which          Reliance Industries, gave                   predictions, such experts continue to
           is a sign of investors' increasing aware-       wrong suggestions a                         make appearances on television.
           ness with the passage with time.
           According to our survey, 20 per cent            number of times about the                   A few exceptions
           investors of below 35 years of age give         company's IPOs, which                           However, there are a few experts
           less importance to the advice of stock                                                      who appear on television channels
           market experts. But on the other hand,          came out this year. But his                 occasionally and offer better sugges-
           50 per cent investors above 35 give less                                                    tions than others. Jhunjhunwala falls
           importance to these tips. This less
                                                           popularity did not take a                   under this category. A huge number of
           importance is clearly visible on their          beating and he continues                    investors follow Jhunjhunwala's port-
           investment decisions as well. Fifty per                                                     folio to decide about what to buy and
           cent investors below 35 take their
                                                           to enjoy the same                           what to sell. During an interview with
           investment decisions on the basis of            reputation.                                 Jhunjhunwala, a TV anchor asked him
           these advices, but only 10 per cent                                                         about his favorite scrips at that junc-
           investors above 35 take such decisions                                                      ture of the market. He said in plain
           on the basis of tips.                           answer things clearly either in affirma-    words that he was going to sell all his
                                                           tive or in negative. And this obligation    investments. He questioned the anchor
           Failures don't harm them                        lands them in trouble. A stock market       'do you want to believe my suggestion?'
                Udayan Mukherjee, the Amitabh              expert, having expertise on Reliance        This interview was done when markets
           Bachchan of stock markets, has a spe-           Industries, gave wrong suggestions a        were at their all time high and Sensex
           cial image among investors. He has an           number of times about the company's         was inching fast towards 21000.
           uncanny gift of being able to talk up           IPOs, which came out this year. But         Everybody knows what happened a few
           to any length on any scrip. But despite         his popularity did not take a beating and   months later in 2008.
           listening him for 10-15 minutes,                he continues to enjoy the same reputa-
           investor can't be sure on whether he is         tion.                                       Wrong means/intentions
           in favour of the scrip or against it! Since         A number of times market experts            It is a fact that there are only a few
           he never commits himself for any scrip,         suggest buy/sell recommendations            experts who talk business. We are liv-
           he is never wrong. This is the reason           about various companies of a sector on      ing in a world where often it is seen
           of his popularity among investors.              the basis of the pro and cons of that       that the tone of experts change with the
                However, market experts have to            sector only. They ignore the specific       very movement of market. They can

           44   MONEY MANTRA   16-30 November, 2010
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           sometimes be forgiven for giving wrong                                                   turbing to see that channels keep on

           tips as they are human beings. But they      Sometimes TV anchors too                    inviting such experts who don't have a
           should be forgiven only when they have                                                   clean image. A renowned expert, who
           no wrong intentions behind giving            try to make profit of the                   was under the scanner of SEBI, was
           motivated tips.                              exclusive news they get. A                  called on various channels until he was
               It is unpardonable when an expert                                                    barred from coming on channels by
           does so intentionally. Experienced           well known anchor of a                      market regulator.
           investors know that these types of           Hindi business channel                          In May this year, SEBI imposed a
           experts exist. Steps taken by SEBI                                                       fine of Rs 5 lakh on a stock market
           against experts are a pointer to the same.   allegedly takes position in                 expert for allegedly misleading
           One thing to look for is that do channels    the stock before the                        investors by providing them false infor-
           check if an expert is helping compa-                                                     mation on a leading business channel.
           nies by making a presence on screen?         news/information about                      The SEBI said in its order that stock
           Do television channels seriously try to      the stock is disseminated.                  expert Pradeep Bhavnani allegedly
           stop such things? A number of times                                                      gave false information about himself
           experts are seen trying to help some         A number of times it is                     and his trade in shares of the United
           companies. Sometimes it is allegedly                                                     Western Bank (UWB). According to the
           done by experts alone and sometimes
                                                        witnessed that television                   SEBI's report, "Pradeep Bhawani was
           channels too are involved in such prac-      channels show wrong                         interviewed on CNBC-TV18 on
           tice. All the channels show a disclaimer                                                 September 5, 2006 regarding United
           to be on a safer side. 'All the advices
                                                        piece of information and                    Western Bank. Bhavnani had claimed
           shown on channel are opinion of expert       correct it a few minutes                    that he was a broker of NSE and that
           and these have nothing to do with the                                                    he had picked up a 7 per cent stake in
           channel' and 'Please take advice of your     later.                                      UWB. He had further added that he
           financial expert before investment' are                                                  would buy more shares to increase his
           a few classical statements/plates shown      ties time and again. And sometimes          stake to 15-20 per cent."
           by television channels. Sometimes tel-       even they are found to be involved in           Investigations revealed that
           evision anchors ask stock market             such wrongdoings.                           Bhavnani was neither a member of NSE
           experts disclosure about the compa-                                                      nor a sub-broker. It was also observed
           nies which are discussed about. But the      SEBI is here to take action                 that he had made no purchase of the
           exercise is mere a formality. Channels           Though SEBI has been seen taking        scrip of UWB as claimed by him. As per
           are not able to stop such activities as      tough action against such experts, its      SEBI's investigation, Bhavnani's wife
           we hear a number of fraudulent activi-       efforts haven't been adequate. It is dis-   had traded in the scrip of UWB and

            RAJESH TAMBE
            - Investment Advisor, Sunchan Securities
              Mumbai-based Rajesh Tambe is a
              fundamental analyst. He has a wide
              experience of over 21 years. Tambe
              tracks the emerging sectors. He is been
              writing regularly for leading
              newspapers and magazines and is a
              common face on business channels.
              He has written articles on almost
              sectors like rubber industries, polymer,
              telecom, power, oil and gas etc. Tambe
              holds a Bachelor's and a Post Graduate
              Degree in Management stream. A
              swimming champ of his times, he
              advices his investors to explore the
              hidden wealth in the deep ocean of the
              capital market where the boundless
              oceans remains undiscovered before
              them. Nowadays, he can be seen in a
              programme called D Street ka Don,
              which is being run on Zee Business.

                                                                                                         16-30 November, 2010   MONEY MANTRA   45
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           made a profit of around Rs 26,000.                                                             large role to play and I am afraid that that

           Bhavnani had also claimed that he was           The advices and tips are                       role is not being played to the best of
           the president of the National                   mere source of                                 its ability."
           Association of Small Investors.
           However, this association did not               information and nothing                        Private treaties between
           appear in the list of investor associa-         more than that. It is                          media & corporate
           tions.                                                                                              The capital market watchdog has
                Also, to protect the interest of           always better to do some                       been trying its best to enhance its image
           investors and safeguard the integrity           research before investing                      as an investor friendly regulator. Current
           of the market, the entity Viniyog and/or                                                       chairman of SEBI C B Bhave has been
           Viniyog Portfolio Management                    the hard earned money                          working really hard to stop irregulari-
           Services and its proprietor Bhaskar             into the stock market.                         ties and corrupt practices. As channels
           Kumar Mukherjee were ordered not                                                               and experts allegedly conspire to help
           buy, sell or deal in securities market in                                                      specific stocks, SEBI has started keep-
           any manner, directly or indirectly in           game (to help a particular group) got          ing a hawk's eye on the 'private treaties'
           2006. Mukherjee was also restrained             over in those few minutes," says a chan-       between some media groups and cor-
           from conducting any programme,                  nel insider. Hence, there is no doubt in       porate. Taking a tough step, market reg-
           including the "Share Bazar" programme,          the fact that information disseminated on      ulator had in August this year made it
           and issuing advertisements in any media,        channels and advices given by experts          mandatory for all media houses to dis-
           including TV, which were alluring and           not only affect stock markets but have an      close their stakes in the corporate sec-
           may be detrimental to the interest of the       impact on the share prices too.                tor. According to SEBI, biased and moti-
           investors.                                                                                     vated dissemination of information in
                SEBI had come across a programme           Accusations on TV channels                     the media guided by commercial con-
           called "Share Bazar" which was being                 Malpractices take place and so fin-       siderations can potentially mislead
           aired daily between 1.30 PM to 2.00             gers are pointed out at TV channels time       investors in the securities market.
           PM on a Bengali TV channel called Tara          and again. In December 2006, SEBI's the        Market regulator was concerned that
           News conducted by Mukherjee who                 then chairman M Damodaran, a soft-             media houses pick up stakes in compa-
           used to provide tips on share market            spoken regulator, had said, "Agenda-           nies (through warrants, bonds, shares
           investment. Mukherjee also used to              driven contents are being passed on as         etc) in return for coverage through
           appear in advertisements during the             information through media that breath-         advertisements, news reports and
           break time wherein he used to solicit           lessly advise people and whereby per-          advertorials in the print and electronic
           clients for investments in share market         sonal information is flowing on TV             media. The move by SEBI came after
           through his entity offering a guaranteed        channels as expert advice.'', The situa-       the recent controversy over paid news,
           return of 5%- 20% per month. Further,           tion hasn't changed much even after four       where some media houses were
           at the end of the programme, he used to         years, though SEBI is trying hard to           accused of publishing material dis-
           state that persons interested in becoming       make the things as transparent as pos-         guised as news, which were actually
           his client may contact him at his mobile        sible.                                         paid for by the advertisers.
           numbers. Though his mobile numbers                   Let us discuss another incident that
           were given at the channel, no address           took place during his tenure. On NDTV's        The way out
           of his entity was given in the programme        Walk the Talk, Damodaran was speak-                Despite all these things, there is no
           which was intriguing.                           ing to The Indian Express Editor-in-           denying the fact that information and
                                                           Chief Shekhar Gupta. Referring to a let-       news broadcast on television channels
           A few anchors!                                  ter he received on his penultimate day in      and advices of stock market experts
               Leave alone experts, sometimes TV           office from an aggrieved investor,             play an important role. It helps the new
           anchors too try to make profit of the           Damodaran said, "In a letter sent to a TV      investors in decision making about var-
           exclusive news they get. "A well known          person along with a few media houses           ious scrips. The advices and tips are
           anchor of a Hindi business channel              and a copy endorsed to me, the investor        an easy source of information, but it
           allegedly takes position in the stock           asked, 'I saw you guys (TV channels)           is advisable to take them as mere source
           before the news/information about the           saying everything was good about a par-        of information and nothing more than
           stock is disseminated," says a channel          ticular issue till it listed below the issue   that. It is always better to do some
           insider. Anumber of times it is witnessed       price. And now I find you all saying           research before investing the hard
           that television channels show wrong             everything is wrong. What happened             earned money into the stock market. By
           piece of information and correct it a few       to you guys?"                                  now, you must be aware that how cor-
           minutes later. Some years back a                     Further talking about the letter,         rect the advices and tips are and if you
           renowned channel, while showing                 Damodaran said, "I think there's               can seriously depend on them. Aren't
           results of a PSU, announced that 'num-          considerable merit in it (the                  you? Always listen to TV waale baba
           bers are bad' and the price of share start-     letter)...How is it that suddenly on list-     but take decisions on your own. It is
           ed sliding. "However, channel accept-           ing all the virtues that you thought           thus well said 'Listen to everybody, but
           ed its fault a few minutes later and said       resided in some particular issue disap-        do what you feel is right'. Yahi hai right
           that the numbers were good…But the              peared? I think the media has a very           way investors!

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                                                CRITICALITY OF PRICING TO

           BUSINESS PLAN
                                                           in the markets get cleared. It discusses   frameworks to SMEs in a meaningful
                                                           various types of markets ranging from      way? One view is that the models and
                                                           perfect competition to monopoly, and       frameworks work independent of scale
                                                           about how prices are fixed in these mar-   of the firm. Another view is that these
                                                           kets. At the outset, these models work     models are esoteric for SMEs.
                                                           for regulators fixing prices or for            There is one model called BCG
               G Rameh                                     Planning Commissions. In reality, pric-    (Boston Consulting Group) matrix. It
                                                           ing is a combination of several factors.   says a firm product strategy can be stud-
                  t is quite commonsensical to say         The challenge we face is in making eco-    ied as a combination of its market share

           I      pricing is a critical aspect of busi-
                  ness strategy; but many entrepre-
                  neurs reach pricing decisions with
           less analysis than they should have.
           Management books deal with pricing in
                                                           nomic and strategic frameworks rele-
                                                           vant to small and medium enterprises
                                                           (SME) segment.
                                                           Challenge of Concepts
                                                                                                      and market growth. The two axes are the
                                                                                                      'growth rate of the business' in which
                                                                                                      it operates and its 'relative share in the
                                                                                                      market'. For example, if a product is
                                                                                                      operating in high growth industry and
           terms of economic, strategic and finan-             There are plenty of management         enjoys high market share, then it is a
           cial considerations. The economic con-          frameworks which can help large firms      'star' product. Now, SMEs operate at
           sideration is a simplistic analysis or in       to strategise, plan and execute. It is a   humble scale and they are hardly in a
           practical terms one can even say is triv-       challenge to writers when one moves        position to corner a share or have many
           ial. It says price will be fixed at the level   from large firms to SMEs. The chal-        choices of operating in a high growth
           where demand meets supply and where-            lenge is: How does one extend these        industry. They could be operating in

                                                                                                            16-30 November, 2010   MONEY MANTRA   47
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           retailing and retailing is a high growth                                                                     sion or during discounts is probably the
                                                                                                  BCG Matrix

                                                           Relative Position in Market
           industry. However, a SME prefers                                                                             real price.
           retailing not because it is a star prod-                                                  High      Low
           uct but because that is what he under-                                        High     Star prod- Question
                                                                                                                        The Pricing Objectives
           stands. He is perennially on survival                                                  ucts       Mark?          The Pricing Objectives can be any
           mode. If we go by this matrix most of                                         Business Low        Cash Cow   of these according to Kotler:
           them will land up in fourth quadrant                                          Growth              Going to        Survival
           which is 'Going to Dogs' or 'a Question                                       Rate                Dog             Maximising current profit
           Mark'. This is the dilemma of writers on                                                                          Maximising market share
           entrepreneurship. I am trying through                                                                             Maximising market skimming
           these columns various approaches                before they had thought through the                               Product quality leadership
           rather than models which can help               design or done any costing. Was it                                Other objectives like partial recov-
           SMEs think and proceed strategically.           based on any hunch or experience?                                 ery of cost like non-profit organ-
           It is also possible that if you follow these    Did they think it was achievable? How                             isations do.
           models, then you can spend time and             did Reliance think of the idea of per                            Thus, we find that pricing has so
           efforts enormously and still lead               telecall at the cost of a post card when                     many determinants. Saying we are low
           nowhere.                                        the rates were significant and unaf-                         cost leader or premium product sell-
                 One entrepreneur had a Guruji who         fordable? How did Deccan Airways                             ers does not completely explain the
           was also a Guruji for a leading politi-         think of Rs.500 for select number of                         pricing behavior. Somebody with low
           cian who was a Minister. This Guruji            seats as a promotional offer? Today,                         reserves may opt for a survival strate-
           used to tell the entrepreneur many              we find in the airlines for the same                         gy even while entering the market. On
           'Parihars' to be done in many temples.          economy seats and services, there are                        the other hand, another entrepreneur
           However, these were still not at the            more than one price applicable. How                          with deep pockets can opt for premium
           scale he used to tell the politician. The       do they determine the check fare?                            pricing and bid his timing. There are no
           entrepreneur was unhappy with the               These questions and decisions are                            one set of rules. Within the sector of
           discrimination at the hands of his              always intriguing. The beauty of these                       retailing of provisions and merchan-
           Guruji. He asked him one day, "You              decisions is that when these are decid-                      dise, Walmart came with the price
           ask the politician to do many expen-            ed there are no market benchmarks or                         objective of 'Every day low price',
           sive penance but you tell me only sim-          competitive prices to go by. These are                       whereas Sears stresses shopping expe-
           ple remedies. Why don't you recom-              pioneering efforts and they are pio-                         rience. A new entrant can have a pric-
           mend an expensive penance to me                 neers.                                                       ing strategy which works at slightly
           also? I can also spend and am willing               Similarly, the decisions on sales,                       lower than prevailing market pricing.
           to spend any money". The Guruji told            offers and discounts are quite subjec-                       This will also tell you that one need not
           him, "The scale of his sins or curses           tive. All these together constitute pric-                    feel constrained by market or by com-
           or threats is Himalayan. Yours is noth-         ing. A life time warranty is a compo-                        petition. Pricing is a creative and entre-
           ing. Don't even think on these lines.           nent of price. There are happy hour                          preneurial activity.
           You are only a miniscule in this                pricing. Multiplex constantly keep tin-
           Universe". Even celestial remedies              kering with pricing based on days, tim-                      Pricing Complexity
           depend on scale. You don't have to get          ings, and demand. There may be some                              The discussion still does not tell
           carried away by impressive models.              pattern to it but these are definitely                       how to do pricing which we will see.
           Think simple.                                   subjective. Are these subjective based                       The idea is to present the complexity
                                                           on the whims and fancies of top man-                         of pricing. There are range of options
           The Price                                       agement and marketing team or on                             and models available whereas we tend
               There is one model of marketing             their experience? These are again                            to equate price with MRP. The innova-
           which fits well the case of entrepre-           probably based on hunches, gut feel-                         tiveness of pricing strategy has changed
           neurship. It is called the 4 Ps Model           ings, and intuition. In fact, there are                      the very character of marketing itself.
           of Kotler who is an internationally             no theories on these.                                        There also models like medical equip-
           respected professor of marketing in                 One of the myths is that prices are                      ment industry wherein they install the
           North Western University. These 4 Ps            cost determined. There is a serious                          equipment first and start charging on
           are Product, Price, Promotion, and              flaw in the argument. The cost of                            usage basis. Today you have to just set
           Place. These four dimensions neatly             water in a 1 liter water bottle is prob-                     up a hospital. The suppliers will come
           summarise the issues that an entre-             ably about 25 p to 50 p whereas its                          and install the equipment on various
           preneur faces. We have been dis-                price is in the range of Rs.12.00. The                       affordable terms. To mention another
           cussing so far Product and I now will           incremental cost of a telecall is negli-                     model, we have auctions of tickets and
           discuss Price.                                  gible, once the towers are set and con-                      reverse auctions. Understanding these
               How does one arrive at the price?           nections are mode. The cost of a soap                        mechanisms itself is learning and will be
           Pricing a product is almost a matter            or toothpaste may be about 10 to 15%                         helpful in arriving at pricing decisions.
           of faith. How did the Dollar shop               of the price. The rest of the price gets                     In the final analysis, do not underesti-
           decide its price at Rs.99? How did              eaten away by the packaging cost, pro-                       mate the criticality of pricing decisions.
           Tata's decide on the figure of                  motion cost, dealers' margins, taxes                              (The author is Associate Professor with
           Rs.100,000 for its small car even               etc. The pricing you see during reces-                                                   IIM, Bangalore)

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     FINANCIAL PLANNING                               TAXATION                       STOCK MARKET                              COMMODITIES

                                                                                                                    BANK A

                Shilpy Arora                             ing until 1983 but RBI banned it follow-
                                                         ing malpractices. In 2007, RBI again
                                                                                                    tomers are willing to pay for it," says
                                                                                                    one of the senior officials of a private
                      ank account management is          allowed banks to offer such services.      bank.

           B          no more a nerve-wracking
                      task. Now banks provide
                      agents who go to customers'
           doorsteps to pick and deposit cash and
           take care of other paperwork. Though
                                                         Banks are authorised to offer doorstep
                                                         banking to corporate clients, public
                                                         sector units and departments of central
                                                         and state governments. But permission
                                                         of the bank board and RBI is necessary
                                                                                                        Further, doorstep banking out-
                                                                                                    reaches rural areas. Even after 40 years
                                                                                                    of bank nationalisation, more than 50
                                                                                                    per cent of population does not get
                                                                                                    banking services. The ruling of RBI
           the Reserve Bank of India (RBI) gave          for individual customers.                  is a step forward to reach the entire
           its nod to doorstep banking way back              Doorstep banking is a blessing to      rural people by 2015. The bank agents
           in 2007, it is now that this concept is       big companies and government               visit the rural areas, twice or thrice a
           catching up. RBI allowed banks to             departments. "Petrol pumps or gas          month, with swap machines and cash,
           either deploy their employees or hire         agencies receive a lot of cash and are     and issue smart cards to the customers.
           agents to extend doorstep banking serv-       forced to keep cash at night or take it    No-frill bank accounts offered by the
           ices like pick up of cash, instruments        to the bank to deposit. Now, banks         State Bank of India (SBI) in Karnataka
           and delivery of cash and demand drafts.       can offer security vans to collect the     are one of the great success stories of
               Banks used to offer doorstep bank-        cash. The cash is insured and cus-         doorstep banking. These accounts are

           50   MONEY MANTRA   16-30 November, 2010
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       MUTUAL FUND                         INSURANCE                                 BANKING                                  INDIA POST

                                                       cash from your home or office               payments from the agent. RBI clear-
                                                       (whatever is registered with the            ly states that cash collected from the
                                                       bank). But some banks have cus-             customer should be acknowledged
                                                       tomised pick up limits depending on         by issuing a receipt on behalf of the
                                                       the need and nature of your busi-           bank.
                                                       ness.                                       Collected cash should be credited to
                                                       Pick up of cheques/instruments:             your account on the same day or next
                                                       The bank will pick up your cheques          working day, depending on the time
                                                       from mailing address registered             of collection.
                                                       with it and deposit them.                   Always ask your agent to keep you
                                                       Delivery of cash against cheques            informed about the date of credit.
                                                       received at the counter: You don't          Remember, delivery of demand draft
                                                       have to travel to the branch or an          should be done by debit to account on
                                                       ATM for cash withdrawal, the bank           the basis of requisition in
                                                       will deliver the cash at address reg-       writing/cheque received and not
                                                       istered with them. However, there is        against cash or instruments collected
                                                       certain limit to cash withdrawal.           from your premises.
                                                       Delivery of demand drafts.                  Bank can offer cash delivery serv-

AT YOUR                                              Individual customers/natural per-
                                                       Pick up of cash
                                                       Pick up of instruments
                                                       Delivery of demand drafts
                                                        If you are an individual customer,
                                                    you can have cash and other bank
                                                                                                   ices            to           corporate
                                                                                                   clients/PSUs/departments of central
                                                                                                   and state governments against receipt
                                                                                                   of cheque only at the branch and not
                                                                                                   against telephonic request.
                                                                                                   Provide the correct address of your
                                                                                                   residence or office, wherever you
                                                    instruments picked up from your home           want to get the services. According

                                                    or office. However, the banks are not          to the guidelines of RBI, doorstep
                                                    authorised to deliver anything to the          banking services can be offered at
                                                    individual customers except demand             either the residence or office of the
                                                    drafts. Corporate customers, on the            customer.
                                                    other hand, can have cash delivered            All banks have an internal grievance
                                                    against cheque received at the bank            redressal mechanism for redressing
                                                    counter.                                       complaints against their agents. You
                                                                                                   must know the name and telephone
                                                    Who is agent?                                  number of the grievance redressal
                                                         Abank can provide doorstep bank-          officer of your bank. It is duty of the
                                                    ing through own employees or agents.           designated officer to ensure that gen-
                                                    If the bank offers services through its        uine grievances are redressed
                                                    agents, it has to ensure that the poli-        promptly.
                                                    cy approved by its board lays down the         It is imperative to know that agree-
                                                    broad principles for selection of agents       ment between you and your bank
                                                    and payment of fee/commission etc.             does not entail any legal or financial
           offered through FINO agents who          Otherwise, the banks can refer to              liability on the bank in case it fails
           roam and deliver services at the         guidelines on Managing Risks and               to offer doorstep services under cir-
           doorstep of the customers.               Code of Conduct in Outsourcing of              cumstances beyond its control. The
               But before you go for these serv-    Financial Services by banks issued on          RBI jurisdiction says such services
           ices, you must be aware of the follow-   November 3, 2006.                              offered by a bank should be seen as
           ing facts:                                                                              a mere extension of its services
                                                    Is there any fee?                              offered at its branch. So liability of
           What does doorstep                           If a bank charges extra fee for            the bank should be the same as if the
           banking offer?                           doorstep banking services, it has to           transactions were conducted at the
               According to RBI, a bank can offer   mention the fee structure in its               branch.
           the following services at the doorstep   brochures. The customers are, there-             With hectic schedules and time con-
           of its customers:                        fore, advised to read the brochure care-    straints, the concept of doorstep bank-
              Corporate customers/government        fully or ask bank executives in case they   ing has come as a blessing. But the
              departments/PSUs                      don't get clear picture of it.              banks are cautioned about risks
              Pick up of cash: There is no need                                                 involved in such services and advised
              to go to the bank to deposit cash.    What you must know:                         to prescribe cash limits for their agents
              You can call the agent to pick up       Make sure you get a receipt of your       and customers.

                                                                                                      16-30 November, 2010   MONEY MANTRA   51
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    FINANCIAL PLANNING                                TAXATION                        STOCK MARKET                                  COMMODITIES

                                             NBFC FDS

                 RISK TO EARN
                Harish Kumar

                     fter remaining in double digits,
                                                           go for NBFC's fixed deposits schemes
                                                           as they are offering higher returns but
                                                           one should better be aware of risk
                                                                                                         ly or monthly basis. There are around 300
                                                                                                         NBFCs allowed to take deposits.

           A         WPI inflation recently fell to
                     single digit. But inflation may
           rise to that level again. In such situation,
                                                           involved in it".
                                                           Who are NBFCs?
                                                                                                         How their deposits are
                                                                                                              Compared to other scheduled banks,
           thing to keep in mind is that our money             As per Reserve Bank of India              NBFCs generally offer higher rate of
           should grow at least by the same rate           (RBI), a non-banking financial com-           interest on its fixed deposits. If a bank
           so that it doesn't lose its value. Bank         pany (NBFC) is a company registered           is offering 7-8% return on fixed deposits,
           FDs do not give returns which could             under the Companies Act, 1956 and is          you may get 10-12% return on these
           beat inflation. Now the question that           engaged in the business of loans and          deposits. As per rules, NBFCs cannot
           arises is where an individual should            advances, acquisition of shares/stock/        accept funds for deposits that are payable
           park his money so that it grows at a sim-       bonds/debentures/ securities issued by        on demand immediately or within a very
           ilar pace. An individual may either             government or local authority or other        short period like current or savings
           choose a debt or equity route to grow his       securities of like marketable nature, leas-   accounts. Also as they are not a part of the
           money. Though debt normally pays                ing, hire-purchase, insurance business,       payment and settlement system, they can-
           less, at least returns here are fixed.          chit business, but does not include any       not issue cheque to its customers. But like
           Hence, those who follow a conservative          institution whose principal business is       other banks, interest from a
           approach shpould take a debt route. The         that of agriculture activity, industrial      company/NBFC Fixed Deposit is also
           normal available debt options like              activity, sale/purchase/ construction of      fully taxable.
           banks fixed deposits, post office               immovable property. For making any
           deposits, KVP, NSC these days are just          deposits in an NBFC, the customer has         How they offer high ROI?
           paying a rate of interest between 5 to          to comply with the KYC (know your                 Raman Agrawal, CEO of Bansal
           8.5% (for a period of 5 years or less).         client) norms prescribed by RBI. The          Credits, says NBFCs are able to offer
           Financial planner of, Anil           per annum interest can be paid (by            high FD rates due to their managerial
           Koul, says, "To beat inflation one can          NBFCs) on yearly, half yearly, quarter-       abilities and lower overheads. Due to

           52   MONEY MANTRA   16-30 November, 2010
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     MUTUAL FUND                              INSURANCE                                     BANKING                                     INDIA POST
                                                                         12     24     36     48     60     REMARKS
           effective recovery mechanism, NBFCs                           MONTHS MONTHS MONTHS MONTHS MONTHS
           are able to achieve low NPAs in com-           KTDFC          9.00% / 9.00% / 9.25% / 9.25% / 9.25% / Rates for below 25
           parison to banks. He says, as the cost of                     9.25% 9.25% 9.50% 9.50% 9.50% lakhs/ above 25 lakhs.
           borrowing of NBFCs (from banks) is                                                                    Min. deposit 10000 Rs
           higher, they offer high interest rates on      MAHINDRA       8.00% 8.50% 9.00%                       Senior Citizens /
           credits and since the credit rates are high    FINANCE                                                Shareholders /
           the companies like us are able to offer                                                               Employees will get an
           high deposit rates. Besides flexibility in                                                            additional rate of
           branch expansion, NBFCs are also                                                                      0.25% per annum
           required to maintain cash reserve ratio        PNB HOUS-      7.25% 7.25% 7.75% 7.75% 7.75%
           (CRR). They enjoy a lower requirement          ING FINANCE
           for statutory liquidity ratio (SLR) which      DEEWAN      9.00% / 9.10% / 9.25% / 9.25% / 9.25% / Rates for below 25
           is mandatory only for deposit accepting        HOUSING     9.25% 9.35% 9.50% 9.50% 9.50% lakhs/ above 25 lakhs.
           NBFCs. They do not have any priority-          FINANCE                                             Min. deposit 2000 Rs
           sector lending targets and enjoy liberal       ICICI HOME     7.10%      7.60%     7.75%      7.75%      7.75%      0.25% additional for
           norms for recognition of non-performing        FINANCE                                                              senior citizen across
           assets (NPA). From April 1, 1999, all                                                                               slabs
           NBFCs are required to maintain liquid
           assets of 15% of its public deposits held                                                 Can
           on the last day of the preceding quarter.          An NBFC can accept an FD if it complies with minimum stipulated credit rating from
           Umesh Revankar, Deputy MD of Shriram               an approved agency at least once in a year. The copy of this rating has to be pro-
           Transport Finance Co. Ltd, says that               duced to the RBI, within 15 days whenever it gets upgraded or downgraded. Some of
                                                              these agencies are CRISIL, ICRA, CARE, FITCH Ratings India.
           "NBFCs are able to pay higher rate of inter-       NBFCs can accept a deposit only against issue of proper receipt. The receipt should
           est just because they deploy money in earn-        bear the name of the company and should be signed by an authorised official of the
           ing assets and have better managing capa-          company. It should also mention the name of the depositor, the amount in words as
           bilities."                                         well as figures, the rate of interest payable on the deposit amount and the date of
                                                              repayment of matured deposit along with the maturity amount.
           High risk, High gain                               An NBFC can accept a deposit only if its loan and investment is subjected to a maxi-
                                                              mum of 25% and 40% of its owned fund respectively.
                Unlike bank customers, the Deposit
           insurance facility of DICGC (Deposit                                                  Can not
           Insurance and Credit Guarantee                     NBFCs (excluding Residuary Non-Banking Company i.e. RNBCs) cannot offer a rate
           Corporation) is not available for NBFC             of interest on deposits more than that approved by RBI from time to time. This ceiling
           depositors. The depositors to the banks are        rate may vary with category of NBFC. At present, this very ceiling rate is 12.5% per
           guaranteed with maximum of Rs one lakh.            annum.
                                                              RNBCs (whose principal business is receiving deposit) cannot offer a rate of interest,
           Also, RBI does not accept any responsibil-         less than 5% per annum on term deposits and 3.5% on daily deposits, both com-
           ity or guarantee about the financial sound-        pounded annually, under extant directions.
           ness of the company or for the correctness         NBFCs cannot accept deposit for a period less than 12 months and more than 60 months.
           of any of the statements or representations        The maximum period for acceptance of any deposit in case of RNBCs is 84 months.
           made or opinions expressed by the compa-           NBFCs (including RNBCs) cannot offer any gifts/incentives to ask for deposits from
           ny and for repayment of deposits/discharge         public.
                                                              In case a depositor requests for pre-mature payment, the NBFCs, cannot make it
           of the liabilities by the company. That is         within a period of three months (lock-in period) from the date of its acceptance. The NBFC
           because NBFCs cannot use the name of the           cannot grant any loan against a public deposit.
           RBI in any manner while conducting their
           business. While investing in an NBFC,
           always remember to first check out its cred-   having minimum stipulated Net Owned             major economic drivers. They have
           it rating. Also, beware of NBFCs offering      Fund (NOF) should also comply with              delivered high interest rates even dur-
           ridiculously high rates of interest. If an     the directions such as investing part of        ing recession. Though the FDs of
           NBFC defaults in repayment of deposit, the     the funds in liquid assets, maintain            NBFCs deliver a higher rate of inter-
           depositor can approach Company Law             reserves (Capital to Risk Assets Ratio          est, they are treated as unsecured instru-
           Board or Consumer Forum or file a civil suit   i.e. CRAR) , rating etc. Acceptance of          ments. So, in case the value of NBFCs
           in a court of law to recover the deposits.     deposits can only be made if the com-           goes down, chances are that you may
                                                          panies are engaged in activities includ-        not even get your principal sum back.
           Entitlement to accept cash                     ing plantation, commodities trading,            Investment in an NBFC can prove to
               According to RBI, all NBFCs are not        multilevel marketing, manufacturing             be a good deal if you put your money
           entitled to accept public deposits. Only       activities, housing finance and compa-          in a safer company. According to
           those NBFCs holding a valid certificate of     nies engaged in collective investment           Revankar, before investing in any
           registration with authorisation to accept      schemes.                                        NBFC one should seek the complete
           public deposits can accept or hold public                                                      detail of the company in order to fig-
           deposits. NBFCs authorised to                  Invest or not to invest                         ure out how safe your investments
           accept/hold public deposits besides               Today, NBFCs are considered as               would be.

                                                                                                                 16-30 November, 2010   MONEY MANTRA   53
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          BANKING WITH

         VK                                      No.1 Sir, my bank account is in ICICI,
                                                 Motikhavdi, Jamnagar branch and I deposit-
                                                 ed an outstation cheque for Rs 4,349 issued
                                                                                                   of service charges levied for various kinds
                                                                                                   of services being provided by them in the
                                                                                                   branch premises and if the chart is not dis-

                                                 by a merchant in my name. The cheque was          played, the details can be provided by the
                                                 drawn on City Bank,Mumbai branch with             branches on demand. Further, if you will read
                                                 number 979904 and submitted in the last           the terms and conditions for availing any
           RBI has liberalised                   week of September 2010. It got cleared in 8       service from the bank, you will usually find
           the process of cheque                 to 10 days. But my bank has charged an            a clause towards service charges also.
                                                 amount of Rs 55 as collection fees from my
           collection and                        account. Is this justified? If so, is there any   No. 2 Sir, Syndicate Bank refused to give
           advised banks to                      rule which I can get in paper or online. I        me housing loan, even though I fulfill all
           frame their own                       visited my bank branch, but the bank person-      the basic criteria fixed by the bank. Which
                                                 nel told me that they charge minimum Rs 50        is the appropriate forum where I can regis-
           cheque collection                     plus 10 per cent as collection charge for         ter a complaint against the bank? Do banks
           policies and give wide                outstation cheques.                               have their own rules to reject loan applica-
           publicity to the same.                              -Arjun Narayanan, Jamnagar          tions?
                                                                                                             -Shishirendra Narayan, Dhanbad
           Accordingly, almost                   Dear Mr Arjun,
           all the banks have                    RBI has taken several measures to bring           Dear Mr. Narayan,
           displayed the                         about changes in the service delivery lev-        Today, home loan portfolio of the banks has
                                                 els, including the cost of services over the      become quite significant. The home loan
           schedule of service                   years. To foster competition and offer bet-       market is so competitive that many of the
           charges on their                      ter services to customers, RBI, in November       banks offer lucrative add on packages, incen-
           website for various                   2004, had liberalised the process of cheque       tives and have announced festive offers and
                                                 collection and advised banks to frame their       concessions in interest rates. Most of the
           services being                        own cheque collection policies and give wide      banks have carved out marketing teams to
           provided by them.                     publicity to the same. Accordingly, almost all    market their retail products, including home
                                                 the banks have displayed the schedule of          loans.
                                                 service charges on their website for various      To qualify for home loan, one must ensure
                                                 services being provided by them. In addition,     that he fulfills the following conditions-
                                                 most of the bank branches display the chart       1. The applicant must be KYC compliant.

          54   MONEY MANTRA   16-30 November, 2010
EP 50-73.qxd   11/10/2010       6:17 PM      Page 7

              That is a foremost requirement.
           2. Credit worthiness is another impor-                                                  Home Loan Junction
              tant factor, which includes track            Home Loan EMI/Rs 100,000 for a loan amount of Rs 30 Lakh as on November 09, 2010
              record and market reputation, reg-                                           5 years  10 years     15 years     20 years
              ular source of income and repay-
                                                                                                 FIXED       FLOATING   FIXED   FLOATING   FIXED   FLOATING   FIXED      FLOATING
              ing capacity over a period of time
                                                         Allahabad Bank                          2212        2100       1449    1322       1233    1090       1119       998
              (i.e. stability of job if he is in serv-
                                                         Axis Bank                               2327        2064       1553    1253       1332    999        1244       884
              ice or a well established business.)       Bank of Baroda                          DP          2076       DP      1280       DP      1029       DP         932
           3. The property which he wants to buy         Bank of Maharashtra Festive             2112        2040       1335    1227       DP      970        DP         852
              is free from all encumbrances and          Offer*
              has clear title.                           Bank of Rajasthan*                      2100        2028       1294    1213       1044    956        932        836
           4. Applicant must also produce an evi-        Canara Bank                             DP          2076       DP      1280       DP      1044       DP         932

                                                                                                                                                                                         Source: Apnapaisa Research Bureau
              dence to meet margin money and/or          Central Bank of India                   2125        2076       DP      1280       DP      1044       DP         932
              down payment requirements.                 HDFC Limited*                           2340        2052       1568    1240       1349    985        1262       868
           5. Any other parameter specifically           ICICI Bank*                             2432        2052       1675    1240       1469    985        1391       868
              prescribed by the bank.                    IDBI Bank                               2174        2064       1378    1253       1137    999        1032       884

           If you meet all the aforesaid require-        Indian Bank Festive Offer*              2052        2052       1240    1240       985     985        868        868
           ments, in my opinion, no bank will            LIC HF New Fix-O-Floaty*                DP 2071                DP 1261            DP 1008            DP         893
           generally refuse to take up your case         Oriental Bank of Commerce               2137 2112              1335 1308          1105 1075          998        965
           for funding, unless some commercial           Punjab National Bank*                   2125 2052              1335 1240          1121 985           1015       868
           decision has been taken not to take any       SBI Easy Home Loan*                     2028 2028              1213 1213          956 956            836        836
           further exposure on the portfolio. If         UCO Bank                                2162 2088              1378 1294          1152 1059          1066       965
           loan has been refused at branch level         PN: The rates given above are for the 1st year of the loan tenure. For the subsequent years, the interest
           without any justification, you may            rates vary from bank to bank. * These banks have interest rates fixed for the initial few years and thereafter
           send a complaint to their head office         then prevailing rate are applicable.The home loan rates are indicative rates, which may change according
                                                         to the credit profile of the customer. Fixed Interest Rates are usually subject to reset clause of two to five
           seeking their intervention in the mat-        years and vary from bank to bank. However, fixed Interest Rates of ICICI Bank, HDFC Limited and Axis
           ter.                                          Bank remain fixed during the entire tenure of the loan
                                                         DP - Do Not Provide
           No.3 Sir, recently I received Rs. 80
                                                                     Fixed Deposit Interest Rates (upto - Rs. 15 lakhs as on 09th Nov. 2010)
           thousand unexpectedly. I was thinking
           to buy a bike for quite some time now.        BANKS                            6mths - < 1 Year       1 – < 2 Year          2 – < 3 Year       3 – < 5 Year 5 Years & above
           I want to buy the vehicle using this          Bank of Baroda                   6.00% - 6.25% 7.25% - 7.50%                  7.25%              7.25%       7.25%
           cash. But one of my friends has sug-
           gested that I should put the money in         Bank of India                    6.50% - 6.75% 7.50%                          7.25%              7.25%       7.00%
           a better avenue of investment and get         Bank of Maharashtra              6.00% -6.25% 7.60% - 7.50%                   7.50%              7.50%       7.50%
           the vehicle financed. I am in a dilem-
           ma that should I buy the bike with this       Canara Bank                      6.00%                  7.00% - 7.25%         7.25% - 7.50% 7.25%            7.50% - 7.75%
           money or get the vehicle financed.            Central Bank of India            5.75% - 6.25% 7.35% - 7.55%                  7.50%              7.60%       7.60% - 7.85%
           Please suggest me the right way.
                               -Rishi, New Delhi         Corporation Bank                 7.10%                  7.50%                 7.25% - 7.50% 7.25%            7.50%

                                                         Dena Bank                        6.00% - 6.25% 7.25%                          7.50%              7.50%       7.50%
           Dear Rishi,
           It is true that saving helps you face         Indian Oversea Bank              6.75% - 7.75% 7.25% - 8.00%                  7.25% - 7.75% 7.75%            7.75%
           the unexpected and unforeseen cir-            Oriental Bank of Commerce 6.25% - 6.50% 7.50%                                 7.50% - 7.75% 7.50%            8.00%
           cumstances and situations. I think your
                                                         State Bank of India              6.00%                  7.00% - 7.50%         7.25% - 7.75% 7.25%            7.50% - 7.75%
           friend has given you the correct advice
           to buy motor-bike by raising a loan           Syndicate Bank                   6.50% - 6.75% 7.25% - 7.55%                  7.75% - 7.80% 7.75%            7.75%
           from the bank. Loans are easily avail-
                                                         Union Bank of India              5.75% - 6.00% 7.25%                          7.25%              7.50%       7.50% - 8.00%
           able in current market scenario, if you
           meet all the requirements and are eli-        Vijaya Bank                      6.25% - 7.00% 7.25% - 7.75%                  7.50%              7.50%       7.50%
           gible for the same. The money which           Axis Bank                        6.25% - 6.75% 7.50%                          7.50% - 7.75% 7.00%            7.00%
           you have got can be invested with the
                                                         Development Credit Bank          6.50%                  7.75%                 7.75%              7.75%       7.50%
           bank or in any other avenue where you
                                                                                                                                                                                         Source: Apnapaisa Research Bureau

           feel your money is safe and secure.           HDFC Bank                        5.75% - 6.75% 7.00% - 7.25%                  7.25% - 7.50% 7.50%            7.50%

                                                         ICICI Bank                       5.75% - 6.50% 6.75% - 7.50%                  7.50% - 8.00% 8.00%            8.00%

           Virendra Kumar Dhingra is a post-graduate     ING Vysya                        6.50% - 7.00% 7.50%                          7.75%              7.75%       8.00%

           in Commerce with over forty years of expe-    IDBI Bank                        6.85% - 7.25% 7.60% - 7.75%                  8.00% - 8.25% 8.00%            8.00% - 8.25%
           rience in banking. He retired as Executive
           Director, UCO Bank. Currently, he is          The Federal Bank                 6.50% - 7.00% 7.75%                          7.50%              8.00%       8.00%
           Director, Industrial Investment Bank of
           India Ltd.                                    Kotak Mahindra Bank              6.50% - 7.00% 7.50%-7.75%                    7.80% - 8.00% 7.80%            7.80%

                                                                                                                                 16-30 November, 2010        MONEY MANTRA         55
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      FINANCIAL PLANNING                              TAXATION                        STOCK MARKET                               COMMODITIES

                                                         DEFFERED IPOS: WAIT

                  THE DAW
                Alok Dwivedi

                      he mood in secondary market
                      is upbeat. Sensex once again
                      touched 20,000 mark on the
                      back of good run during
           September. Not to be left behind, the
                                                         Indian primary market history. But what
                                                         is amusing in this scenario is that there
                                                         are a few companies which have post-
                                                         poned their IPOs. There are others also
                                                         that have failed to come out in stipu-
                                                         lated time.
                                                             Majority of such companies are
                                                                                                     is the thing which is stopping them from
                                                                                                     coming out with the IPOs." The last IPO
                                                                                                     from the real estate sector came in April
                                                                                                     this year by Bangalore-based Nitesh
                                                                                                     Estates. The shares of Nitesh Estates are
                                                                                                     trading at Rs.44, compared to the issue
                                                                                                     price of Rs 54 in May.
           primary market is trying its best to          from the realty sector. Arun Kejriwal,
           match the success story. To cash in on        Director at Research Firm KRIS, says,       IPOs hanging in balance
           the rally, more than ten companies came       "These companies want to raise money,       Lodha Developers: Mumbai-based
           up with their initial public offerings        but are afraid of response of markets.      Lodha Developers, which focuses on
           (IPOs) in the last days of September          Realty sector has underperformed the        high-end residential apartments in and
           with an aim to raising total capital of       markets despite good run in the broad-      around Mumbai, is holding its planned
           around Rs.3500 crore. This had been the       er markets. Documents, for most of          $600 million initial public offer. It had
           busiest week of this century in the           them, are not neat and clean and that       received the final set of comments from

           56   MONEY MANTRA   16-30 November, 2010
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        MUTUAL FUND                           INSURANCE                              STOCK MARKET                                 INDIA POST

                                                       stake to HDFC Venture Funds in its           SEBI had increased the validity of
                                                       World One project in Mumbai in               clearance for IPOs to one year from
                                                       August. It had sold about 7 million sq       the date of clearance (before that, the
                                                       ft in last financial year. The company       validity of SEBI clearance was only
                                                       had, in June, agreed to pay $850 million     three months). But despite this, a few
                                                       for a plot in central Mumbai.                firms could not bring out their IPOs
                                                       BPTP: Realty firm BPTP has not yet           within the period of one year.
                                                       come out with its IPO. It is important       Radiant Info Systems: Bangalore-
                                                       to note that it had received market reg-     based information technology solu-
                                                       ulator SEBI's nod to raise up to Rs.1,500    tions provider Radiant Info Systems
                                                       crore through IPO in May, 2010. BPTP         failed to come out with its IPO in the
                                                       had filed draft prospectus with SEBI         stipulated period of one year. In July
                                                       last December. On the use of proceeds,       last year, it had filed the draft red her-
                                                       it had said that it would deploy around      ring prospectus with SEBI to tap the
                                                       Rs 460 crore to part-finance the con-        market with an initial public offering of
                                                       struction and development of Project         65.07 million equity shares. Objectives
                                                       Parkland, a township in Faridabad. In        of the issue were to finance the funds
                                                       addition, it had said to use Rs 514 crore    required for potential acquisitions and
                                                       to pay development charges to the gov-       to set up a Software Development
                                                       ernment authorities for ongoing and          Center. Remaining proceeds were
                                                       forthcoming projects. The remaining          aimed to be utilised for meeting work-
                                                       capital was intended to be used for          ing capital, other corporate and issue
                                                       repayment of debts.                          related expenses. The company pro-
                                                       Kumar Urban Development: Pune-               vides information technology solutions
                                                       based real estate firm Kumar Urban           to various industries like transportation
                                                       Development Limited (KUL) had                & logistics, pharmaceuticals, telecom,

                                                       received the nod from SEBI in March          financial, e-governance etc.
                                                       this year to raise funds through public      Mid       Valley        Entertainment:
                                                       issues, but it is yet to come out with its   Midvalley Entertainment had filed
                                                       IPO. It had planned to raise Rs 450 crore    DRHP in July 2007 and October 2008
                                                       through an IPO to retire high cost debts     and failed to tap the capital market with
                                                       and for new projects. KUL has                its IPO. Now it has filed draft red her-
                                                       embarked on IT-SEZ project named-            ring prospectus (DRHP) for the third
                                                       Cerebrum IT SEZ in Pune, which is            time with SEBI. It is planning to raise
                                                       expected to cost Rs 1,000 crore. If a few    Rs 60 crore from the capital market.

                                                       reports are to be believed, Kumar            The company wants to raise capital for
                                                       Urban Development is in talks with           financing various activities like enter-
                                                       PE funds for Rs 400-500 crore at the         ing into screening agreements with cin-
                                                       project level.                               ema theatres, acquisition of companies,
                                                       Glenmark Generics Ltd: Drug maker            innovation work and buying screening
                                                       company Glenmark has indefinitely            rights etc. The company, engaged in the
                                                       postponed its initial public offering for    media and entertainment industry in
                                                       its subsidiary- Glenmark Generics            South India, produces, distributes and
                                                       Limited. According to a few reports, the     exhibits movies both in Indian and for-
            SEBI on their draft red herring prospec-   company has said that its cash flow is       eign languages.
            tus (DRHP) in January this year. The       improving and it did not require the         Emaar MGF: Emaar MGF, a joint ven-
            company had filed the draft red her-       funds. If we recall, Glenmark Generics       ture between Indian lender MGF and
            ring prospectus for the IPO in late        had received regulatory approval to          Dubai's Emaar Properties, had initial-
            September last year. The company had       raise about Rs.600 crore. Then the com-      ly planned a massive IPO of Rs 7,000
            intended to utilise the IPO proceeds to    pany had said that the raised capital        crore, but pulled out. Then, in
            repay debt and to meet the construc-       would be used to reduce the collective       September 2009, the company had filed
            tion cost of its ongoing and planned       debt of the company as well as unlock        its DRHP and received the go ahead
            projects. There were talks that the com-   value for the parent company. The com-       from SEBI in March 2010 for an IPO
            pany may slash its IPO size, but noth-     pany's debt at present is over Rs 1,500      of Rs 3,850 crore. That was put off as
            ing has happened as yet. It is banking     crore. SEBI's nod for IPO is valid up        well. The realty major has again filed
            on stronger-than-expected sales to tide    to March next year.                          a revised application with market reg-
            over immediate cash flow needs. In                                                      ulator SEBI for an IPO. In its third
            addition, Lodha Developers Limited         Wait is getting longer                       attempt, Emaar MGF has reduced its
            raised Rs 500 crore by selling a 10%           In 2008, capital market regulator        issue size down to Rs.1,600 crore.

                                                                                                          16-30 November, 2010   MONEY MANTRA   57
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    FINANCIAL PLANNING                                 TAXATION                        STOCK MARKET                                  COMMODITIES

                                                         PREPARING FOR

               THIRD PARTY CHEQUE CHANGES                   To tackle the fraud
                                                                                                              One of the biggest problems faced

                                                                                                          with the use of third party cheques has
                                                            relating to third party                       been that they have been misused and
                                                            cheque and protect the                        investors have been cheated out of their
                                                                                                          investments. What happens is that the
                                                            interest of the investors                     investor fills in the application form for
                                                            the changes will come                         making the mutual fund investment and
                                                                                                          issues the cheque along with the invest-
                                                            about in investments                          ment. Instead of depositing both the
                Arnav Pandya                                related to mutual funds.                      cheque and the form and completing the
                                                                                                          process there are instances where the
                       change is coming to the man-         Mutual fund will not                          form of the investor is replaced by some

           A           ner in which investors will
                       put their money in mutual
                       funds as this will be possible
           only in specific ways. There will be addi-
           tional control in the manner in which
                                                            accept third party cheques
                                                            for investments into their
                                                            funds. In other words the
                                                                                                          other form of some other person. Now the
                                                                                                          investment is complete as the cheque gets
                                                                                                          deposited but what happens is that the
                                                                                                          actual or original investor is not allotted
                                                                                                          the units but they are actually allotted to
           the mutual funds will accept payments            amount of investment into                     the other person whose form was attached
           for the investments in the funds. There          a mutual fund has to come                     with the investment. The other person
           have been several complaints regard-                                                           then sells the units and takes away the
           ing frauds suffered by investors while           from the account of the                       money. This kind of fraud has been wit-
           putting their money into the mutual              investor.                                     nessed in several cases and there have
           funds and this has forced the changes                                                          been complaints in this regard which has
           that are evident now. According to the                                                         led to a situation where there has to be a
           change, third party cheques will not be          payment can be made for an investment         change in the manner in which the invest-
           acceptable for investments from                  in a mutual fund. One involves making         ments are to be completed.
           November 15, 2010 and hence investors            payment from the own account of the
           would have to take steps to ensure that          investor by issuing a cheque from such        Guidelines
           they are in compliance with the require-         accounts. Another method involves                 In order to tackle this kind of situa-
           ments. Here are some of the issues that          investment using a cheque that does not       tion and protect the interest of the
           will arise with respect to these guide-          involve the account of the investor and       investors the changes will come about
           lines.                                           this is known as a third party cheque. Such   in investments related to mutual funds.
                                                            third party cheques are usually used by the   Mutual fund will not accept third party
           Third party cheques                              investor as a matter of convenience when      cheques for investments into their funds.
                There are different ways in which           money from a family member is used.           In other words the amount of investment

           58    MONEY MANTRA   16-30 November, 2010
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     MUTUAL FUND                               INSURANCE                                MUTUAL FUND                                   INDIA POST

           into a mutual fund has to come from the          Investment using a cheque that does
                                                                                                         of the investor will have to be linked
           account of the investor. Since there will        not involve the account of the investor      with the mutual fund investment.
           be some situations where the funds do            is known as a third party cheque.            Currently, a bank account is already
           not come from the investors accounts                                                          mentioned for the investment but going
                                                            Major concern is that they have been
           there are exceptions that have been pro-         misused and investors have been              forward this will be further linked for
           vided for this purpose and even here there       cheated out of their investments.            investment purposes. This will ensure
           are some additional guidelines that need                                                      that there is no way in which the cheque
           to be followed. This is required to ensure       To avoid this problem, mutual fund will      from some other account will be pos-
                                                            not accept third party cheques for
           that even such payments are coming from          investments into their funds.                sible for investment. The investor would
           authorised accounts only and that the                                                         also have to be very clear about the
           exceptions are not being misused in any          In case of investment for minors for a       account that they actually register with
                                                            sum less than Rs 50,000, the invest-
           manner. There are a couple of exceptions         ment is allowed through third party
                                                                                                         the fund so that all future payments
           that will concern individual investors and       cheque.                                      would have to come from this account
           here is a closer look at them                                                                 only. This will ensure that there is a
                                                            Amount invested by employer on behalf        proper manner in which the payments
           Investment for minors                            of employees into the mutual fund
                                                            through the route of a systematic invest-
                                                                                                         will take place.
                There are investments in the name of        ment plan will be allowed through third           In addition, there is another thing
           minors and due to the fact that they might       party cheque.                                that will be witnessed and this is that
           not be operating their own bank account                                                       in case there is an instrument like a bank
                                                            Mandatory will be Know Your Customer
           there would be a problem of not using their      (KYC) checks for the investor as well as
                                                                                                         pay order or a demand draft that is used
           own cheques for investments. The other           the person making the investment.            for the investment, then some addition-
           thing is that their parents or grandparents                                                   al documentation will be required. The
           would like to invest in the name of the minor                                                 investor will have to get a certificate
           so that they are able to build up a corpus      account and hence would normally be           from the bank for payments through
           that can be used later. This would take place   disallowed. However, there is an excep-       such instruments so that there is no
           because the minor is not likely to have a       tion that has been provided for this par-     chance of any misuse of the instruments
           source of earnings to be able to generate       ticular type of investment and hence this     that are not cheques. This will ensure
           the amounts for the investments. In these       would actually be allowed to facilitate       that efforts to circumvent the existing
           cases if the investment is for a sum that       the transaction which is genuine in           rules will also not be very successful.
           is less than Rs 50,000 then there would         nature.
           be permission for the investment to take                                                      Online payments
           place even though the route is a third party    Additional check                                  There is another area which will
           cheque. This will ensure that there is no           While there will be allowance for the     require some careful action as this is
           disruption of a genuine investment              exceptions, there is another aspect           the online payments route. It involves
           process because here is a situation where       involved and this is the presence of addi-    the payments using the banking sys-
           the minor is not able to issue a cheque         tional checks. This would involve             tem and even direct payments made
           from their own account but this has to be       mandatory Know Your Customer (KYC)            using the ECS system. This will
           done by those who are natural guardians.        checks for the investor as well as the per-   require a certificate from the bank that
           The other thing is that family members          son making the investment and even            will have to accompany the invest-
           will also not be prevented from giving          other declarations that would be required     ment but the situation is not very clear
           amounts to the minor through invest-            to confirm that the payments being made       when it comes to the direct online
           ments.                                          are genuine. The KYC guidelines will          investment part. There has to be an
                                                           ensure that there is some confidence that     account through which this payment
           Employer payment                                the parties involved are genuine. At the      is made and when that takes place
                 There are also situations where sev-      same time there would also be a look at       again there could be a position where
           eral employees decide to undertake              the bank account from which the pay-          the third party impact comes in. The
           investments such that there is a direct         ments are being made and hence this           amount for the investment has to come
           deduction taking place from their salary.       would be a significant thing. The other       from the account of the investor that
           This amount is then invested by the             thing is that the relation of the person      is registered with the mutual fund.
           employer into the mutual fund through           making the investment with the investor       There could be a situation that the
           the route of a systematic investment plan       will also have to be known as outlined        account that is registered does not have
           which means that there is a figure that         as this will also highlight the exact posi-   the internet facility for direct payments
           is going each month to the account of           tion.                                         or this could be an account where all the
           the investor without him having to under-                                                     investment income goes. Investors
           take the work every single month. Again         Linking bank accounts                         should ensure that there is clarity
           this would be a situation where there is            One of the primary activities that        obtained in this matter so that their
           a third party cheque involved because           will take place as the system for the         investment process is not disrupted.
           it is not the investor or the employee who      prevention of the third party cheques
           is making the payment from his own              come into play is that the bank account            (The writer is Chief Coach at FinCare
                                                                                                               16-30 November, 2010   MONEY MANTRA   59
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     FINANCIAL PLANNING                               TAXATION               STOCK MARKET                           COMMODITIES

                                       DIFFICULT TO GET
                Alok Dwivedi                                                            mechanical engineer Arun, she decid-
                                                          In India, insurance

                                                                                        ed to buy a life insurance cover for her.
                    opularity of insurance is on the      companies don't offer         She visited a number of state-run and

           P        rise. People opt for it to be on
                    a safer side in case of an unhap-
                    pening. Insurance companies
           are always more than eager to sell their
           plans to customers. But there are also
                                                          health insurance policy to
                                                          the elderly after a certain
                                                          age. Generally, insurance
                                                          companies provide health
                                                                                        private insurance companies, but they
                                                                                        simply denied selling the insurance
                                                                                        cover to her. Neither her husband, nor
                                                                                        any of Anita's family members are cov-
                                                                                        ered with a life insurance policy.
           situations when a person wants an insur-                                         When Anita visited an insurance
           ance cover and companies deny sell-            policies up to the age of     company for a life policy, she was
           ing the same. This is strange but true.        70 years. Insurers don't      denied the same by the insurer on a very
           In this write up, we have taken up a                                         simple ground. According to the insur-
           few hypothetical cases where willing           want to take risks with       ance company, since her husband was
           persons are not sold policy by insurance       regard to elders. But there   not covered with a life cover, she could
           companies.                                                                   not be given the same on moral grounds.
                                                          are a few state-run           The company explained that insurance
           For married woman, must                        insurers which allow          is based on utmost faith and it was not
           is husband's insurance                                                       fulfilled in this case. The insurer termed
             Anita, aged 27, is a house wife. Six
                                                          entrants till 80 years of     the reason 'moral hazardous'. Avaneesh
           months after getting married to a              age.                          Nirjar, Chief Operating Officer and co

           60   MONEY MANTRA   16-30 November, 2010
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      MUTUAL FUND                              BANKING                                  INSURANCE                                 INDIA POST

           founder,, says, "If a      ance companies. Such persons are not          ready to sell a health cover to him. In
           husband is not covered, the wife won't      sold policy by insurance companies. As        India, insurance companies don't offer
           be given insurance policy. Insurers         he is already in a poor health, he is find-   health insurance policy to the elderly
           think that there are chances of husband     ing it very difficult to get approval for     after a certain age. Generally, insurance
           murdering his wife to get the amount        a critical illness insurance policy. Such     companies provide health policies up
           of insurance." What is the solution of      people are not given policy by insurance      to the age of 70 years.
           Anita's problem? Nirjar says, "If Anita     companies. Insurers don't offer policies          Insurers don't want to take risks
           wants to buy life insurance, Arun has       in the presence of HIV, advanced cases        with regard to elders. But there are a
           to buy the policy first." But there is      of cancer and such critical diseases.         few state-run insurers which allow
           another catch in this case. Life insur-     There are cases when certain close fam-       entrants till 80 years of age. Rahul
           ance cover for such woman can't exceed      ily members have a high incidence of          Aggarwal, CEO at Optima Insurance
           the insurance cover of their husbands.      a specific life-threatening illness.          Brokers, says, "Private insurers don't
                                                           In such cases, either the disease is      feel any obligation towards senior cit-
           No insurance in case of                     excluded from the policy or the pre-          izens, hence state-owned insurers have
           life-threatening illness                    mium charged is much higher. J L              taken up the job to provide medical
               Insurance is not mandatory at all for   Vohra, GM at,             cover to senior citizens." Varistha
           anyone, but not having insurance cover      says, "In case a person is suffering from     Mediclaim policy by National
           costs much higher. If a person doesn't      fatal diseases like cancer, insurance         Insurance Company is such a scheme
           have health insurance, he may find him-     companies either increase the premium         which allows entrants till 80 years of
           self in trouble as the cost of hospitali-   or exclude that specific disease from         age. The age limit can be extended up
           sation and other related stuff is rising    that policy."                                 to 90 years for renewal. Another state-
           day by day and, for many, it is becom-                                                    run insurer United India Insurance as
           ing almost unaffordable.                    Difficult for elderly to get a                well offers a similar policy which
               Akhilesh, aged 43, is a cancer          cover                                         allows entry for the person of 61 to 80
           patient in advance stages. People with          Ajay is heartbroken as he is not able     years of age. Max Bupa Insurance, a
           a family history of genetic diseases are    to buy a health policy for his grandfa-       new entrant in the field, is offering
           often discriminated by not only by their    ther. As the age of his grandfather is        health insurance policies with no
           relatives and friends, but also by insur-   72 years, insurance companies are not         age bar.

           MFs not to disclose L&T Mutual Fund launch-
           assets every month es 12 Months FMP
           Mutual Fund Houses won't need to compete with
           each other over the status of their assets under               L&T Mutual Fund has announced launch of L&T FMP - II
           management (AUMs) every month end from now on.                 (November12M A), a Close Ended Income Scheme having a
           The lobbying arm of local domestic mutual funds-               tenure of 12 months. L&T FMP - II (November12M A) is a
           The Association of Mutual Funds in India (AMFI) -              close ended Scheme and can invest in debt and money market
                                         has done away with                                                        instruments maturing
                                         monthly disclosure of                                                     on or before the matu-
                                         AUMs from October.                                                        rity of the Scheme/
                                         This disclosure would                                                     Plan. The minimum
                                                                                                                   application amount is
                                         be made every quarter.
                                                                                                                   Rs. 5000/- and in mul-
                                         "The average AUM
                                                                                                                   tiples of Rs. 1 there-
                                         (AAUM) for each                                                           after. The Scheme
                                         quarter (90-day average)                                                  offers both Growth and
                                         will be computed and             Dividend Payout Option. The Investment objective of the
                                         uploaded on the AMFI             Scheme/ Plan would be to achieve growth of capital through
                                         website on the first             investments made in a basket of debt/ fixed income securities
                                         working day of the               maturing on or before the maturity of the Scheme/ Plan. Being
           following month of every quarter, effective from               close ended in nature, the Scheme/ Plan will be listed on National
           quarter ending December 31, 2010," it has said. The            Stock Exchange of India Limited (NSE). Investors will not be
           move follows representations from the industry,                able to redeem their units during the tenor of the Scheme/ Plan
           which felt that monthly AUM disclosure did not serve           and there will be redemption on the maturity of the Scheme/ Plan.
           the purpose because it put 'undue pressure' on mutual          However, the units held in dematerialized form can be traded
           funds.                                                         on NSE.

                                                                                                           16-30 November, 2010   MONEY MANTRA   61
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                  PV Subramanyam                                 there are upwards of 14 companies - and               Buy it on the net:
                                                                 all of them hope to have some market                  If you are savvy enough you
                  rying to save money is such a                  share!

           T      great idea that one tends to try
                  to do it in every sphere! After all
           money is time, is it not? If you can save
                                                                 So let us look at what
                                                                 steps can be enumerated:
                                                                                                                       could buy the policy on the net
                                                                                                                       (not just shopping even buying
                                                                                                                       can happen). Nowadays many
                                                                                                                       companies sell low commis-
                                                                                                                       sion or no-commission term
           some money and invest it somewhere,                        Do a c omparative shopping on the
                                                                                                                       policies on the net. Also, these
           it means you can retire early (so have                net: Easy to understand I guess! Once                 policies may not be available
           more leisure). After all leisure has to               you have done this look at the best rates             from all the companies, so if a
           be bought - and that requires money!                  from 2-3 companies that you trust. If                 company you trust is not selling
           Saving money on life insurance has just               say, company 'L1' comes out as the                    its policies online, you may not
           got easier on the net. There are com-                 cheapest and company 'L2' comes out                   have this choice!
           parative shopping engines that help you               as the next cheap one, it is not necessary
           shop for the cheapest source of life                  to choose L1! Choose L2 if you trust
           insurance policy writers. Obviously                   that brand more than you trust L1!
                                                                                                                     Ignore riders
                                                                                                                          Riders are nice parts of a policy - like a
                  Buy Term Insurance:                                                                                term rider, accident rider, critical illness rider
                                                                                                                     etc. However, if you are buying on the net and
                  I found this really difficult to say, but have to say it. In real life the risk charges that you   are not a great reader of legal documents,
                  pay in a unit linked plan is lesser than the risk charges of a term plan. However the              stay away from riders. Why am I saying this?
                  other costs, the loads etc. make the unit linked plan more expensive. So stick to what             Simply because there is something called an
                  you hear regularly on the media: Stick to Term Insurance. An endowment plan - unit                 'accidental death cover'- one of the many
                  linked or otherwise is really an inefficient investment hence avoidable.                           companies which are in existence does not
                       The difference in premiums between a 'term plan' vs. endowment life insurance                 cover 'accidental deaths occurring at home'.
                  (classic or unit linked) is not just a small amount. It can be substantial - for example a         Which means if a person dies of an electric
                  per year premium for a 37 year old (a 23 year policy) is Rs. 9480 (sum assured Rs. 60              shock, the family may not get the rider claim.
                  lakhs). However, to get a sum assured of Rs. 60,00,000 you will end up paying about                It is better either to find a trustworthy
                  Rs 200,000 per annum when you take a endowment plan. In terms of cash flow clearly                 agent/friend who will explain all the riders or
                  term is cheaper, far cheaper than an endowment plan. In fact, term insurance could get             stay away. Term insurance is easy to under-
                  cheaper if you buy it for say an 18-year period instead of buying it for say 23 years.             stand. If you die, your nominee gets paid. It will
                                                                                                                     not matter as to how death happens.

               Improve your health

                                                                                                                             CUT THE
                     If you have health problems, it becomes almost impossible to buy
               life insurance in India. Diabetes, nicotine, high blood pressure, all put
               the red flags for the underwriter. In a market so big it is much easier to
               say no to such proposals, because we anyway have a huge untapped
               market! High blood pressure, diabetes and heart disease are among
               those conditions that can make life insurance companies worried and
               rate up your premium. Unfortunately, there is not adequate medical

                                                                                                        YOUR LIFE
               research - especially of heart disease onset age, patterns etc. All this
               means you need to improve your health. Then there are rates for nico-
               tine users. You will have to pay a higher premium - but that is the lucky
               part, at least you can get life insurance. Shopping around might bring
               down the price, but hiding the smoking from the insurer is a stupid
               idea. If something were to happen to you, your nominee will get noth-
               ing! Do not apply as a non smoker if you actually smoke! Some com-
               panies will accept you as a non nicotine user if you have been off nico-
               tine for a period of 5 years at least. However, some companies will not!
               Shop around for these prices.
                     After a particular age weight is a big dampener for the underwriter.
               So if you are about 10% overweight, you will be rated up, but more
               than that and you will pay a huge premium. So reducing your weight
               before you go for medicals is a good idea to keep the premium at lower
                     If you have a history of medical problems, parents with health
               problems before they were 65 years of age etc. could lead to higher

           62      MONEY MANTRA    16-30 November, 2010
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                                                              Buy only as much as you need
                                                                   Anybody who tells you that your insurance is a function of your income is lying. Stay
                                                              away from that person. The question to ask is how much money it will take to maintain your
                                                              dependant's lifestyle if you were to die. Do you have money already set aside for your chil-
                                                              dren's education? For your parents? What about your spouse's retirement? And will she
                                                              be able to pay off all the mortgages? Will she have to take up a full time job immediately?
                                                                   You should keep reviewing your life insurance requirements - say once in 3 years.
                                                              Also, you should re-look at your coverage whenever there is a change in the family or an
                                                              increase in the liability. One more area that I suggest is to look at your plans if you are feel-
                                                              ing a little insecure about your job. A person without a job will not be able to get life insur-
                                                              ance easily. And the stress due to a job loss could make you more vulnerable to stress.
                                                              Similarly, if kids enter college, you move to a bigger mortgage etc. are reasons to review
                                                              your life insurance.
                                                                   However, the life insurance industry (like most others) exaggerates the need for life
                                                              insurance - like all industry bodies. Be alert, and understand that life insurance is a func-
                                                              tion of expenses rather than income! After all we have all been using toothpaste, sham-
                                                              poo, soap, malt drinks, even though we may be new to life insurance, pension plans, etc.
                                                                   If you see the pictures on the cover of the items that you buy you see pictures of how
                                                              much to use. The toothpaste cover shows toothpaste from one end of the brush to the
                                                              other. The shampoo bottles says use twice, malt advertisements say 'Two teaspoons' etc.
                                                                   However, with time and age you experiment and find that lesser (in fact in some cases
                                                              60-80% less) does the job just as well. Obviously, why does the industry ask you to con-
                                                              sume more? So that you go and buy more toothpaste, and their sales goes up.
                                                                   Now similar thing happens when you ask an agent or a financial planner the following
                                                              two questions:
                                                                   - How much life insurance do I need? and
                                                                   - How much money do I need to accumulate for my retirement?
                                                                   Even though we live in a country where most people suffer from 'Kam life insurance
                                                              lene ki bimari' many of our 'salesmen-planners' exaggerate the need for insurance and
                                                              pension plans. So be careful, use your common sense and act responsibly.
                                                                   Do not ignore every thing that a 'salesman-planner' tells you, but do not be blinded by
                                                              what he (increasingly she) says. If you are a disciplined person with good saving / invest-
                                                              ing habits, my answer would be you do not need a pension plan commitment till you reach
                                                              your 40s.

                                                                                             Buy as close to the need and as long
                                                                                             as the need:
                                                                                                   Buy insurance exactly as much as you need and for a

                                                                                             period which covers the contingency. If you are putting your
                                                                                             son in college - and you think you need more life cover, buy
                                                                                             it for 5 years in which time he would finish college. If you
                                                                                             have paid Rs. 25 lakhs fees for his training as a pilot, insure
                                                                                             your son for Rs. 25 lakhs. In case he were to die, the loan
                                                                                             would be repaid (hope that never happens). Also, just

                                                                                             because your needs change it may not be necessary to take
                                                                                             fresh insurance.

                                                                                                                       Pay the premium on
                                                                                                                       a quarterly basis!
                                                                                                                            Imagine a situation of a poli-
                                                                                                                       cy taken in January with the pre-
                                                                                                                       mium paid on a quarterly basis. If
                                                                                                                       the customer dies in the month of
                                                                                                                       February, he has paid premium
                                                                                                                       only up till March, and he can live
                                                                                                                       with that! Even though it is better
                                                                                                                       priced for an annual premium, it
                                                                                                                       makes sense to pay on a quar-
                                                         Keep shopping continuously for                                terly basis.
                                                         newer rates:
                                                                As the number of life insurance companies keeps
                                                         increasing term rates will keep falling. In the US the rates
                                                         fall on a weekly basis. In India also it keeps falling - so keep
            (The writer is a CA, a trainer and the       shopping. It is also possible to get better rates if your health
            author of book ‘Retire Rich Invest Rs        is improving - plug all that data and see what rates you are
            40 a Day’. He also runs                      getting. If you get better rates take a fresh policy before you
                            surrender the old plan!

                                                                                                                    16-30 November, 2010   MONEY MANTRA   63
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   FINANCIAL PLANNING                                 TAXATION                         STOCK MARKET                                       COMMODITIES
           Expert Advice

               Avoid Group
               Go Single
                                                                We would recommend you to take
                                                           health insurance policy for your fami-
                                                           ly, especially for your father. You can
                                                           choose Varishta Mediclaim policy from
                                                           National Insurance, if is 60 or above.
                                                           In case he is below 60, you should con-
                                                           sider buying regular individual
                                                           mediclaim policy for him. For health
                                                           insurance needs of your family, given
                                                           your tight budget, you should look at
                                                           a family floater of at least Rs. 2.00
                                                           lakhs. We normally recommend indi-
                                                           vidual mediclaim policies for the rea-
                                                           son already mentioned in earlier arti-
                                                           cles, but in your case we are suggest-
                                                           ing the family floater due to the tight
                                                                You can get complete details on
                                                           health premium, various features of
           Q1. Sir, I am a regular reader of your          health plan and so on on our site
           column in Money Mantra. After         
           going through your column, I felt the           insurance-india/comparison.html
           need of term insurance and health                                                               es full sum assured without deducting
           insurance policy for me and my fam-             Q2. Sir, I am 28 year old and work for          any of the survival benefit amounts,
           ily. I live in Delhi with my spouse,            a private organisation. I want to buy           which have already been paid.
           one kid and parents. My take home               a pure life insurance product which             Similarly, the bonus is also normally
           salary is Rs.10000 only. Is term pol-           is not a ULIP. Which product I                  calculated on the full sum assured. For
           icy available for a group? Would it be          should opt for, a money back policy             example, take a Money-Back Policy
           better to take a group policy? Please           or a term insurance? What else I                offered from LIC for a term of 25 years.
           suggest me the best possible way for            could go for? Please explain me their           The 15% of the sum assured becomes
           me and my family.                               difference and benefits. How much               payable each after 5, 10, 15 and 20
                         -S Gopalraja, New Delhi           will the product cost for an insurance          years, and the balance 40% plus the
                Group term plan are typically taken        (sum assured) of Rs 10 lakhs.                   accrued bonus become payable at the
           up only by employers for their employ-                                -Anjani, Mumbai           25th year.
           ees or professional bodies such as                   A term insurance plan is a pure                We would recommend you to go
           Institute of Chartered Accountants of           insurance cover with no investment              for a term insurance policy as they are
           India for their members. So unless, you         component. Under term insurance plan,           the cheapest form of insurance available
           are part of such a body or your employ-         there are no maturity benefits at the           in the market. Following are the pre-
           er is offering such a facility, you will        end of the policy term; if the insured
                                                                                                       Sr. Plan Name           Maximum A n n u a l
           not be able to get a group term insur-          person dies within the policy term, then    No                     Policy Term Premium
           ance policy. You can opt for an individ-        the insurance company will pay the stat-
                                                                                                       1    AEGON Religare 25     years    1,908
           ual term policy. Before taking any insur-       ed sum assured to the nominee of the             -iTerm Plan #
           ance cover you need to analyse the insur-       policy holder. On the other hand, money     2    Tata AIG Life - 25    years    2,680
           ance needs, so that your family's finan-        back policy is insurance plan with               Raksha
           cial obligation is taken care of in your        investment component. Under this plan       3    ICICI Pru Life - 30   years    2,722
           absence. For your insurance need, you           the insured person receives survival             Pure Protect
           can visit the following link and analyze        benefits as percentage of sum assured       4    HDFC Standard 30      years    2,997
           how much insurance do you need -                during the term of the policy. In the            Life   -   Term
          event of the death at any time within the        Assurance Plan
           advice-india/insurance-planner.html.            policy term, the death claim compris-       Online purchase only, for non-tobacco users.

           64   MONEY MANTRA   16-30 November, 2010
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         INSURANCE                                                                    Medical Insurance
                                                                               Age : 30 years Sum Insured Rs.300,000
                                                                                Compare your Health Insurance Policy
                                                            Name of   Name of Premium Renewab Pre              Sub Limts
                                                            the       the Policy           le Upto Existing
                                                            Companies                      Age      disease
                                                            Bharati   Smart      2,729/- 70         4 continu- Room rent of 1% of Sum
                                                            AXA       Health                        ous policy Insured per day
                                                                      Plan                          year
                                                            ICICI           Compreh 3,046/-           70            4 continu- No Sub- Limit
                                                            Lombard         ensive                                  ous policy
                                                                            Health                                  year
                                                            United India Mediclaim 3,609/-            Life Time Covered    Room rent 1% of Sum
                                                            Insurance Policy                                    from day   Insured per day or the actu-
                                                                         Platinum                               one        al amount whichever is
                                                                                                                (Congenit  less.
                                                                                                                al dis-    I.C.U expenses : Room rent
                                                                                                                eases not  2% of Sum Insured per day
                                                                                                                covered)   or actual amount whichever
                                                                                                                           is less.
                                                            Apollo      Easy       3,626/-            Life Time 3 contin- No Sub- Limit
                                                            Munich      Health                                  uous poli-
                                                                        Individual                              cy year
                                                            Star Health Medi       3,640/-            80             4 contin-    Room rent of 2% of Sum
                                                                        Classic                                     uous poli-    Insured per day maximum
                                                                                                                    cy year       to Rs 4,000/-
                                                            HDFC Ergo Health   3,653/-                75             4 contin-    No Sub- Limit
                                                                      Suraksha                                      uous poli-
                                                                                                                    cy year
                                                            Future          Health   3,932/-          70             4 contin-    Room rent 1% of Sum
                                                            Generali        Suraksha                                uous poli-    Insured per day and I.C.U
           mium quotation of Term Insurance                                 Golden                                  cy year       expenses :Room rent 2% of
           Plan. For a 28-year-old healthy individ-                                                                               Sum Insured per day to a
           ual who is looking at take sum assured                                                                                 maximum of 35%. Surgeon
           of Rs.10.00 lakhs for a period of 25                                                                                   fees up to 35% of the Sum
           years.                                                                                                                 Insured per claim. OTC : Up
           Q3. Sir, I have taken a life insurance                                                                                 to 40% of the Sum Insured
           cover. Should I opt for a health insur-                                                                                per claim.
           ance as well?                                    National        Mediclaim 3,988/-         80             4 claim Room rent 1% of Sum
                                   -Renu, Meerut            Insurance       Policy                                  free policy Insured Per day to a maxi-
                Both life insurance & health insur-                                                                 year        mum of Rs 5000.I.C.U
           ance serve different purposes. Life                                                                                  expenses :Room rent 2% of
                                                                                                                                Sum Insured per day to a
           insurance provides lump sum payment
                                                                                                                                maximum of Rs.10,000.
           of sum assured to the dependent fam-                                                                                 Surgeon fees : Maximum
           ily of the policy holder, in case of the                                                                             limits per illness- 25% of
           unfortunate death. These lump sum                                                                                    Sum Insured. OTC :
           benefits act as financial cushion to ful-                                                                            Maximum limits per illness-
           fill the family commitments.                                                                                         50% of Sum Insured
                                                                                                                                                                     Source: Apnapaisa Research Bureau

                On the other hand, health insurance         IFFCO           Individual 3,990/-        70            Not cov- Room rent 1% of Sum
           will give medical-related reimburse-             Tokio           Medishiel                               ered        Insured Per day
           ment on hospitalisation of policy hold-                          d                                                   I.C.U expenses :Room rent
           ers. Both the policies plays equal and                                                                               2.5% of Sum Insured per

           important role in the personal finan-                                                                                day.
           cial plan of family.                             Cholamand Individual 4,377/-              69            3 continu- OTC : Maximum limit per ill-
                                                            alam MS   Health                                        ous policy ness - 15% in AC Single
                                                            General                                                 year       Room Upwards.
                (Harsh Roongta is CEO, a      Insurance
                      search comparison engine for loans,
                    insurance and investments. He can be    All policies come with cashless facility in the network hospital, specific to each company
                                                            * Premium is inclusive of service tax
               reached at
                                                                                                                         16-30 November, 2010    MONEY MANTRA   65
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      FINANCIAL PLANNING                              TAXATION                        STOCK MARKET                                 COMMODITIES

       THE DREAM
                                                         now to first of all count your children      a house. The total family members are
                                                         and then proceed further. Some of you        just husband and wife. Another couple
                                                         may be thinking that what a crazy idea       we look at is someone who has been
                                                         it is to think about counting children and   married five years ago, has a small kid,
                                                         only then taking a decision about buy-       surely their style and thinking of buy-
                Subhash Lakhotia                         ing the house. Well my research and          ing the house would be different. Now
                                                         the above mentioned theme has been           comes a gentleman who just celebrat-
                         hen you are ready to buy        implemented by thousands of tax pay-         ed his 15th marriage anniversary and

           W             your dream home, the
                         most important things
                         that come to your mind
           is to decide about the area, the venue,
           the location. But I personally feel that
                                                         ers of India and I am very happy to place
                                                         on record the summary of what has tran-
                                                               Different couples will have differ-
                                                         ent number of children in their family.
                                                                                                      has two children, a son and a daugh-
                                                                                                      ter, aged 13 and 11. His situation and his
                                                                                                      thinking of buying a home, I feel, would
                                                                                                      be different in comparison with the fam-
                                                                                                      ily size of the first participant. And now
           before you start your hunt for buying         A just married couple may be having          there is a gentleman who has been mar-
           a dream house, it is time now, yes right      money right now and would like to buy        ried for 30 years and has grown up chil-

           66   MONEY MANTRA   16-30 November, 2010
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         BANKING                             INSURANCE                                    TAXATION                                INDIA POST

                                                                                                    ter have to study at different timings.
                                                                                                    In this situation, definitely they are going
                                                                                                    to need one room independently. If this
                                                                                                    type of family is contemplating to buy
                                                                                                    a house, they must keep the minimum
                                                                                                    requirement in mind namely a master
                                                                                                    bed room, an independent room for the
                                                                                                    son as well as an independent room for
                                                                                                    the daughter. So whenever a family is
                                                                                                    contemplating buying a house, they
                                                                                                    should do it keeping in mind the require-
                                                                                                    ment of the space required by the chil-
                                                                                                    dren as also the future requirements.
                                                                                                         Whether you believe in the joint
                                                                                                    family concept or not but the fact
                                                                                                    remains that as and when your children
                                                                                                    are of marriageable age, then surely your
                                                                                                    home should be such so as to take care
                                                                                                    of the just married son or going to be
                                                                                                    married son. Likewise, if parents are
                                                                                                    staying with you and the children are
                                                                                                    going in higher classes, in that situation
                                                                                                    also you need to consider the require-
                                                                                                    ment before purchasing the house.
                                                                                                    Always write down on a piece of paper
                                                                                                    your requirements like what is the total
                                                                                                    space required by you and your family

                                                                                                    members and prepare a floor chart of
                                                                                                    the space requirement. Do remember
                                                                                                    that only when you adopt this strategy,
                                                                                                    you will find that your dream home has
                                                                                                    been selected in a most idealistic man-
                                                                                                    ner. So the next time you get ready for
                                                                                                    purchasing a home, in the first place do
                                                                                                    count your children. Once you do so, you
                                                                                                    find that your focus is crystal clear.
                                                                                                         Buying a dream home definitely is
                                                                                                    not a child's play. It is not that easy to buy
                                                                                                    one property today and later on find that
                                                                                                    you have done a mistake. Remember
                                                                                                    that rectification of the mistake with
                                                                                                    respect to buying a dream home is not
                                                                                                    that easy. All that is required is lot big
                                                                                                    exercise, lot of time and money to be
           dren, some of them married and some        apartment. But when we have a look            wasted coupled with tax outgo. It is time
           yet to be married. Finally, comes a fam-   at a couple with one or two children          now to assess your requirement of the
           ily of a grand old man comprising the      going to school, the situation would be       real estate and then only go in for the
           grand old person, his wife, his sons,      different. This couple will definitely        required size of the house.
           the daughter in laws and grand children.   require at least one children room.                The sole purpose of writing this arti-
           Well what is the size of your family       Hence, when such a family is thinking         cle is just to impress upon your mind that
           and how many children you have are the     of buying a house, they should keep in        before hunting to buy the dream home,
           questions which need to answer right       mind the requirement of the children          jot down the economics of the space so
           now.                                       room in addition to the master bed room.      that after buying the property, everyone
               The couple who has just been mar-      Now comes the situation of a person who       in the family is satisfied and contended
           ried would immediately go in for buy-      has got slightly grown up children and        space wise.
           ing a house just by seeing the location.   these children have to study for long
           After all they are newly-wed couple and    hours. Supposing, there is a family of        (The author is tax & investment consultant
           need just one bed room set. This cou-      a husband and wife, a son and a daugh-        at New Delhi for last over 40 years. He is
                                                                                                    also Director of M/s R.N. Lakhotia &
           ple can also think of buying a studio      ter in higher classes. The brother and sis-   Associates LLP & The Strategy Group. )

                                                                                                          16-30 November, 2010   MONEY MANTRA   67
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           DR MENON'S CLINIC


                                                                                                     Rs 30 Lakh

                                                                                                     Rs 4 lakh

                  Build sizeable                                                                     Health Cover
                  liquid assets                                                                      Mother
               Dear Sir,
               I am Tina Bannerjee. At the age of
                                                            We have a flat in Kolkata worth Rs
                                                        30 lakhs. It is on rent there which fetch-   Rs 5 lakh
           29 years, I have big responsibilities on     es us Rs 15,000. Here in Delhi we pay
           my shoulders. My dad passed away             a rent of Rs 10,000. The rest of the
           when I was pursuing graduation and 21.       amount plus the pension amount, I
           With that tragic event, our world came       deposit in my mother's account for her
           crashing down. He was the only bread-        old age. She is 47. So far, her account
           winner of the family of five. I have a       has Rs 1.7 lakhs. I am planning to buy
           brother (25) and a sister (16). My moth-     a two-bedroom flat in Noida and a car
           er had always been a housewife. The          and give an EMI of Rs 15,000 and Rs
           pension that we got was very meager          5000 a month. I manage to save Rs
           - Rs 5000; so immediately after my           30,000 now. I have savings of Rs 4
           graduation, I joined a job to support        lakhs in bank in the form of FDs. I have
           my family.                                   investments in the form of mutual funds
               In between cleared my bank PO            of Rs 1 lakh which will mature 2 years
           exam and got recruited with a bank. I        hence. The purpose of the investment is
           did my MBA simultaneously and took           my sister's studies. When it comes to
           up a job in private sector bank in Delhi,    transportation, I prefer to travel by         Ms Tina, 29, works with a pri-
           which offered me good money - Rs             metro or public transport as I can't          vate bank and earns a hand-
           50,000 a month. Over three years, my         afford to buy a car. I plan to marry two      some Rs. 80,000 per month.
           salary increased and now I am getting        years later with my long time friend. We      After her dad passed away she
           Rs 80,000 a month. My brother also has       are very simple people with no big            took over the entire onus of
                                                                                                      looking after the family. She
           become financially independent. He           dreams. Please, draw a financial plan
                                                                                                      has a brother who is working
           joined Infosys, Bangalore as a software      for me and suggest a medical insur-           and a sister pursuing her stud-
           programmer last year at a salary of Rs       ance for my mother.                           ies. She wishes to have a
           30,000. Now, we are in a comfortable             Regards.                                  roadmap for her future invest-
           position financially.                            Tina Bannerjee                            ments.

           68   MONEY MANTRA   16-30 November, 2010
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                       HOW TO
           Home - 2011:
             The funding for house will happen in two parts via;
             margin money which is typically 20% of the home
             value and the rest from home loan.
             To provide for margin payments deploy Rs. 25,000
             per month from now onwards for 1 year growing @
             8 % p.a. By the year end you are most likely to
             accumulate about Rs. 3.13 lacs.
             The above funding plus bank FD's to the extent of
             Rs. 3 lacs will suffice for the margin money of
             For the balance Rs. 24 lacs you will have to take
             a home loan. If the home loan is availed at
             9.50% for tenure of 20 years, then the EMI will be in
             the range of Rs. 22,000 - Rs. 23,000.
             Hence after funding the home loan EMI you will be
             left with a monthly surplus of around Rs. 7,000 - Rs.
             8,000 for other goals.                                     your retirement goal.
                                                                     Plugging Loopholes:
           Sister's Education - 2012:                                   As of now you do not need any life insurance; that
              The current requirement of Rs. 2 lacs will surge to
                                                                        said you can opt for medical cover of Rs. 5 lacs to
              Rs. 2.25 lacs in 2 years assuming inflation @ 6%
                                                                        cover yourself with medical emergencies.
                                                                        At any point of time ensure that all your savings
              You can harness the mutual funds which mature in
              two years plus, the remaining in fixed deposits to        does not go towards servicing your EMI's. Always
              meet this goal.                                           keep in mind house is an appreciating asset on the
                                                                        other hand it is highly illiquid.
           Mother's Medical Insurance:                                  So make sure all your savings do not go towards
             Let the current bank balance of Rs. 1.70 lacs act as       creating an illiquid asset as over a period of time we
             a contingency fund.                                        need to build sizeable liquid assets to fall back on.
             You should look to buy an individual medical policy
             to the extent of Rs. 5 lacs.
             This policy will come to succor to meet immediate
             medical needs.                                                         HOT
             Divert Rs. 5,000 per month to a mutual fund which           SNAPS
             invests 85% of the money in debt instruments and
                                                                     All you goals will be met provided you start
             15% money in equities.
                                                                         It is recommended to postpone the car goal and
           Car - 2013:
                                                                         start focusing on retirement goal.
             An amount of Rs. 5,000 from the monthly surplus, if
              deployed for the next 3 years growing @ 12% will          In coming years build sizeable liquid assets to fund
              most likely yield Rs. 2 lacs.                              other financial goals.
             The above money plus a car loan will suffice to buy
              the car.
              If you avail car and home loan then majority of the     Satish Menon is a Financial Planner & con-
                                                                               sultant with Transcend Consulting
              surplus will go towards servicing their respective                                      (I) Pvt. Ltd.
              EMI's; hence it is recommended to postpone the car                    If like Tina, you would also
              goal by two years or when the income becomes              like to share your financial story with
              more robust.                                                 us and have a plan made by Satish
                                                                       Menon, do write to us at
               Alternatively, this money can be used for funding                   

                                                                                                 16-30 November, 2010   MONEY MANTRA   69
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           70   MONEY MANTRA   16-30 November, 2010
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                                                16-30 November, 2010   MONEY MANTRA   71
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                Shilpy Arora

                      ashing clothes will now help

           W          maintain a toned body, thanks to
                      an     exerciser-cum-washing
           machine which serves the twin purpose.
           The eco-friendly and health friendly

                                                                                                                                                     Photo: National Innovation Foundation
           device makes it possible to reduce weight
           and clean clothes simultaneously. It is an
           invention of a Keralite Remya Jose who
           hails from Malappuram district.
                This machine works on the principle
           of mechanical energy. While it looks like
           an exercise cycle, it washes clothes as effi-
           ciently as a conventional machine does.
           Like conventional washing machine, you
           need to fill its chamber with water and
           washing powder and rotate with a shaft
           connected to the pedals. The seating
           arrangement is such that it helps you do
           physical exercise and keep yourself fit
           and healthy.
                The device has an aluminum cham-
           ber that consists of a horizontal cylin-
           der made of iron net wire. A pedaling
           system, with a chain and seat, is attached
           to the cylinder.                                                                              repeat the process.
                This        exerciser-cum-washing
                                                                  How to buy?                         6. If clothes get clean in one washing
           machine is, basically, a 'tumble wash'          You need to place an order on the             round, refill the cylinder with clean
           system that is operated via pedal mech-         website of National Innovation                water and pedal for five to six min-
           anism. Pedal mechanism of the device is         Foundation (NIF).                             utes.
           similar to that of a bicycle. So as you                                                    7. Drain out clean water and pedal with-
           pedal, the machine spins, washes the            1. Log on to the website of NIF-              out water. It allows clothes to dry upto
           clothes and keeps you in shape simul-                                80-85 per cent.
                Remya assembled material from              2. Click the activities link given on      Features
           local workshop and took the assistance             the top of the page.                         3 kg per washing round
           of local technicians. She instructed tech-                                                      Dimension: 60 "X 25 "X 39
                                                           3. Click the Business Development               Semi-automatic
           nicians personally how she wanted her
           device to be, and came out with a sim-             and Micro Venture link.                      Total time taken for one washing
           ple yet novel device, the exerciser-cum-        4. Scroll down and click the lookout            round is 20-30 minutes
           washing machine. All it costs is just                                                           Made of stainless steel and alumini-
                                                              link.                                        um. Thus, harder to rust, easy to clean
                                                           5. Click the consumer durable link.             and easy to maintain its strength at
           How to use?                                                                                     higher temperatures.
                                                           6. Scroll down and click the wash-
           1. Fill the aluminium cylinder with                                                             Only one user can operate the device
              water and put clothes in it.                    ing cum exerciser machine link.              at a time
           2. Add washing powder and leave                 7. Click "If you are interested to buy          Eco-friendly- 100 per cent
              clothes in the solution for 10-15 min-          the product, please send us your             Health-friendly- 100 per cent
              utes.                                                                                       There is a huge market potential
           3. Rotate pedal for three-four minutes.            letter of intent" link given at the     for a device like an exerciser-cum-
              Rotate with very high speed to clean            bottom of the image section.            washing machine as people in low
              clothes properly.                            8. Fill the letter of intent page. Click   income bracket can afford it. Even, peo-
           4. Let the soap water drain out.                                                           ple from upper middle class and upper
                                                              the submit button. Your request
           5. If clothes don't get clean in one wash-                                                 class who like cycling as an exercise can
              ing round, refill the cylinder and              will be forwarded to NIF.               use it as a multitasking device.

           72   MONEY MANTRA   16-30 November, 2010
EP 50-73.qxd   11/10/2010   6:17 PM   Page 25

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