HAPPY NEW YEAR 2010 TO ALL

MITESH BHATT REPLIES TO QUERIES ON INVESTMENTS

________________________________________
Tejas asked, Is there SIP available in any Gold ETFs?
Mitesh Bhatt, hi, there is no SIP facility in Gold ETF. you will have to be a little bit more disciplined and buy a fixed amount worth gold very month
________________________________________
bbassocaites asked, i have 5 lac rupees i want invest for short term please advise
Mitesh Bhatt, hi, if by short term you mean less than a year, then liquid plus funds are an ideal option. If you are looking for guaranteed return, then bank FDs are the best.
________________________________________
Manjunath asked, Hi, I wanted to know what is tax treatment proposed for insurance, PPF, mutual funds, and shares in new tax code and what about existing products in these categories.
Mitesh Bhatt, hi, the new tax code is in draft stage, hence I would recommend that you wait and watch till the bill is actually passed by the parliament.
________________________________________
Xyz asked, I am 31. What is best as per your advice. Pure equity based mutual fund or Balanced with a mix of both since balance funds typically put only 10-15% in debt instruments? Investment horizon 3 years.
Mitesh Bhatt, hi, if your investment horizon is 3 years then balance funds ( funds that invest min 65% in equity and balance in debt)are the ideal option.
________________________________________
Rupesh kumar asked, Hello Sir, I am 30 years of age. i have my own house, car and all the basic things that are required. I invest 40,000 in mutual funds every month. 20,000 in Fixed Deposits. Apart from it i put up approx amount of 5,00,000 in properties in small towns every 6 months. My investment horizon is for 10 to 15 years. Do i need to correct myself somewhere or is it fine?
Mitesh Bhatt, hi, from your question I assume that your investment decision is ad-hoc and not in line with a financial plan that will help you achieve your various financial goals. I would recommend that you get an investment plan made for yourself and invest accordingly.
________________________________________
Bhaskar_girish asked, Hi Mitesh , I regularly invest in equities and there are times when I would be waiting for months for an opportunity to invest. During this time, what is the best instrument to invest in which would be liquid and also provide reasonable returns in the short term?
Mitesh Bhatt, hi, you are trying to do something which no investor has been successful with - timing the markets. If you are investing directly into stocks and do not find opportunities, I would advise you to start an SIP in diversified equity funds. In this way you leave the job of stock selecting and market timing to professional fund manager
________________________________________
Mustafa asked, Hello sir, I am planning to invest Rs.2500 p.m. for period of 10 years. Which is the best option?. Whether R.D or SIP of MF. Pls. advise
Mitesh Bhatt, hi, the best option is to have a mix of equity and debt in your portfolio. Hence, both SIP and RD are advisable.
________________________________________
Sai asked, If i will invest 4000 in MF via SIP how much return i will get in next 5 years.
Mitesh Bhatt, hi, assuming that your investment earns you 12% p.a., your value of investment at the end of 5 years is likely to be Rs 3.25 lakhs
________________________________________
Faiz asked, hi , i am planning to invest in gold, what u say about this also i am planning to invest in forex ,all i have is very little money and i am planning to utilize the credit facility provided by brokers..what is ur opinion ??
Mitesh Bhatt, hi, I would strongly advise you against investing using the credit facility offered by brokers. If you have small amount of money to invest, be satisfied with the same. Start small, invest judiciously with care. I am sure you will build wealth over the long term. Please avoid credit facility offered by brokers.
________________________________________
amitjain1100 asked, Sir, I am always at the loosing end of money , be it mf , stocks , s/b a/c , fd , nse. Ihave tried Sip & others. I am Invested in Stock Market for 11 Years as of Now. Regards Amit Jain
Mitesh Bhatt, hi amit, in my view you should definitely take help of a honest and competent investment advisor. Maybe its time to change your existing advisor. To be a successful investor, you need to follow the rule of the game - invest according to your risk appetite/tolerance and investment horizon.
________________________________________
gautam asked, Mitesh ji,i don’t need insurance cover n pls advice me where to invest rs 20000 monthly, from which i can get maximum returns for 10 yrs. thank u
Mitesh Bhatt, hi, the ideal investment for investment horizon for 10 years is definitely equities. However, please note that equities are high risk investments with the potential to generate above normal returns.
________________________________________
Rajj asked, Hi Mitesh , Which is the best ELSS in the current period to save Tax? Thank you.
Mitesh Bhatt, hi, you can choose to invest in Franklin India Tax shield Fund among others for your ELSS investments. This is a predominantly large cap fund with small exposure to midcaps
________________________________________
NB asked, hello, could you suggest any good pension plans, which will give me a decent monthly payment after I retire. I am 35 and do not want to invest in risky MFs. Thanks
Mitesh Bhatt, hi, the answer to your question does not lie in identifying a pension plan but in creating a customized retirement plan for you. I would recommend that you take help of a financial planner who will help in this regard. The best ways of providing for post retirement expenditure, is to build the necessary corpus comprising of various investment instruments like equity, debt, gold and insurance.
________________________________________
Vikrama asked, My salary is about 85k and most of it goes away in taxes. What should I do? Please guide me. I am very depressed.
Mitesh Bhatt, hi, I would advise you to get in touch with a tax consultant to help you with your tax planning. Tax planning will not only help you reduce your tax liability but investments done for the same will also aid your overall investment planning to meet your financial goals like retirement, child education, etc.
________________________________________
Sindhi asked, Can I approach to Certified Financial Planner (CFP)for my financial goal setting?
Mitesh Bhatt, hi, it is advisable to seek help of a investment expert to understand your financial goals who will suggest investment options accordingly.
________________________________________
KBS asked, Am an NRI NOW. I opened PO MIS and PPF when I was working in India. Can I continue to invest in my PPF account and also open fresh PO MIS accounts in my current status?
Mitesh Bhatt, hi, as an NRI you cannot invest further in PPF and POMIS
________________________________________
aj asked, can u please suggest any retirement plan?
Mitesh Bhatt, hi, according to me every retirement plan is unique to the individual. It is advisable to consult a financial planner to get a retirement plan made for yourself.
________________________________________
Amar asked, Hi Mitesh , I am considering investing in MIPs as an alternative to FDs. My investment horizon is 3-5 years. My primary reason for doing this is tax efficiency and possibility of higher returns. Can you share your thoughts on this?
Mitesh Bhatt, hi, MIPs are essentially debt funds with a mandate to invest 20-25% in equities. While the debt portfolio provides stability and regular income, the equity portfolio has the potential to increase the average returns. IF you are willing to take some risk and your investment horizon is more than 2 years, then MIPs are ideal for you. Please be aware that returns from MIPs are not guaranteed unlike the bank FDs.
________________________________________
Ramasamykuppusamy asked, What is the best way to invest in India for NRIs like me?
Mitesh Bhatt, hi, as an NRI, you can invest directly into stocks. You can even invest in mutual funds without any restrictions. However, you cannot invest in post office savings schemes or 8% Taxable Govt of India Bonds and PPF. Also, if you have a NRE A/c you can invest in NRE Bank FDs.
________________________________________
justin asked, Hello Sir, What all Options in gold we have for investment as less as 1000 Rs per month?
Mitesh Bhatt, hi, you can consider buying Gold ETF. You can buy as low as 1 unit of Gold ETF.
________________________________________
PKAgarwal asked, One of my friend died recently. His wife( 50 yrs) has to invest his retirement benefits(over 20 lacs)
Mitesh Bhatt, hi, since its retirement money and sacred, my advice would be to put aside this money in safe and guaranteed return yielding investments like bank fixed deposits. You can even consider investing a portion of the money in Post Office Monthly Income Schemes
________________________________________
Geer asked, what is a good investment option for a new born kid per month investment around 2500 is what can plan for?
Mitesh Bhatt, hi, assuming that your investment for your child is to meet his/her expenditure on higher education and marriage and building a seed capital, then allocate higher percentage of your investments to high risk investments like equities. Equities need time to grow and if you have 10-15 years on your side, then equities would be the ideal option.
________________________________________
Dinar asked, Hi Mitesh , I am able to save 10,000/- per month. How should I go about my investments? (insurance, healthcare components are taken care, expecting the first child by end of Jan 2010) Please let me know
Mitesh Bhatt, hi, the ideal way to invest your savings of Rs. 10,000 would be to link it to your financial goals. I would rather recommend that as a first step get a financial plan made for yourself and invest in line with the same.
________________________________________
Siddharth asked, as a small investor can i invest in G-sec
Mitesh Bhatt, hi, as a retail investor, you cannot directly invest in G-Secs. You can however, choose to invest via the G-sec funds.
________________________________________
Nikhil asked, Hi Mitesh , Good afternoon. I have started investing in Mutual funds from this month. Investing in Rs. 9000/- pm in HDFC Top 200 -Rs.2500, DSP Black Rock Equity Top 100 - Rs.2500, Reliance Diversifed Power & HDFC Sensex Plus - Rs. 1500 each and SBI Contra - Rs. 1000. Kindly advise if these funds are good as i have started SIP in these funds for period of 3 years... Thanks
Mitesh Bhatt, hi, While your choice of funds are good, I would prefer not to have exposure to sector fund like Relianc Div Power Sector Fund. Also, you can give SBI Contra a miss. Rather consider a large cap diversified fund like Franklin India Bluechip Fund.
________________________________________
Jigar asked, I want to invest around 50,000 for short term and with highly liquid instrument
Mitesh Bhatt, hi, the best investment option for you would be liquid funds. These are highly liquid, you get the redemption proceeds within 24 hours. There is no penalty in the form of entry/exit loads.
________________________________________
Alan asked, I would like to invest 50000 Rs, which is better one ? ULIP, Mutual fund, FD ?
Mitesh Bhatt, hi, if your objective is capital preservation, then FDs are best. If you are looking at growing your capital and willing to take risk, then equity mutual funds are the ideal choice. IF you are looking at ULIPs from insurance perspective, then Term plans are even better option.
________________________________________
ZENU asked, Hi Mitesh , I want to enter for HDFC TOP200/DSPBR100 for 5yrs. Is it right time or wait for consolidation?
Mitesh Bhatt, hi, there is never a right time for investment. IF your investment horizon is 5 years then go ahead and invest the funds you have mentioned. Invest via the SIP route.
________________________________________
Raj asked, Mitesh , what would be a better option (a) SIP OR (b) Purchase MF Units at my own free will (monthly or a few times in a year) ?, with respect to charges etc. ?
Mitesh Bhatt, hi, SIPs in a way are a programmed way of investing, You do not have to bother about timing the market or hunt for an opportunity. If you are not a disciplined investor, then SIPs are the best way of investing.
________________________________________
Sb asked, what are the best mutual funds to invest at present.
Mitesh Bhatt, hi, there is no such thing as a best mutual fund. You will have to select the fund that meets your investment objective, risk tolerance and investment horizon. For e.g. if your investment horizon is more than 5 years and you are willing to take relatively higher risk, then equity funds are the ideal option.
________________________________________
Asan asked, what will be the income tax deduction in my salary exceeds 1,00,000
Mitesh Bhatt, hi, income tax act provides for basic exemption of Rs. 160000 for individuals (male). IF your total salary for the year is within the limit of Rs 160000, then no tax will be payable by you.
________________________________________
Rajinder asked, what is best Recurring deposit or SIP of 1000 for at least 5- 10 years
Mitesh Bhatt, Hi, Recurring deposits (RDs) are a way of investing in fixed income asset like bank fixed deposits. RDs suffer from lack of liquidity. SIPs on the other hand is the facility to invest a small portion of your investible surplus in various mutual funds which can include equity and debt. It pays to have a balanced portfolio comprising of equity, debt and gold.
________________________________________
Saurabh asked, If i do the investment for the Gold would be benefited. if yes then what is the procedure.
Mitesh Bhatt, Hi, it is always better to have a small allocation to gold, say 5%-10% of your overall portfolio. Invest in gold via the Exchange Traded Funds (ETFs)
________________________________________
Sindhi asked, Is it better to invest in ULIP or (term+Mutual Fund)?
Mitesh Bhatt, ULIPs combine insurance with investments. If you are looking at insurance, then Term plans are the best as they give you maximum coverage for relatively lower premiums. For investments, Mutual Funds are the best options. Please be aware that a majority of your initial contribution in ULIPs would be appropriated towards various administrative and management charges.
________________________________________
Bans says, Mitesh , so far i have bank balance of 20lac, without any investment, except one lic money back policy. as an nri i don’t have to pay any tax in India. now i m thinking to invest my money, but don’t know how and where? please suggest..
Mitesh Bhatt, You have not mentioned your age . Since you are an NRI you need to follow Govt regulations and guidelines as far as investments are concerned. You need to contact a financial adviser in India who will do the needful.
________________________________________
tusshar says, hi, which of the FD give tax benefits?
Mitesh Bhatt, Bank tax saving FD s give tax benefit but the lock in period is 5 years. Also the interest earned is subject to tax
________________________________________
shah says, Hello Mitesh , Im planning to invest in shares 4,000 as an SIP. I’m bit worried about the market scenario. So what would you suggest, should I continue the same or look for any other options?
Mitesh Bhatt, Anytime is a good time for investing in the market. Since you have not mentioned your risk appetite it Is advisable to choose a balanced fund for your investment purpose.
________________________________________
Soumini says, I am investing 13K every month in SIP would that be beneficial, how much returns I can expect 5 years or 10 years down the lane..
Mitesh Bhatt, You have not mentioned the schemes you have invested into so it is difficult to give you a correct perspective ________________________________________
sankhadeep says, is there anyway I can get a good ROI of around 20-30% on an investment of 20k in 3-5 months time frame?
Mitesh Bhatt, At least not of now , I am aware of any schemes which could give you such a high rate of return in this little time
________________________________________
Kesh says, what is the future of rel diversified power fund
Mitesh Bhatt, This fund has been disappointing after the promise it showed in 2006-2007 as of now it has failed to beat the market growth and if invested it is better advised to exit this fund and invest in a more diversified fund like dspr top 100 , hdfc top 100 , idfc premier to name a few
________________________________________
Jay says, Do you think Real Estate in India is a good investment option at this point of time. Or, should we wait for some more time to invest in Real Estate?
Mitesh Bhatt, It is better to wait and watch in the current scenario
________________________________________
anki says, Hi Mitesh , I am 26 years old, Unmarried.i Can invest around 5000/- every month for long term (more than 25 years)Which is the best options. I don’t have any insurance policy. I have not invested in any MF, SIPs or anything. Just do some small time intra day trading. Please advice
Mitesh Bhatt, Buy a vanilla life term policy and avoid ULIPs, again invest in two or more well managed funds via SIP route to get advantage of cost averaging.
________________________________________
Rajj says, Hi Mitesh , Is ELSS redemption taxable? Thank you.
Mitesh Bhatt, As of now yes .
________________________________________.
jsme says, : dear sir, could you please suggest as to how somebody earning just about 30K a month could invest wisely?
Mitesh Bhatt, Start a SIP in well managed funds if you wish to stay invested in the markets for at least 5 years and you have not mentioned your age so it becomes difficult to suggest .
________________________________________

Maverick says, Dear Mitesh , Can you suggest some diversified equity funds to start SIP with for 5000 a month with 10year horizon. My risk appetite is good
Mitesh Bhatt, HDFC top 200 , DSPR top 100 , IDFC premier to name a few are well managed diversified funds .
________________________________________
manoj8383 says, Hi Shaliesh, i want to know about Birla sun life policy....my one friend came to me with policy.....he told me that i have pay 500. p.m for 25 year & in between this year if i would die by accident they will pay me Rs. 20 lakhs & for natural death its 14 lakhs and after maturity of policy they will pay 2.75 or 3 lakhs depend on market, so my question is should go for it? Is there ant kind policy exists in birla?
Mitesh Bhatt, Well you need to look at the brochure for details
________________________________________

REAL ESTATE PRICE SURGE IN VIJAYAWADA SLUMP IN HYDERABAD

Property prices in Vijayawada have increased nearly 20 % since the
agitation for a separate Telengana began, while Hyderabad has seen a fall in demand for realties.Many builders are showing a keen interest on "construction activity" in Vijayawada, expecting that it would become the capital of Andhra Pradesh if Telengana is carved out, said Giridhara Prasad Gupta, a real estate businessman. And this has led to prices of apartments and plots zooming upward in ayawada.Ramavarapadu and Gannavaram in the city are now the most sought after areas as the L&T IT Park construction is going on there. In comparison,
in Hyderabad, the property registration activity has come down by 10 per cent, according to a senior official.C. Sekhar Reddy, president, Andhra Pradesh Builders Forum, said real estate transactions in Hyderabad have come down recently. However, he said, this could not be attributed totally to the Telangana issue. "There has been a slump in the sector for the past one
year," Reddy said. He said on an average as many as 15,000 apartments were sold in Hyderabad from 2004 to 2007. The figure has come down to 10,000 in 2008.Reddy said the builders were hopeful of recovering from the signs of global recession and see good growth this year. "Hyderabad has become global destination for investments. Telangana will not be an issue for investments. This is only a temporary issue," The builders Forum president said.

ICICI PRU DISCOVERY FUND A PRIMER

With broader market valuations moving into expensive zone, a focus on ‘value’ stocks may be a good strategy to follow now. ICICI Pru Discovery is one of the rare equity funds in India that practises value investing (most equity funds here have a ‘growth’ bias) and what is more, with a tilt towards mid- and small-cap stocks.

As this structure makes for a portfolio that is very different from most other equity funds, ICICI Pru Discovery is a good investment option for investors with some appetite for risk. The average PE multiple of the fund’s portfolio stood at a modest 13 times by end of August — a steep discount to market valuation of over 20 times.

Suitability: ICICI Pru Discovery appears to be a lower risk option within the universe of mid-cap funds. ICICI Pru Discovery has invested well over two-thirds of its portfolio in mid and small cap stocks (market cap less than Rs.7500 crore) this year.

That does peg up the risk profile of the fund in relation to large-cap focussed funds or index funds. However, the fund has managed to keep its Beta (tendency to move with the Sensex) low through unconventional stock choices. Contrarian stocks and sectors picks dominate its portfolio and a focus on low PE stocks protects value.

Performance: The ICICI Pru Discovery has managed to comfortably outperform peers and its benchmark over five-year and one-year time-frames, but has lagged over a three year period. The returns stand at 28 per cent compounded annual return over five years, falling to about 10 per cent over three years, followed by a robust 36 per cent for one year.

The fund’s five-year record puts it among the top performing equity funds. What is noteworthy is the fund’s reasonable success in containing downside during the corrective phase last year. Between January 2008 and March 2009, the Discovery Fund managed to contain the fall in its NAV to about 59 per cent, marginally less than the Sensex. Given that even large-cap funds struggled to do this, this is a good showing from this mid-cap oriented fund.

The explanation for this performance probably lies in the fund’s strict adherence to the “value investing” mandate. Mid-cap stocks from sectors such as banks, pharmaceuticals, auto components and FMCGs dominated the portfolio in March, keeping the portfolio PE at a modest 7.7 during the market lows.

With market valuations rising, the portfolio too has become more expensive. By end of November, the top sector choices were again pharmaceuticals, banks, and software companies.

But with the fund taking care to hold a good number of low PE stocks (Cadila and FDC in pharma, ING Vysya and Corporation Bank in financials and so on), average valuations for the portfolio, at 13, have in fact widened their discount to the Sensex (20) and the Midcap Index (about 17).

This may not help the fund entirely avoid a fall in its NAV, should the broader market correct; but it may certainly help contain it.

OTHER AVENUES TO EHANCE INCOME FOR RETIRED PERSONS

I am retired and aged 58 years now. My retirement benefits are invested - 20 per cent in Post Office MIS scheme and rest in bank deposits earning an average interest of 7 per cent per annum. The incomes from bank deposits are too low. Please advise me on other avenues of safe investments to improve my income.


If you had locked into bank fixed deposits post February this year, interest rates would not have been attractive. Yes, it is not an easy task, keeping your risk profile low and yet earning superior or at least inflation-beating returns. We would like you to explore the mutual fund option to enhance returns, although these instruments do carry risks. We will attempt to build a portfolio with average risk but with a potential to deliver returns superior to fixed income options.

We do not know if you have exhausted the permissible exposure allowed under the post office MIS. Try to open joint accounts with your spouse to utilise the post office investment limit to the maximum.

You will have two more years before you become eligible to invest in post office senior citizen's scheme. This would offer a slightly superior return of 9 per cent and also allow you to claim deduction under Section 80C, if the same is eligible at that point.

You can consider small exposure to fixed deposits offered by corporates to prop up the average returns of your portfolio. However, make sure to get a good agent/advisor to elucidate the credit worthiness of the company that's offering the deposit. Remember to ask for the credit rating of the company's debt as the business and financial risks of company would have a bearing on its ability to pay the deposit interest and also repay your capital. Hence make sure, you invest in this avenue, only if you have the right advisor.

Post office, bank deposits and corporate deposits (5-10 per cent of your portfolio) can account for 70-75 per cent of your portfolio; a low risk appetite would mean higher holding in the above-mentioned fixed income securities. Bank deposits can be expected to go up in 2010; wait and watch for the increase before investing further. You can, in the meantime, invest in a few mutual funds listed below: we intend to keep this a combination of equity, debt and monthly income plans.

Mutual funds: Quantum Long Term Equity and Templeton India Growth are the 2 equity funds that we would like a retired investor like you to hold, especially given your low risk-taking ability. You have to either use the systematic investment route or request your agent to remind you to make investments on every 10 per cent or more fall in the broad market. The current market levels do not provide much confidence to invest lump sum.

Consider investment in UTI Mahila Unit Scheme through your spouse or invest directly in FT India Life Stage Fund of Funds 50s Plus. Canara Robeco Income and HDFC MIP Long Term are two other debt-oriented funds we would like you to hold. Opt for dividend payout options in all the schemes. Accumulate dividends payout to invest in bank deposits over the next year and a half if interest rate for a 2-3 year deposit is not less than 9 per cent. Otherwise, start investing in Post Office Senior Citizen's Scheme after 2 years.

However, ensure that your overall exposure to mutual funds, including the debt funds, does not exceed 25-30 per cent of your entire portfolio.

REAL ESTATE IN TURMOIL IN ANDHRA PRADESH

With weeks of agitation continuing across Andhra Pradesh over the issue of statehood for Telangana, transactions in the real-estate sector have nearly come to a standstill in Hyderabad and other major towns, with buyers opting to wait and watch.

After a gloomy recession-hit beginning to 2009 and major price correction, the sector had begun to gradually show signs of recovery in the last few months. However, the continued uncertainty over the statehood issue has set the clock back, according to representatives from the realty sector.

The President of AP Builders Forum, Mr C. Shekhar Reddy, said the sector has taken twin blows in the form of economic recession and also drop in prices due to slackening demand. “The prices of residential properties have dropped by about 30 per cent in the last 12 months. The flexibility to go down any further has gone,” Mr Reddy said.

The Managing Director of Koncept Ambience, Mr M.P. Agrawall, said: “While realtors are concerned about the ongoing agitation as transactions have come to a halt, genuine buyers are keen They expect some more downslide before buying.”

The notion that there is more supply than demand is incorrect, he said. The economic downturn and lack of buyer interest in the first half has deterred many developers from venturing into new projects.

The available supply will take care of the demand over the next six months, and “suddenly we will realise that there is need for more projects particularly in the affordable segment, which is in short supply,” Mr Reddy said.

The Chairman of Confederation of Indian Industry, AP region, Mr Y. Harish Chandra Prasad, said: “The agitation is bad for the infrastructure sector and real estate players. It sends wrong signals to investors. We hope the issue settles down soon and the uncertainty is put behind, helping resume normal business. The offtake of commercial property too could be hit as companies and establishments adopt a cautious wait-and-watch approach.”

Speculative buying

The Chief Executive Officer of Lanco Hills, part of the Lanco Group, Mr S. Pochendar, said that speculative buying was missing in the market in the last six months. This augured well for the sector as the slowdown, coupled with demand-driven pricing, has helped stabilise prices.

“Before the build-up to the current agitation, market was already subdued and bottomed out at every nook and corner of the twin cities. The number of takers too had come down. The speculative investment was totally out. The prices too had reached their lowest levels in the last four years. I don't see any more surprises in the sector,” Mr Agrawall said.

Since the recent agitation, genuine buyers hope to see some more downslide, which is unlikely. There is also no likelihood of flight of investors, as some speculate. Investors invest wherever there is opportunity, not just in Hyderabad, but other States and in some overseas markets, Mr Agrawall said.

However, some players said prices will go up in Vijayawada and Visakhapatnam as some of the speculative investors could prefer these growing cities to Hyderabad in the near term.

Mr Shekhar Reddy, however, believes this is not true. From the interaction he has had with some of the project developers, they see this as a passing phase of their business cycle and are okay waiting for this phase out. “Even assuming that a separate state is formed, how will this change their existing business plans?” he asked.

“Due to slowdown, with scores of real-estate developers delaying taking up new projects and concentrating on completing the ongoing ones, in the next six to 12 months we will suddenly face a situation where we will have increased demand and shortage of supply. This could potentially push up prices faster than we anticipate,” Mr Agrawall argued.

Mr Prasad said the ongoing impasse could also affect the prospects of some of the major infrastructure projects such as the Hyderabad metro rail and foreign direct investment. Banks and financial institutions base their project estimation on the business prospects and valuation of real-estate. And if this comes down, they could be wary of funding new projects.

Impact on infra projects
Asked if some of the projects are in trouble due to liquidity crunch, Mr Shekhar Reddy said the situation is no different from the one about 12 months ago. In fact, several private equity players have set up their teams to look at potential buyout candidates or investment opportunities.

“The agitation has had a negative impact on the sector. However, we are looking at the next year with much optimism and hope that the current stalemate is resolved. Once that happens, all those who are keen to own a property will be back hunting for properties,” Mr Pochendar said.

For the real estate developers, reality has sunk in. From a stage a couple of years ago, where on the day of Bhoomi Puja most apartments would see buyer interest, realtors are now faced with the challenge of convincing potential buyers who prefer to wait and watch. This happens when it is a buyer's market, Mr Reddy said.

MUTUAL FUNDS - STILL NOT OUT OF THE WOODS IN 2009

2009 may have been a year of rags to riches for the equity market and its investors, what with mutual funds, on an average, returning over 74 per cent during the year, but the gains haven't been enough to wipe way the losses suffered during the 2008 crash. If you are one of those investors who entered the market close to its peak just before the January 2008 crash, chances are your investments may still not be in the money.

No surprise, then, that the two-year scorecard of equity funds (both open and close-ended) between December 2007 and now presents a rather gloomy picture. Only 21 of the over 260 funds, or 8 per cent of the equity fund universe, (with a two-year track record) generated positive returns. The rest still languish in negative territory.

Having said that, the performance scorecard should not, however, really shock investors, given that key indices such as the Sensex or even the broader market index such as the BSE-500 still sport a two-year negative score; the compounded annual return over the two-year period for Sensex and BSE-500 stands at -8.5 per cent and -10.9 per cent respectively.

Benchmarked against the BSE-500, the average -9.5 per cent returns staged by equity funds does appear less bleak. Three out of every five funds, or 60 per cent of the universe have declined, fell than the BSE-500.

Outperformers

Funds that generated positive returns could truly be called the outliers. Not surprisingly, theme funds in the pharma and consumer goods space topped the list, their two-year returns ranging 10-25 per cent. As against this, the best fund in the diversified equity category, ICICI Pru Discovery, delivered only 5.2 per cent.

The defensives tag attached to pharma and consumer good themes, backed by good financial performance by the underlying companies, appear to have helped the sector funds drastically outrun their diversified peers.

But even among diversified funds, those with a ‘value theme' or the ones that did not go significantly into cash closer to market-lows were the ones that generated positive returns.

While ICIC Pru Discovery and Birla Sun Life Dividend Yield Plus would fit the ‘value' category, others such as Templeton India Growth, Quantum Long Term Equity and HDFC Top 200 delivered well as they were almost fully invested in equities by December 2008, ahead of the March 2009 lows.

This trait also differentiated the performers from the rest of the pack as most other funds were late to shift from their cash-heavy positions to equities.

Negative territory

A good number of funds that underperformed were either sector funds or ones with a small-cap and mid-cap bias. Funds from the JM Stable languished at the bottom of the two-year performance chart.

Interestingly, if you thought that equity-oriented balanced funds helped tide the downturn, you would have been proved wrong. Although six of the 25 balanced funds, including HDFC Prudence, and DSPBR Balanced moved to positive territory, thanks to the 2009 rally, the rest continue to suffer negative returns.

Balanced funds are constrained by the mandate of having to hold an average 65 per cent in equities to qualify as equity funds; hence their ability to shield the fund returns with debt is limited.

2009 was different as far as investing was concerned

If 2008 was a year when most asset classes failed to perform, 2009 was one when almost every popular asset class provided an opportunity to build wealth. Be it equities, debt, gold or real estate, the Indian investor would have generated healthy portfolio gains this year; with no asset class acting as a drag on the other.

Surprised? Well, here's how you would have made a quick buck by just staying invested round the year, across asset classes.

Debt for all seasons

Take the simple time-tested debt option; fixed deposits with banks. Looking back, you would be surprised to know that these fixed return investment havens lured investors with interest rates as high as 12 per cent in end of 2008. Of course, the beginning of any lucrative offer or rally is often overlooked.

Even if you had been a late entrant and missed the 12 per cent rates, locking in to fixed deposits in January 2009 would have still guaranteed an 11 per cent interest rate.

Missed the bus there and watched bank interest rates sadly dwindle? Never mind, a series of non-convertible debentures issued by companies such as Tata Capital, Shriram Transport Finance and L&T Finance at various time periods between February and August offered interest rates between 10 and 12 per cent. It's not just the interest rates that made these offers noteworthy. These non-convertible debentures (NCDs) are traded in the stock exchanges and can be sold anytime.

Take the case of Tata Capital NCD offered in February. It currently trades 22 per cent above its offer price. A rather neat return from a debt option.

And as if that was not enough, corporate deposits – tagged risky in the initial part of the year given the high leverage of their underlying companies – soon provided comfort with improving financials. Interest rates of 9-12 per cent offered (and still on offer) by many creditworthy finance companies such as Sundaram Finance or Mahindra Finance followed by a number of corporates ensured that investors were not short of good debt options for most part of the year.

Debt mutual funds too, played their part well in ensuring that investors were not disappointed.

Rich, richer …

If debt was not exactly your idea of building wealth, then let's move on the most-loved and at times the most-hated asset class – equities.

Returns of 120 per cent from the March lows would only have been a dream for many as few could have timed their entry in to equities in March, given the undercurrent of pessimism then. However, even if you had waited a while and invested sometime during May (when mutual funds too derived conviction to move fully in equities from their deep cash positions), chances are that you would have made a neat returns of about 50 per cent (returns generated by the broad market index CNX 500, during this period). And had you taken the mutual fund route, your returns could have been much higher.

Real opportunity

Not often do you get a real deal – when a reasonable property price and low home loan rates are offered at the same time. Well, 2009 is one such year.

While it would be hard to generalise, property prices were available at a bargain beginning February and extending up to June-July. To enable you to purchase at bargains, interest rates offered by banks also dipped to as low as 8 per cent (and still remains so). However, property prices, especially in the middle income offerings, were not available at discounts for too long as select areas across cities witnessed appreciation.

Between June and September alone capital values of residential properties in key cities such as Mumbai, Gurgaon and select parts of Chennai and Bangalore have seen a rise of between 10 and 25 per cent. Had you been among the smart investors who bought a property before June, you may already be sitting on substantial gains.

Not just property prices, homes loans with interest rates kept fixed for 3-5 years at 8-9 per cent could certainly be called some deal. And to think, a home loan would have cost you as much as 12 per cent a year ago. If that does not make an impact sample the difference in terms of EMI: A Rs 20-lakh, 15-year home loan at 12 per cent would have resulted in an EMI of about Rs 23,000 a month. At 8 per cent, there is a drastic reduction by Rs 4,000 a month to Rs 19,000.

The gold rush
Besides debt, if there was one asset class that endowed multiple opportunities to earn returns in 2009, it would have to be gold. Had you invested in gold (through exchange-traded funds) as early as January, this asset class would have yielded a good 20 per cent profit. Had you delayed your purchase to, say, June, the returns would have been 10 per cent – not too lucrative but nevertheless attractive for a safe asset class like gold that does not always generate returns that beat inflation.

So 2009 would certainly go down in history as one of those singular years where every asset class held by you added to your portfolio wealth; that is only if you had invested those cash holdings in to some of these options.

Investment misses of 2009

Not investing in stocks at their lows was the single biggest investment blooper for which young investors kick themselves in 2009.

True, the Sensex zooming from 8000 to 16,000 in a single year was something no one expected.

After all, who would have thought the BSE Sensex, after plunging to a pitiable low in March this year, would have locked itself in the upper circuit limit just two months later?

But despite the going being good, most retail investors seem to have gained little from the market rally.

Business Line interacted with some young and experienced investors and learnt that most of them missed the first leg of the market action due to initial scepticism; the second leg due to excessive caution and belief that markets may correct again; the third and final leg of the rally due to unwillingness to commit investments on already high priced stocks.

Here are the mistakes that investors regretted during the year gone by.

Playing it too safe with cash was one mistake that many investors succumbed to in 2009.

Staying put in cash

“I was thrilled when the Sensex dropped to 8,000 points in March. But at that point, neither did I have enough money nor the courage to say that everything was going to be okay from the next month,” says Keerti Bhandari who entered the stock market in 2007.

“Since this was my first experience with a bear market recovery, I hadn't expected it to happen so quickly. Things were quite bad, both for the big and small companies, and I was waiting for another leg of correction to happen.

“But now I realise what an opportunity I have wasted,” she grumbles. Investors such as Keerti were not alone.

Many equity fund managers too held on to cash for a good part of the initial rally and ended up missing the bus.

Day-trading

If holding on to cash was one mistake people committed, there were also those who switched their strategy, to regret it.

Some investors admit to shifting from long-term investing to day trading in 2008 and 2009 as they felt this would ensure a minimum market return! Day-trading may have thrown up the odd opportunity with the markets upward bound, but it came with its share of sleepless nights.

“For the whole of 2009 my only activity in equities was day trading. My returns are almost on a par with those given by the broader indices. However, now it seems that had I stayed my course of being a ‘value investor', I may have made the same or probably even better profits, but sans the excitement (read anxiety) associated with trading,” says Sushil Churiwala, a long-time stock market investor.

But unlike Churiwala, Shantanu Sharma, decided to hold on to his fundamental principles. “After all, making returns is about picking the right stocks at the right time,” he says. Sharma has made 30 per cent gains from his equity investment this year.

“When everyone around me has made no money because of excessive cautiousness, I am happy I braved it through 2009. In 2008, as the market began to decline, I cut losses from some stocks or booked gains on some of the blue-chips,” he adds. But as soon as the market bottomed out in 2009, he revisited these stocks and started accumulating them. “When I read about how foreign institutional investors and domestic institutions had entered equity markets with renewed vigour, I decided to follow them because they would have done better homework than me. So, first I accumulated large-cap stocks and then mid-caps with strong fundamentals. I pick small-cap stocks based on the sectors only, since I am not too convinced about all of them,” states Sharma.

Exploring new options

Investors who didn't want to sit on cash took this chance to diversify their portfolio. “I was waiting for stability to set in my job. So for half the year, my funds were idle but safe in the bank account”, says Rajiv Mithra. But of what use can idle money be? So once his financial position improved, he began to explore relatively safer options and entered the debt market.

“Liquidity was my only concern while investing in debt options. Despite returns being low, I parked my money in short term bank deposits, where I could easily withdraw it, to invest in stock markets, when required”, says Mithra.

Apart from stock market and debt instruments, some investors also used this chance to add some gold to their portfolios. Some investors wanting to cash in on the low home loan rates, such as Shridar Sivakumar, indulged in buying low cost property.

“With many banks offering home loans for 8-10 per cent, I bought a low-cost apartment this year,” he says. “I am hoping rates won't become too expensive by next year. But if they do, I have to think of plan-B”, he adds.

What's ahead?

All said and done, most investors appear to have missed out on the stock market rally. And now with stock prices looking costlier than what it was a year ago, six out of ten investors Business Line spoke to feel they may continue with their current investment patterns for 2010 also. “Until I see any visible correction happening in the stock market, I will stay away from it”, affirms Dhanya Parasuram.

“However I will keep track of the blue-chip stocks and accumulate them as and when their prices correct”, she adds. Reliance Industries, Bharti Airtel, L&T, BHEL and ITC are a few stocks she added to her kitty after closely monitoring them.

And then there also those, who not wanting to repeat their older investment mistakes, are queuing up to invest in small and mid-cap stocks. “I missed making money out of small and mid-cap stocks in 2009. But I will not repeat this mistake next year,” affirms Vikram Seshadri.

“I know it's risky, but that's okay,” he beams. Well, isn't that the story of most investors who missed the rally in 2007? No wonder they say hindsight is always 20/20.

FACTORS AFFECTING INVESTORS PREFERENCE FOR MUTUAL FUNDS IN INDIA

By
1. Animesh Kumar Shukla
2. Sathishkumar.C

INTRODUCTION
The project contains the brief description of the mutual fund industry in general. It also includes the study and comparison of other investment products available in the market like Insurance plans, ULIP, Mutual Funds, Savings account, Provident funds, Postal savings and Fixed Deposits and Stocks available in the market.
A survey was conducted to gather primary data to judge the factors that influence investors before they invest in any of the investment tools and thus the first part of the paper scrutinizes the investor’s perception and analyzes the relation between the features of the products and the investors’ requirements. With this back ground an attempt has been made in this paper to categorize investors based on various demographic factors such as age, sex, income level and occupation. The second part of the paper deals exclusively in Mutual Funds. It is widely believed that MF is a retail product designed to target small investors, salaried people and others who are intimidated by the stock market but, nevertheless, like to reap the benefits of stock market investing. At the retail level, investors are unique and are a highly heterogeneous group. Hence, designing products that are customer tailored to the different needs is important. Currently (as on 23/3/2009) there are more than 2500 schemes with varied objectives and AMCs are competing against each other by launching new products or repositioning old ones. MF industry today is facing competition not only from within the industry but also from other financial products that provide many of the same economic functions as mutual funds but are not strictly MFs. Thus the second part of the paper attempts to study the factors influencing the fund/scheme election behavior of Retail Investors who invest in Mutual funds.


OBJECTIVE• To categorize investors as being inclined towards investment products based on certain characteristic such as sex, age, academic qualifications, marital status, occupation, annual income etc.
• In order to examine the issues raised above, this paper has the following objectives before it :
1) To understand the savings avenue preference among MF investors
2) To identify the features the investors look for in Mutual Fund products
3) To identify the scheme preference of investors
4) To identify the factors that influences the investor’s fund/scheme selection
5) To identify the information sources influencing the scheme selection decision.
• This paper shall also look into the brief history of mutual funds industry in
India; try to classify them according to the various schemes and products offered. It shall also provide a comparative analysis between different types of mutual funds in India and between mutual funds and other investment products.

COMPANY PROFILE
Mahindra and Mahindra Financial Services Limited is one of India’s leading non-banking finance companies focused on the rural and semi-urban sector providing finance for utility vehicles, tractors and cars with largest network of branches covering these areas. It is a subsidiary of M&M, a leading tractor and UV manufacturer with over 60 years experience in the Indian market. The Company was incorporated on 1st January, 1991 as Maxi Motors Financial Services Limited and received Certificate of Commencement of Business on 19th February, 1991. The name has been changed to Mahindra & Mahindra Financial Services Limited and Fresh Certificate of Incorporation was received on 3rd November, 1992.
Credit Rating:• Credit Rating Information Services Limited (CRISIL) has reviewed the performance of the Company and reaffirms FAA for Fixed Deposit program and AA for Long term Debt and P1+ for Short term Debt.
• Company has also been awarded “Ind AA+” rating by Duff & Phelps (DCR) for the Rs.50 crores Long Term Non- Convertible Debentures.
Products & Services
• It provides financial loans to tractors, utility vehicles, light commercial vehicles, cars, two wheelers, three-wheelers and used vehicles.
• Its services include Mutual Fund distributions and financial advisory services also.
• In May 2004, as a supplement to its lending business it started an insurance broking business through its wholly owned subsidiary, Mahindra
Insurance Brokers Limited (MIBL). Mahindra Finance has already started distributing insurance products in rural and semi urban India through its subsidiary Mahindra Insurance Brokers Limited.
• It has also recently commenced its mutual fund distribution business and are exploring opportunities of entering housing loans and personal loans in rural and semi urban markets.
• It believes that the growth of their interactive, people-driven business model depends on the building of strong, long-term personal relationships. This coupled with superior knowledge of rural markets, and the ability to tailor products, positions the company well to continue to meet rural and semi-urban credit needs and provide competitive, flexible and speedy lending services.

MAHINDRA FINANCE - FINSMART: INVESTMENT ADVISORY
SERVICES
• Now Mahindra finance has started its new venture named Mahindra Finance- FinSmart which is an investment advisory services provider.
• It provides financial planning solutions to customers by which they can get all those things which they want to achieve.
• And as in today’s scenario Mutual Funds is the best available investment option so it deals in MFs. Its planners tell people for how long and how much money they have to invest in MFs.
• In just over three years since its launch, it have strongly cemented its position as a leading player in industry based on its pioneering strategy i.e., “Where your Investment Matters and not its size”.

INVESTMENTS
Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings.
An investment can be described as perfect if it satisfies all the needs of Fll investors. So, the starting point in searching for the perfect investment would be to examine investor needs. If all those needs are met by the investment, then that investment can be termed the perfect investment. Most investors and advisors spend a great deal of time understanding the merits of the thousands of investments available in India. Little time, however, is spent understanding the needs of the investor and ensuring that the most appropriate investments are selected for him.

The Investment Needs of an Investor
By and large, most investors have eight common needs from their investments: 1. Security of Original Capital; 2. Wealth Accumulation; 3. Comfort Factor; 4. Tax Efficiency; 5. Life Cover; 6. Income; 7. Simplicity; 8. Ease of Withdrawal; 9. Communication.
• Security of original capital: The chance of losing some capital has been a primary need. This is perhaps the strongest need among investors in India, who have suffered regularly due to failures of the financial system.
• Wealth accumulation: This is largely a factor of investment performance, including both short-term performance of an investment and long-term performance of a portfolio. Wealth accumulation is the ultimate measure of the success of an investment decision.
• Comfort factor: This refers to the peace of mind associated with an investment. Avoiding discomfort is probably a greater need than receiving comfort. Reputation plays an important part in delivering the comfort factor.
• Tax efficiency: Legitimate reduction in the amount of tax payable is an important part of the Indian psyche. Every rupee saved in taxes goes towards wealth accumulation.
• Life Cover: Many investors look for investments that offer good return with adequate life cover to manage the situations in case of any eventualities.
• Income: This refers to money distributed at intervals by an investment, which are usually used by the investor for meeting regular expenses. Income needs tend to be fairly constant because they are related to lifestyle and are well understood by investors.
• Simplicity: Investment instruments are complex, but investors need to understand what is being done with their money. A planner should also deliver simplicity to investors.
• Ease of withdrawal: This refers to the ability to invest long term but withdraw funds when desired. This is strongly linked to a sense of ownership. It is normally triggered by a need to spend capital, change investments or cater to changes in other needs. Access to a long-term investment at short notice can only be had at a substantial cost.
• Communication: This refers to informing and educating investors about the purpose and progress of their investments. The need to communicate increases when investments are threatened.
• Security of original capital is more important when performance falls.
• Performance is more important when investments are performing well.
• Failures engender a desire for an increase in the comfort factor.
Perfect investment would have been achieved if all the above-mentioned needs had been met to satisfaction. But there is always a trade-off involved in making investments. As long as the investment strategy matches the needs of investor according to the priority assigned to them, he should be happy.
The Ideal Investment strategy should be a customized one for each investor depending on his risk-return profile, his satisfaction level, his income, and his expectations. Accurate planning gives accurate results. And for that there must be an efficient and trustworthy roadmap to achieve the ultimate goal of wealth maximization.


Choosing the Right Investment Options
After understanding the concept of investment, the investors would like to know how to go about the task of investment, how much to invest at any moment and when to buy or sell the securities, This depends on investment process as investment policy, investment analysis, valuation of securities, portfolio construction and portfolio evaluation and revision. Every investor tries to derive maximum economic advantage from his investment activity.
For evaluating an investment avenues are based upon the rate of return, risk and uncertainty, capital appreciation, marketability, tax advantage and convenience of investment. The following Table should give the clear picture relating to the investors’ investment decisions in various financial market instruments. The choice of the best investment options will depend on personal circumstances as well as general market conditions. For example, a good investment for a long-term retirement plan may not be a good investment for higher education expenses. In most cases, the right investment is a balance of three things: Liquidity, Safety and Return.

Investment Options in India
Fixed Deposits – They cover the fixed deposits of varied tenors offered by the commercial banks and other non-banking financial institutions. These are generally a low risk prepositions as the commercial banks are believed to return the amount due without default. By and large these FDs are the preferred choice of risk-averse Indian investors who rate safety of capital & ease of investment above all parameters. Largely, these investments earn a marginal rate of return of 6-8% per annum.
Government Bonds – The Central and State Governments raise money from the market through a variety of Small Saving Schemes like national saving certificates, Kisan Vikas Patra, Post Office Deposits, Provident Funds, etc. These schemes are risk free as the government does not default in payments. But the interest rates offered by them are in the range of 7% - 9%.

Money-back insurance - Insurance in India is mostly sold and bought as investment products. They are preferred because of their add-on benefits like financial life-cover, tax-savings and satisfactory returns. Even if one does not manage to save money and invest regularly in financial instruments, with insurance, the policyholder has no choice. If he does not pay his premiums on time, his insurance cover will lapse. Money-back Insurance schemes are used as investment avenues as they offer partial cash-back at certain intervals. This money can be utilized for children’s education, marriage, etc.
Endowment Insurance – These policies are term policies. Investors have to pay the premiums for a particular term, and at maturity the accrued bonus and other benefits are returned to the policyholder if he survives at maturity.
Bullion Market – Precious metals like gold and silver had been a safe heaven for Indian investors since ages. Besides jewellery these metals are used for investment purposes also. Since last 1 year, both Gold and Silver have highly appreciated in value both in the domestic as well as the international markets. In addition to its attributes as a store of value, the case for investing in gold revolves around the role it can play as a portfolio diversifier.
Stock Market – Indian stock markets particularly the BSE and the NSE, had been a preferred destination not only for the Indian investors but also for the Foreign investors.. Although Indian Markets had been through tough times due to various scams, but history shows that they recovered very fast. Many types of scrip had been value creators for the investors. People have earned fortunes from the stock markets, but there are people who have lost everything due to incorrect timings or selection of fundamentally weak companies.
Real Estate- Returns are almost guaranteed because property values are always on the rise due to a growing world population. Residential real estate is more than just an investment. There are more ways than ever before to profit from real estate investment.
Mutual Funds - There is a collection of investors in Mutual funds that have professional fund managers that invest in the stock market collectively on behalf of investors. Mutual funds offer a better route to investing in equities for lay investors. A mutual fund acts like a professional fund manager, investing the money and passing the returns to its investors.

Unit Linked Insurance Plans - ULIPs are remarkably alike to mutual funds in terms of their structure and functioning; premium payments made are converted into units and a net asset value (NAV) is declared for the same. In traditional insurance products, the sum assured is the corner stone; in ULIPs premium payments is the key component


BY STRUCTURE
1. Open - Ended Schemes:
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
2. Close - Ended Schemes:
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back theunits to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.
3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of openended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.


Conclusion
Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.
Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

MERRY CHRISTMAS TO EVERYONE

SRIVIDYA RAO OF PAGE&RICE REPLES TO QUERIES ON INVESTMENTS

________________________________________

SEEMA asked, MADAM, I HAVE TAKEN SOME LOAN FROM MY RELATIVE. SO TEL ME PLS CAN I CLOSE MY PF ACCOUNT FOR PAY MY RELATIVE LOAN
Srividya Rao,hi, if repayment of loan is urgent and cannot wait then there is no option but to liquidate your current investments, in your case withdrawal from PF. Withdrawal from PF will be subject to tax. If it’s not urgent, then pay a mutually agreed fixed sum every month from your monthly savings. Dipping into your PF is not a good idea.
________________________________________
Praveen asked, Madam, i am drawing per month 80,000 RS .I am now 26 year old unmarried. Now i having saving is 2-LIC , 1-Muitual Fund and i took house loan from SBI bank 12 lks which i have repay 16,000 per month . So these all my saving at present . But i need to save for my future , i mean to say if i save now i should get good returns after 5 years of time . So please advice my where i can invest .
Srividya Rao, hi, its good to read that you are building your assets at a young age. I would recommend that you get a comprehensive financial plan made for yourself. IT will help you identify and prioritize your financial goals. It will also tell you how much you should save for each goal and in what instruments.
________________________________________
Srividya asked, Dear Madam, Please suggest us the 2 good fund which can giving me good return in next 5 years. Srividya
Srividya Rao, hi , i have given the names of schemes in my earlier answer
________________________________________
Ravish asked, to save tax where should i invest
Srividya Rao, hi, you can invest in PPF, NSC, ELSS among others to save tax.
________________________________________
robinmazumdar asked, Hi, What are that factors to consider before investing in MF? Thank You
Srividya Rao, hi, you should always look for funds with track record of at least 3 years to show for. It is important to know the fund management team and their track record. Choose the funds with low expense ratio. Choosing funds based only on their performance may not be the right approach.
________________________________________
Subrat asked, Is opening a PPF a/c is better then invest in a mutual fund
Srividya Rao, hi, you cannot compare PPF with any mutual fund, PPF offers guaranteed tax free return of 8%p.a. compounding annually. It also qualifies for deduction under section 80C. Mutual funds are market linked instruments and hence there is no guarantee of return. Also, there is a select category of equity funds call the Equity Linked Savings Schemes (ELSS) that qualify for deduction under section 80C
________________________________________
hari1 asked, Hi Srividya, Just let me know about Gold ETF ? Is it safe to buy gold ETF? Which is best among UTI, DSPBR & Quantum? All offers minimum 1 Gm except Quantum which offers half gram? Please suggest.
Srividya Rao, hi,yes, Gold ETFs are the best way of investing in gold. Among UTI and Quantum, I would opt for Quantum on account of its low expense ratio and tracking error
________________________________________
Neeraj asked, I have a small income of Rs 20000 a month. I have an SIP of Rs 5000 a month. Is the decision OK in the current market scenario?
Srividya Rao, hi, the more you save the better it is. The decision to save more hold good in very market scenario. If you can save more and invest your savings wisely, I would encourage you to do so.
________________________________________
rahulsolanki1 asked, Dear Madam my age is 19 .i save Rs.10,000 per month and i have Rs.50,000 to invest.plz tell me where to invest.
Srividya Rao, hi, it’s good to know that you have developed the habit of savings at an early age. If your investment horizon is more than 5 years then, invest majority of the savings in high risk investments like equities. I would rather encourage you to start an SIP in 2-3 equity funds. Choose from well managed diversified equity funds like HDFC Equity and Franklin India Blue-chip among other. Continue with this habit and I am sure it will create wealth for you.
________________________________________
Apurva asked, Hi Srividya I am 30 years old and I want to invest Rs.30000/year for my retirement at 55. What is the amount that i will get after 25 years if I keep investing in MF?
Srividya Rao, hi, rather than calculating the amount that you will have in hand after 25 years, it is better to work the other way. Rather calculate the corpus you will require at the time of retirement and the amount you need to save every month to reach the target. It is quite possible that you may have to save more than Rs 30000 per month.
________________________________________
Raman asked, Hi Madam, I am a retired person and i want to invest 1 lakh rupees which is the best investment option?
Srividya Rao, hi, if you want safety of capital with guaranteed returns then opt for bank fixed deposits. If you are willing to take some risk, then invest in Monthly Income Plans (MIPs). MIPs are debt funds with 15-25% allocation to equities, Its ideal for investment horizon of 18-24 months.
________________________________________
ponraj asked, Good short term investment plants..... Whether we can invest in shares, mutual funds... Please suggest
Srividya Rao, hi, if you are thinking short term, you should safely ignore equity linked investments. Equities are best if your risk appetite is high and investment horizon 5 years. IF you are looking at options for investment horizon of less than a year, then liquid / liquid plus funds are the ideal choice.
________________________________________
Msn asked, I want an investment option for 10 Lakhs. I have exhausted PPF, MIS, couple of NCDs, Stock market and real estate. Don’t want to invest further on these. What are the options?
Srividya Rao, hi, you seem to have invested in all possible avenues. If you still have money, add to the existing investments, you can invest in mutual funds. Except for gold, I can't think of any other suitable option.
________________________________________
PP asked, I m planning to invest Rs1000/- pm via sip in HDFC Top 200, BSL frontline,DSPtop100, SBI magnum contra,HDFC balanced fund, please suggest...
Srividya Rao, hi Avoid Magnum Contra. opt for HDFC Prudence as against HDFC Balanced
________________________________________
kijhagfdsa asked, Investment through Insurance is good? OR taking Term plan is better?
Srividya Rao, hi, if your objective is to insure yourself, then Term plans are the best. IF you wan to grow your money, then mutual funds are the best.
________________________________________
Shripad asked, Which is the safest way of investing the money
Srividya Rao, hi, if you are looking for safer avenues, then post office savings schemes and bank fixed deposits are the best. These offer guaranteed returns with no risk of capital erosion. However, the returns in this case will low and at times the real return could be negative i.e. the inflation may be more than the rate of interest.
________________________________________
kumar_rajiva asked, I have @5 Lakhs to invest . Can some strategy be suggested?
Srividya Rao, hi, you have not mentioned your age and risk appetite, hence it is difficult to suggest an appropriate asset allocation. I would recommend that you have a mixer of equity, debt and gold in your portfolio. IF your investment horizon is more than 5 years then allocated more to equity. If you need the money in less than 3 years then invest more in debt. Allocation to gold should be restricted to Gold.
________________________________________
vishal asked, Madam, I'd invested a sum of about 2.5 lacs in the share market around the peak time last year. Have met with the same destiny as everyone else has. As on date many of my shares at a loss of 50% to even 80%. I can't dream of even loss booking as 50% of my capital will be eroded. What should I do? Wait and watch game is leading no where and the uncertainties of a bear is predicted by the pundits once again. Many thanks for your advice
Srividya Rao, hi, in my view you should book your losses if the fundamentals of the companies in which you have invested have eroded. If that is the case you cannot expect the share price to go back to its original level. Book your losses and reinvest the proceeds in companies with strong business model and growth potential. You can choose to invest in well managed diversified equity funds
________________________________________
Pankaj asked, I am 33 years old and want to purchase retirement plan. Please suggest which plan will be better. I want to invest not more than 30K in a year and want the pension after 55 years of age.
Srividya Rao, hi, my advice to you would be get a retirement plan made for yourself. The plan will help you know how much money you will need at the time of retirement to live a happy and comfortable retired life. It will also help you in deciding the investment instruments that are ideal for your plan based on your risk appetite and investment horizon. Do not opt for a retirement plan that are offered by insurance companies.
________________________________________
iamkurias asked, what are the options of investment for NRIs?
Srividya Rao, hi, as an NRI you can invest in stocks, mutual funds and bank fixed deposits. You need to have a NRE/NRO account in India to make any investments mentioned above. It is always preferable to have a NRE A/c. Also opt for income tax PAN, its compulsory for investments in India. Please note that you cannot have a savings bank a/c in India. Hence, convert your savings bank a/c into an NRO A/c
________________________________________
Santanu asked, Hi Srividya, I have put my money in FD and MF now. What else are the good options except equity market and Land?
Srividya Rao, hi, you can allocate a small portion, 5%-10% to gold via ETFs
________________________________________
Narssimha asked, hello which is best retirement plan
Srividya Rao, hi, there is not such thing as a best retirement plan. Every retirement plan is unique to an individual based on his corpus requirement, investment horizon and risk appetite.
________________________________________
Mohan asked, How can i invest in gold?
Srividya Rao, hi, the best way of investing in gold is through the Exchange Traded Funds (ETFs). All you have to do is to open a demat account and register with a share broker to buy and sell units of gold ETF. Units of Gold ETFs are backed by physical gold of the highest purity.
________________________________________
Rajiv asked, i have 80k so how can i invest in equity with good return?
Srividya Rao, hi, equities have the potential to deliver higher returns with higher risk. However, you need to have long term view of at least 5 years. These investments are volatile and you should not panic if the investments turn negative in the short term.
________________________________________
QWERTY asked, I am having tax saving mutual fund since last 3 years. I am worried about my investment after new TAX code April 2011, which says EET. Does it mean my 4-5 years investment will be wasted and I need to pay tax after April 2011 on withdrawal?
Srividya Rao, hi, as per the provisions of the draft direct tax code, all investments in tax savings made on or after 1st April 2011, will be subject to tax at the time of maturity. Investments made prior to that will attract the provision as they exist now.
________________________________________
ABC asked, Is HDFC Equity good for 3-5 yr period?
Srividya Rao, hi, HDFC Equity funds have a concentrated portfolio of large cap and midcap stocks. The fund has the tendency to take higher exposure to midcaps and hence can be a candidate for higher volatility. The fund has an impressive track record of over 10 years and is definitely worthy of being a part of any investor's core portfolio.
________________________________________
sderfsdf asked, HI MADAM. IF I INVEST HDFC TOP 200. CAN I GET TAX EXCEMPTIONS
Srividya Rao, hi; HDFC Top 200 Fund is not an Equity Linked Savings Fund. It will not be eligible for deduction under section 80C. You can invest in HDFC Tax Saver if you want to avail of the Section 80C benefits.
________________________________________
shoker asked, Hi Srividya, I have invested in Birla Frontline Equity, DSPBR Top100, Franklin Prima Plus, HDFC Top 200, Reliance Growth and Sundaram Select Focus. I plan to continue investing in these 6 funds. My goal is to have a corpus of 1 crore. Is my selection good? Do I need to invest in more funds? Thanks
Srividya Rao, hi, the number of funds in your portfolio are adequate. Also, the schemes which you have invested in are top of the line. You can continue with these funds. I am sure you will achieve your goal of becoming a crorepati!
________________________________________
sderfsdf asked, SUNDARAM NEW LAUNCHED PSU NFO. HOW IS THIS FUND FUTURE GROWTH?
Srividya Rao, hi, this is a thematic fund with PSU stocks forming the theme. Given the fact that PSU stocks do well on the news of their probable disinvestment, the opportunities the fund manager may have post disinvestment may be limited. This restricts the universe of stocks available to choose from. In my view, opt for a diversified equity fund as against thematic fund which give more flexibility and hence more opportunities to the fund manager to choose from.
________________________________________

LIQUID FUNDS

A lucrative means of parking money for the short term and earning reasonable returns is to invest in liquid funds.

Liquid funds are ultra short-term debt funds that invest in money market instruments such as certificate of deposits, commercial paper and treasury bills, either on an overnight basis, ten days or a month. We present an analysis of liquid fund investing.

Liquid funds have no entry and exit loads in most cases. Compared to savings accounts, where the returns are as low as 4% per annum, the historical returns on liquid funds have been as high as 8% per annum.

Moreover, liquidation is easy. Investors can liquidate at an NAV (net asset value) which they consider to be lucrative, as against a normal mutual fund where an NAV just has a notional value. These funds require a minimum investment of Rs 1,000. However, some funds have a minimum investment requirement of Rs 5000-10 ,000 or Rs 25,000.

There are two kinds of liquid funds. One is a pure liquid fund and the other is liquid plus. The main difference between pure liquid and liquid plus funds is the tenure of the securities held. The instruments held by liquid plus funds have a longer tenure than liquid funds. In terms of tax implications, there is a dividend distribution tax of 28.33% on liquid funds, whereas 14.16% is levied on liquid plus funds (in case of individual investors).

In the past five years, liquid funds have given 6.41% returns. LIC MF Liquid Fund, the best performing fund, has given returns of 4.62% in the past six months and may give annualised returns of 9.2%.

A fixed deposit, that gives returns of around 9%, entails long-term capital gain tax of 33% (excluding the surcharge of 10%), while investing in a dividend option of a liquid fund, with maturity of up to a year, entails a dividend distribution tax of 28.33%, which is better than post-tax returns of an FD.

Liquid funds witnessed huge redemptions last year. But they still provided returns in excess of 8% during the period.

Given their resilience, these funds can come in handy for parking short-term money. One needs to, however, be cautious about the quality of papers and instruments. Last year, some funds invested in papers issued by real estate companies, whose defaults resulted in huge redemptions.

PRIMER ON INVESTMENT OPTIONS IN DETAIL -

HERE IN A COMPREHENSIVE LSIT OF INVETSMENT OPTIONS IN VARIOUS SCHEMES WHICH IS POSTED AS A PDF FILE HERE IS THE LINK
http://rapidshare.com/files/322610284/27_investment_options.pdf.html

INVESTING IN A HOUSE PROPERTY - VISHWAS KADAM REPLIES TO QUERIES

Suhas asked, Alibaug it seems is u r forte whats the right price for a home in Alibaug? And do u think it’s the location for middle class?
Vishwas Kadam answers::, HI Suhasss, Alibag is definitely a location for middle class as it is close to Mumbai and to make our homes accessible and affordable in the SUB 50 Lakh budget.
________________________________________
Varun asked, Hi Vishwas , I have a house in choul in Alibag. However, it’s difficult to maintain. Is there a company that can maintain it for me?
Vishwas Kadam answers::, Hi Varun, this is excatly why we advise to invest in fully serviced gated communities as opposed to building on your own.
________________________________________
Ranjit asked, in mumbai, which areas are likely to appreciate due to the new air port in Navi mumbai- which specific area in Navi Mumbai is likely to appreciate the most?
Vishwas Kadam answers::, Hi, Kharghar and Panvel.
________________________________________
Mahendragade asked, What are your views on Nagpur Real Estate (on Wardha Road near MIHAN Project)?
Vishwas Kadam answers::, Hi , that is a perfect area in Nagpur to invest.
________________________________________
Nayak asked, which are the areas where if you invest there could be potential growth on the western line in mumbai ?
Vishwas Kadam answers::, HI, Goregoan could be a good potential.
________________________________________
Ameya asked, Hi, Which areas in and around Mumbai are worth investing? Can you specify a few names of the areas?
Vishwas Kadam answers::, Hi Ameya, Panvel -Alibag, are great bets to invest in.
________________________________________
Hiren Shah asked, Vishwas Kadam answers:, How about Mumbai Western Suburb - Dahisar Miraroad , Virar for investment and @ what rate one should invest such places?
Vishwas Kadam answers::, Hello, Dahisar Miraroad would be around 3500-4500 per sqft.
________________________________________
Alan Dsouza asked, Hi ..What are rates of property in panvel and alibagh.
Vishwas Kadam answers::, Hi Alan, Panvel is around 2000-3000 per sqft and Alibag is about 4500 and up for luxury homes.
________________________________________
Hemal asked, JUST WANT TO KNW IS a RETURN OF RECESSION possible soon in REAL ESTATE INDUSTRY??
Vishwas Kadam answers::, HI Hemal, recession is related to lot of cumuliative factors, and if real estate pricces escalate too quickly it could lead to a recession.
________________________________________
Deepak Hasani asked, Hi Vishwas Kadam answers:I am Deepak from Pune. I want to buy a 2BHK in outer areas of Pune. Do you think prices will go down to 2000 Rs/feet in near future, as currently it looks like prices are in the range of 2500 -3000 Rs/square feet.
Vishwas Kadam answers::, HI Deepak, i think the prices will go down. AS too much of supply is hitting the market.
________________________________________
Nithya asked, Hi Vishwas . Since you have already mentioned that this is a good time to invest in property, can you tell me how long this period is. I am newly married and want to know from when can I start thinking about buying a house.
Vishwas Kadam answers::, HI Nithya, now to 6 months is a good time frame to buy a house.
________________________________________
Ramesh Jha asked, Hi Vishwas , I am looking at buying property in alibag but my budget is only 30 lacs. could you recommend a project for me.
Vishwas Kadam answers::, Hi Ramesh, we have just introduced a project called Samira Lofts in Alibag which is in the 25 Lakh budget.
________________________________________
NDBansode asked, i am planning to buy a 1 bhk house in vikhroli, the builder is quoting 61 lakhs. is it realistic.
Vishwas Kadam answers::, HI, its too expensive.
________________________________________
Ajay asked, Is buying a house in Nashik a good investment option ?
Vishwas Kadam answers::, HI Ajay, yes it is a good option.
________________________________________
Sach asked, Hi Vishwas , I am looking to buy 1BHK apt. in Mulund West, what is the best price I should go for it?
Vishwas Kadam answers::, HI Sach, Mulund best price would be between 4500 to 5500per sqft.
________________________________________
MumbaiHome asked, I am planning to purchase 1 BHK Flat for self occupation purpose in kandivali west area. Resale flats are available at price of 7500 - 8100 / SQ Feet in good locality. Are these price good to buy. I am taking 80% loan.
Vishwas Kadam answers::, HI, YES they are good prices.
________________________________________
KOLI asked, IS THIS RIGHT TIME TO BUY HOME? IN VASHI-KOPARKHAIRNE, NAVI MUMBAI
Vishwas Kadam answers::, Hi Koli, yes it is the right time.
________________________________________
Nafis asked, I am from Mumbai , I want to buy home at vasai for investment purpose . can you tell me this is right time or I have to wait
Vishwas Kadam answers::, Hi Nafis, i think its the right time to buy before the rates shoot up.
________________________________________
Nakool asked, Hi Vishwas , Can you put some light on what will be total money spent if I buy 2BHK with 1000 sq. ft area at rate of 3300 Rs. per sq ft. in Kharghar area. I want you to put some light in additional charges like car parking, stamp duty, registration and maintenance and any other charges that I might have missed to mention.
Vishwas Kadam answers::, Hi Nakool, stamp duty will be roughly 6% and the car parking charges would be 1-2Lakhs depending on the developer, maintenance charges should be 4-5rupees per sqft.
________________________________________
Devendra Kumar asked, I am staying at Panvel and planning to invest in 2BHK flat in Panvel itself, will there be rise in price due to Airport which is planned at Panvel.
Vishwas Kadam answers::, Hi Devendra, there will be rise in prices in Panvel due to the airport and planned infrastructure for improved connectivity with Mumbai.
________________________________________
sanju asked, hi i am from mumbai -malad I have been waiting to buy property from log Sime. I want to know are the property rates are going to slash in mumbai ? can I buy my dream house
Vishwas Kadam answers::, HI Sanju, the property rates are not likely to slash any further. If anything we expect them to go up.
________________________________________
Rajendra asked, Hello Vishwas , Hello Mihir, There are many questions on Hyderabad real estate status. Is it advisable to sell the property now? Would you be kind enough to give your view on this?
Vishwas Kadam answers::, HI Rajendra, I would advise to hold on to the property.
________________________________________
Manas asked, Hi, I would like to know which Tier-II city I should invest so that in future even if I want to relocate I can live a pleasant life- Bhopal Indore Nagpur Thanks// Manas..
Vishwas Kadam answers::, Hi Manas, I think Nagpur is the best option.
________________________________________
RV asked, I've been offered an interest rate of 8% for the 1st year and 9% from 2nd year for a total period of 18 years. Is it ok or I can wait for some more time?
Vishwas Kadam answers::, HI rv, the rates are not expected to reduce any further. So its not worth waiting.
________________________________________
Chirag Chandiwala asked, It’s unfortunate that people started investing in Real-estate; middle class cannot afford a house any more...
Vishwas Kadam answers:, Hi Chirag, there are products for all different budgets in the market now, if you are open to moving little further away from city centre. For instance, great rates are available outside of mumbai in areas such as Vashi, Thane etc. And these are mostly township development with lots of amenities as well and proximity to train station for easy commute.
________________________________________
ongc asked, how much is the anticipated correction at mumbai
Vishwas Kadam answers:, Hi Ongc, correction in Mumbai has already taken place especially in area like South Mumbai and Bandra. In fact property rates are going back up again.
________________________________________
Ary asked, I am from Mumbai , I am Planning to buy a flat at Wakad -, Hinjewadi near sayaji Hotel , Pune. What is your opinion will this area give me better returns ? At present the rates in that area are around Rs. 2700-2800 psf. This is purely for investment purpose and I want to give it on rent. Please advice
Vishwas Kadam answers:, Hi Ary, Pune is not the best place for investment. Since there is a lot of supply compared to the demand also bulk of the demand was based on foreign companies and IT industries both have been badly hit by recession, if you are looking at investment opportunities areas close to tier one metro such as Panvel Alibag etc are better opportunites.
________________________________________
Chatwal Biren asked, When it is not a good time not to buy a property
Vishwas Kadam answers:, Hi, a year back was a very bad time to invest in property since prices were highly inflated and lending rates were high as well.
________________________________________
V Raj asked, Hi, past two years I am waiting for price to go down in Chennai, but the price is still at the higher end. What shall I do, do you think the price will come down or it will go up further in this situation?
Vishwas Kadam answers:, HI, lot of questions on property prices. Generally speaking across the country because of recession prices have rationalized and bank lending rates are also reasonable. Prices are only going to go up from here so this is a good time to buy property.
________________________________________
Baiju asked, I am planning to buy a 3 BHK flat at kharghar sec-12. Is there any chances that the real estate prices is likely to go down due the water supply problems for high rise building?
Vishwas Kadam answers:, Hi Baiju, not really , we are not expecting the prices to drop any further
________________________________________
Bis asked, In kalamboli area adjacent to Kharghar how good is Rs 2950 per sq feet, plot is 12.5% GES
Vishwas Kadam answers:, Hi Bis, it depends on who the developer is, if it’s a premium developer and there is an incremental charge due to brand and quality of construction then its a good price. But, if it’s a local developer then it’s high.
________________________________________
Suma asked, I have to buy 3 BHK row house
Vishwas Kadam answers:, Good areas such as Alibag are good bets to invest in 3BHK row houses.
________________________________________
Pina Shah asked, I am planning to buy a flat, please tell me weather it is the right time to do the same or the interest rate are going further down?????
Vishwas Kadam answers:, Yes, it is a good time to buy. Interest rates may go down but property prices may go up. Its a good balance at the moment
________________________________________
Harshal asked, Prices for Apartments have gone exorbitantly high...I don't see a market for buyers, but am wondering on how do Construction Co & Other House owners manage to sell a premium.
Vishwas Kadam answers:, It’s a demand and supply equation, metros like mumbai have limited new products and a lot more buyer to buy them which hikes up the prices.
________________________________________