Outlook Money

www.outlookmoney.com`30

27 December 2012-9 january 2013

anoop bhaskar

maneesh Dangi

chirag Setalvad

Sachin Padwal-Desai

r.j. Shiller

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9 January 2013 Volume 12

Issue 1

www.outlookmoney.com l 9 January 2013 l ouTlooK money 1

Contents

Head Office AB-10, S.J. Enclave, New Delhi 110 029; Tel: (011) 33505500, Fax: (011) 26191420 OtHer Offices Bangalore: (080) 33236100, Fax: (080) 25582810; Kolkata: (033) 33545400, Fax: (033) 22823593; Chennai: (044) 33506300, Fax: 28582250; Hyde rabad: (040) 23371144, Fax: (040) 23375676; Mumbai: (022) 33545000, Fax: (022) 33545100. Printed and published by Vinayak Aggarwal on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: Udayan Ray. Printed at IPP Limited, C4-C 11, Phase-II, Noida and published from AB-10 Safdarjung Enclave, New Delhi 110029For Subscription queries, please call: 011-33505653, or email: [email protected]

Published for the fortnight of Dec 27, 2012 - Jan 9, 2013; Release date: Dec 26, 2012. Total no. of pages 88 + Covers

Outlook Money does not accept responsibility for any investment decision taken by readers on the basis of information provided herein. The objective is to keep readers better informed and help them decide for themselves.

Cover Design: MaNOJit datta

48 india’s top fund managersThe best in managing your money: Anoop Bhaskar; Chirag Setalvad; Maneesh Dangi; and Sachin Padwal-Desai

Global thought leader Robert J. Shiller brainstorms about the course of stocks, gold and the economy in a televised panel discussion with Arun Maira and Anup Bagchi 26 Plus His views on the future of finance

The road ahead

pg 18

neXt issue

DateD 23 Jan 2013

ON StaNDS 9 Jan2013

CoVer sTory


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2 ouTlooK money l 9 January 2013 l www.outlookmoney.com

4 Internet Contents Action in our Web world6 Editor’s note8 Letters85 Fortnight Figures88 Sunny’s Money Bad Than Worst?

update10 newsroll EPFO’s controversial circular has been put on hold, till further orders; RBI puts rate cut on hold, despite easing inflation; Sun Pharma shares rise

following news of US acquisition; M&M to buy out US partner’s stakes in joint ventures 16 Queries Your queries on matters affecting your personal finance answered

regulars

Contentsstart56 House saleA house sale doesn’t end with handing over the keys to the buyer. Here’s why

58 decoderBajaj Allianz Life Assure

59 insurance made easyTax benefits of life insurance policies

60 stock pickLIC Housing Finance

62 Banking stocks New bank licenses are up for grabs. How should you play the sector?

66 my planA roadmap for the Jasuds

68 Head start Take care of your child in your absence by having a hassle-free succession plan

manage76 commodities The Fiscal Cliff is posing a threat to the commodities market, but all’s not lost

77 diy money Build a strong stock portfolio

spend 80 interiors Your home decor this new year

84 your space Share personal finance thoughts

pg

10

30 and tHe award goes to... The Outlook Money Awards were presented in Mumbai on 13 December to companies that provided the best customer value in banking, home and educational loans, life and health insurance, e-broking and mutual funds. A report on the event and the profile of the winners in their respective categories

34 Best BankBest loan Providers36 education loan37 Home loanBest Insurers 38 life insurers39 HealtH insurers

40 Best e-BrokerageWealth Creators41 Best fund House42 Best fund House—equity43 Best fund House—debt46 Hall of fame K.V. Kamath, Chairman, ICICI Bank

ouTlooK money aWards 2012


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Join us on FacebookVisit www.facebook.com/olmindia. Get links to our articles and access to Outlook Money Digital, personal finance calculators and polls.

Have a query?Join our individual groups: click on the DISCUSSION tab, start a NEW TOPIC and post queries to members.

Sukhvinder Sidhu: As per a global study, Indians are living longer than they did 40 years ago. How far is it good news? Is there any abnormality associated with the rise in life expec-tancy? What’s the message for citi-zens for improving their life quality? 16 December

L. Krishnamurthy: My car was pur-chased in 2004. How do I determine the premium at the time of renewal?

OLM Replies: Premium depends on factors, such as age of the car, type of engine, renewal year, etc. Most insur-ers have a facility to renew the cover online, where you get the idea of the premium amount by filling the details.19 December

Follow us on TwitterLog in to Twitter and search for us or visit http://twitter.com/OutlookMoney. Follow us for updates and articles.

Tweet! Tweet!Naveen Kumar: RBI keeps rates un-changed. No respite of lower interest in the near term for borrowers. Exist-ing rate on FDs to continue 18 December

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LasT week on

CHeCk ouTDon’t forget to surf our easy-to-navigate website www.outlookmoney.com

IndIa’s FirsT personal fInance

eweekly

to stay on the ball visit http://digital.outlookmoney.com

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IPO Financing Risks IPO financing may look attractive in terms of the profit you could make from it. But does it really pay?Which Way? Inflation is not showing any signs of abating even as our cost of living is going up steadilyEased KYC Norms rBI revises know your customer (KyC) process for con-venience of new accountholders FDI in Insurance Proposal to allow foreign institutional investors (FIIs) to enter insurance sector in India

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mon

ey.com

14 december 2012

Cover Design: MANOJIT DATTA

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The parliamentary approval of the Banking Laws (Amendment) Bill, 2011, was, perhaps, last fortnight’s most important economic event and set the scene for entrants in the sector. In this issue, we analyse its impact on the stocks of compa-nies most likely to apply for banking licences (page 62). New banks, it has been argued, are needed for the huge credit disbursal required to fund India’s growth over the next decade, but, at the same time, the size of Indian banks will also be critical for them to be globally competitive. So, we may see banks, old and new, tak-ing over others. The proliferation of new banks will also dovetail with the effort towards greater financial inclusion through the use of Aadhar. This had taken centrestage lately with the Centre’s decision to undertake direct cash transfers using this route to plug leakages from subsidies to the poor and control the subsidy bill. Going forward, apart from subsidy payments into new bank accounts—many of them in new banks—microinsurance, micropensions and microinvestments, such as small-ticket systematic investment plans of mutual funds and gold, will make the make these accounts viable.

No wonder then that in a televised panel dis-cussion on Bloomberg Television India organised by Outlook Money and featuring emi-nent panellists Arun Maira, member, Planning Commission, and Anup Bagchi, managing director and CEO, ICICI Securities, Robert J. Shiller, one of world’s foremost econo-mists and thought leaders called Aadhar the biggest recent reform measure in India, far ahead of others such as FDI in retail (page 18). Shiller, in India at the invitation of Outlook Money and the guest of honour at the Outlook Money Awards 2012 held in Mumbai on 13 December, however, remains wary of the course of the world economy in the immediate future and argues that global financial crisis is still not behind us. In his awards address, he gave the audience a fascinating peek into the future of our financial world. Don’t miss the excerpts (page 26).

Lastly, like every year, the best in personal finance, who create value for you, be it through loans, banking, life insurance, health insurance, mutual funds, or e-brok-ing, were felicitated at the prestigious Outlook Money Awards in a glittering ceremo-ny attended by the who’s who of India’s financial world. Of particular interest to you would be the award winning fund managers who have made your money grow and taken you closer to your dreams. We profile them in our second cover story (page 48), a must-read for you. r

A Long View


shiller speakTop: Thought leader robert j. Shiller speaks at the Outlook Money Awards

Above: at the Bloomberg TV panel discussion on the Future of Finance

Editor’s Note

(Udayan Ray)[email protected]

http://twitter.com/udayanray

www.udayanray.blogspot.in

1. anoop Bhaskar 2. Chirag Setalvad 3. Maneesh Dangi

4. Sachin Padwal-Desai

1

3

2

4

ACE fund mAnAgErs


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EDITOR Udayan RayDEPUTY EDITORs Abhijit Mitra, Clifford AlvaressENIOR EDITORs Pankaj Anup Toppo, Sunil DhawanCONsULTING EDITORs Mohit Satyanand, Swami Saran SharmasENIOR AssIsTANT EDITOR Samarpan DuttasPECIAL CORREsPONDENTs Anagh Pal, Kundan Kishore, Teena Jain KaushalPRINCIPAL CORREsPONDENT Kavya Balaji sENIOR CORREsPONDENTs Ashwini Kumar Sharma, Naveen Kumar, Pheji Phalghunan CORREsPONDENT Deepali PenkarCOPY DEsk Lakshmi Krishnakumar, Sutirtha Sanyal (Dy. Copy Editors), Shinjini Ganguli (Assistant Copy Editor)ART Manojit Datta (Art Editor), Anil Panwar (Assistant Art Director) Saji C.S. (Principal Designer), Bhoomesh Dutt Sharma (Sr. Designer), Varun Vashishtha (Chief of Graphics) PhOTOGRAPhY Soumik Kar (Photo Editor), Bhupinder Singh (Chief Photographer), R.A. Chandroo (Principal Photographer), Nilotpal Baruah, Vishal Koul, Tushar Mane (Sr. Photographers) TECh TEAm Anwar Ahmed Khan, Hasan Kazmi, Manav Mishra, Raman Awasthi, Suraj Wadhwa EDITORIAL ChAIRmAN ViNoD MEHTA

Business Office PREsIDENT indranil RoyAssOCIATE PUbLIshER Johnson D’silvaCFO Vinodkumar PanickerAdvertisements GENERAL mANAGER Kabir Khattar (Corp) AssIsTANT GENERAL mANAGER Manoj Nair (West) REGIONAL mANAGERs Kailash Lohani (North), Taroon Kumar (South) sENIOR mANAGER James V Jose (East) mANAGERs Suchitra Vaidya (West), Suneel Raju (South), Ankur Srivastava (North) AssIsTANT mANAGER Devesh S Shetty (West)circulAtiOn NATIONAL hEADs L Arokia Raj (Circulation), Himanshu Pandey (Subs & Biz Dev) GENERAL mANAGER B.S. Johar (Subs) AssIsTANT GENERAL mANAGERs Anindya Banerjee (West), G Ramesh (South) ZONAL sALEs mANAGER Vinod Kumar (North) mANAGER Vinod Joshi DEPUTY mANAGER Shekhar SuvarnaPrOductiOn ChIEF mANAGER Shashank Dixit sENIOR mANAGERs Deshraj Jaswal, Shekhar Kumar PandeyAccOunts sENIOR GENERAL mANAGER (F&A) Satish Raghavan mANAGER Diwan Singh BishtAdministrAtiOn AssIsTANT GENERAL mANAGER Rajendra Kurup

mENTOR MAHESHWER PERi

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insurance Plans M. Rao Gopidalai, emailThis is regarding the article Invest Early For Your Child (14 November). I didn’t get the meaning of reduction in yield (RIY) mentioned in the table, Children’s Plan: What’s On Offer. Is this the policy charge which exists in the life insurance plans or something else? How can I compare the performance of unit-linked insurance plans (Ulips) across companies? Is there any methodology to do it?

OLM RepliesFor unit-linked plans we have calculated returns at an assumed annual growth rate of 10 per cent as they do not offer any guaranteed returns. Reduction in yield shows the net return after deducting policy charges from the assumed annual rate of 10 per cent. For instance, if the stockmarket rises by 10 per cent then your invest-ments will grow by 7 per cent (assuming charges are 3 per cent), as companies invest your premium money after deducting various policy charges. There is no website where you can compare their performance.

loan realities Rajeev Srivastava, emailI have been a regular reader of Outlook Money. I took a home loan from LIC Housing Finance (LICHFL) in March 2010, which is on a fixed interest rate up to March 2013. I want to transfer the loan to State Bank of India, which has a floating interest rate of 10.15 per cent up to 31 December 2012. LICHFL is charging 2 per cent of the outstanding amount as acco-unt closure charges and a fur-ther `22,000 as broken peri-od interest. Is LICHFL justified in doing so? I understand that the Reserve Bank of India (RBI) has banned prepayment penalty on housing loans.

OLM RepliesWaiver of prepayment penalty is only applicable to float-ing rate home loans. For the dual rate (fixed for initial few years and then floating) home loans, this penalty waiver works only after the loan has completed the fixed rate ten-ure and entered into the float-ing rate regime. In your case, since the rate is applicable till March 2013, till that time your loan will be considered as a fixed rate loan and, hence,

the waiver will not be applica-ble. It will be better for you to wait till your loan enters the floating rate regime and then go for the refinancing.

sunny’s moneyB. Bandyopadhyay, emailI have been a regular sub-scriber of Outlook Money since the very first issue and I eagerly wait for the forthcom-ing issues as I like the differ-ent type of informative and serious topics you bring out in your issue every time.That said, I like the one par-ticular illustration feature in the Sunny’s Money series (The Idiot Box Story, 12 December). I thought of sending my appreciation to the editor for the concept and the illustra-tor for the sketch. I had a hearty laugh while going through the story and shared the same with many of my friends, who also liked it very much. I hope you will bring out some well-conceptualised illustrated feature in the forth-coming issues too.

Sachin Agarwal, emailApropos The High Price Of Low Risk (12 December), traditional plans, though relatively less risky, are not rewarding, while term plans don’t pay anything. Unit-linked insurance plans (Ulips) provide a mix of insurance and investment, but can never be as rewarding as equity mutual funds (MFs) or stocks. In my opinion, it’s better to invest in stocks or equity MFs and partly in debt instruments, such as Public Provident Fund (PPF) and gradually shift the equity investments to debt as one nears his goals. One should buy a term plan only to offset a liability such as a home loan or to provide for the family’s expenses in the event of his demise. Otherwise there’s no need to make the insurers rich if one doesn’t have any liability. A health plan is advisable unless one is adequately covered for medical expenses for his entire life.

www.outlookmoney.com

12 DECEMBER 2012

`30

Rajiv Bose (L), 39, is using Ulips to

save for retirement and Manish Dak, 33,

took a pure term plan to get a high risk cover. Both gave traditional

plans a miss

12 December 2012

Letters

Letters must be addressed to: The Editor, Outlook Money, AB-5, 3rd floor, Safdarjung Enclave, New Delhi [email protected] Please mention your full name and residential address.

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Update


x Newsroll 10 x Queries 16

The new Central Provident Fund commissioner, Ravi Mathur, has put the controversial Employees’

Provident Fund Organisation (EPFO) circular on hold. It, experts say, would have otherwise increased the cost of hiring and decreased the take-home salary for employees.

The 30 November circular issued by the former PF commissioner R.C. Mishra, stated that all allowances which are uniformly paid to employees should be included in the definition of basic salary. At present, employees and employers contribute 12 per cent of the basic salary each. So, going forward, if the circular gets implemented, even regularly paid allowances, such as spe-cial and transport allowance would be added to the salary while calculating PF contribution, which would leave employees with reduced take-home sal-ary (see The Impact).

With increased cost to company (because of higher matching PF contri-bution), employers may also restruc-ture the salary of employees to mini-mise the impact of the cost to company.

Manish Sabharwal, CEO, TeamLease,

a staffing company said: “If the circular gets implemented the gross salary of employees would go up, but, at the same time, their take-home will come down. Moreover, this will give rise to informal employment as people won’t trust EPFO with their money.” Further, you wouldn’t have enough money left to make your own investments in funds

offering higher returns. EPFO currently offers 8.25 per cent to its members.

Mukul Asher, a social security expert and professor at National University of Singapore, said: “The proposed mea-sure can be interpreted as being designed to fetch additional revenue in the short term to the EPFO at a time when its finances are constrained.”

The circular goes on to add: “Confusion in definition of wages pri-marily arises from the expression ‘com-mission or any other similar allowance payable to the employee’ as ‘commis-sion’ and ‘any other similar allowance’ are read as two separate expressions. The expression ‘commission or any other similar allowance payable to the employee’ is one continuous term meaning commission or any other “commission” like allowance by what-ever nomenclature referred.” Asher further said: “The EPFO circular is unfortunately, not well-drafted and throws light on the outdated nature of the 1952 Act under which it contin-ues to operate.”

The circular stops EPFO officials from acting against companies that default-ed on employees’ dues unless it can be proved that the worker is cheated. It also says that no inquiry should go beyond seven years. This was to stop open-ended assessment investigations which have gone beyond seven years as EPFO insisted it only harasses employ-ers. “If an organisation can’t ensure recovery of dues after seven years it is EPFO’s gross failure and calls for a dras-tic restructuring,” said Asher r

TEENA JAIN KAUSHAL

NewsRollA sigh of Relief foR employeesEPFO’s controversial circular has been put on hold with immediate effect till further orders

10 OUTLOOK MONEY l 9 jaNuary 2013 l www.outlookmoney.com

Salary Structure

exiSting (`)

ProPoSed (`)

Basic salary (BS) 40,000 40,000Dearness allowance (DA) 10,000 10,000

House rent allowance* (HRA) 10,000 10,000

Special allowance (SA) 10,000 10,000

Transport allowance (TA) 800 800

Total salary 70,800 70,800

Provident fund contribution 6,000

8,496 (BS + DA + HRA + SA + TA)

Take home 64,800 62,304Employer’s contribution 6,000 8,496

THE IMPACT

*Inclusion will depend on the interpretation of the circular


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NewsRoll

small Change by VArUN VASHISHTHA

12 OUTLOOK MONEY l 9 jaNuary 2013 l www.outlookmoney.com

the wAit goes oN

In the recent past, though inflation went down from the earlier double

digits it is still a factor for the Reserve Bank of India (RBI) while considering rate cuts. The central bank has yet again put policy rate cut on hold in its mid-quarter monetary policy review on 18 December. We tell you how the ‘no policy rate cut’ decision will affect you.What lies ahead? Inflation has been a major concern for the RBI and it has hinted that going forward the inflation situation may improve, which might lead to a rate cut. RBI in its review says: “Headline inflation has been below the Reserve Bank’s projected lev-

els over the past two months. The decline in core inflation has also been comforting. These emerging patterns reinforce the likelihood of steady mod-eration in inflation going into 2013-14, though inflation may edge higher over the next two months. In view of infla-tion pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards.” Industry experts feel that an opportunity has been lost. However, they hope that in its next review the RBI would bring down the interest rate. Naina Lal Kidwai, presi-dent of Federation of Indian Chambers of Commerce and Industry, says: “With the inflation numbers showing a decline and the global economy still in a difficult situation, industry is crying out for an impetus for investment and growth and lower interest rates would

With RBI putting rate cut on hold despite easing inflation, borrowers wait for respite

be oxygen to the sentiment which is beginning to look positive.” So, if you are waiting for rates to come down you would have to wait a little longer.impact on borrowers. If you are an existing borrower with a floating rate loan or are planning to take one with the expectation of interest rate cuts, then you will have to wait a while. In all likelihood, RBI may cut rates in the January review as it is set to focus on growth. So, if you have done all your groundwork for a home loan or an auto loan and are comfortable with the downpayment charges and equated monthly instalment servicing, go ahead with your loan. However, if you are still in the initial stages of exploring loan options, then it would make more sense to wait for the rates to come down.impact on depositors. The interest rate on deposits, after reaching its peak of around 10 per cent, has started coming down. Most banks are now offering their highest interest rates on deposits typically around 9-9.5 per cent. If you are a senior citizen you would be able get an additional 0.5 per cent interest above the normal rate.

Now, with no rate cut in the picture, the only way to benefit from the exist-ing rates is through deposits, at least till the next rate cut is announced. So, if you have surpluses or funds matur-ing it would be a good idea to park your funds in fixed deposits as the rates are still attractive. debt funds. The return of debt funds depends on the movement of interest. Therefore, as the key policy rate remains unchanged there was no impact on such funds. Experts suggest that investors with investment horizons of less than a year can stick to short-term debt funds. r NAVEEN KUMAr

gold ANd glitteRThe government is planning a number of schemes to unlock some of the huge domestic savings held in gold. The schemes may redirect demand from gold to gold-backed products

gettiNg the NodThe Banking Laws (amendment) Bill, 2011, and the Enforcement of Security Interest and Recovery of Debts Laws (amendment) Bill, 2011, gets Parlia-mentary approval in its winter session


Time for another squeeze, guys?


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NewsRoll

14 OUTLOOK MONEY l 9 JANUARY 2013 l www.outlookmoney.com

wait it outThe Insurance Laws (amendment) Bill will not be taken up for passage in the ongoing winter session of the Rajya Sabha. The Bill has been passed in the Lower House of the Parliament

probe onThe Securities and Exchange Board of India is investigating the share price movement of Karnataka Bank driven by speculation about its possible merger with a leading bank


After Sun Pharma’s US subsidiary Caraco

Pharmaceutical Laboratories announced it will buy the generic drugs business of Philadelphia-based URL Pharma from Japan’s Takeda Pharmaceutical Company, its stock rose. On 18 December its shares went up 2.33 per cent to `736.3 from `719.55 on the BSE.

URL Pharma’s leading prod-uct Colcrys’ net sales in 2011 was more than $430 million and revenue was nearly $600 million. This is Sun Pharma’s second acqui-sition in the US within two months. In November it had bought US-based DUSA Pharmaceuticals for `1,251 crore. More than 60 per cent of its revenue comes from international markets. Sarabjit Kaur Nangra, vice-president, research, Angel Broking, says: “URL’s acqui-sition will strengthen Sun Pharma’s foothold in US.” r

dEEpaLi pENKar

Sun Pharma shares rose after it announced US acquisition

On hopes of rising demand Shree Cement

rose as much as 0.25 per cent to `4,496.65 from `4,485.35 on 17 December. In three consecutive trading sessions its stock rose 4.35 per cent from `4,309.45 to 4,496.65 (13-17 Decem-ber). Post monsoon, things have turned positive for

cement stocks. Improving supply-demand dynamics and government measures to boost infrastructure proj-ects are driving the cement stocks upwards.

The company improved its capacity utilisation to meet the rising demand. Demand surged as construction activities in both the hous-ing and infrastructure seg-ments picked up. Analysts and broking firms are posi-tive about the stock and believe that location advan-tage, strong management team and strong earnings growth will support the stock in the future. r

d.p

Followed by reports of Mahindra & Mahindra’s

(M&M) plan to buy out its US partner Navistar Group for `175 crore its shares shot up 0.89 per cent to `967.68 from `959.13 on the BSE on 18 December. In the utility vehicle making joint venture (JV), M&M will acquire the 49 per cent stake held in both JVs by the Navi-star Group and make them wholly-owned subsidiaries. The JVs for trucks and engi-nes were formed in 2005 and 2007, respectively.

In the quarter that ended September, Navistar’s num-bers were disappointing struggling to stay afloat in the US business environ-ment. It reported a loss of $100 million in Q3 2012. Its revenues in the Q3 were $3.3 billion, down 6 per cent from Q3 2011. It will thus, be difficult for Navistar to invest in the joint venture. Navistar will, however, con-tinue to supply technology to M&M on the basis of its indefinite licence. r

d.p.

buying spreesebi alert

sebi Has revised the base minimum capital (BMC) requirement for stockbrokers to a maxi-mum of `50 lakh. Earlier, a flat BMC of `10 lakh was levied on members of stock exchanges. It is man-datory for all the mem-bers to maintain a mini-mum capital deposit with the regulator

on the Curve

The stockmarket dipped substantially and gained slightly during the fort-night. The BSE Auto surged well above the Sensex

Shree Cement stock hit a high on demand and positive measures

M&M to buy out US partner’s stakes in joint venture

05 Dec 2012 08 Dec 2012

BSE Sensex

05 Dec 2012 08 Dec 2012

Nifty

Auto Index

5,900.5

99.86100.00

104.55

5,896.8

5,850

5,875

5,900

5,925

5,950

99

101

103

105

HIgH on dEMAnd

uTILITy dRIvE

street talk


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harsh sinha, email My father is retired and has no pension. His only source of income is rent from property, which is about `2.10 lakh per annum, and bank interest of `50,000 a year. Does he need to file his income tax returns? Is there any way he could be exempted from taxes?OLM replies As you have stated, the income of your father falls under two heads, namely ‘income from house property’ and ‘income from other sources’ (bank interest). The income from rent is subject to a standard deduction of 30 per cent and, therefore, his taxable income under this head will be only `1.47 lakh. Income from bank interest being fully taxable, the gross total income of your father will work out to `1.97 lakh. A gross income of under `2 lakh is exempted from tax. Therefore, your father need not file his income tax return in case he does not

wish to do so. However, in case tax has been deducted at source by either the tenants or the

bank, your father must file his return to claim the refund of tax deducted. In case your father is aged 60 or above, he will not be required to pay any tax up to `2.50 lakh per annum. r

General insurancegaurav thapar, email If I purchase two insurance poli-cies on my house, can I make a claim under both policies in case of any loss incurred?

OLM replies You can have two insurance poli-cies on your property covering different types of risk, such as a fire insurance and a burglary insurance for the contents of your home. In that case, any loss will be classified under one policy or the other. However, if you have two policies covering the same risk, say both policies cover the risk of fire, the loss shall be shared by both the policies in the ratio of the sum insured under each policy. One basic premise of a gener-al insurance contract is that no insured can make profit out of an insurance policy. Therefore, the insured only has to be indemni-fied for the loss incurred. In case there is more than one company covering the loss, the loss will be shared between the companies. r

LOkesh singh, email I have recently bought a second-hand car, which has a no-claim bonus attached with the insurance taken by the previous owner. Will this benefit be transferred to me when I take a fresh insurance for the car?OLM replies No-claim bonus (NCB) is a reward which is given to the owner of the vehi-cle for safe driving. It is not attached with the vehicle. Therefore, as soon as the vehicle chang-es hands, the insurance companies withdraw the no-claim bonus. The original owner, howev-er, can retain the bonus and transfer it to his next buy (vehicle). A purchaser of a second-hand vehicle will not get the benefit of NCB when he or she renews the policy. r

life insuranceshiLpi gupta, email What is the legal status of a life insurance policy during the grace period for payment of premium?

Life insurance generaL insurance MutuaL funds taxatiOn banking reaL estate retireMent stOcks nri

16 OutLOOk MOneY l 9 january 2013 l www.outlookmoney.com

vijaY singh askedPlease advise me about tax rebate on purchase of a new property?

OLM replies Per se, there is no provision under the Income Tax Act, 1961, for rebate on property purchase. However, there are certain benefits which are ancillary to the purchase of property. For example, if you buy a property for a business purpose, you can claim a pre-scribed percentage of its cost as depreciation, which will be treated as a business expense. If you buy a property by raising a loan and generate rental income from it, you can claim the payment of interest as an expense for earning that income. If you buy property in the form of a house for self occupation, you can claim rebate for repayment of the principal amount of the home loan subject to limits under Section 80C of the I-T Act, 1961, as well as on the interest paid on that loan, up to `1.5 lakh per annum. r

taxation

Queries


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Life insurance generaL insurance MutuaL funds taxatiOn banking reaL estate retireMent stOcks nri

OLM replies Life insurance companies usually give a grace period of 30 days for depositing a premium of a life insurance policy after the due date of payment, without any charge or interest. During this grace period, the policy remains in force. In case a death occurs during this grace period, the insurance company would, typically, deduct the outstanding premium and the inter-est thereupon from the death claim proceeds and pay the balance proceeds to the beneficia-ries. This provision has been made to avoid the unintentional lapse in an insurance policy. The grace days are normally one month, but not less than 30 days for all modes of payment except in a monthly mode where only 15 days are allowed as grace days. r

aMit pathak, emailI earn `2.1 lakh annually and wish to save and invest on a regular basis. Apart from some fixed deposits I do not have any investments. I would like to take a life insurance policy. Please advise. I am 30 years old. OLM replies Considering your age and income you should go for a term insurance plan for yourself. This is a pure risk cover that takes care of the risk to your life. In simple words, if any-thing happens to the policyholder his or her nominee would receive the sum assured. Term insurance is more economical than other insur-ance plans because it has lower premiums. Often, the idea is to go with a cheaper term insurance and invest the difference in regular savings and investment plans. The main benefit of taking a term plan is that it provides more insurance coverage at lower premiums and also there is no-lock in period. Thus, the policyholder has nothing to lose if he or she wishes to switch to some other insurance plan. r

naveen bhaskar jha, email With so much of controversy around unit-linked insurance plans (Ulips), is it advisable to buy Ulips? What factors one should know before investing in unit-linked schemes?OLM replies The choice of investing in unit-linked investment schemes will depend on your investment requirements and your insurance needs. A Ulip provides both insurance and investment benefits. So, if you are looking for insurance as well as appreciation of your money and are willing to take risks, you can consider investing in Ulips. In a Ulip, the insurance com-pany invests the amount you pay as premium in different funds after deducting administration and other charges. So, the policyholder’s money is invested in different funds which invest in equities, debt instruments, money market instruments, government securities and so on. Also, the policyholder determines the appropri-ate ratio of investments into these funds. r

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What lies aheadCover Story

Anup Bagchi, Managing Director & CEO, ICICI Securities

Robert J. Shiller, Arthur M. Okun Professor Of Economics, Yale University


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for stocks, gold and the economy

What lies ahead

As 2012 heads towards an end and you wonder what 2013 has in store for you, Outlook Money, in association with Bloomberg Television India got three eminent experts to brainstorm on the likely

course of the economy, stocks and gold in a televised discussion last fortnight. Participating in the discussion moderated by Vivek Law, editor, Bloomberg Television India, were Robert J. Shiller, one of the world’s foremost economists and thinkers, who correctly predicted the current finan-cial crisis and the dotcom bust of 2000. Besides Shiller, the other participants were Arun Maira, member, Planning Commission and Anup Bagchi, managing director and CEO, ICICI Securities. Here are excerpts from their discussion.

Arun Maira, Member, Planning Commission


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Real Estate


Cover Story

Economy x Vivek Law: Is it still a long way from feeling a little more comfortable about the global economy?Shiller: Well, one thing we know about financial markets is that there is uncertainty, but we still see the overhang from the crisis. We still see damaged financial institutions with balance sheet problems, households who are under water and have negative net worth. We have long-term unem-ployment and we have people who are giving up on finding jobs. All these are weighing on confidence and that damage in confidence might last a long time.

x Vivek Law: You recently said you were hopeful that the US will go over the ‘fiscal cliff’. What’s your view now?Shiller: I am hopeful that some kind of compromise will be reached. The problem is that there is such a polarisation in US politics, it would be tough. We have the Republican Party, which has a low tax priority. It’s very difficult for them to give in and President Obama has said that he won’t compromise on raising taxes on the rich. Therefore, we surely have a battle and we have no idea how it is going to come up. If it drags on, it can hurt confidence and hurt the economy as a whole. There are so many scenarios that

could unfold. We can just go over the cliff, but only for a short time and then there could be some corrections. That wouldn’t be so bad. It’s so hard to predict right now, but I think it does reflect a deeper mood of austerity that is driv-ing the US and the economy of other countries in the world. This austerity is dragging the economies back and it is affecting the whole world.

x Vivek Law: What about Europe? How bad is the situa-tion there?Shiller: Well, I have seen recent reports that have described the financial sector as very fragile. We have banks that are in trouble. They have been encouraged to hold the debt of governments whose debt is not entirely viable. We have a possible break-up of the eurozone area and the important psychological consequences in that. It is very unpredictable and it has the potential to develop into a serious crisis that would drag down the world economy.

x Vivek Law: Do you believe that there is a bigger chance of things going wrong from here on? Shiller: I think the most likely course for the world econo-my is that it will be steady and at lower growth. There is a

(R-L): Shiller, Bagchi, Maira, (video link from Delhi) and Law at the televised discussion


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substantial chance of a world recession, but I am not pre-dicting it as of now.

x Vivek Law: Mr. Maira, what is your reading on what’s really happening in the global world?Maira: We foresee three scenarios for India. One of the sce-narios is that we keep muddling along because of the log-jam in the system caused by lack of trust in institutions, which, in turn, disables the policy-making machinery from getting things done. The other scenario which can emerge—a worse one at that—is, if this logjam continues for much longer, then the condition of the system deterio-rates much further, both in the financial and economic conditions, as well as the lack of trust in institutions. We could then witness the falling apart of India’s growth story. There is another scenario that is possible, and there are forces which suggest that if they are taken advantage of, a flotilla advancing, the flotilla of various states, various interest and various stakeholders lining around strategies, would produce benefit for the whole system.

We have calculated gross domestic product (GDP) growth numbers within these three scenarios. And we do foresee that if we get the flotilla aligned and moving, for which we determine what needs to be done, we could see in the next five years growth of over 8 per cent. This means, going from where we are at 5-6 per cent, towards 9-10 per cent by the end of the five years. The second scenario—the fall-ing apart scenario—where the growth would be around 5-5.5 per cent on an average, in the next five years. And, the in-between scenario, where we just keep muddling along and don’t fall apart entirely, it could be 6-6.5 per cent GDP growth in the five-year period.

x Vivek Law: Anup, over $20 billion have been invested in the country this year. How would you explain that in the context of what’s going on globally?Anup Bagchi: In the Indian context, there has been four

times, where there was a massive upsurge in the index. All the four times, it has been driven by liquidity—(quatitative easing) QE1, QE2, Japanese Tsunami and then QE3. We must keep that in mind that liquidity is driving a lot of this upsurge that is coming in. Second, I think the whole mar-ket moves in expectation, not what happens in the real economy, but the expectations on the real economy. So, I think, the last 3-4 years, the index hasn’t gone anywhere, but the earnings have increased. And, to that extent, I think there is a decompression, so monies have started to come in, but I would say that it is largely driven by liquidity.

The bulk of the money that is coming in the country is of an ETF (exchange traded fund) variety, which is essentially allocation money and it is not so much India-dedicated active investing money. So, we have to keep in mind that these are the two factors for the inflows. In the Indian con-text, FIIs (foreign institutional investors) are looking at rea-sons and places to invest.

x Vivek Law: Dr. Shiller, you are visiting India at a time when the government has announced big bang reforms in the last 2-3 months. How does India look to you?Shiller: Well, I am impressed with some of the new reforms, one of them being this new unique identity num-ber, Aadhar, which I think is revolutionary (in terms of the very concept and the intended application). We don’t have that, by the way, in the United States, not a biometric sys-tem connected with an identification system that allows and, eventually, connects with databases across the coun-try. This is powerful and, I think, it will help lead India to a new and better future. So, in order to keep the economy advancing and to keep preventing the loss of trust and con-fidence that Mr. Maira was talking about, it would help.

Cover Story

arun maira “We have not been able to get a large flow of foreign investments because the money gets stuck and doesn't produce results. Aadhar and other administrative reforms will enable people to see benefits of growth”

robert j. shiller “Stockmarkets can still give 3-5 per cent real returns. From a value per-spective, it is still a good investment”


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x Vivek Law: What you are really saying is that this is perhaps something which could change India in the next 5-10 years. It’s a far bigger reform than throwing open an odd sector to foreign direct investment.

Shiller: It’s fundamental because it changes the informa-tion structure. It brings people into the financial system who are now anonymous and unidentified. Now they have got an account, they have the ability to act as an economic agent on their own. That is fundamental, and it works at benefitting all levels of the Indian society.

x Vivek Law: Mr Maira, with the kind of decisions gov-ernment has taken recently, do you think that the govern-ment has created a better opportunity to not fall in the worst case scenario?Arun Maira: There has been a lot of focus on opening up the country’s markets to outside investments previously. And, the truth is that most of our sectors are already opened to outside investments and only a few remain, and we are talking about opening those up. But, we haven’t been able to get a big flow of investments into the country except under conditions where everywhere else is depressed so short-term money would come here for a while perhaps. And, why it has not happened though India is a large mar-ket with a lot of potential is because when money comes in things don’t get done here. The money is sort of stuck. It doesn’t repay and produce results. So, people have been saying “why don’t you concentrate on getting things done

anup bagchi “Improved ‘feel good’ and liquidity have driven up the market. If there is time gap between the real economy moving and this enthusiasm, there will be a correction”


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Real Estate


Cover Story

within the country?” Therefore, Aadhar and other adminis-trative reforms, which will enable people to see the benefits of growth, are very important. If you do these reforms, people will not only directly benefit, but even the projects will get implemented (on time), money will produce returns faster and you would be able to draw in more money from investors both in India and from elsewhere in the world.

x Vivek Law: Will the recent (reform) announcements take us to next level of high in the market? Anup Bagchi: If you look at the markets construct as of now, it is tripolar. You have cash-rich companies and com-panies which are generating cash. Then, you have very asset-heavy and investment-heavy companies, such as those in infrastructure. Then, you have companies which are very exposed to global factors like the IT sector. If you see, massive underperformance has happened on the investment side and on the capital-heavy sectors. And, if you look at that sector, it hasn’t moved much because the real stuff has to get done. I think, so far what has happened is that the feel good factor has improved. So, (recent market upmove) is a factor of two things: a general feel good and liquidity which drives the market. The second one is the critical factor. But, the real economy has to catch up.

When you speak to corporates and when you look at pro-moters, I don’t think much has changed. But, I think confi-dence is coming back. Now it’s a very good start for the market always, because, when confidence comes back, expectation of returns on investment comes back (with it) and things start to move. Cash-rich companies are sitting on cash, but not investing. If they see that there is less poli-cy volatility, they will start to invest.

While on the ground nothing much has improved, I think sentiment has improved a great deal. People are waiting with bated breath that things might move, going ahead. And, trust me, if it moves, I think we will have a big jump,

as the two sectors, as you know, haven’t participated much in the overall rally. So, I think, we can see a good run up if real economy starts to move. If there is time gap between real economy moving and this enthusiasm, there will be a correction for sure.

Gold x Vivek Law: Dr. Shiller, do you think gold is where the next bubble is?Shiller: Well, gold has already been in the bubble and I have to admit I missed this one. I didn’t predict it. But, I have a lot of company. There are lot of other people who didn’t predict it, including some very successful money managers. You can’t get everything (right). The problem with gold is it has very little intrinsic use. It has a stored value, but it doesn’t generate earnings. So, I would like to compute a price-to-earnings ratio for gold, but we don’t have that. I study behavioural economics and human psy-chology, but I find it inscrutable. So, if you ask me to predict when this gold bubble will end I can’t do it.

StockS x Vivek Law: What about equities?Shiller: I have my ‘CAPE’, Cyclically Adjusted Price Earnings ratio, which is little over 20 in the US. It varies by countries and, in the UK, it is lower. But, it is high and it’s a sign that we don’t probably expect as good returns as we have got historically. It is just suggesting something like 3-4-5 per cent a year real returns, which is pretty good in this environment. And, moreover, you can go into lower price sectors of any economy and, maybe, do even better than that. So, I think the stockmarket, if you take it from a value perspective, is still a good investment. r

arun maira “If we have a flotilla of various states, interests and stakeholders aligned with strategies that would produce benefit for the whole system, we could see a growth rate of 8 per cent in the next five years.”

robert j. shiller “I think the most likely course for the world economy is that it will be steady and at lower growth. There is a sub-stantial chance of a world recession”


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26 OUTLOOK MONEY l 9 january 2013 l www.outlookmoney.comWorldMags.netWorldMags.net

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In the future, I think, that the next course of action should be to continue the expansion of our use of modern financial theory including behavioural finance, and a better understanding of how people actually think and behave. One thing that’s happening is we are entering the age of big data, where we have

expanding databases that allow better risk management. In order to make these work better we also need—and this is something that I know you are very much aware of here in India—better individual identification systems, biometrics, identification cards and numbers and ways of interacting financially with these numbers. So, I think that the new identification system being developed in India is extremely important. I talked about this in one of my earlier books, New Financial Order, and I think it’s very important because it allows people to link to data and automatic processing of data that allows systems to manage their risks and to incentivise people better. It is absolutely fundamental.

At the same time, I believe there is a trend in the world today that we will see evolving over the next half century, of a decline of the underground or par-allel economy. More things would be above ground and quantifiable and identifiable, which would mean better risk management and better incentivi-sation. Another thing you hear talked about now is that we have more com-plex contracts because with computers and databases and identification we

can do it. We can enforce the contracts, we can see it actu-ally fulfilling its plan. And we will see more use of electron-ic money; the paper money that we have is gradually disap-pearing. We will see more, I am hopeful, of what I call 'index units of account'. I have talked about this in my vari-ous books. I think that we will see the decline of conven-tional money and we will have more different kinds of money indexed to economic variables, better than anything we have seen so far.

The next few years are possibly difficult. ...Unemployment rate can stay up for a decade or more in the time of eco-nomic slowdown. It is irregular and you see ups and downs within that, but I think the slowdown that we see in the

Indian economy is just one example of the kinds of slowdown that may still be ahead of us because of this crisis (which started in 2008), which is not over yet. We are still in the aftermath of a bubble and the effect depends on confidence, on animal spirits, on how people are thinking. Fortunately, the G-20 nations responded very well to the crisis that developed in 2008. They did expansionary fiscal and monetary policy. The problem has been that since then there has been a tendency towards austerity because when you do get into a crisis like this and you use expansionary fiscal policy, it tends to put governments greater in debt. And there has been an absolute panic about that leading to austerity campaigns around much of the world.

In his address at the Outlook Money Awards 2012, the economic visionary mentioned how our financial future will pan out and what we should prepare for. Excerpts

‘The economic crisis is not quite over yet’

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RobeRT j. shIlleR Professor of Economics, Yale University

in motionThe future depends on improving and extending use of financial theoryn Expanding databases allow better risk managementn Individual identification (as ongoing in India) will allow databases to be linked bettern Decline of underground economy will continuen Much more complex con-tracts will be drawn upn Electronic money and indexed units of account will become more common

Cover Story


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I have been arguing in various news-paper articles and in my books that governments shouldn’t be afraid of stimulus anymore and that the bal-anced budget stimulus can still be applied. That means raising taxes and raising expenditures to invest in infra-structure and other important activi-ties that are neglected in a time of eco-nomic austerity. It doesn’t look like we have the political will to do this. So, it is not a forecast to say that we would not be using economic stimulus to put us out of this slow period and I am wor-ried that this slow period will continue. But I wanted to just say finally and conclude that it is important also to think about the longer term and not lose sight of the exciting, truly exciting revolution that’s going on in finance around the world. The little downturn that we are going through—little, maybe not so little—but the downturn we are going through now will be forgotten. There will be new bubble and busts like the one that we have now.

The important thing to keep in sight is to keep the revolu-tion, the financial revolution going. And this means that we need to be positive about the development of new finan-cial derivatives to deal with important risks. The important risks tend to be long-term risks to the income streams. I tell my students that the next half century is going to be an adventure for the next century. It’s a serious uncertainty about what’s coming up. The horizon, as I tell my students, that one should have is about a hundred years. My students will live the better part of the century themselves and we care about our chil-dren. So, we have a 100-year horizon. What is going to happen in the next 100 years nobody knows. The last cen-tury had enormous uncertainty revealed. This coming century will as well. We have to think about our finan-cial system as a system that insures against risks that are important to us and allows us also to incentivise people to move ahead in a risky world.

So, some examples of the kinds of things that we are to be thinking about that are even more important than the current economic slowdown is how we can insure against the major risks com-ing up. One of these is environmental risk. It looks like global warming is not being solved, this is just one example, by international treaties. It’s getting worse. Maybe there will be some treaty. We don’t know, but it’s a major uncer-

tainty. I don’t know how we can get international agreement to prevent this worsening, but I do know how we can ensure people against suffering from it. Now the environmental risk affects the whole planet, but it doesn’t affect the whole planet equally. So there are many risk management contracts that ought to be made, long-term risk man-agement contracts.

Another one is when you think about the distant future there is a worry about war and terrorism. I have NBCR, that’s nuclear, biological, chemical and radiological risks. These are risks that we need to talk about and develop long-term risk management contracts against them.

There is also a risk going forward about increasing economic inequality. With the informa-tion revolution going at the a pace that it is going at, there is uncertainty of people as to whether they would be able to earn a decent income. I am not saying that I know that inequality will increase, there is a risk that will increase. And this is something again that we can help devise finan-cial or insurance products (to mitigate the risk of). And if we develop finance further with advanced risk manage-ment and incentivisation methods, it will create a very positive future for ourselves and for our children. Because ultimately what finance releases is human achievement so that their activities are not diminished by excessive or unnecessary fears.

When you have a financial system that is attentive to peo-ple and makes complex contracts to protect them and to incentivise them, it will create amazing new things. One thing that is being happening during this immediate financial crisis is we have seen our communications tech-nology move ahead amazingly. If you compare our telephones, our mobile phones from five or 10 years ago with today's, they have just advanced so much in spite of the financial crisis. What this means is that the financial system, I believe, incentivises human behaviour and incentivises people to work better in groups. This is some-thing that is amazing, it’s the story of our times, we have to see it continue.

But the important lesson is that finan-cial innovation, which is discredited and doubted by so many people, is alive and well and has to be promoted for the future.” r

[email protected]


FAR vision Financial predictions for the next centuryn Increased speculative acti-vity will bring about more bubbles and bustsn Financial derivatives required to deal with long-term risks to income streamsn Protections against nuclear, biological, chemical and radio-logical risks to evolven Insurance against environ-mental risksn Insurance against rising inequalityn Advanced risk management will make for better achieve-ment of personal goals

Cover Story

nEAR HoRiZonThe next few years to depend on consistent application of economic stimulus because ofn Fundamental instability of capitalist economyn The G-20 nations responded well to this crisis (after 2008)n The tendency towards austerity in aftermath of bud-get crises is major threat (to the global economy)n Balanced-budget stimulus can still be applied today


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a different tea Party It was a high-powered high tea at Mumbai’s ITC Grand Central on 13 December 2012, in honour of

global thought leader Prof. Robert J.Shiller from the prestigious Yale University, who was visiting India at our invitation. The country’s best finance brains came to spend some quality time with Prof. Shiller

to discuss emerging trends in world finance. Among them were Subir Gokarn, deputy governor, Reserve Bank of India; O.P. Bhatt, former chairman, State Bank of India; K.V. Kamath, chairman, ICICI Bank; Y.H. Malegam, noted tax and financial regulation expert; and Anup Bagchi, managing director

and CEO, ICICI Securities. They were joined by Vinod Mehta, editorial chairman of the Outlook Group and Akshay Raheja, vice-chairman of the Outlook Group. Before the eminent gathering left after a

stimulating conversation, they posed for our shutterbug. r

From left: O.P. Bhatt, former chairman, SBI; Y.H. Malegam, financial expert; Subir Gokarn, deputy governor, RBI; Robert J. Shiller, noted economist; Akshay Raheja, vice-chairman, Outlook Group; K.V. Kamath, chairman ICICI Bank; Vinod Mehta, editorial chairman, Outlook Group; and Anup Bagchi, MD & CEO ICICI Securities

Conversations

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tushar Mane


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By Pheji Phalghunan

Ayear of volatile markets, stub-bornly high inflation and poor investor sentiment: that’s how many of us would describe 2012. But even this bleak back-

drop threw up its set of shining stars. The Outlook Money Awards 2012 was held to honour those who had delivered excep-tional service to the man on the street.

The evening began with Outlook Money editor Udayan Ray welcoming the stal-warts of Indian finance. That was fol-lowed by a talk by Robert J. Shiller, one of the foremost economic thinkers of our time and the only person to have predict-ed both the dotcom bust as well as the 2008 crash, on the future of the financial world. A Q&A session moderated by jour-nalist Govindraj Ethiraj was next.

The Outlook Money Children’s Special Collector’s Issue 2 was launched at the ceremony by Vinod Mehta, editorial chairman, Outlook Group, Harshendu Bindal, president, Franklin Templeton Investments (India), and Shiller. This was the second of the Collector’s Issues, with the first being the successful Women’s Special and more to follow.

The Awards evening was rounded off by the induction into the Outlook Money Hall of Fame of K.V. Kamath, a legend of Indian finance, who, with his foresight and acumen built up the country’s sec-ond-largest commercial bank, ICICI Bank, of which he is now the chairman. That was, indeed, a rare privilege.

The Constellation

The winners with their trophies at the Outlook Money awards 2012 ceremony at the iTC grand Central, Mumbai, on 13 December 2012

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The ConstellationThe Ceremony

t Update Awards Start Manage Spend

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1 K.V. Kamath, chairman, iCiCi Bank (l), who was inducted into the Outlook Money hall of Fame in 2012, with the 2011 hall of Fame awardee and tax and financial regulation expert y.h. Malegam. 2 Robert j. Shiller, arthur M. Okun professor of economics, Cowles Foundation for Research and economics, yale university, delivers his address. 3 (l-R) harshendu Bindal, president, Franklin Templeton investments (india); Vinod Mehta, editorial chairman, Outlook group, and Shiller launch the Outlook Money Children's Special Collectors' issue 2. 4 udayan Ray, editor, Outlook Money, delivers the welcome address. 7 (l-R) O.P. Bhatt, chairman, awards jury, and former chairman, State Bank of india; Mehta; akshay Raheja, vice-chairman, Outlook group; and Ray on the dais. The Outlook Money awards 2012 winners: 5 Keki Mistry, vice-chairman and CeO, housing Development Finance Corp.; 6 hemant Bhargava, executive director (marketing & product development), life insurance Corporation of india; 8 M.V. Tanksale, chairman & managing director, Central Bank of india; 9 antony jacob, CeO, apollo Munich health insurance Co.; 10 V. Philip, managing director & CeO, Bajaj allianz life insurance Co.; 11 Vibha Padalkar, executive director and CFO, hDFC life insurance; 12 R.K. Bammi, executive director (retail banking), axis Bank; 13 g. Srinivasan, chairman cum managing director, new india assurance Co.; 14 anup Bagchi, managing director & CeO, iCiCi Securities; 15 aseem Dhru, managing director & CeO, hDFC Securities; 16 amandeep S. Chopra, president & head (fixed income), uTi aMC, (l) and imtaiyazur Rahman, acting CeO, uTi aMC (R); 18 nimesh Shah, managing director & CeO, iCiCi Prudential aMC; 19 n. Seshadri, executive director, Bank of india; 20 (l-R) lakshmi iyer, senior vice-president & head (fixed income & products), Kotak Mahindra aMC, and Sandesh Kirkire, CeO, Kotak Mahindra aMC; and 21 Prashant jain, executive director & CiO, hDFC MF. 17 johnson D'silva, vice-president, Outlook group, & associate publisher, Outlook Money, delivers the vote of thanks. 22 (l) indranil Roy, president, Outlook group, and Manoj nair, assistant general manager, Outlook Money

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Photos: sOuMik kar; tushar Mane; aPOOrva salkade; aMit haralkar; Pravin utturkar


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2 3 4

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Winner’s edge n Consistent performancen It topped the tables in the financial performance category by a big marginn Good reach



IndIan Bank

Competition was tough and Indian Bank performed well across all parameters, topping the list on ‘reach’. Axis Bank

and ICICI Bank also scored similar points, but Indian Bank won the award on the ground that it provides services such as phone banking, mobile banking and Netbanking along with the fact that it opened a large number of no-frill accounts. That is what worked in its favour. Indian Bank also boasted of a healthy increase in its savings bank accounts in FY12 compared to FY11 and a large number of new customers in the last three years. The bank also scored on the cost and convenience criterion. The bank has the minimum average quarterly balance requirement for a savings account with cheque book facility, the lowest charge for non-maintenance of the average quarter-ly balance and the lowest annual charges for debit cards. Where it lost a little ground was in the financial performance. Not that it did not perform well in this parameter, only it fell below its performance in other parameters. r

bank IndIan bank

t.m. bhasin Chairman &

Managing Director

Winner’s edge n Services such as phone, mobile and Netbankingn Their no-frill accountsn Minimum average quar-terly balance requirement

axIs Bank

this bank has been on the winner’s podi-um for a second year in a row, only that it was the topper last year. In the reach

parameter its performance was on a par with Indian Bank’s, but it faltered in ‘cost and convenience’. The average quarterly balance needed to maintain a savings account is high compared to Indian Bank as are the charges for not maintaining the average quarterly balance. Even the annual debit card fee and the interest in rollover credit charged by Axis Bank is high com-pared to Indian Bank. But where it made up for lost ground was in the financial perfor-mance parameter. In fact, it topped the tables in the financial performance category by a big margin. One of the major reasons for this was healthy fee-based income, CASA and low NPA among others. r

RUNNER-UPbank

aXIS bankshikha sharma

Managing Director & CEO

bankBestWINNER

Bankt

Update Awards Start Manage Spend

Up next x OLM Awards: Best Education Loan Provider pg 36


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winner’s edge n High loan disbursementn Low default raten Low cost of interestn Quick loan disbursaln Higher repayment options



Bank of IndIa

Bank of India (BOI) has driven ahead of the competition and won the best educa-tion loan provider award by proving its

worth across parameters. So, what is it that BOI did and others could not? For starters, the bank’s extensive network worked in its favour. The number of loans disbursed by the bank further strengthened its cause. While BOI registered a positive growth rate with regard to the number of loans disbursed in FY12 over FY11, many of the competing institutions struggled to even maintain the levels of FY11. Not only that, it left the com-petition way behind in the value of the loans disbursed. It more than doubled the value of loans disbursed in FY12 compared to FY11. On the ‘cost and convenience’ parameter, the bank fared well, thanks to its low interest rate and fleet-footedness in disbursing loans. It also earned points on the disclosures and good governance parameters for its openness about providing quality information to edu-cation loan seekers, both on its website and in the product brochure. r

education loan

Bank of india

n. sesHadri Executive Director

winner’s edge n Extensive networkn High loan disbursementn Value of loans disbursed better than peersn Good governance

Central Bank of IndIa

central Bank of India’s performance was only second to that Bank of India. It disbursed higher number and value

of education loans in FY12 as against FY11 compared to its competitors. The bank has a low default rate compared to institutions competing in the same category. It scored the highest on the cost and convenience parameter. The low cost of interest and quick loan disbursal were the major reasons for Central Bank of India topping the tables in this category.

Further, higher number of repayment options of the education loan for custom-ers’ convinience also worked in the bank’s favour. It, however, faltered a bit in the dis-closures and good governance criterion. r

RUNNER-UPeducation loan CEnTRaL Bank of indiaM.V. tanKsale

Chairman & Managing Director

education loan ProViderBest ider

WINNER

Education Loant



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winner’s edge n Year-on-year increase in the number of loans disbursedn Table-topper in disclosures and good governancen Lowest cost

HDFC

HDFC made it to the top for the second consecutive year. This year, however, the competition was really tough with

the runner-up, Central Bank of India, breathing down the neck. Yet, at the finish-line, HDFC was the undisputed king with its sound performance and reach. The value of loans disbursed by the private sector player was far higher than its peers—even beating that of State Bank of India, which has the largest branch network in the country. The average number of loans disbursed per branch by HDFC was also the highest among competing institutions.

HDFC also topped the table in terms of cost and convenience, but the margin between the runner-up and the winner was very thin. What worked in HDFC’s favour in this cate-gory, though, was the fact that it provided greater convenience to loan applicants. In the disclosures and good governance front, HDFC did fairly well, but was not good enough to beat Central Bank of India, which kept its nose ahead. r

Home loan

provider HDFC

KeKi misTrY Vice-chairman & CEO

winner’s edge n Highest loan disbursed in value termsn Table-topper in cost and conveniencen Gives more convenience to loan applicants

RUNNER-UPHome loan provider

CENTRAL BANK OF INDIAm.v. TanKsale

Chairman & Managing Director

Home loan providerBestWINNER

Home Loan Providert


Central Bank oF InDIa

The bank has been a steady performer at the Outlook Money Awards in this space. Though the value of loans disbursed by

the Central Bank of India was on a par with its peers, the increase in the number of loans disbursed in FY12 over FY11 exceed-ed expectations. It did reasonably well in the performance and reach parameter and gave a run for the money to HDFC in the cost and convenience category. Central Bank not only charged the least, but was fleet-footed—something that is not associat-ed with PSU banks. The disclosures and good governance parameter—where it topped—helped it make up for lost ground elsewhere. The bank’s good show across parameters helped it get the second spot. r

Up next x Life Insurer pg 38

www.outlookmoney.com l 9 January 2013 l OUTLOOK MONEY 37x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindia


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LIFE INSURER HDFC lIFE InsuranCE CompanyAMITABH CHAUDHRYManaging Director & CEO

RUNNER-UP

HDFC LiFe insuranCe

It’s a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life. Its reach, cus-

tomer education programmes, persistence and product innovation makes it our next best in the business. In terms of premiums collected (excluding renewals), the insurer has fared better than most peers. r

LIFE INSURER baJaJ allIanZ lIFE InsuranCE Company

V. PHILIP Managing Director & CEO

RUNNER-UP

Bajaj aLLianz LiFe

Bajaj Allianz is a joint venture between Bajaj Auto and Allianz AG, a German company. It has also offered good

returns to its policyholders with high bonus rates and good fund performance. On the basis of improved customer service, the decline in the number of awards against the insurer from the ombudsman also makes Bajaj Allianz Life the frontrunner. r



LiFe insuranCe Corporation oF inDia

Life Insurance Corporation of India contin-ues to be the market leader in the life insurance industry in India. In FY12 it

sold over 35.7 million individual policies with total premium collection at `2,02,889 crore. Add to that its extensive reach with 2,048 branches, 109 divisional offices, eight zonal offices, 992 satellite offices and the corporate office in Mumbai. It also has the strong agen-cy force of 1.28 million during 2011-12, of which 1.21 million are the active agents. To its credit, the company manages to deliver good returns to the majority of its policyhold-ers, for both unit-linked and traditional plans. Few surrenders and low percentage rise of complaints to Ombudsmen also gives it an edge. In terms of reach, disclosures and prod-uct innovation the company scores well. Despite a fall in its total agent count and even on the active agent front the company has managed to pull off a win. r

LIFE INSURER lIC

D.k. MEHRoTRAChairman

wINNER’S EDgE n Consistent performancen Gives good returns to policyholdersn Few surren-ders and low percentage rise in complaints to ombudsmen

LIFE INSURERBestWINNER

Life Insurert



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winner’s edge n Extensive networkn High customer responsivenessn Varied product portfolion Promoted cashless servicesn Underwriting practices

The New INdIa assuraNce

The New India Assurance, a leading global insurance group with 1,068 offices, bagged the first prize in the inaugural

edition of best health insurance award. With approximately 21,000 employees, it has the largest number of technically-qualified per-sonnel at all levels of management. It is also the only Indian insurance company to have an ‘A-’ (excellent) rating by A.M. Best, an international rating agency.

Health continues to drive the insurance company’s growth story, significantly sup-ported by the motor and the fire segments. The healthy top-line growth for two consecu-tive years has helped the company continue as the market leader with a global premium of `8,225.51 crore.

In terms of reach, it is way ahead of its peers, not only in terms of its network, but also in terms of number of lives covered. It also maintains high standards of customer service and regulatory compliance. r

healTh insurer the new IndIa

assurance company

g. sriniVasan Chairman cum Manag-

ing Director

winner’s edge n High number of technically qualified employeesn High number of lives coveredn High stan-dard of cus-tomer service

apollo muNIch

apollo Munich Health Insurance is the runner-up in this category. A joint ven-ture between the Apollo Hospitals

Group and Munich Health, a company of the Munich Re Group, Apollo Munich oper-ates as a standalone health insurer and offers innovative health, accident and travel insurance solutions.

The company scored well across all the four parameters—reach, product portfolio, customer service and complying with regu-latory norms. It, in fact, showed remarkable determination in extending its cashless ser-vices across the entire country. The compa-ny’s underwriting practices, bouquet of innovative products and features, and prompt customer responsiveness helped it tally up its score. r

RUNNER-UP

healTh insurer apollo munIch health Insurance

companyanTOnY JaCOB

Chief Executive Officer

healTh insurerBestWINNER

Health Insurert


www.outlookmoney.com l 9 January 2013 l OUTLOOK MONEY 39x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindia

Up next x e-brokerage pg 40


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winner’s edge n Extensive networkn Strong retail customer acquisi-tion strategyn Diversified product suiten Reduced costs and overheads



ICICI DIreCt

For the fifth consecutive time, ICICI Direct has bagged the best e-Brokerage Award. It is one of the fastest-growing e-broking

companies, serving 2.4 million retail custom-ers across the country. Of course, being backed by a strong parent, ICICI Bank, helps, with the bank offering services across invest-ment transactions.

But that’s not all. ICICI Direct, which was the first to introduce a mobile trading plat-form, has been taking giant strides in inves-tor outreach by tapping a growing list of cus-tomers. Besides offering equity and deriva-tives in the local market, it facilitates trading on major US exchanges, including the New York Stock Exchange. The bank rationalised its brokerage costs last year and rolled out a stream of products and incentives to facili-tate more trading for retail investors. It also offers special incentives such as no deposito-ry sell charges and interest on idle money in a trading account.

Little surprise then that ICICI Direct won our coveted award. r

e-brokerage ICICIdirect.com

anUP bagCHi Managing Director

& CEO

winner’s edge n Investor out-reachn Trading on US exchangesn No depository sell chargesn No interest on idle money

HDFC seCurItIes

The runner-up in the e-brokerage catego-ry, with a strong banking parent (HDFC Bank) is HDFC Securities. Incorporated

in April 2000, the firm expanded from being a single-product broking house to a full-service financial intermediary.

HDFC Securities has more than 180 branches and over 1.4 million customers. It is a fast-growing brokerage with a healthy retail customer acquisition strategy. Its diversified product suite aims at reducing costs and overheads for investors. The firm has been among the top eight distributors of IPOs and FPOs across India and pio-neered NCD applications online. This is one securities firm we would be watching in the ensuing years. r

RUNNER-UPe-brokerage

HDFC SeCurItIeSaseeM dHrU

Managing Director & CEO

e-brokerageBestWINNER

e-brokeraget



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winner’s edge n Strong performancen Extensive reachn Star-rated schemes

x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindiawww.outlookmoney.com l 9 January 2013 l OUTLOOK MONEY 41

HDFC AMC

Yet again, HDFC Asset Management Company clinched the first place in the best fund house category. In its equity

category, all the 12 schemes outperformed the category average, while in its debt catego-ry, six out of nine schemes outperformed on a risk-adjusted basis.

HDFC mutual fund is one of the most con-servative asset management companies in the market. Yet, what sets it apart is its uncanny fund management acumen. It has consistently outperformed its peers in most categories. Its stellar performance in equity and the above average performance in the debt space have been its trump cards. Some of its equity and hybrid schemes such as HDFC Equity, HDFC Top 200, HDFC Balanced and HDFC Prudence and debt schemes, such as HDFC MIP, HDFC HIF S/T Fund, have con-sistently been a part of OLM 50; Outlook Money’s recommendation of 50 schemes across categories.

The fund house backs up its performance with high service standards. r

FUnd HOUse HDFC ASSET

MANAGEMENT COMPANY

MiLind BArVe Managing Director

winner’s edge n Consistent performancen Star rated schemesn Above-par returns

UTI AMC

UTI Asset Management Company has unparalleled brand recall among retail investors. It is virtually synonymous

with the term ‘mutual fund’, at least in the Indian MF industry. The fund house bagged the second position in the best wealth cre-ator category for its superior performance across both equity and debt funds. In the equity category, a total of 15 schemes qual-ified for the award. Of those, eight outper-formed the category average. In terms of star rating, six of them are either four-or five-star rated. In the debt category, six out of seven schemes outperformed on a risk-adjusted basis, five of which are either four-or five-star rated.

The fund house is well established across cities and towns in India with 124 branch-es outside metros. It has more than 5.3 mil-lion folios with the AAUM of `14,000 crore beyond the top 15 metros. r

RUNNER-UPFUnd HOUse

UTI ASSET MANAGEMENT COMPANYiMTAiYAZUr rAHMAn

Acting CEO

FUnd HOUseBestWINNER

Fund Houset


Up next x Fund House-Equity pg 42


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winner’s edge n Wide product rangen Process-backed strong invest-ment performancesn Star-rated schemesn Above-par returns



HDFC MF

HDFC MF truly justifies its win in the best fund house-equity category. Its out-standing performance on the equity side

has ensured that it leads the equity pack for the second consecutive year. On the perfor-mance parameter, it scored a perfect 100. In the equity category, all the 12 schemes taken into consideration outperformed the category average. All the schemes have a four-or five-star rating, giving HDFC MF a winning edge.

HDFC MF has exhibited exemplary commit-ment to ensuring good performance by focus-ing on its existing schemes instead of going on new fund offer (NFO) launching sprees. The decision bodes well for both the MF and its investors. The equity schemes of the fund house are on top of the chart, be it the equi-ty-diversified category (both large-cap orient-ed as well as mid-and small-cap oriented), equity-linked saving schemes (ELSS), bal-anced funds or others. All its funds have consistently outperformed peer’s funds.

Can it repeat it’s performance next year? It will be worthwhile to watch. r

FUnd HOUse-eQUiTY HDFC ASSET

MANAGEMENT CoMpANy

MiLind BArVeManaging Director

winner’s edge n Consistent performancen Star-rated schemesn Focus on existing schemes n Capital safety

ICICI MF

Over the years, ICICI Prudential MF has forged a position of pre-eminence in the Indian mutual fund industry and

has evolved into an esteemed value creator for investors. Its efforts in consolidating its product range and a strong investment per-formance backed by processes favoured its case. The fund house bagged this award for the second time in a row. Eight of its 10 equity schemes that made the cut have out-performed the category average. This is an impressive figure given the tough market conditions. Of these, five schemes were rated with four or five stars. Four of ICICI MF’s equity schemes—ICICI Dynamic, ICICI Discovery, ICICI Focused-Blue chip Equity and ICICI Tax Plan have consistently been featured in Outlook Money’s OLM 50. r

RUNNER-UPFUnd HOUse-eQUiTY

ICICI pRUDENTIAL ASSENT MANAGEMENT CoMpANy

niMesH sHAHManaging Director & CEO

FUnd HOUse eQUiTYBestWINNER

Fund House-Equityt


Up next x Fund House-Debt pg 43


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winner’s edge n Debt investing one of the best in the industryn Five out of seven schemes outperformed category averagesn Many four- or five-star schemes

x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindiawww.outlookmoney.com l 9 January 2013 l OUTLOOK MONEY 43

KotaK Mahindra aMC

Kotak Mahindra Asset Management Company has been one of the most con-sistent performers at the Outlook Money

Awards. This year, it did it again. Its debt schemes continue to impress across all cate-gories, with four out of its six debt-oriented schemes outperforming the category average and maintaining a low expense ratio. Since returns in debt funds are modest, having a low expense ratio helps prop up returns. It has also left its mark in terms of innovation and launching of new products. It was the first to launch gilt funds in December 1998 and a serial plan in the following year.

A well-managed debt fund is also character-ised by low credit risk and, so far, the fund house has successfully managed the credit risk by investing in better rated paper as com-pared to its peers. It has also been able to deliver better returns and earn higher yields. The fund house’s debt fund managers have worked wonders with their portfolios. r

FUnd HOUse-deBT

KOTAK MAHINDRA ASSET MANAGEMENT COMPANY

sAndesH KirKire

CEO

winner’s edge n Four out of six schemes beat category averagen Low expense ratio, better returnsn Innovation, new product launches

RUNNER-UPFUnd HOUse-deBT

UTI ASSET MANAGEMENT COMPANYiMTAiYAZUr rAHMAn

Acting CEO

FUnd HOUse-deBTBestWINNER

Fund House-Debtt


Up next x Hall of Fame: K.V. Kamath pg 46

Uti aMC

UTI Asset management Company has come a close second in this year’s Outlook Money Awards in this catego-

ry. Its debt side, headed by Amandeep Chopra, has made a serious comeback. UTI’s MF has comfortably raced to the top—way ahead of its peers—and its debt investing is now one of the best in the industry. Out of its seven schemes, five have outperformed their respective category averages and four are either four- or five-star rated schemes. Its debt scheme, UTI Bond Fund, has consis-tently been a five-star rated scheme in OLM’s rankings. Its expense ratio (1.39 per cent) for the period under consideration was below the category average (1.45 per cent). A low expense ratio has always been a fea-ture across its debt funds and has, therefore, resulted in good returns. r


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You may call it an enhanced access to banking and financial services, someone else may term it as financial inclusion, while others may prefer “democratisation of finance”. Since the underly-ing theme of the Outlook Money Awards 2012

was the increasing outreach of personal financial services to the Indian masses, it is only fitting that the Outlook Money Awards Jury unanimously decided to induct K.V. Kamath, chairman, ICICI Bank, into the Hall of Fame. For many of us, ATMs, credit cards, home and other loans might be a way of life today. However, things were quite different even in 1994, when ICICI Bank was set up. Then you had to be a client of a foreign bank to get access to an ATM. Otherwise, you waited in serpentine queues at teller counters for cash.

As new private banks, such as ICICI Bank, hit the scene, all this began to change. And what is important is that you need not have a large bank balance to be eligible to access the services. If ATMs and phone banking brought banking closer to you, ICICI Bank also aggressively opened branches across the country. These efforts picked up great momen-tum after Kamath took over the reins in 1996. Yet another lasting contribution of Kamath is in ensuring that ICICI Bank took the lead in bringing home and car loans closer to the customer from the early part of the decade of the noughties. He was in no small measure helped by the low interest regime, which, when combined with the handsome tax breaks provided by the government on home loan principal and interest repayment, made people’s life dreams of buying a home not only achievable, but that too at a time when one was fairly young. In a very short period of time, the average age of the home owner went down from early 40s to early 30s. The economic boom during 2004-08 was also marked by a rapid rise in income and savings that led to many Indians moving on to their second or third homes. Then, as the life insur-

The Pathbender

by pankaj anup toppo

46 outLook MonEy l 9 January 2013 l www.outlookmoney.com

Kamath, an engineering graduate and IIM-A alumnus, has taken banking to the people

fameHall of

k.v. kaMathChairman, ICICI Bank


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ance sector opened up, ICICI’s entry into the space and its aggressive approach to reaching out helped people get life insurance covers in a badly underinsured country. Even as all this was happening, ICICI Bank’s e-broking company icicidirect.com was reaching out to a whole class of inves-tors who wanted to get a share of the India growth story by investing in stocks and other products available online.

Born on 2 December 1947 in Mangalore, Kamath fin-ished his primary and intermediate education from St. Aloysius School. Then he pursued his mechanical engi-neering degree from the Karnataka Regional Engineering College, Surathkal (presently known as National Institute of Technology, Karnataka). His formal education culminat-ed with a masters degree in Business Administration from the IIM, Ahmedabad. Under Kamath’s stewardship, the growth of the retail business, in what was an essentially an organsation relying on institutional business, catapulted ICICI Bank to the number two slot among Indian banks, just behind behemoth State Bank of India. But, the impact of fast-paced growth by private sector groups, such as ICICI Bank and HDFC, is more far-reaching than just this. They have ended up forcing the public sector banks and other players to keep up with the times and provide their custom-ers with nothing less than what is provided by private sec-tor players. The impact and benefit of Kamath’s leadership went far beyond the customer of ICICI Bank.

Kamath’s ICICI growth story also established one more model in India without doubt. Before, there were companies who would be in stand alone car or home finance, or brok-ing services, and there were banks providing pure banking services. Kamath’s ICICI Bank journey established banks as one-stop shops that provide for all the financial needs of a customer. Kamath’s contribution to India’s personal finan-cial services does not stop there. He managed to groom a school of future top executives in retail finance, thus leav-ing behind an unmatched legacy of talent that will contin-ue taking personal financial services across India.

Today, Kamath is more in the news for his role as the Chairman of the Board of Directors, software major Infosys, though he continues to be the chairman of ICICI Bank. He is making other significant contributions, all of which will be difficult to list here. Even at 65, Kamath’s innings is going ahead briskly, for there are few in India, who can match his accomplishments for engineering growth and creating a world-class bank that reaches out to the masses. r

[email protected]

The PathbendereducaTionn B.Tech, Karnataka Regional Engineering College, Surathkaln MBA, Indian Institue of Management, Ahmedabad

careern Started his career in 1971 at ICICIn In 1988, he moved to the Asian Development Bank and spent several years in South-East Asian Returned to ICICI Bank as its managing director and CEO in 1996n Retired as managing direc-tor and CEO in April 2009 and took up his present position as Chairmann Joined the Board of Infosys in 2009 and took over as the chairman of the Board in 2011

http://digital.outlookmoney.com l 9 January 2013 l outLook MonEy 47x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindia

Kamath, an engineering graduate and IIM-A alumnus, has taken banking to the people

Hall Of Famet


Up next x India’s Best Fund Managers pg 48


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Managing others money is never easy. You have to look closely at which sectors to invest in, analyse thousands of stocks to pick one that will outperform the rest and what should be the composition of your portfolio. Every move of a fund manager has a cost

and a bearing on a portfolio. A decision could make or break it. Hence, fund managers have to take more than a little extra care when making that crucial investment decision.

Outlook Money’s Best Fund Managers didn’t have it all on a platter when they began trading last year. The economy was weak, GDP growth was falling (to below 6 per cent), capital investment trickled down and companies held back

their investment plans while profit growth began to falter (dipped below 18 per cent). But by mid-2012, the investment climate started to change as foreign investment began pour-ing in and stock prices commenced their long upward climb.

In this seemingly contrary environment, fund managers had to initially protect their portfolios from a market fall; then quickly U-turn their strategy to rake in the gains in the rising market. It's a challenge to do both, protect against the downside and capture the upside. But our winners have.

This year’s winners have delivered against a very difficult and uncertain climate, at least initially. They have truly man-aged their portfolios in the best possible way.

Our congratulations! r

india's best

fund managersWhether the stockmarket is up or down, they are

among the best in making your money work for you

48 OUTLOOK MONEY l 9 January 2013 l www.outlookmoney.com

Graphics: varun vashishtha

bY KUNdaN KishOrE


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Experience 16 years Total Assets Managed `7,500 croreExperienceTotal Assets Managed

sChEMEs MaNaGEd

PErFOrMaNCE* OLM raTiNG1-year 2-year 3-year

UTI Equity Fund 29.66 4.29 9.34UTI Master Value Fund 26.42 -0.18 8.74

UTI Mid Cap Fund 36.39 4.43 9.69BSE 100 28.65 -0.83 4.77 NA#

Fund Managerst


Up next x Real Estate: After Sales Must Dos pg 56

midas touch!T

he Best Equity Fund Manager Award at the Outlook Money Awards was the first for Anoop Bhaskar, 46, the man who changed the fortunes of many who had invested in UTI MF’s equity funds. His focus has

always been to beat the benchmark during an 'uptrend' with little concern for the downside. He points to the 'mad-ness of 2007', when high-beta and stocks with corporate governance issues rocked the charts. Not surprisingly, his funds underperformed massively, “It’s a badge of honour, I wear with pride,” he says. This belief was justified when these stocks tumbled in 2008 and 2009 while his funds escaped relatively unscathed. “Similarly, we were cautious in October-December 2010, when markets were frothy.” This helped in outperformance during 2011.

Bhaskar, an MBA, worked for various companies before kicking off his career with Kothari Pioneer Mutual Fund as a research analyst. “Becoming a fund manager after a 10 year stint as a research analyst is similar to being selected for the Indian (cricket) test team after playing on the domestic circuit and scoring over 5,000 runs in the Ranji Trophy,” he quips. “It makes you respect the opportunity more; you try a bit harder,” he adds. Having managed mid-and large-caps funds, he finds investing in large-caps more ‘macro’ (economics) based and mid-caps more ‘micro’ (eco-nomics). Bhaskar says: “Developing an investment style is a slow process, which one imbibes over a long time.” r

x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindiahttp://digital.outlookmoney.com l 9 January 2013 l OUTLOOK MONEY 49

winner

fund manager equiTyBestanoop bhaskarHead-EquityUTI AMC

*Percentage returns #Not Applicable Returns as on 17 December 2012 Source: mutualfundsindia.com


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fund manager equiTyBest


Experience 16 years Total Assets Managed `5,311 croresChEMEs MaNaGEd


HDFC Mid-Cap Opportunities 34.53 7.61 15.22

HDFC Capital Builder 26.01 -0.34 8.43

BSE 100 28.65 -0.83 4.77 NA#

mr steadyT

o accelerate and decelerate is easy but maintaining the momentum is the tricky bit. If you want to learn the art, we strongly recommend you learn from Chirag Setalvad of HDFC MF. For the second time in a

row, Setalvad bagged the second position in the best equity fund manager category at the Outlook Money Awards.

Setalvad,38, a BBA graduate from the University of North Carolina, believes managing a fund in a bull market is much harder. “In a bear market there is a plethora of investment opportunities. Thus, you are spoilt for choice and the challenge is to pick and choose, which seems like a good place to be in,” says he.

Setalvad started as a research analyst with HDFC MF in 2000. Within a few years, he had his hands on few small funds. He quit the job in 2005 to work with a hedge fund, but returned soon, in 2007. Currently, he is managing seven funds which have consistently performed well. The credit for this goes to his investment philosophy of buying quality businesses at fair valuations and hold on to them. Setalvad says: “We try and buy high-quality businesses at a reasonable price and hold onto them for an extended period of time. We aim to stay within our circle of competence and take advantage of adverse market conditions.” Chirag is obviously valued in his fund house.

“Chirag is an extremely talented fund manager who has fully imbibed the HDFC philosophy and shown outstanding results,” says Milind Barve, managing director, HDFC MF. r

runner up

Chirag seTalvadSenior Fund Manager HDFC AMC


Fund Managerst


Up next x Real Estate: After Sales Must Dos pg 56


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fund manager debTBest

Fund Managerst


Experience 12 years Total Assets Managed `15,213 croreExperienceTotal Assets Managed

sChEMEs MaNaGEd


Birla Sun Life Dynamic Bond Fund

10.13 9.85 8.35

Crisil Composite Bond Fund Index 8.84 8.05 6.98 NA#

top gunh

e is undeterred by the highs and lows of life. He also knows to hold his oars steady in a stormy sea. Maneesh Dangi, co-chief investment officer at Birla Sun Life AMC, has proven his mettle and won the

top honours in the best Debt Fund Manager category. Former ex- financial intermediary, Dangi’s past experience

has taught him that the size of a fund has nothing to do with its performance. For him, managing smaller funds is as challenging as managing larger funds.

He says: “We take a long-term view (our definition of long term is longer than the term most of our competitors are thinking of) and avoid hectic trading. The market is gener-ally smart, but we don’t rely on it blindly. If everybody is buying, we want to avoid. We generally add risks by going contra instead of trading momentum.” For him, prices or their direction or their acceleration doesn’t matter—they always revert to their mean.

Dangi feels 2012 was better than 2011 since trends began to emerge clearly. He says, “Beginning 2012, growth began to decelerate and inflation started moderating, albeit slowly. In 2011, the trend was just the reverse. 2012 was enriching as markets gave space to create value for our investors, both in bonds and equities.” His outlook for 2013 is bright. He expects the RBI to cut rates further. “We see the repo rate 50 basis points lower by March and CRR at the current levels as RBI should choose open market opera-tions to inject liquidity in the markets,” predicts Dangi. r

winner

maneesh dangiCo-Chief Investment Officer Birla Sun Life AMC


52 OUTLOOK MONEY l 9 January 2013 l www.outlookmoney.comWorldMags.netWorldMags.net

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www.outlookmoney.com l 9 January 2013 l OUTLOOK MONEY 53

Experience 12 years Total assets managed ` 10,000 croresChEMEs MaNaGEd


Templeton India STIP 9.95 9.47 8.16

Templeton India IBA — Plan A 11.46 10.86 8.80

Templeton India Income Fund 9.72 8.95 7.10

Crisil Composite Bond Fund Index 8.84 8.05 6.98 NA#

saChin padwal-desaiAssistant vice-president Franklin Templeton AMC

safety firstf

or Sachin Padwal-Desai, assistant vice-president at Franklin Templeton Asset Management Company, devising an investment strategy for the safety of his investors’ money is key. The metallurgical engineer

and IIM Bangalore alumnus has not only been able to con-sistently deliver the goods for his clientele for 12 years, but has also bagged the runner-up trophy at the Outlook Money Awards for the second consecutive year in this category.

Desai always plays it by the rules and does not take undue risks. “The objective is to limit the downside and exploit opportunities available, while remaining within prudent limits,” says Desai. His constant effort has been to optimise the trade-off between safety, liquidity and returns within the investment objective and positioning of the product. Desai feels managing debt in a volatile interest-rate scenar-io is challenging and one must have well-planned strategies to counter it. He focuses on intense research before taking a call. Says Desai: “All investments go through the filters of credit risk, industry and sector exposure, liquidity and interest rate risk norms. Portfolios are constructed accord-ingly to meet specific fund objectives over the long-term.” Desai’s mantra for his clients is simple: “Investors must look at fixed income funds positioned to take advantage of high interest rates and potential capital appreciation.” r

fund manager debTBest

runner up


Fund Manager Debtt


Up next x Real Estate: After-sale Process pg 56



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Greater Bangalore Eco Assets Pvt Ltd, formerly Greater Bangalore Estates, as one of the leading land developers and builders in Bangalore we understand that our role is to create peace of mind by creating

an effortless, stress free environment that ensures that the client receives what they want, each time - every time. The testimonials of our customers are a proof of our efficiency, transparency and integrity.Why you chose Hosur?With the advent of Hosur as a major Automobile and IT hub, the focus of the company turned to Hosur. The proposed TIDEL IT Park ( A Joint venture

of Tamilnadu Industrial Development Corporation and Electronic Corporation of India) and the Multiproduct SEZ at Hosur along with already successful SIPCOT Phase I and Phase II, Hosur has turned out to be a hot destination for investments out of Bangalore.Advantages of buying a property in Hosur.Hosur is conveniently situated close to Electronic city. People working in Electronic city, Biocon and Bommasandra Industrial Area find it more convenient and faster to commute to Hosur rather than negotiate the Bangalore Traffic. The Six lane high way connecting Chennai has made the travel even more comfortable.What does your company offer to investors?The company offers three projects. Eco vista which is located adjoining the

Multiproduct solar SEZ and opposite HOSTIA (Hosur Small and Tiny Industries Association). Now the price is quite affordable. Once these Industrial parks become completely functionally we are expecting a huge demand of over 5,000 houses in this area. The prices then would appreciate exponentially as it happened in OMR Road, Chennai where the price have multiplied over 20 times in recent years.

We have designed two more farm land projects with less than 40 min drive from Bangalore Electronic city with tree plantations at a most affordable price one can expect. What would your advice be?Hosur will definitely be to Bangalore what Gurgaon and Noida are to Delhi. Do give a serious investment thought on Hosur. Do not miss the bus! ■

With the real estate prices in Bangalore soaring high, real estate developers are now looking at cheaper locations.

In the last few years, Mysore has benefitted from the high cost of land in Bangalore. Now, Hosur is the new kid on the block.

The location. Hosur is located in Krishnagiri district, Tamil Nadu. Located at a distance of 294 kilometers from Chennai, Hosur is only 40 kilometers away from Bangalore. Like Bangalore, Hosur has a pleasant climate with the temperature ranging between 15 and 30 degree celsius.

Why Hosur? There are many reasons why Hosur should be included in your investment zone. For starters, IT companies are looking at locations beyond Bangalore, thanks to the rising cost of land and infrastructural nightmares in the city. On the other hand, Hosur has a sound infrastructure as it has been an industrial hub for over two decades.

Hosur’s proximity to Bangalore, the upcoming Special Economic Zone and the IT Parks have enhanced its potential as a possible real estate destination. It houses the SIPCOT’s industrial estate and many major floriculture export units of Tamil Nadu. Once the proposed SEZ becomes a reality, Hosur is expected to draw an investment of Rs2,000 crore with major IT companies expected to set up their campuses here. Electronics Corporation of Tamil Nadu (ELCOT) has already allocated land in the Hosur IT SEZ to six companies.

As a result, the requirement for residential as well as office spaces has gone up. The potential for increase in capital values, especially of the residential units is huge.

The investment options. Hosur offers a range of investment options, especially in the residential property space. You can choose from apartments, row houses and plots of land.

Where in Hosur? If you want to invest for the long term, Ring Road should be your first priority. While the road, which will connect NH-7 to Thally Road, is under construction, it will be ready soon. You could also invest in NH-7 towards Krishnagiri, as many industries are coming up in that area along with a third SIPCOT. If you are short on budget, you can look at properties located at Avalapalli Dam Road, Rayakottai Road and Chinna Elaththagiri (near TITAN Industries).

For short or medium term investments, look at plots near VS TVS, Sanasandhiram, Anand Nagar (Behind TITAN), TVS Nagar and Muneeshwar Nagar. If you want to invest in farmlands, look at areas near Denkanikottai, Thally, Krishnagiri, Dharmapuri and Kelamangalam. Depending on location, capital values of plots ranges between Rs300-Rs1200 per sq.ft.

Hosur certainly looks like a winner in the years to come.

Future hotspot

outlook money ■ 9 January 2013 54

Hosur is bound to gain from the high cost of land and infrastructural bottlenecks that plague Bangalore

Mr. Raaj MuruganManaging DirectorGreater Bangalore Eco Assets Pvt. Ltd.


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Things To do afTer you sell Handover of keys and receipt of sale proceeds from proper-ty sale don’t end the sell process. Find out what follows

Selling a house is actually the transfer of the property title to the buyer by the seller. According to the sales contract,

the buyer receives the title of a proper-ty while the seller receives the sale pro-ceeds. As simple as it may sound, there are numerous procedures associated with the sale of property that some-times makes selling more complex than buying. The process of selling takes time and doesn’t just end with handing over the keys. In fact, there is much a seller needs to take care of even after he has transferred the pos-session of the house to the buyer. Maintaining documents, managing

bY AshwiNi KUMAr shArMA

Startx real Estate 56 x Decoder 58 x Insurance Made Easy 59 x Stock Pick 60 x Bank Stocks 62 x avant Garde 64 x My Plan 66 x Headstart 68

Real Estate


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sale considerations, calculating taxes, filing tax returns and reinvesting money are some of the key items on the ‘to do’ list of a seller after the prop-erty sale. Here is a primer on how a seller should proceed after his property is sold. Documents. Keep copies of all the paperwork pertaining to the closing and settlement in a separate file. Santhosh Kumar, CEO-operations, Jones Lang LaSalle India, says: “This

will ensure that you are able to address all future queries by the buyer, the bank involved and the municipal or tax authorities.” Typically, once a deal is finalised between parties, the buyer pays a token money and decides on a date and the amount for subse-quent payment. On receipt of the token money, the seller generally issues ordinary cash receipts. Based on the receipts, total payment and receiv-ables are mentioned on the ‘agreement for sale’ at the time of final payment. After this the receipts become invalid and thus, can be destroyed.

The document (agreement for sale) should include proof and receipts of

payment towards property, items included in the sale price, such as parking space, structural modifica-tions or additions which enhanced the value of the property, society charges and property taxes paid till that year. Besides documents pertaining to the property sale, you should also keep copies of money spent on renovation, repairs, extensions and prior purchas-es. “There should also be a clear record of home loan closure if you bought the sold property this way,” added Kumar. Maintaining documents and a seamless financial record make the process of filing tax returns easy. However, before you file your income tax returns for the financial year, remember to keep the fund received from sale in a specific bank account.Open a Capital Gain Saving Scheme account. Put your sale con-sideration into a Capital Gain Saving Scheme (CGSS) account with a bank. The amount deposited under this scheme, if utilised by the assessee within a specified period either for acquisition of a new asset, or for investment in specific bonds under Section 54 and Section 54EC of the Income Tax Act, 1961, lets the seller avail tax exemptions on long-term capital gains (LTCG).

Under this scheme, the taxpayers can get exemption benefits from capital gains if the amount of capital gains or the net sale consideration is deposited in the bank on or before the due date of filing returns, which is typically 31 July every year. It is, however, advis-able to seek clarification regarding applicable sections in your case from a charted accountant before you open a CGSS account.Taxation. Any gains arising out of property sale is taxed under the head ‘income from capital gains’. Short-term capital gain (any gain arising from the sale of property within 36 months of its purchase) tax is calcu-lated according to the income tax slab of the assessee, while LTCG is taxed at 20 per cent with indexation or at 10 per cent without it. However, if you intend to reinvest the sale proceeds, you can save on LTCG. But you should

evaluate your financial position before you take the decision to reinvest. If you require funds to meet other impor-tant goals in the near future, paying capital gains tax might be a better option than reinvesting the fund. Reinvestment. In case you do not require the money in the near future, you can decide to reinvest the capital gain arising out of the property sale. There are instruments such as capital gains bonds in which such gains can be reinvested in order to avoid taxes. However, you can claim exemption only if the investment in these bonds are made within six months from the date of transfer of the assets. These bonds typically have a lock-in period of three years and the maximum limit for investment in such bonds is `50 lakh in a financial year. Currently Rural Electrification Corporation Capital Gain Tax Exemption Bonds Series-VIII and National Highways Authority of India 54EC capital gain bonds (Series XIII) are available for investment. Coupon rate in both these bonds is 6 per cent, payable annually. The interest is, however, taxable. Kumar advises: “Discuss all financial movements resulting out of the prop-erty sale with a chartered accountant and take appropriate guidance.”

Besides reinvesting in bonds, you can also reinvest money in a residential property to avoid paying taxes on long-term capital gains. However, it needs to be clearly shown on papers that the proceeds from the property sale have gone into the purchase of a new home within two years (three years for constructing a new house) from the date of sale. You can also set off the tax on LTCG if you have bought a residential house in the last one year with your purchase amount. Mean-while, keep the proceeds from the property sale in a CGSS account.

If you decide to reinvest in a residen-tial property with the sale proceeds, do not rush into buying a house if you are unable to find a suitable one imme-diately. You can, instead, consider renting a house until you identify a suitable option to buy. r

[email protected]

Real Estatet

Up next x Decoder: Bajaj Allianz’s Life Assure pg 58


■ Keep copies of all the paperwork pertaining to closing and settlement■ Keep proof of renova-tion, extension, repairs and prior purchases■ Put your sell consid-eration in a Capital Gain Saving Scheme before the due date of filing the tax return■ Reinvest sale proceeds to save on long-term capi-tal gains or pay the tax■ Take time to choose the best avenues to reinvest■ Consult a chartered accountant and take appropriate guidance

AfTEr sELLThings to do after you sell your house


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The Life Assure plan offers you two variants to choose from—Sure and More. Under the Sure option, premiums are invested in

the assured return fund which offers a guaranteed value on maturity. Under the More variant, premium is invested according to your choice of funds or the portfolio strategy selected by you.

PREMIUMThe plan is available at a minimum annual premium of `10,000, half-yearly `5,000, quarterly `2,500 and `1,000 for monthly premium. There is no limit on maximum premium paid.

INVESTMENT STRATEGIESThere are two portfolio strategies—Investor Selectable and Wheel of Life. Investor Selectable portfolio strategy is for those interested in investing in any of the listed funds. While for Wheel of Life the premium is allocated in a prede-cided ratio in various funds depending on its outstanding years to maturity and the fund value gets reallocated each policy year.

DEATH BENEFITIt’s a type-II policy where sum assured (SA) plus fund value is paid on the death of the life assured. The death benefit is not less than 105 per cent of the total premiums paid to preserve the capital. For accidental deaths (after you turn seven) you get an additional SA. MATURITY VALUEUnder the Sure variant, the fund value

will be the higher of the guaranteed maturity value or the fund value as on maturity date. Guaranteed maturity value is the total premium paid (less all charges, including the cost to guaran-tee) at the rate of 3 per cent per annum compounding monthly. Under the More variant, fund value is paid on maturity.

FLEXIBILITYYou can change the frequency of pre-miums paid according to the minimum premium limit. You could also change the premium payment term. Also, the SA, too, can be cut up to 115 per cent.

PARTIAL WITHDRAWALSYou can withdraw not less than `5,000 after five policy years and the fund value should not fall below three times the annual premium.

COSTIf a 35-year-old pays annual premiums of `50,000 every year under the More variant for 15 years and for a SA of `5 lakh in an all equity fund, the policy will pay `9.96 lakh and `13.91 lakh at assumed annual growth rates of 6 per cent and 10 per cent respectively. The corresponding net yields come to 3.47 per cent and 7.40 per cent.

COMPARISONFor a similar type-II plan, such as Kotak Life’s Wealth Insurance, the net yield comes to 6.80 per cent at the growth rate of 10 per cent.

CONCLUSIONConsidering the high cost of guarantee the promised return of 3 per cent doesn’t fetch much. We suggest you invest in an all-equity fund under the More variant as equities perform better in the long-run. r

[email protected]

LIFE ASSURE



bY TEENa jaiN KaUshaL

This plan from Bajaj Allianz Life is available at a monthly premium of `1,000 a month and comes in two variants

Decodert


Decoder

COST STRUCTUREPremium Allocation (% of AP)Year 1> 20Years 2-5 > 4Year 6 onwards > NilPolicy Administration (% of AP)

Year 6 onwards `10 p.m, inflating at

5% per annumFund Management (% of fund value)

It ranges from 0.95-1.35. Guarantee

charge at 2% of premium paid

FUND PERFORMANCEFund Equity

Expo- sure (%)

Returns (% since inception)

Equity Growth Fund II

60- 100

12.20

Accelerator Mid-Cap Fund II

0- 100

8.20

Pure Stock 60-100 14.80Asset Allocation 0-100 7.60Bluechip Equity 60-100 -0.80Liquid 0 8.70Bond 0 9.10Assured Return 0-50 7.70As on 30 November, 2012

*Policy term **Annual premium

Entry age > 1-65 yearsMaturity age >

18-75PT* > 10, 15 and 20 yearsPremium payment term >

10 years PT*: 5 & 10 years

15 years PT*: 10 & 15 years

20 years PT*: 10, 15 & 20 years

Minimum sum assured >

Under 45 years: 10 times AP**

45 years and above: 7 times AP**

Maximum Sum Assured >

50 years and below:

50 times AP**

Over 50 years: 20 times AP

ELEGIBILITY


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Tax benefits from insurance poli-cy acts as a sweetener by reduc-ing your overall tax burden. You must, however, choose the

product on the basis of your long-term goal, while enjoying the tax breaks.

Tax breaksUnder the present tax laws, a life insur-ance policy features under the exempt-exempt-exempt (EEE) tax structure, wherein the first ‘E’ gives tax benefits at the initial stage of investment (under Section 80C of the Income Tax Act, 1961), the second ‘E’ doesn’t levy tax during the growth phase and, lastly, the third ‘E’ provides tax-free returns on maturity under Section 10 (10D).

Tax exempTion on buyingAt the time of buying or renewing a policy, the premium qualifies for deduc-tion under Section 80C within the over-all limit of `1 lakh per year. The maxi-mum tax one can save varies on the tax bracket one belongs to, i.e., `10,300, `20,600 and `30,900, for the 10.3 per cent, 20.6 per cent and 30.9 per cent tax rates, respectively. However, to get deduction the sum assured must be at least 10 times the premium.

Tax on maTuriTyThe maturity proceeds from life insur-ance policies are exempt under Section 10(10D) if the premium paid in a year


Insurance Made Easyt

Up next x Stock Pick: LIC Housing Finance pg 60


Life insurance policies are useful tax-planning tools, but the choice of plans must be on the basis of your goals

by sunil dhawan

http://digital.outlookmoney.com l 9 January 2013 l OuTlOOK MOnEy 59

anil panwar

Insurance Made Easy

Life cover Tax breaks

is not more than 10 per cent of the sum assured. Money received as claim, including bonus, is exempted from income tax. All life insurance plans, including pure term, children’s and whole-life plans, give tax benefits. For policies bought before 1 April 2012, the limit is 20 per cent of the sum assured for both Section 80C and 10(10D).

pension pLansPension plans are eligible for deductions under Section 80CCC within the overall

limit of Section 80 C upto `1 lakh. Commuted amount on vesting is tax-free, however, the annuities received under such plans are taxable.

service TaxThe service tax rate is 12. 36 per cent. For life insurance plans, such as term or endowment, where the entire premium is not towards risk cover, the first year’s premium is taxed at 3 per cent, while subsequent premium at 1.5 per cent. r

[email protected]

BJAZ-S-0019/19-Dec-12

Bajaj Allianz General Insurance Co. Ltd., G.E. Plaza, Airport Road, Yerawada, Pune - 411006. Reg No.: 113. Insurance is the subject matter of the solicitation

I havesaved tax.Have you?

SMS TAX to 56070 | www.bajajallianz.com

Tax Benefits under section 80 D of IT Act OPD / Hospitalization expenses covered Pre-existing Diseases are covered after 4 years continuous renewal Family Floater for self & Spouse Separate plan for Senior citizens covering both OPD & Hospitalization benefits Health Check up at designated Bajaj Allianz Empanelled Diagnostic center after every 4

claim free policy periods

Optimize your Health & Wealth with Bajaj Allianz Tax Gain Comprehensive Health Cover


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Stock Pick


If any segment of the loan market can be truly said to be the safest and least prone to defaults, it

is clearly housing finance. Yields here are typically low. Combine that with safe lending to builders where yields are significantly high and the business can enjoy visibly high returns on assets. That’s what Life Insurance Corporation Housing Finance (LICHF) has been doing successfully.

With the rise in urbanisa-tion, higher disposable incomes and a housing shortage, housing finance companies have registered growth. LICHF is the sec-ond-largest housing finance company (HFC) in India with an 11 per cent market share. Its individual loan portfolio registered a 29 per cent compound annual growth rate (CAGR) in the last five years. Its builder loan portfolio took a knock in the last two years because of the slowdown in real estate. In the next two years, however, it plans to raise its developer loan book from the present 4 per cent of its

loan book. Around 94 per cent of its outstanding loans are to the retail segment; the rest to builders. This is set to tilt marginally towards higher-yielding assets.

Over the years, LICHF has been investor-friendly and done really well in share-holder returns. The business has slackened somewhat in the last two years because of low builder loans, high interest rates and new retail hybrid loan products (fixed and floating) that yield lower returns in the first few years. Its net interest mar-gin, therefore, lately con-tracted to 2.13 per cent. But that is more than likely to be the lowest in a while.

Interest rates are widely expected to slide next year. LICHF’s teaser rate loans are expected to start being con-verted from fixed to floating

rate next year. LICHF should be able to reduce its cost of borrowing even as it focuses more on offtake. Further, its builder loans should take off on more construction activi-ties. This is likely to further boost its returns. LICHF’s net interest margin could also rise to around 2.3 per cent next year, and even higher thereafter.

LICHF’s income has been growing steadily in the last few quarters averaging 5.2 per cent quarter-on-quarter. Driven by the demand in smaller housing, this trend is likely to contin-ue. Its net profit for September 2012 was `243.06 crore. At the cur-rent earnings per share of `20.4, the stock trades at a price-to-earnings ratio of 13.8 times. Comparable HDFC trades at 28.7.

LICHF’s non-performing assets were a low 0.6 per cent in September 2012, quite healthy after its strong retail loan growth.

LICHF is strong in tier-II and tier-III cities, where demand is high. And with its clear focus on the middle-income segment, its stock is surely one of the cheapest of the housing finance com-panies even as it likely to capitalise on the housing boom. We suggest you buy it for the long term. r

[email protected]

WhY bUYn LICHF is one of the large players in housing finance and has a strong backing from its parentn Its margins should im-prove on the back of low costs and high yieldsn LICHF is focussed on middle-income and low-cost housing which is seeing good growth

DraWbacKsn The company incurs high costs for sourcing its business through third-parties and direct selling agencies

Graphics: SAJI C.S.

bY cLiffOrD aLvarEs

On a sOlid fOundatiOn

Lic hOUsiNg fiNaNcE x `282.75 x PE 13.8

LICHF’s profitability is set to improve as rates fall and yield rises. Home in

Stock Pickt

Up next x Bank Stocks: New Licence Boost pg 62


2.58

net proft (`cr)

expenses (`cr) loans (`cr)

fiNaNciaLs

6,21

5.1

662.

2

974.

5

914.

2

4,98

4.2

38,0

81.3

51,0

89.8

63,0

80.2

total income (`cr)

fY 2010 2011 2012 fY 2010 2011 2012

fY 2010 2011 2012 fY 2010 2011 2012

2,55

8.8

3,46

9.2

4,86

8.7

3,57

4.5


WorldMags.net




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Ever since erstwhile finance min-ister Pranab Mukherjee in February 2010 suggested that banking licences to private

players were up for grabs, there has been a palpable buzz among non-banking finance companies. The draft initial guidelines suggested that licenc-es would be given to entities with not more than 10 per cent income from broking and focused on financial inclusion. The thrust was clear—to create more banks and drive penetra-tion. The passage of the Banking Bill in the Lok Sabha has now set the ball rolling. And the buzz has increased, stirring up a host of non-banking

financial companies and bank coun-ters. Stocks, such as Cholamandalam, M&M Finance, Shriram City Union Finance and L&T Finance, have been on a tear. Most of these stocks have given high double-digit returns, some even manifold returns.

One possible reason could be that some of these non-banking financial companies (NBFCs) are run by promot-er groups, which was one of the main criteria set in the draft guidelines. Promoter groups should have successfully run their businesses for 10 years. Some of these promoter groups have strong NBFCs. Of course, even other promoter groups can potentially bid for a licence, especially those that have been in business for over 10 years. So, not only NBFCs, but even corporate houses have a chance of snagging a licence. Says Shinjini Kumar, director, Pricewaterhouse-Coopers India, a con-sulting firm: “There are many candi-

dates who can qualify for the licence. With so many difficult conditions set for it, I am happy that there are so many candidates.”

2011’s draft banking licence guide-lines stipulated that entities will have to create an NOHC (wholly-owned non-operating holding) structure. Capital required is `500 crore and, at least, 25 per cent of branches should be in unbanked areas. Thus, the government is attempting to ensure financial inclu-sion. Besides, the Reserve Bank of India can supersede the board of directors and appoint an administrator if the board functions in a manner detrimen-tal to depositors. These sweeping pow-ers are meant to ensure that the inter-ests of depositors are protected.

Some NBFCs have turned really large in the last couple of years, with asset books running into several thousands of crore of rupees, while others are run by good promoter groups. In some ways, many of these NBFCs are regu-lated by the RBI’s guidelines, such as having a minimum capital adequacy, etc. Says Kumar: “There are large NBFCs that are well run. There’s no reason for them not to put their candi-dature forward. They are already sub-ject to many regulations by another arm of the RBI.”

by Clifford AlvAres

The race for The licenceWith new bank licences up for grabs, there’s a buzz in financial counters. Here’s how to play the sector

NBFC Stocks

62 oUTlooK MoNey l 9 january 2013 l www.outlookmoney.com

outlook money photo

Business and promoter groups should have a minimum track record of 10 years in running their businesses

Groups which have a significant exposure to real estate and capital markets will not be eligible for a license

The new bank will have to be set up through a wholly-owned non-oper-ating holding company (NOHC)

All existing businesses that can be transferred to a bank should be held within the NOHC

The minimum paid up capital is `500 crore, with 40 per cent held with a lock-in of five years

At least 50 per cent of the NOHC’s board of directors at least should be independent directors, and not of the promoter group

The bank’s exposure to any single promoter group company should be capped at 10 per cent

Within two years of obtaining the license, the bank will have to list on a stock exchange

Many Indian business houses are in a position to apply for a banking licence. Here’s a low-down

All for A bANK



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advanTage nBfcsThe allure of a bank licence could alter the fortunes of quite a few. Banks are allowed access to low-cost funds (such as savings accounts) at signifi-cantly cheaper rates, while they can lend at higher rates to businesses and individuals. (Most NBFCs source a good chunk of their liabilities from banks.) This tends to increase the mar-gins and profitability, but the question is, do all NBFCs want to turn into banks? Which of them stand the best chance of snagging a licence?

Businesses that are specialised—those lending solely for housing or for gold or autos—are unlikely to apply for such a licence. That’s because banking laws mandate that 28 per cent of a bank’s liabilities should be in: cash reserves (5 per cent at zero inter-est rate) and government bonds (23 per cent, at very low interest rates). One reason is that a bank should be solvent and largely invested in safe securities to guard it from future financial shocks. This ensures greater safety of liabilities. But it restricts their ability to maximise earnings from their liabilities. Specialised lending institutions, such as home-loan lend-ers or auto-finance companies, would be hard-pressed to maintain such high

statutory deposits at such negligible rates as they borrow at significantly higher rates. Banks, having diversified lending business practices straddling a gamut of loans from housing to per-sonal to business, stand a better chance and are most likely to apply for a licence, depending on how many licences the RBI issues.

fronTrunners may gainNBFCs with a significantly diversified business are frontrunners for banking

licences. Some businesses not only lend to housing, but also make busi-ness, auto and personal loans. It makes more sense for them to bid for a banking licence. There is also the stip-ulated minimum capital requirement. There could be numerous licence hopefuls, but only a few candidates.

The most probable are L&T Finance Holdings, M&M Financial Services, Cholamandalam Investment and Finance, and Bajaj Finance. Some are diversified; some have notable opera-tions in rural India. L&T Finance has a diversified business in mutual funds and business loans, while M&M Financial is predominantly into auto loans, but has since branched out into other loans. Cholamandalam has a diversified loan book.

The stocks of many of these have already run up. So, playing for gains from the banking licence may not be a good idea. It would take time and cost to set up a new bank. Some of these businesses command sky-high valua-tions. L&T Finance Holdings has surged and is now trading at a price-to-earnings ratio of 187. M&M Financial Services and Cholamanda-lam are reasonable at 16.8 and 15.7 times. But, it would be prudent to await a correction. Given the huge entry barriers in banking, investing in an existing growing private bank could work out well too.

For now, though, since it’s too early to tell which NBFCs could bag a bank-ing licence, investors should invest carefully in the sector. The buzz of a banking licence is driving some of these stocks crazy. Says Rajat Rajgarhia, director research, Motilal Oswal Financial Services: “The bank-ing licence can’t be the basis of invest-ing in these stocks. Ultimately you will have to look at these companies on their fundamentals.” If some of them don’t manage to get a licence, the frenzy could disappear and they could tumble. So, look for ones that can grow at a rapid pace even if they don’t bag a licence. That should ensure that wyour downside is protected. r

[email protected]

http://digital.outlookmoney.com l 9 january 2013 l oUTlooK MoNey 63x http://twitter.com/outlookmoney; http://www.facebook.com/olmindia

NBFC Stockst

Up next x Avant Garde: Holding Operation pg 64


There are many in the reckoning, but go easy

froNT rUNNers

L&T Finance Holdings

Price `92.75 PE 193.08 Gains (%) 115.45The stock is quoting at an astronomical valuation currently

Bajaj Finance

Price `12,90.75 PE 11.15 Gains (%) 105.16One diversified financial conglomerate in the finance space

Mahindra & Mahindra Fin. Services

Price `1,078.75 PE 16.79 Gains (%) 70.42Has a good rural presence and backed by a strong promoter

Cholamandalam Investment and Fin.

Price `274.75 PE 14.82 Gains (%) 145.20Well-entrenched in the South and growing rapidly in financePE: Price-to-earnings ratio %Gains in the last one year Return as on 18 Dec 2012 Source: CMIE


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MOHIT SATYANAND

The drive among Indian companies to shed ‘non-core’ assets to trim their balance sheet is gathering momentum. But will it lead to profitability?

Holding Operation

The author is an investment advisor and posts stockmarket comments on outlookmoney.com. He can be reached at [email protected]

Avant Garde

are trimming their balance sheets is a good sign. Companies which fall prey to the seduction of a financial boom need to do this to recover financial health. My belief is that they deferred the process far too long.

That deferral lies in the past though and the ques-tion for the future is whether the current pace of divestment is rapid enough to dramatically change their profitability.

To a large extent, this will depend on the state of health of the retail real estate markets, which con-tinue to be sluggish. Players in the business have long been looking to the Reserve Bank of India to provide some relief on the interest rate front, but that hope just got postponed once again by the reality of rising consumer prices.

That said, the outlook on the price front is still far from clear, though the mood of equity markets seems to be that an interest rate cut in January 2013 is a done deal. RBI deputy governor Subir Gokarn, who has represented the Bank’s interest rate policy, holds out hope that a combination of a stronger rupee and softer international commod-ity prices should help. Obviously, a combination of

the two dynamics would be extremely welcome, but it is far from clear that they are a certainty.

The twist in the tale is Prime Minister Manmohan Singh’s recent statement that his government needs to trim the fiscal defi-cit if the inflation battle is to be convincingly fought. One way to do this, he said, is to rationalise energy prices.

This could be read as a signal that we will see another diesel price hike. On the one hand, I see that as a difficult political deci-sion. On the other, it will be the only meaningful signal that the PM means what he says. If the latter is the case, then it means price levels will go higher before they begin to flatten.

In that event, the DLFs and the Aloks of our business world need to keep those trimming shears sharpened. r

In the week before Christmas, real estate major DLF announced the finalisation of a contract to sell Aman

Resorts back to its founder, Adrian Zecha. DLF had bought the luxury chain at a reference price of $400 million, and is now sell-ing it for $300 million. Since the reverse deal excludes the Delhi property, one can’t make a like-for-like comparison.

However, it would be safe to assume that DLF has not made money on the deal. Add to that, the interest cost of holding assets for five years and you get a whole new meaning to the term, ‘holding company’.

In a very similar develop-ment a few weeks earlier, textile manufacturer Alok Industries had offloaded a huge chunk of its invest-ment in Mumbai real estate to the developer, Peninsular. Alok took a small hit on the capital cost of the investment, but once you add the interest burden, Alok’s excursion into real estate was an expensive one.

Incidentally, both DLF and Alok have been strug-gling with their debt burden for the last several years and interest payments have swallowed up a significant share of their operating profits.

In the case of DLF though, the ratio of interest payments to gross profit has been steadily increas-ing. This made it imperative that it trim the balance sheet. A look at the realty major’s quarterly num-bers would also indicate that the pace of retail sales was not rapid enough to achieve this in the normal course of business. Thus, it became necessary for it to hack off large clumps of assets. Even earlier this year, DLF had sold a chunk of its Mumbai land to the Lodha group. So, the liquidation process is clearly ongoing.

The fact that DLF, Alok and other business houses


varun vashishtha


Avant Gardet

Up next x My Plan: A Start That’s Begun Right pg 66



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A bright future requires a head start!Outlook Money presents every parent's guide to providing a better future for your childrenOutlook Money presents every parent's guide to providing a better future for your children

How to cover financial and health risks

How to build a portfolio to fund your child's education

How to smartly finance your child’s marriage

Creating

Wealth for your

Child’s FuturePresented by-

- Partnered by -

On stands

NNOWWWWOOWOOWOOOOOOWWOWWOWWOOWWWWOOWWNONNOONONOONOONNOONOOOOOOOOOOOONNONNONNOONNNNOOOOWOWWWOWWOOOOWWOOWWNOW


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BY AshwiNi KUMAr shArMA

A stArt thAt’s begun rightA balanced approach to expens-es is all that the Jasud couple needs to fulfil their dreams. Here’s the way ahead

RamchandRa Bhairu Jasud, 34, an IT professional with Indusind Bank, stays with wife Pallavi, 26, a teacher, in Thane. His sister also lives with them. His parents are financially dependent on the cou-ple, but stay at their home town.

The couple earn `72,500 a month of which they spend `65,300 on household and life-style expenses, equated monthly instalments (EMIs) on home loan and insurance premi-ums. Of the surplus `7,200 each month, they invest `1,500 in a gold fund through a sys-tematic investment plan (SIP).

Their investments are `1 lakh in Public Provident Fund (PPF), `35,000 in Employees’ Provident Fund (EPF), `3 lakh, `1.50 lakh and `20,000 in savings account, fixed deposit and cash-in-hand, respectively, and `1.30 lakh in equity mutual funds (MFs). They have an outstanding home loan of `25.50 lakh.

Ramchandra has a total life cover of `84 lakh consisting of a whole-life, an online term plan and two more plans. He pays an annual insurance premium of `68,700.

He also has a health/hospitalisation cover of `2 lakh each for himself, his wife and each of his parents. His lists his sister’s wedding as his first priority. The couple are yet to start a fami-

If, like Ramchandra and Pallavi, you would like to share your story and have a financial plan made by a financial planner, write in to us with your contact number at [email protected]

ly, but want to provide for the child’s educa-tion and wedding at the appropriate time, besides having a safe retirement corpus for their own. Here’s the way. r

[email protected]

the plAnby

hArsh rOONgTA

CEO aPnaPaISa.COM The planner can be

reached at [email protected]

My Plan

TushaR mane


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x http://twitter.com/Outlookmoney; http://www.facebook.com/olmindiahttp://digital.outlookmoney.com l 9 january 2013 l OUTLOOK MONEY 67

Contingency planning. Their monthly expens-es will come down to

`61,000 if they follow our recommendation. They can keep their FD and cash-in-hand in their bank to build a corpus equal to three months’ expenses.Insurance planning. Jasud can continue the whole-life plan, but surrender his endow-ment plans as their performance is poor compared to the Nifty and ongoing charges will further reduce returns. He can continue his unit-linked pension plan without further contribution till the completion of five years and then review the fund performance. Jasud and his wife will require additional life covers of `50 lakh and `15 lakh, respective-ly, and they should buy online term plans for `8,000 per annum for both. Health insurance. Jasud should utilise the health cover from his employer for his par-ents only and further buy top-up plans of `5 lakh with deductibles of `3 lakh for them. This will cost `8,700 per annum. As for him-self and his wife, Jasud should buy individu-al health covers for `3 lakh and top-up plans of `5 lakh with deductibles of `3 lakh. This will cost them `9,600 per year. Additionally, Jasud should take an online critical illness

policy of `50 lakh and an accidental death-cum-disability cover of `25 lakh for `18,500 per annum. He should disclose all the facts correctly while buying new insurance plans. Retirement planning. The couple will need `1.78 lakh a month by the time Jasud retires. By then, his EPF will grow to `93 lakh, if he continues his job till retirement and his PPF to `7.40 lakh. The inflation-linked corpus will suffice till Pallavi is 80 years old. For the rest, they should invest `11,000 each month in equity MF and PPF in the 90:10 ratio after an increase in income. Having repaid the loan, they can also reverse mortgage the house in retirement to partly meet this goal.Child’s future planning. They are planning for their first child after a year and want to provide for his or her higher education and wedding after 20 and 25 years, respectively. Besides their investment in Reliance RSF Equity Fund, maturity proceeds of LIC policy and value of Ulip pension policy, they must invest `8,500 a month in equity MF and PPF in the 90:10 ratio after a year. For the wed-ding, they should invest `2,800 in an equity MF and a gold fund in the 90:10 ratio after a year. They should reduce their existing SIP in gold ETF to `300 per month and start an SIP of `2,500 in a diversified equity MF.

LOAN PLANNiNgThey should shift to a float-ing rate home loan of 10 per cent for 20 years after pay-ing a penalty of 0.56 per cent of the balance.

OThEr gOALs jasud can use his savings balance for his sister’s wed-ding and redeem all his MFs except reliance regular Savings Fund for buying a new vehicle. The surrender value of two ulips can help him buy agricultural land and for his self-education. Besides, he should also save `10,000 a month for one year to fund these goals.

TAxATiON jasud’s contribution to EPF, PPF, home loan and insur-ance premium makes up his tax saving requirements. He can take further benefit for his family and parents for health insurance premium.

steps

goAlsgoAgoAgo ls

2020 20302025 20402035*All figures according to future prices Inflation @ 8 per cent per annum *For child

educAtion*`1.17cr

year 2032

retirement `4.66 cryear 2038

Wedding*`68.50 lakh

year 2037

My Plant

Up next x Head Start: Will For Sucessors pg 68



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Saving for your future goals is crucial, but what is more important is a plan to ensure a hassle-free transfer of your life

savings to your children when you are no more. So, if you have done your bit of savings, it is time you carve out a road map for your assets, investments, bank accounts for a smoother transi-tion to your legal heirs.

If your child is a minor, you need to put in place a mechanism to ensure your child is taken care of till he or she becomes an adult and responsible enough to manage his or her money. In fact, even in case of a grown-up

child, some like to pass on the inheri-tance in a certain manner. This is where succession planning comes in.

The iniTial sTepsSuccession planning at an early stage will ensure that your children do not have to face rough weather while inheriting your property. The plan-ning, however, needs to be done in a systematic manner. The way forward is to write a Will for all your fixed and financial assets. Nomination could also be a good starting point as it sim-plifies the transfer of financial assets. However, assigning a nominee is only a step towards a foolproof succession plan as a nominee is only a trustee who takes care of the fund in your absence till the legal heirs come of age.

JoinT accounTsIt is better to go for an ‘either or survi-

vor’ joint account with your spouse for your bank and investment accounts. Such joint accounts hold signatures of either holders valid to carry out a transaction. Having a joint account with your spouse nominating your child is a better way to ensure easy transfer of your financial assets as the surviving members get seamless access. If both account holders die, the nomination helps the child get imme-


bY sUNiL dhawaN

succession planningTo truly take care of your children after you are gone, pen down a Will and make the succession hassle-free

Head Start


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diate possession of the funds.

have The Will A Will is perhaps the most efficient way to transfer assets. It makes it easi-er for your children to get legal rights on your assets in the event of your death. You may take professional help of a lawyer to pen down your Will. A Will has to be made in the presence of two independent third-party witness-

es, not aligned to any family member. Preferably, a Will should be typed, notarised by an independent notary and left with the solicitor.

Once you register a Will, you can only add codicils, i.e., make amendments to the Will, but cannot replace it. You can update the terms and conditions in the Will as and when the need is felt. It is better to write a copy of a Will and, every time you need to revise it, replace

it with the new one. Keep the Will in a safe place such as a locker and make sure your heirs have access to it.

TrusT FacTorCreating a trust, too, is part of your succession planning. Doing so ensures both your children and the assets are taken care of and the Will is executed within the specified time. The owner-ship of your assets can remain with you as long as you live and, in the event of your death, can be allotted in the way outlined by you in the trust deed. You have to nominate your heirs as beneficiaries of the trust and specify what each would get. However, the most crucial aspect is to choose the right trustees. Trustees play an impor-tant role. Therefore, you must appoint someone you trust. He or she can be a relative or friend, or you can even take help from professional institutions. You can also specify how you would like the property or money to be man-aged in case the heir is a minor.

conclusionAll your hard work in putting together your savings could become meaning-less if your savings fail to make it to your children. So, plan well and help your children inherit your assets with-out any legal trouble . r

[email protected]

http://digital.outlookmoney.com l 9 january 2013 l OUTLOOK MONEY 69x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindia

Head Startt


Up next x Commodities: Year-end Jitters pg 76

bhupinder singh


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Y ou have successfully estab-lished and run your small or medium enterprise (SME) and now you want to take it to the next level. But to

do that you need funding. Banks are doing their best to understand the specifi c funding needs of vari-ous businesses and coming up with specifi c products to meet them. Some of these have been in place for quite some time now while some are pretty new and innovative. We tell you what all options you have in the form of bank funding and how to go about it.BE FUNDING READY. Unlike the ini-tial capital which you might have arranged through your own sources or as loans from friends and relatives, bank funding will depend on the soundness of your business model, track record and future growth plans. Typically, a bank will provide you with a tradi-tional bank funding option, such as a term loan, over-draft, working capital loan and so on only after you

have profi tably run a business for at least three years. If you need bank funding for expansion of operation, launch of new product or modernisa-tion, you will need to come up with a feasibility plan and convince the bank to extend you a loan. Depending upon your requirement you may also have to arrange the margin money. This is typically between 5-20 per cent. As a rule, banks ask for collater-al such as land, building or equipment and also ask for a charge on the assets created through their funding. So you should have an encumbrance-free asset to offer as a collateral.LOAN TO MANUFACTURERS. An SME manufacturer may either work inde-pendently or as a vendor for a larger

enterprise. In case of the former, you will have to convince the bank with your business plan and past record for a loan. But if you are a vendor, banks will be more comfortable in giving you a loan for meet-ing your capital expenses.FUNDING FOR TRADERS. A

trader involved in domestic and overseas trading will require funds, such as working capital or term loan, as well as non-fund based fi nance, such as letter of credit (L/C) and bank guarantee (BG). An L/C or BG will require you to pay a fee in the 0.05-0.25 per cent of the involved amount. L/Cs are typically issued for 3-6 months while BGs could be for up to 10 years. For new traders with small scale operation, the banks would typi-cally issue the L/C or BG after taking a collateral. An established trader may get them unsecured as well.LOAN FOR SERVICE PROVIDERS. Besides other services, banks are now provid-ing loans to doctors wanting to buy equipment or for opening a nursing home, hospital or a laboratory. Many banks are also providing professional loans to CAs (chartered accountants) while some are extending specialised fi nance for schools and colleges.FOREX REQUIREMENTS. SMEs involved in import and export of products and services or trading need foreign exchange. An exporter or importer should choose a bank based upon its

Bank funding will depend on the sound-ness of your business and your rapport with the bank

70 OUTLOOK MONEY � 9 JANUARY 2013 � www.outlookmoney.com

WHETHER YOU ARE RUNNING A SMALL, MEDIUM OR A MICRO INDUSTRY, YOU WILL ALWAYS WANT TO EXPAND AND FOR THAT YOU WILL NEED FUNDS. HERE’S THE GUIDE TO EASY FUNDING BY BANKS

SME BANK FUNDING


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reach and expertise in the particular country and currency they are dealing in. Some Indian banks have branches abroad while some work through a representative offi ce or a partner foreign bank. Keep in mind the cost of the forex funding, which could be based on the bank’s margin and com-mission, while choosing a bank. PRIORITY-SECTOR LENDING. The Reserve Bank of India has included fi nancing to small scale industries (SSI) in the list of priority-sector lend-ing. Typically, banks are required to extend 40 per cent of their advances to priority-sector lending. For a manu-facturing unit to be eligible for this funding, its total investment in plant and equipment should not be more than `5 crore. For a small (service) enterprise, its total investment in

equipment should not be more than `2 crore, while for micro enterprises this limit is `25 lakh and `10 lakh for manufacturing and service, respec-tively. For a medium enterprise, its total investment in plant and equip-ment should be between `5 crore and

`10 crore for a manufacturing unit, while for a service enterprise it should be in the `2 crore-5 crore range. COLLATERAL-FREE FUNDING. In the past, many new businesses failed to get bank funding for want of collater-als. It was then that the Government of India and SIDBI realised that availability of bank credit without the hassles of collaterals or third party guarantees should be a major source of support to fi rst-generation entre-preneurs willing to set up their own micro and small enterprises (MSEs). Keeping this objective in mind, the Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched the Credit Guarantee Scheme (CGS) in a bid to strengthen the credit delivery system and facili-tate fl ow of credit to the MSE sector.

Its main objective is that the lender should give more emphasis on the viability of the project and extend credit as well as retain the charge of the asset fi nanced till the loan is repaid in full. The other objective is that the lender, who is getting the guarantee facility, should try to give composite credit to the borrowers so that the borrowers obtain both term loan and working capital facilities from a single agency. The CGS seeks to reassure the lender that if the bor-rower fails to repay the loan then the trust will repay a majority portion of the loss to the bank. As such, banks are now more comfortable in extend-ing loan to the SME sector without any collateral. However, a charge is created for the bank for the asset cre-ated through the bank’s funding.


Funding option Specifi cations Security/other requisites Tenure

Bill discounting

Business receivables such as bills or credit card receivables are bought by the bank, which gives you cash advance after discounting charges

Bill of exchange or promissory note

90-180 days before the billdue date

Business loan Bank issues a term loan after conducting due dilligence on the business Unsecured 1-5 years

Cash credit

Similar to an overdraft account, it is usually taken by businesses involved in manufacturing to manage their working capital requirements

Stocks of goods or commodities

Renewed every year

Export fi nance

It is for export activities in the form of pre-shipment and post-shipment credit. It is also available for the puposes of pro-curing raw material, manufacturing goods, processing and packaging them and even shipping them

Firm export order or letter of credit

Up to 180 days (can be extended)

Letter of Credit (L/C)/Bank guarantee (BG)

It is used for fi nancing imports and depending upon the creditworthiness, the bank issues L/C to pay on the client's behalf or BG to guarantee to pay if the client defaults

Secured or unsecured

3 to 6 months for L/C and 1-10 years for BG

Loan against Property

It is a secured loan offered against the property of the business or that of the directors'/promoters'

Property 1-5 years

Overdraft

It refers to a credit that is unsecured or issued against various securities. The bank charges an agreed interest on a monthly basis on the net amount withdrawn

Shares, bonds, mutual funds, debentures, fi xed deposits

Renewed every year

Bank funding is usually available after three years of successful commencement of the enterprise and in majority of the cases banks demand that the business should have been profi table for the last two years. Interest rates vary according to the tenure of the loan/advance and amount


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Starting its

operations

in the year

1937, Indian

O v e r s e a s

Bank recently

completed 75

glorious years of banking

service to the nation. IOB

has been a front-runner

in extending credit to the

personal segment and the

priority sector. IOB has also

been consciously extending

credit to the MSME Sector.

Many credit products have

been designed catering to

specific segments under

MSME Sector.

• IOBUrbanHorticulture

– an innovative scheme

for developing rooftop

gardens, landscaping, etc.

• IOBMicroOne–for

extending collateral-free

credit to fresh Micro

entrepreneurs

• IOBSMEMahilaPlus

– recently launched

product to cater to women

entrepreneurs in the

manufacturing and service

sector.

• IOBEngineer–forfinancing

engineers

• IOBCA–forextending

credittoChartered

Accountants.

As a recognition to the

Bank’s contribution to financing

MSME sector, IOB was awarded

the first prize under “National

Award for Excellence in MSE

lending” for the year 2010-11.

Some of the other major

awards won by the Bank in the

last two years are :

• BestPublicSectorBank

underMicroCreditcategory

for Dun & Bradstreet and

PolarisSoftwareBanking

Awards2011.

• SkochAward2012for

Financial Inclusion of Nilgiri

Tribals

• BestBankAward2012by

SMEChamberofIndia

• SkochChallengerAward

2012forCorporateSocial

Responsibility

• ResponsibleBusiness

Awards2012fromWorld

EducationCongress

• SriVisvesvarayaIndustrial

Award2012fromAll

India Manufacturers

Organisation

• TheSundayStandard

FINWIZ2012BestBanker

AwardsunderBestIndian

BankerandBestPublic

Sector Banker categories

IOB, presently has an MSME

portfolio of Rs. 20,000 crores

and aims to double the same

in the next five years. Many

initiatives have been taken

by the Bank to boost credit

to MSME sector. Some of

them are :

• SMECreditcampaignswith

specific targets at Regional

level

• LendingunderGovernment

sponsored schemes like

PMEGP

• Onlinesubmissionand

e-tracking of MSME

applications

• ClusterapproachforSME

credit.

IOB has embarked on an

expansion drive during the

past two years. The Bank’s

total number of branches in

India has gone beyond 2,700.

The business of the Bank

has crossed Rs. 3,40,000

crores. The Bank celebrated

its Platinum Jubilee year,

with the tagline “Touching Hearts, Spreading Smiles”, and continues its journey, with

a mission to excel in all key

parameters and to provide

value to all its stakeholders.

Indian Overseas Bank Canara Bank’s 75 glorious years of banking Initiatives For

Promoting MsMe sector

Canara Bank was started in the year

1906 at Mangalore, in the stateofKarnatakabySriASubbaRaoPai,aneminentEducationist.AsatMarch2012, the total clientele base of the Bank is 42 million.CanaraBankisoneof the leading Banks in the Country, having a marketshare of around 4.75 % in terms of total business.Canara Bank has a long

standing commitment to MSME sector and the Bank has been taking a number of initiatives to increase credit flow to this sector. Bank’s initiatives for Development of MSME sector:-•TheBankhasanexposure

of Rs.31200 crores in MSME sector.

•Bankhas41SMESulabhs(centralized processing Units), for processing ofMSME credit proposals across the country headed by Senior Executives to ensure faster delivery of credit.

•Bank has 69 SpecializedSME branches which cater to the needs of MSME units exclusively.

•Loans to womenentrepreneurs under Micro and Small Enterprises sector are granted at concessional rate of interest of 0.50% in the applicable rate along with NIL processing charges,for loans upto Rs 5 lakhs.

•Bankhastailormadeloan

schemes for extending need based credit

•Assistance to MSMEsector including Area/Cluster specific loanschemes.

•Providing information ofMSME schemes on our Website.

•Facility for onlinesubmission of loan applications and their online tracking.

•MOUs entered withCRISIL Ltd, CARE Ltd,SME Rating Agency ofIndia Ltd (SMERA) andBrickworks Ratings India Private Ltd, the externalCreditRatingAgenciesforrating of MSME units, with concessional fees.

•OD-MSME scheme forextending working capital

finance to MSME units upto Rs.3 crores per borrower with liberalized lending norms.

•Toimprovetheoperationalefficiency of our workforce in catering to the needs of MSME entrepreneurs, the Bank is imparting specialised training on MSME financing to its staff.

•Under the present difficulteconomic scenario, it is quite possible that some of the MSME units may be facing difficulty for valid reasons. Subject to establishing viability, the Bank is extending a need based restructuring package to MSME units.







Bill discounting





Cash credit



Renewed every year

Export fi nance










Property 1-5 years

Overdraft



Renewed every year


Shri.M.Narendra - CMD







Bill discounting





Cash credit



Renewed every year

Export fi nance










Property 1-5 years

Overdraft



Renewed every year



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02 Jan 2012 18 Dec 2012

MCX Crude5,325

4,8904,500

4,800

5,100

5,400

5,700

`/b

arre

l

02 Jan 2012 18 Dec 2012

MCX Gold

27,382

31,056

27,000

29,000

31,000

33,000

35,000

`/10

g


The fiscal cliff in the US contin-ues to make the commodities market nervous. It refers to the situation in the US where, by

the end of 2012, certain tax breaks are about to come to an end, even as spending cuts for the US government

kick in from January 2013. Says Nalini Rao, senior research analyst—com-modities & currencies, Angel Broking, “According to the latest US Congressional Budget Office projec-tions, if the combination of higher taxes and spending cuts come into

Manageeffect, the US gross domestic product (GDP) will decline by 4 percentage points.” Adds Tapan Trivedi, senior research analyst, Inditrade Derivatives and Commodities, “The ‘fiscal cliff ’ issue has increased volatility among metals and other commodities. Their prices are affected by positive and neg-ative updates on the fiscal front.”

There are three possible outcomes from here on. First, the tax breaks and spending cuts come into effect. Second, only a part of it comes into effect. Third, neither sees the light of the day. If the first or the third hap-pens, it could negatively impact a number of commodities including base metals and energy. Demand for these commodities depends on large nations like the US. Muted demand would ultimately lead to lower prices. However, this might be good news for precious metals. Economic uncertain-ty typically leads to an increase in demand for gold. Says C.P. Krishnan, whole-time director, Geojit Comtrade, “Due to its safe haven appeal, gold will benefit in the immediate run on antici-pation that growth will erode.” Silver is likely to follow suit.

In case of an orderly settlement of the issue, the second scenario, a posi-tive impact on base metals and energy is likely. But warns Rao, “The continu-ing debt crisis in eurozone and con-traction in GDP projected by ECB for 2013 shall exert downward pressure on the base metals pack.” Gold and sil-ver are likely to move up if the euro-zone continues to struggle. It is rea-sonable to conclude that whatever be the outcome of the fiscal cliff, precious metals are likely to outperform other commodities while the fate of the base metals pack remains uncertain. r

[email protected]

bY KavYa baLaji

Year-end jitters The fiscal cliff posing a threat to the US economy and the commodities market is unlikely to impact precious metals

Commodities

vaNTaGE viEW



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DIY Moneyt

Up next x Interiors: Time For A New Look pg 80


Investing in the stock market may seem easy with a click of a mouse, but building a stock portfolio can throw you out of gear. Stocks are a

volatile asset class and there’s no guar-antee of returns. The only silver lining is that over long periods equity has been able to deliver higher returns. If you wish to try your hand, keep track of certain things. The first step. Before you start zeroing in on stocks, ensure you’ve identified your long term goals as equities take time to deliver results. Earmark sepa-rate stock portfolios for different goals.

There are several ways to build a portfolio, but the basic idea behind all

is optimising the risk-return tradeoff. At the very basic level, you can do that by putting your money in different stocks, which is called diversification. The diversification should happen across sectors and also across the mar-ket capitalisation of stocks i.e. large, mid and small companies. Concentrating in one sector, or putting all your funds in mid-cap stocks may not be the right thing. Spreading your money helps as it diversifies the risk.

For starters, it’s better to stick to large-cap stocks which mostly com-prise the index. The mid-cap index can work well for those buying into mid-cap stocks. Over time you can look at emerging companies, but after careful analysis. Ideally, small-caps should form only a small part of the portfolio. Weights. Not all stocks in a portfolio should have equal weightage. You may be holding more of a particular stock compared to others. Use Microsoft

by sunil dhawan

Build your portfolioIf you are ready to invest in the volatile stockmarket, build a strong portfolio to reap in the benefits

DIY Money

Excel to review performances. This way you can have a better control over your portfolio. The right weightage goes a long way in determining returns on a portfolio.Stock selection. This requires knowl-edge on a vast range of subjects such as economics, finance and corporate law. However, if you lack training in these subjects, you can use some basic principles. First, you should try to understand a company’s business. If you cannot understand it, refrain from buying its stock. Don’t just focus on a company’s earnings; instead read its financial statements. Second, look at its valuation; a strong balance sheet, coupled with lower valuations com-pared to peers or the index makes a strong case for buying. Taking call. At times, the stock market remains flat, while at others it can be extremely volatile. Your decision to exit should, ideally, not be based on short-term market movements. If there’s no fundamental change in your stocks, including their financials and busi-nesses, stick with them. Risk is inher-ent to stock investing and, hence, one should be able to stomach the risk of a 10-20 per cent downside. Keep around 5 per cent of investible corpus in cash to make use of market opportunities. If your stock has performed well, booking a profit and putting it into debt paper may not be a bad idea. Align investments with goals.Avoid. If you merely go with the momentum, you end up buying stocks when they rise and selling them when they fall. You should actually be doing the opposite, especially to accumulate existing stocks at lower levels and bring average cost of holding down through cost averaging. Conclusion. Invest in an individual stock only if you think you can outper-form a market index. Else, it is wise to invest in an index where your risk gets diversified. Don’t worry about mis-takes, learn from them. r

[email protected]

http://digital.outlookmoney.com l 9 january 2013 l OuTlOOK MOnEy 77

varun vashishtha


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The Outlook Money Awards 2012 felicitated excellence in the world of Personal Finance. The 11th edition of the coveted Awards were presented to companies that provided the best customer value in Banking, Home & Education Loans, Health & Life Insurance, e-Broking and Mutual Funds.

Also, at the event, Mr. K. V. Kamath, Chairman, ICICI Bank, was inducted into the Hall of Fame for his path-breaking work, which has been a beacon of light for others to follow.

India’sBest in Personal Finance


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by teja lele desai

Spend

Time for a new look A new year brings in a lot of expectations and promises and there’s no place better than our home to ring in the changes

Another year draws to a close and it’s time to ring in the new. So, what better place to start than our home? It mirrors us

and our personality. How we decorate reveals the kind of person we are. Here are some of the things we can do to create a new look across our home.Ambience. Choose a décor you are most at home with for a distinctive ambience to reflect your personality. Blend. Country chic and contempo-rary can coexist if blended well. Get an

Interiors 80

80 OUtlOOK MONey l 9 JANUARY 2013 l www.outlookmoney.com

Interiors

1


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eclectic style for a unique look. Colour. Colour affects mood, emotions and health. Get your favourite colours on walls, furnishings and accessories. Drama. Paint a wall in a bright colour; get designer wallpapers or a bold rug. Donate. Donate things that you don’t need, such as old furniture, toys, uten-sils, appliances, books and magazines. Entrance. The first impression is very important. Organise to show off your style and to ensure that the last-min-ute rush for things is a past thing.Green. Switch to CFLs, buy appliances with high energy ratings and replace when needed. Conserve water. If you can, instal rainwater harvesting and solar heating systems. Indulge. Splurge on one feature that you have always wanted—a breakfast counter, a silk carpet, a swanky bar, a home theatre, bunk beds for the chil-dren, a built-in barbeque,—think up. Light. Ensure a mix of light fittings and controls to provide enough ambi-ent, task and mood lighting. Multitask. Invest in a multifunctional space for the family to use at different times of the day. Multifunctional furni-ture provides both seating and storage. Natural. Flowers ensure a festive spirit round the year. Stack fruits and vege-tables in bowls; display a collection of leaves and branches in vases. Organic. Use natural fibres and mate-

http://digital.outlookmoney.com l 9 JANUARY 2013 l OUtlOOK MONey 81x http://twitter.com/OutlookMoney; http://www.facebook.com/olmindia

Interiorst


2

Ring out 1 Replace old cabinets and faucets in kitchen, if needed, for a new look 2 Choose a decor you are most at home with


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82 OUtlOOK MONey l 9 JANUARY 2013 l www.outlookmoney.com

rials. Use accessories such as rocks, pebbles, shells, branches, driftwood and twigs for a trendy, organic look. Photos. Create a collage of photos and set them in unusual frames or use them to jive up mugs and coasters. Plants. Besides flowering plants and shrubs, try growing herbs and vegeta-bles. DIY-ers can try a terrarium, a tiny garden inside a glass jar.Retro. Look for vintage artwork, lamps and accessories, or try kitsch—the options are many. Paint. A coat of paint—for the entire house or a few walls—can give your home a new look. Or, try wallpaper. Repurpose. Things that you have no use of can be repurposed. Recycle old fabric into patchwork quilts; rethink furniture arrangements for a new feel. Rest rooms. Jazz up bathrooms with

colourful shower curtains and anti-skid mats or area rugs. Twine a string of lights around the mirror. Repair. Paint over cracks in walls, fix broken furniture, replace burned-out bulbs and fix up broken accessories.Replace. Replace toilet seats and fau-cets in bathrooms, cabinets and hard-ware in kitchen, and mirrors and cushions in bedrooms for a peppy look. Simplify. If you haven’t used some-thing in three years, chances are you never will. Clean up closets and stor-age areas. Take an inventory stock.Storage. If there’s anything no home has enough of, it’s storage. Think out-of-the-box and tap walls, nooks and crannies, and unused areas. Thrift. Hit the flea markets and bazaars for one-of-a-kind furniture, artwork, frames, lighting and memorabilia.Update. Give your furniture a make-over by updating it. Go for new uphol-stery and colourful cushions. Window treatment. The right window treatment—be it a billowing pair of sheers, smart wooden blinds or luxuri-ous valances—can create a new look. Zen. Overdoing anything—colour, tex-ture or material—creates a sense of clutter. Ensure that your space is calm and restful, one that traverses the dis-tance from house to home. r

[email protected]

Interiors

1

2

Ring in 1 The right window treat-ment can do wonders to your room 2 Create space such as by using bunk beds for children

Interiorst


Up next x Your Space pg 84


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Your SpaceStocks:Wealth Maker


By B.C. Marwaha

In common parlance, the stockmar-ket is often regarded as the satta bazaar (gamblers’ den). This could be both true or untrue depending

on one’s approach to investing. If one invests merely on the basis of street rumours without due knowledge of stocks or the companies, then it is not much different from taking a gamble. While it is true that the stockmarket is guided to an extent by emotions and news, from my own limited experi-ence, long-term investment with rea-sonable study and knowledge of the company and the promoter’s track record is rewarding. Here are some points one could consider while invest-ing in stocks.n Identify some stocks in your area of interest; follow their market price and trend for a few days. Consider the pro-moter’s track record and the line of business, daily trade volume, dividend yield, earnings per share, book value and future developments, such as restructuring, bonus issues and so on.n Always purchase and sell in smaller lots and keep on reviewing the holding periodically.n Keep the portfolio diversified, but limit it to 15 companies or so.n Nobody can predict the right timing for entry or exit from the stockmarket and the price of a scrip. However, as a

rule of thumb, the price of scrips should be reasonable when the stock-market is declining because of some depressing news or poor sentiment. This is the time to purchase your choicest scrips. In other words, pur-chase stocks when others are mostly selling theirs and sell your stocks when everybody else is rushing to buy, or taking a ‘wait & watch’ position.n The Sensex and the Nifty are the barometers of the stockmarket, but do not follow blindly either of these two indices or a particular sector, such as realty, or automobiles. It’s immaterial whether a scrip belongs to the large-cap, medium or small cap category. Often people advice giving preference to blue chips, but one could make more money by wisely investing even in small- or medium-cap stock if their fundamentals and the business model look promising. For instance, I picked up Yes Bank and Union Bank when their price was below `50 and I am holding these for more than 30 months with rich gains. Similarly, I got decent returns from M&M and Tata Motors. Now I am following Suven Life Sciences, Specialty Restaurant and Visa Steel for over a year.

Based on my limited experience in the stockmarket, I may vouch that a slow, staggered, systematic and watch-ful investment can prove rewarding. r

The author is an OLM reader

Best Tweet Stretching your finances to buy a car is a bad idea. It’s better to have a fixed budget and not fall for salesmen talkSudhir Mohanty 19 December

Money TipsSonali MalhotraTo buy the things you desire, maintain a grown-ups piggy bank. Withdraw a particular amount every month for your piggy bank. Once a sufficient amount is accumu-lated, splurge and acquire

desire, maintain a grown-

84 OUTLOOK MONEy l 9 january 2013 l www.outlookmoney.com

Now you can contribute to your favourite personal finance

magazine. Send in your articles on personal finance (within 300 words), your money tips (within 30 words) and other contribu-

tions to [email protected]. The selected entries will be published and the winners

awarded attractive prizes

Best FB Post I have recently starting us-ing an online budgeting tool which helps me keep track of all my expenses under differ-ent heads. It has even got an Android app and so I can use it on my cellphone too. There are several similar tools one can use and they are all free! Pooja Kar 20 December

varun vashishtha


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Palam Vihar 4 1,600 7,350 117.60

Sector-47 Gurgaon 3 1,400 7,200 100.80

Sector-66 Gurgaon 3 1,400 7,170 100.38

SOHNA ROAD 4 1,600 7,450 119.20

South City 3 1,400 10,980 153.72

Sushant Lok 3 1,200 9,010 108.12

Vatika City 3 1,200 8,950 107.40

Noida

UNder `50 LaKH

Noida Extension 4 1,600 2,800 44.80

Sector-129 Noida 3 1,200 4,000 48.00

Sector-134 Noida 3 1,200 3,400 40.80

`50 LaKH to `75 LaKH

Noida-G. Noida Expressway 4 1,600 4,400 70.40

Sector-110 Noida 3 1,200 4,900 58.80

Sector-137 Noida 3 1,200 4,400 52.80

Sector-168 Noida 3 1,200 4,400 52.80

Sector-74 Noida 4 1,600 4,270 68.32

Sector-76 Noida 3 1,200 4,400 52.80

Sector-77 Noida 4 1,600 4,400 70.40

Sector-78 Noida 3 1,200 4,340 52.08

`75 LaKH aNd above

Sector-128 Noida 4 1,600 6,900 110.40

Sector-50 Noida 3 1,200 7,470 89.64

Sector-61 Noida 3 1,200 7,100 85.20

Sector-93 Noida 3 1,200 6,650 79.80

Hyderabad

UNder `40 LaKH

A.S Rao Nagar 3 1,200 1,900 22.80

Kukatpally 3 1,200 2,800 33.60

Madinaguda 3 1,200 2,700 32.40

Manikonda 3 1,200 2,300 27.60

Miyapur 3 1,200 2,620 31.44

Nizampet 3 1,200 1,950 23.40

`40 LaKH aNd above

Banjara Hills 3 1,200 5,560 66.72

Chandanagar 4 1,600 2,599 41.58

Gachibowli 4 1,600 3,600 57.60

Hi-Tech City 4 1,600 3,330 53.28

Kondapur 3 1,600 3,200 51.20

KPHB 3 1,600 3,500 56.00

Faridabad

UNder `50 LaKH

BPTP 3 1,400 3,470 48.58

Nehar Par 3 1,400 3,340 46.76

Sector 88 Faridabad 3 1,200 3,030 36.36

above `50 LaKH

Charmwood Village 3 1,400 8,960 125.44

Green Field 4 1,600 4,760 76.16



GUrGaoN

UNder `50 LaKH

Sector-103 Gurgaon 3 1,200 3,910 46.92

Sector-37 Gurgaon 3 1,200 4,060 48.72

Sector-68 Gurgaon 3 1,200 4,050 48.60

Sector-84 Gurgaon 3 1,200 4,150 49.80

Sector-86 Gurgaon 3 1,200 3,590 43.08

Sector-91 Gurgaon 3 1,200 3,500 42.00

Sector-92 Gurgaon 3 1,200 3,300 39.60

`50 LaKH to `75 LaKH

Manesar 4 1,600 3,700 59.20

NH-8 3 1,400 4,900 68.60

Sector-69 Gurgaon 3 1,200 5,400 64.80

Sector-70 Gurgaon 3 1,200 5,570 66.84

Sector-71 Gurgaon 3 1,200 4,950 59.40

Sector-81 Gurgaon 3 1,200 5,000 60.00

Sector-82 Gurgaon 3 1,400 4,350 60.90

`75 LaKH to `1 Crore

Nirvana Country 3 1,200 8,170 98.04

Sector-52 Gurgaon 3 1,200 6,480 77.76

Sector-56 Gurgaon 3 1,200 6,670 80.04

Sector-67 Gurgaon 3 1,200 7,020 84.24

Sector-33 Gurgaon 3 1,400 7,000 98.00

Sector-57 Gurgaon 3 1,400 7,130 99.82

`1 Crore aNd above

DLF CITY PHASE II 3 1,200 12,500 150.00

DLF CITY PHASE IV 3 1,200 11,290 135.48

DLF CITY PHASE V 3 1,200 12,580 150.96

Golf Course Ext. Road 4 1,600 8,000 128.00

GOLF COURSE ROAD 4 1,600 12,750 204.00

MG Road 3 1,200 11,500 138.00

Fortnight Figures


Source: www.99acres.com 1These are average indicative prices

Location Bedrooms area (sq ft)

rate (`/sq ft)

Price (`lakh)1 Location Bedrooms area

(sq ft)rate

(`/sq ft)Price

(`lakh)1

ProPerty Prices: Faridabad, GurGaon, noida and Hyderabad


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bank fds home loanS inSuranceFortnight Figures


bank Fixed dePosits

Graphics: saji c.s.

1-2 years 2-3 years 3-5 years >5 years

allahabad Bank 9.00 9.00 8.75 8.75

andhra Bank 9.00 9.00 9.00 9.00

axis Bank 8.50-9 9.00 9.00 8.50

Bank of Baroda 9.00 9.00 9.00 9.00

Bank of India 9.00 9.00 9.00 8.75-9

Bank of Maharashtra 8.75 8.75 8.75 8.75

Central Bank of India 8.75 8.75 8.50 8.50

Citibank 7.25 7.25 7.25 7.25

Corporation Bank 8.75 8.75 8.75 8.75

Dena Bank 8.75 8.75 9.00 8.75-9

Deutsche Bank 7.25 8.00 8.50-9 9.50

Dev. Credit Bank 8-9.25 8.00 8-9.30 8.00

Federal Bank 8.75 8.75 8.75 8.75

HDFC Bank 8.75 8.75 8.75 8.25

HsBC 7.25-7.50 7.25 7.25-7.50 dNP

ICICI Bank 7.50-8.75 8.75 8.75 8.50

IDBI Bank 9.00 9.00 9.00 8.5-8.75

Indian Bank 9.00 9.00 9.00 9.00

Indian Overseas Bank 9.00 9.00 9.00 9.00

IndusInd Bank 9-9.25 8.75-9.25 8.75 8.5-8.75

ING Vysya Bank 9.00 9.00 8.75 8.50

Karur Vysya Bank 9.00 9.25 9.00 9.00

Kotak Mahindra Bank 8.90-9 8.75 8.75 8.50

OBC 9.00 9.00 9.10 9.10

PNB 8.75 8.75 8.75 8.50

south Indian Bank 9.00 8.75 8.50 8.50

standard Chartered 7.50-8.50 7.50 7.50 dNP

state Bank of India 8.50 8.50 8.50 8.50

syndicate Bank 8.75 8.50 8.50 8.50

UCO Bank 9.10 9.10 9.00 8.75

Union Bank of India 9.25 9.25 9.00 8.75-9Interest rates in per cent per annum, only for deposits of less than `15 lakh. Interest rates as on 20 December 2012; OBC: Oriental Bank of Commerce; PNB: Punjab National Bank; DNP: Do not provide

inFlation (Food)

Source: www.eaindustry.nic.in OPEC daily basket price ($/barrel) Source: www.opec.org

crude oil

Figures are in %, annual change in the monthly food articles index

Home loans5 years 10 years 15 years 20 years

FIxeD FlOatING FIxeD FlOatING FIxeD FlOatING FIxeD FlOatING

allahabad Bank NA 2,149 NA 1,349 NA 1,105 NA 998

axis Bank 2,212 2,149 1,420 1,349 1,184 1,105 1,084 998

Bank of Baroda NA 2,149 NA 1,349 NA 1,105 NA 998

Bank of India NA 2,149 NA 1,349 NA 1,105 NA 998

Bank of Maharashtra 2,197 2,149 1,432 1,349 NA 1,105 NA 998

Canara Bank NA 2,149 NA 1,349 NA 1,121 NA 1,015

Central Bank of India NA 2,149 NA 1,349 NA 1,105 NA 998

Corporation Bank 2,319 2,149 1,544 1,349 1,322 1,105 1,233 998

Federal Bank NA 2,161 NA 1,362 NA 1,120 NA 1,014

HDFC NA 2,137 NA 1,335 NA 1,090 NA 982

ICICI Bank* 2,353 2,137 1,583 1,335 1,366 1,090 1,280 982

IDBI Bank 2,199 2,149 1,406 1,349 1,168 1,105 1,066 998

lIC Housing Finance* NA 2,144 NA 1,344 NA 1,099 NA 992

Indian Overseas Bank NA 2,149 NA 1,349 NA 1,105 NA 998

Indian Bank 2,199 2,149 1,406 1,349 1,168 1,105 1,066 998

Jammu & Kashmir Bank NA 2,187 NA 1,392 NA 1,152 NA 1,049

Oriental Bank of Commerce NA 2,149 NA 1,349 NA 1,105 NA 998

Punjab National Bank 2,174 2,149 1,378 1,349 1,137 1,105 1,032 998

state Bank of India NA 2,125 NA 1,322 NA 1,075 NA 965

syndicate Bank 2,224 2,162 1,435 1,363 NA 1,121 NA 1,015

UCO Bank NA 2,149 NA 1,349 NA 1,105 NA 998

Union Bank of India 2,237 2,149 NA 1,349 NA 1,105 NA 998NA: Not Available *Offers special rates Figures in ` EMIs per `1 lakh Source: Apnapaisa Research Bureau

liFe insuranceLowest term insurance cover premiums in ` for the different sum assured from age 30 to 50. The policy term is 60 minus your age

sUM assUreD (` laKH)

aGe

IN y

ears

106

156

206

256

306

356

406

456

506

304 AVIVA 2,640

AVIVA 3,960

Aegon Religare 4,860



MetLife 10,800

AVIVA 10,160


ICICI Pru. 11,177

344 AVIVA 3,080

AVIVA4,620


ICICI Pru. 7,103

ING Vysya 10,788


ICICI Pru. 11,365

ICICI Pru. 12,786

ICICI Pru. 13,207

384 AVIVA 3,680

AVIVA 5,520


ING Vysya 10,760

ICICI Pru. 10,247

ICICI Pru. 11,954

ICICI Pru. 13,662

ICICI Pru. 15,370

ICICI Pru. 16,078

424 AVIVA 4,450

AVIVA 6,675

Kotak Mahindra 10,300

ICICI Pru. 10,445

ICICI Pru. 12,533

ICICI Pru. 14,622

ICICI Pru. 16,711

ICICI Pru. 18,800

ICICI Pru. 19,889

464 AVIVA 5,450

ING Vysya 10,063







ICICI Pru. 24,592

504 AVIVA 6,770

AVIVA 10,155







ICICI Pru. 31,571

Note: `10 lakh cover for 30-year-old, the lowest annual premium is `2,640 is offered by Aviva. Excluding LIC, Tata AIG, IDBI Federal, Future Generali and Canara HSBC. Online term plans have lower premiums than the above. Min. premium varies. Edelweiss Tokio Life Insurance’s term plan has lower preimums across most categories. These are the second best rates.

CIty PetrOl DIesel aUtO lPG

ahmedabad 71.27 52.37 48.42

Bengaluru 74.22 51.41 50.56

Bhubaneswar 66.82 49.90 38.17

Chandigarh 68.50 47.89 50.05

Chennai 70.57 50.16 51.64

Delhi 67.24 47.15 47.92

Guwahati 73.83 50.68 39.11

Hyderabad 73.73 51.35 50.24

Kolkata 74.55 50.78 53.01

Mumbai 73.53 52.63 52.28Price in `/ltr as on 20 December 2012

Fuel Prices


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STockS currency commodiTieS

stocks: toP 10 winners stocks: toP 10 losers

stocks: bse indices


bullion Gold

Silver

volatility index(vix)

Source: www.nseindia.com

The prices are in ` per 10 gramSource: www.ncdex.com

The prices are in ` per kilogramSource: www.ncdex.com

index tracker BSE Sensex

excHanGe ratesPercentage gain/loss of the rupee from 4-18 December 2012. Exchange rate in `

Source: www.rbi.org.in

COMPaNysHare PrICe

(`)1GaIN(%)2

Kolte Patil Developers 129.35 25.64ess Dee aluminium 382.30 21.17Brigade enterprises 95.75 15.71JM Financial 22.75 15.19amtek India 114.20 14.89ansal Properties & Infra. 39.30 13.42tube Investments Of India 204.05 12.27Jindal Drilling & Inds. 268.15 11.61adhunik Metaliks 47.25 11.57Greenply Industries 344.20 11.43

1As on 18 Dec 2012 2Between 04 and 18 Dec 2012

INDex ClOsING1 GaINlOss2

Metal 10,946.67 5.25 auto 11,286.70 4.63 realty 2,120.67 3.83 Bankex 14,322.15 2.30 Healthcare 8,071.19 1.05 Oil & Gas 8,383.60 -0.45 Capital Goods 11,065.15 -0.46 FMCG 5,964.05 -1.12 Power 1,983.38 -1.32 Consumer Durables 7,803.83 -2.67


COMPaNysHare PrICe

(`)1lOss(%)2

Gtl Infrastructure 4.53 -18.82CCl International 131.55 -8.17Jaiprakash Power Ventures 38.70 -7.75IrB Infrastructure Developers 128.95 -7.60Man Industries (India) 132.30 -7.58Gokul refoils & solvent 43.30 -7.18sKs Microfinance 167.65 -6.45Fertilisers & Chem., travancore 30.00 -6.40shree Global tradefin 34.35 -6.02Claris lifesciences 216.85 -5.12


Fiis & mFs

FIIs & Domestic MF net equity investment (`cr) Source: www.sebi.gov.in

Dow Jones

HealtH insuranceLowest health insurance cover premium in rupees for the different sum insured from the age between 30 and 70 years. The premiums are for individual health plans

sUM INsUreD (`)

aGe

IN y

ears

0.5 lakh6

1 lakh6

2 lakh6

3 lakh6

4 lakh6

5 lakh6

7.5 lakh6

10 lakh6

304 Oriental Insu.677

Apollo Munich1,095

Bharti Axa1,771

Bharti Axa2,474

Bharti Axa3,115

Bharti Axa3,292

Apollo Munich6,800

Cholamandalam8,081

404Oriental Ins.

809Star Health1,350

Apollo Munich2,400

Bharti Axa3,283

Star Health4,500

Star Health5,400

Bajaj Allianz 7,510

Bajaj Allianz9,163

454 Oriental Insu.809

Star Health1,350

Star Health 2,600

Bharti Axa3,283

Star Health4,500

Star Health5,400

Bajaj Allianz7,510

Bajaj Allianz9,163

504Oriental Insu.1,265

Royal Sundaram2,347

Apollo Munich 4,200

Apollo Munich 6,000

Apollo Munich 7,300

Apollo Munich 8,900

Cholamandalam13,065

Cholamandalam14,543

604 Oriental Insu.1,803

Bajaj Allianz2,793

Star Health5,300

Bajaj Allianz6,983

Bajaj Allianz10,416

Bajaj Allianz12,697

Bajaj Allianz15,490

Bajaj Allianz19,757

704 Oriental Insu.2,688

Star Health4,547

Bharti Axa8,677

Bharti Axa10,001

Bharti Axa14,229

Bharti Axa16,465

Cholamandalam25,059

Cholamandalam28,224

How to read this table: If a 30-year-old wants a cover of `1 lakh, the lowest premium on offer is by Apollo Munich at `1,095. These are only base premiums. Check for actual rates with the specific insurer.

stocks: HiGHest m-caPCOMPaNy

MKt. CaP(`cr)1

sHarePrICe (`)1

reliance Industries 2,68,272.75 830.95tata Consultancy services 2,36,999.89 1,210.90ItC 2,31,055.22 293.55Coal India 2,22,778.17 352.70ONGC 2,19,234.43 256.25HDFC Bank 1,59,832.77 675.65sBI 1,59,131.68 2,371.40ICICI Bank 1,32,469.00 1,148.75HDFC 1,30,405.80 846.25Infosys 1,30,385.22 2,270.60

1As on 18 Dec 2012


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Sunny’S MoneyStoryboard & ConCept UdaYaN RaY IlluStratIon vaRUN vashishTha

bad than worst?

Sunny’s boss tries to motivate him in vain. As always, trouble is round the corner with a triple whammy this time

SS Y

You will have to return the money, NOW!

Part I,II,III?...

Sunny! Don’t be funny! The times are tough. We should be strong to take the punches on our chin just like Stallone did in ‘Rocky’.

What?!! Message from my bank! They have deducted massive amounts for charges I can’t figure!

Really?!! Upturn or downturn, Mr Sunny Singh’s life goes on!

Uggh!

The first correct answer gets a free copy of the Layman’s Guide to secure investinG

Ms siNgh’s MONEY Tipsn Its website is a good place to find out a bank’s charges

n Keep the necessary account balance to avoid non-maintenance charges

n Keep funds so that all cheque payments, standing instructions and eCS debit clearances are honoured

n Keep contact updated to avoid courier return charges

n Check whether bank services free

QuizFinancial and non-finan-cial transactions are a) Free at all aTMs B) Chargeable if exceeds the limit at your bank aTM C) Free at other aTMs for 5 financial and 5 non-financial transactions d) Free at other aTMs for total 5 transactions in allanswer to last issue’s ques-tion: Index of eight core industries in the IIp has the base year as 2004-05Correct answer by srinivas shukla

Send in your replies to the quiz at [email protected]

Sunny you really need to lift your game. Times are tough. How will I execute our vision, mission, goals and objectives?

What is it now?!

Which one, sir? Chairman’s, the president’s or yours? You mentioned 3 plans in the last 10 minutes.

Oh! I thought you received a message from Santa Claus. There you go, your phone again!

Sunny, you are getting on my nerves! There goes your mobile again, ringing all day.Go ahead, check.

My son wants me to message Santa to gift him the latest gaming console in town!

But they have deducted the taxes! And this is the least they owe me after putting me through so much misery all through the year.

I know. Didn’t you get my little thank you note?

You are really incorrigible! By the way, the accounting department credited your salary twice this time by mistake


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RNI NO. DELENG/2002/8292


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Outlook Money

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