Credited with being the first foreign ETF in the country, Hang Seng BeES is the latest offering from Benchmark Asset Management Company. An open-ended index scheme, the Hang Seng BeES aims to provide its investors with returns (before expenses) that closely correspond to the total returns of securities as represented by the Hang Seng Index.
The fund will track the index on a real-time basis and will be passively managed. That is, the AMC will not try to ‘beat' the market or seek temporary defensive positions when the market declines or appears over-valued.
Hang Seng exposure
The ETF will enable Indian investors to buy into China, the world's largest manufacturing economy. It will invest at least 90 per cent of its total assets in the stocks of its underlying index, in the same proportion as that in the index. The Hang Seng Index comprises 42 stocks, representing about 60 per cent of the total market capitalisation of the Hong Kong stock market.
The index has a 37 per cent representation from of H-Share companies (those incorporated in mainland China and listed in Hong Kong) and little under 17 per cent from the Red Chips companies (incorporated outside mainland China but controlled by mainland entities and with at least 50 per cent share of sales revenue or profits or assets from mainland China); while the remaining are HK Ordinary shares.
Among the well-known index constituents are companies such as HSBC Holdings, China Mobile, Bank of China, Petro China and Tencent Holdings.
Comment
While reams have been written about the investment attractiveness of Chinese equities, Hang Seng BeES may not fit the investment needs of all categories of investors. It may be best suited to such investors who fully understand, and have the time and resources to track, the fundamentals of the Chinese market and economy.
Unlike the actively managed domestic fund offerings that provide exposure to Chinese equities, the ETF will passively mimic the Hang Seng Index in returns. Besides, its equity exposure will be limited to the Hang Seng Index, unlike the existing fund offerings that can invest outside of the index as well as in Greater China shares.
For instance, while Fortis China-India Fund, the only fund in the pack with at least a year's existence, invests directly in Chinese equities (overall exposure limited to 35 per cent), others such as JP Morgan JF Greater China Equity Offshore Fund and Mirae Asset China Advantage Fund offer China exposure through the feeder funds route. The ETF may, therefore, offer a good fit only for investors looking specifically for Hang Seng Index exposure.
However, to its advantage, exposure to the Hang Seng Index would offer a better proposition to dividend-seeking investors. The index enjoys a higher dividend yield (about 3.25 per cent, as on January 29, 2010), compared to the little over one per cent yield of the domestic bellwether index.
Investors may also have little to worry about the scope of ‘tracking error' as the fund house has an impressive score on that front; at least as far as its existing fund offerings are concerned. Nonetheless, investors may have to build currency risk into their returns expectation.
As for those simply looking to enhance returns, Hang Seng BeES may have little to offer, though it boasts of an exposure to the world's fastest growing economy. Domestic equities offer a better bet in comparison. For instance, the CNX Nifty outperformed the Hang Seng Index each year in the last five years, save for the 2008 correction when it lagged by a couple of percentage points. Last year too, the Hang Seng Index advanced only 52 per cent, as against Nifty's 76 per cent.
Friday, February 26, 2010
WHATS BAD ABOUT THE BUDGET 2010
BUDGET 2010 by VS Subramaniam
THE SENIOR CITIZENS ABOVE 65 YEARS ARE COMPLETELY NEGLECTED. WHEN THE TAX LIMIT WAS INCREASED TO 160000/- , FOR SENIOR CITIZENS
ABOVE 65, THEIR TAX LIMIT SHOULD ALSO BE INCREASED FROM 2,25000/- TO 250000- AT LEAST
IT IS A GREAT INJUSTICE SHOWN TO THEM
Not addressing national issues by Dipak Srivastava
The FM has ignored the 3 most emergencies overshadowing the country:
1. Under development of tribal/ backward areas that have become a hotbed for Maoists.
three National Issues. Even though our Railway min did give token recognition, our FM has blissfully ignored the problem.
2. National defence : anybody's guess as to when war with China and Pakistan may flare up. We shall be caught highly unprepared discussing growth rates and Sensex, while the vital statistics go for a toss. FM has not spared a thought for National Security.
3. Inflation: Any body's guess when India can go the Mexico/ Malaysia way as far as sky rocketing inflation is going. It is virtually accepted by every other minister that it cannot be controlled in the short term. What are we waiting for? for inflation to touch 60% before we start acting. All eyes are on whether stimulus will go or not, any guess as to the extent of counterfeit currency notes in circulation. Rs. 1,14,000 crores last estimate by RBI. Any surprise why inflation is going up without control?
Aristocratic Budget by VIJAYAKUMAR
It seems traditional Old man (Pranab) has faith in creamy layers only those will give support to India both financially and morally. Others have only to vote but not to taste the cake (benefits) from the Govt.
What about educated youth employment ?
What about Landless laborers ?
What about Infrastructure development ?
What about Urbanologist ?
Still 70% of Rural People seeking employment in nearby Urban areas by which transportation is wasted (using different mode of travels like bus/car/two wheelers etc. by which petrol/diesel & man hour&man powers are wasted). More over pollution increases alarmingly. If Govt plan to start suitable industry in the nativity of rural / urban areas then there will be sufficient saving of health & wealth of these people.
Again Govt is paving path to way warding youth.
God only has to save our youth/nation.
Budget 2010-11 by Rajagopalan Krishnan
The budget as usual has the intricate deception. On one hand Mukherjee is giving Income-tax benefits to the salaried class, on the other he has increased the price of gold, automobiles, diesel,petrol, MAT etc. which will definitely have a cascading effect on the common man. When I say common man I am talking about the poor people and people whose income is lower than 1.6 lacs. Government babus are comparatively richer and the unscrupulous staff in excise and income tax department will definitely make a hay while the sun shines! There is no drastic measure on the teeming population nor there are any measures to tackle the skyrocketing food prices. This budget again favours the builders and not the home seekers as the racket involved in the housing and black money churned out in the deal is still untackled. It is common knowledge in each deal minimum 10 to 50 lacs are made in black by the builders and the buyers have no hesitation in shelling out the money in black. It is very difficult to either eradicate poverty or corruption in India with the present government machinery. I am sorry the budget is totally a far-fetched and impracticable one which superficially looks good at a glance. If India has to catch up with the west they have to arrest the teeming population and give enough space for people to breath fresh air as the cities are becoming concrete jungles. In fact the houses are not bought by the needy but people who want to double their income in short span of time.
Not for common Man by chanchal chakrabarti
This budget will please all those, who are paying taxes and in organized sector. what about those who do not fall in any tax bracket. Increase in diesel and petro products will have cascading effect on prices of all commodities. It is the common man who has to bear the burnt for that. common is already reeling under 17% inflation in food and vegetables and I feel it will now go up to 20%. That is the Common Man's budget, my foot.
Given one hand snatched with other hand pankaj ruparel
Given a little tax concession it will only benefit who's income is more than 3Lakhs. Other hand increase the rate of Petro and Diesel and Coal. Within the month the electricity, transportation will increase. Automatic cost increase rate increase. Service tax introduce in Health related service from Hospital. No. tax will be paid by insurance co. If they pay they certainly increase the premium.
Not a Cheering Budget. by Rahul Singh
Pranab babu has once again proved that today's budget goes all out to support the rich investors and the relatively comfortable economic strata of the country. In any case the rich or the higher middle class is hardly bothered by hike in Petroleum products and the inflation, but the middle class and AAM AADMI is certainly hit by the hike in Diesel and Petrol prices as this will have cascading effect on the inflation of all most all the commodities. As such the common man is hard pressed with the high inflation of food items. This will only add fuel to the fire and make the middle class life miserable. The opposition walkout from the Parliament is justified and the government needs to push back the inflation as an immediate priority lest the have nots start looting the haves leading to lawlessness all over.
THE SENIOR CITIZENS ABOVE 65 YEARS ARE COMPLETELY NEGLECTED. WHEN THE TAX LIMIT WAS INCREASED TO 160000/- , FOR SENIOR CITIZENS
ABOVE 65, THEIR TAX LIMIT SHOULD ALSO BE INCREASED FROM 2,25000/- TO 250000- AT LEAST
IT IS A GREAT INJUSTICE SHOWN TO THEM
Not addressing national issues by Dipak Srivastava
The FM has ignored the 3 most emergencies overshadowing the country:
1. Under development of tribal/ backward areas that have become a hotbed for Maoists.
three National Issues. Even though our Railway min did give token recognition, our FM has blissfully ignored the problem.
2. National defence : anybody's guess as to when war with China and Pakistan may flare up. We shall be caught highly unprepared discussing growth rates and Sensex, while the vital statistics go for a toss. FM has not spared a thought for National Security.
3. Inflation: Any body's guess when India can go the Mexico/ Malaysia way as far as sky rocketing inflation is going. It is virtually accepted by every other minister that it cannot be controlled in the short term. What are we waiting for? for inflation to touch 60% before we start acting. All eyes are on whether stimulus will go or not, any guess as to the extent of counterfeit currency notes in circulation. Rs. 1,14,000 crores last estimate by RBI. Any surprise why inflation is going up without control?
Aristocratic Budget by VIJAYAKUMAR
It seems traditional Old man (Pranab) has faith in creamy layers only those will give support to India both financially and morally. Others have only to vote but not to taste the cake (benefits) from the Govt.
What about educated youth employment ?
What about Landless laborers ?
What about Infrastructure development ?
What about Urbanologist ?
Still 70% of Rural People seeking employment in nearby Urban areas by which transportation is wasted (using different mode of travels like bus/car/two wheelers etc. by which petrol/diesel & man hour&man powers are wasted). More over pollution increases alarmingly. If Govt plan to start suitable industry in the nativity of rural / urban areas then there will be sufficient saving of health & wealth of these people.
Again Govt is paving path to way warding youth.
God only has to save our youth/nation.
Budget 2010-11 by Rajagopalan Krishnan
The budget as usual has the intricate deception. On one hand Mukherjee is giving Income-tax benefits to the salaried class, on the other he has increased the price of gold, automobiles, diesel,petrol, MAT etc. which will definitely have a cascading effect on the common man. When I say common man I am talking about the poor people and people whose income is lower than 1.6 lacs. Government babus are comparatively richer and the unscrupulous staff in excise and income tax department will definitely make a hay while the sun shines! There is no drastic measure on the teeming population nor there are any measures to tackle the skyrocketing food prices. This budget again favours the builders and not the home seekers as the racket involved in the housing and black money churned out in the deal is still untackled. It is common knowledge in each deal minimum 10 to 50 lacs are made in black by the builders and the buyers have no hesitation in shelling out the money in black. It is very difficult to either eradicate poverty or corruption in India with the present government machinery. I am sorry the budget is totally a far-fetched and impracticable one which superficially looks good at a glance. If India has to catch up with the west they have to arrest the teeming population and give enough space for people to breath fresh air as the cities are becoming concrete jungles. In fact the houses are not bought by the needy but people who want to double their income in short span of time.
Not for common Man by chanchal chakrabarti
This budget will please all those, who are paying taxes and in organized sector. what about those who do not fall in any tax bracket. Increase in diesel and petro products will have cascading effect on prices of all commodities. It is the common man who has to bear the burnt for that. common is already reeling under 17% inflation in food and vegetables and I feel it will now go up to 20%. That is the Common Man's budget, my foot.
Given one hand snatched with other hand pankaj ruparel
Given a little tax concession it will only benefit who's income is more than 3Lakhs. Other hand increase the rate of Petro and Diesel and Coal. Within the month the electricity, transportation will increase. Automatic cost increase rate increase. Service tax introduce in Health related service from Hospital. No. tax will be paid by insurance co. If they pay they certainly increase the premium.
Not a Cheering Budget. by Rahul Singh
Pranab babu has once again proved that today's budget goes all out to support the rich investors and the relatively comfortable economic strata of the country. In any case the rich or the higher middle class is hardly bothered by hike in Petroleum products and the inflation, but the middle class and AAM AADMI is certainly hit by the hike in Diesel and Petrol prices as this will have cascading effect on the inflation of all most all the commodities. As such the common man is hard pressed with the high inflation of food items. This will only add fuel to the fire and make the middle class life miserable. The opposition walkout from the Parliament is justified and the government needs to push back the inflation as an immediate priority lest the have nots start looting the haves leading to lawlessness all over.
BUDGET2010 HIGHLIGHTS
Minimum Alternate Tax up from 15% to 18% on book profits
-Fiscal deficit pegged at 5.5% of GDP
- I-T dept to notify simple two-page Saral 2 form for individuals for current year
-Personal income tax: Nil for income up to Rs 1.6 lakh, 10% for income bet Rs 1.6 -5 lakh
- Personal income tax: Income between 5-8 lakh: Tax at 20%
- Personal income tax: Above Rs 8 lakh, tax at 30%
- Professionals with Rs 15 lakh income need account audit
- Partial rollback of excise duty relief on large cars
- To provide subsidy in cash instead of bonds for fertiliser, oil
- Customs duty on gold, platinum imports raised to Rs 300 from Rs 200
- Service tax to GDP ratio is 1%
- Net revenue gain of Rs 43,500 cr from customs, excise proposal
- Direct tax proposals result in Rs 26,000 cr loss; indirect tax yield Rs 45,000
cr gain
- News agencies exempt from service tax
- Some services hitherto not taxed would be brought under the purview of new Service Tax
- Service Tax rates unchanged at 10%
- No import duty on some equipment in road projects
- Cut in duty for photovoltaic units
- External commercial borrowing will be available for food storage industries
- Clean energy cess on domestic, imported coal
- Peak customs duty remains unchanged at 10%
- Central excise on LED lights halved to 4%
- Agricultural seeds exempt from service tax
- Full excise cut on electric cars
- For solar mission, solar power generating units rates are to be reduced by 5%
- Cut on personal tax rates means saving of Rs 50,000 for income up to Rs 8 lakh
- Partial rollback of excise duty relief on large cars
- Peak excise duty hiked from 8% to 10%
- Market borrowing were up to 3,45,000 cr. Enough to meet credit need of private sector
- Duties on smoking and non-smoking tobacco products up
- Excise duty on large cars, SUVs, multi utility vehicles hiked
- Petroleum products: basic excise duty of 5% crude, 7.5% on diesel & petrol; 10% on other products
- Structural changes in excise duties of tobacco, propose to extend excise duty
- Revenue loss of Rs 26,000 cr on a/c of direct tax proposals
- Surcharge for companies reduced to 7.5%
- Due to direct taxes, result in a revenue loss of Rs 26,000 cr
- Threshold limit for TDS applicability to be rationalised
- Extended scope of presumptive taxes up to Rs 40 lac
- Real estate sector now gets 5 years for completion instead of 4 years before
- To boost tourism investment, offers investment linked tax deductions
- Addl Rs20,000 deduction available for investment in infra bonds
- Reduces current surcharge of 10% on domestic comp to 7.5%
- Automation of excise, service tax already rolled out
- FY11 market borrowing pegged at Rs 3.45 lakh cr
- Govt to set up apex level Financial Stability and Development Council
- FY13 fiscal deficit seen at 4.1%
- Fiscal deficit seen at 4.8% in FY12
- Allocates Rs 1,900 cr for UID project
- Planned expenditure up 15% over 2009-10
- Increase in non-planned exp up only 6%
- Total exp proposed up 8.7% over 2009-10, to Rs 11 lakh cr
- Taskforce to counter problems in Maoist affected areas. Adequate funds will be allocated
- Allocation to Defence over Rs 147,000 crore
- Technology advisory group to be set up under Nandan Nilekani
- Smart card extended to NREGA
- RBI to dole out more banking licences: Pranab
- Sign language training centre for hearing impaired
- Rs 4,500 cr for program of social justice, sr citizens, backward classes, handicapped
- Rs 100 cr allocated for women farmers
- Exclusive skill dev prog in textile and garment sector
- Rs 48,000 cr for Bharat Nirman plan
- Asks state govt to contribute for social security to workers in unorganised sector
- Infra stocks spurt on higher allocation
- To allocate Rs 22,300 cr to Health Ministry
- Allocates Rs 100 cr for new pension scheme, to benefit 100,000 low income citizens
- Khadi institutes get Rs 400 cr
- GOI sign $150 mn deal with ADB for implementing Khadi programme
- Rajiv Awas Yojana now ready' gets Rs 1,270 cr for FY11
- Rs 7300cr in 2011 for backward sections
- GST, Direct Taxes Code from April 2011
- Housing loan: 1% interest subvention scheme extended, allocation Rs 700 cr
- Urban dev allocation up more than 75% to Rs 5400 cr
- Allocates Rs 1,200 cr for drought mitigation
- Indira Awas Yojana: allocation up by Rs 10,000 cr
- NMDC, SVJN stake sale to fetch Rs 25,000 cr in FY10
- NREGS gets Rs 40,100 cr in FY11
- Rs66,1000 cr allocateds for rural development in FY11
- IIFCL disbursements at Rs 9000 cr by March 2010
- School education outlay for FY11 at Rs 31,000 cr
- States to get Rs 3,675 cr for primary education at rural level
- To set up coal regulatory authority
- Spending on social sector at Rs 137,000 cr
- Rs 25,000 cr allocated to develop rural infrastructure
- Growth to exceed 7.2% in this fiscal
- Final FY10 GDP figure maybe higher than estimate of 7.2%
- To set up National clean energy fund
- Plan outlay for Renewable energy ministry up 61%
- Power allocation doubles to Rs 5,100 cr
- To set up 5 more mega food park projects
- Allocation for road tansport Rs 19,894 cr
- Farm loan repayment extended by 6 months
- ECB to be available for cold storage
- To provide Rs 400 cr to boost farm output in eastern India
- Timely repayment of crop loans: subvention raised from 1% to 2%
- Govt is committed to growth of SEZ to promote exports
- Proposes allocation of Rs 200 cr for climate-resilient agricultural program
- Extend 2% interest subvention for exports for another year
- FY11 capital for PSU banks at Rs 16,500 cr
- Extends interest subvention of 2% for handloom, handicrafts for 1 more yr
- Propose new bill to address problems in corpoate sectors
- Will augment assistance to RRBs to strengthen rural sector
- RBI may give license to some more private sector players and NBFCs
- Rs 1,900 cr addl capital in four PSU banks
- Ownership and control clearly defined in FDI policy
- To discuss Kirit Parikh report in due course
- Subsidy for fertiliser sector to increase farm productivity
- Govt to raise Rs 25,000 cr this year to meet cap expenditure requirements
- GST and DTC can be introduced in April 2011
- Steps to reduce public debt, paper to be presented in 6 months
- Signs of food inflation going to non-food items
- Need to review stimulus, move to fiscal consolidation
- Double digit food inflation in 2009
- Export figures encouraging; pvt investments can be expected
- Concerned over emergence of double digit food inflation
- 18.9% growth rate in manufacturing sector in 2009
- Final figure may be higher if earnings in last quarters are strong
- Need to make recovery
- Growth slows down to 6% in Q3 vs 7.9% in Q2 this fiscal
- Focus shifts to non-governmental actors
- 3rd challenge: relates to problems in government system
- 2nd challnge: harden economic growth to make dev more inclusive
- 1st challenge: quickly revert to higher GDP growth path of 9%, cross double digit growth
- Economy is in a better position than a year ago, however, challenges remain
- Uncertainity was there on account of delay in monsoon, concerns about production and food prices
- Pranab Mukherjee starts announcing Union Budget
- Bond yields steady ahead of Budget
-Fiscal deficit pegged at 5.5% of GDP
- I-T dept to notify simple two-page Saral 2 form for individuals for current year
-Personal income tax: Nil for income up to Rs 1.6 lakh, 10% for income bet Rs 1.6 -5 lakh
- Personal income tax: Income between 5-8 lakh: Tax at 20%
- Personal income tax: Above Rs 8 lakh, tax at 30%
- Professionals with Rs 15 lakh income need account audit
- Partial rollback of excise duty relief on large cars
- To provide subsidy in cash instead of bonds for fertiliser, oil
- Customs duty on gold, platinum imports raised to Rs 300 from Rs 200
- Service tax to GDP ratio is 1%
- Net revenue gain of Rs 43,500 cr from customs, excise proposal
- Direct tax proposals result in Rs 26,000 cr loss; indirect tax yield Rs 45,000
cr gain
- News agencies exempt from service tax
- Some services hitherto not taxed would be brought under the purview of new Service Tax
- Service Tax rates unchanged at 10%
- No import duty on some equipment in road projects
- Cut in duty for photovoltaic units
- External commercial borrowing will be available for food storage industries
- Clean energy cess on domestic, imported coal
- Peak customs duty remains unchanged at 10%
- Central excise on LED lights halved to 4%
- Agricultural seeds exempt from service tax
- Full excise cut on electric cars
- For solar mission, solar power generating units rates are to be reduced by 5%
- Cut on personal tax rates means saving of Rs 50,000 for income up to Rs 8 lakh
- Partial rollback of excise duty relief on large cars
- Peak excise duty hiked from 8% to 10%
- Market borrowing were up to 3,45,000 cr. Enough to meet credit need of private sector
- Duties on smoking and non-smoking tobacco products up
- Excise duty on large cars, SUVs, multi utility vehicles hiked
- Petroleum products: basic excise duty of 5% crude, 7.5% on diesel & petrol; 10% on other products
- Structural changes in excise duties of tobacco, propose to extend excise duty
- Revenue loss of Rs 26,000 cr on a/c of direct tax proposals
- Surcharge for companies reduced to 7.5%
- Due to direct taxes, result in a revenue loss of Rs 26,000 cr
- Threshold limit for TDS applicability to be rationalised
- Extended scope of presumptive taxes up to Rs 40 lac
- Real estate sector now gets 5 years for completion instead of 4 years before
- To boost tourism investment, offers investment linked tax deductions
- Addl Rs20,000 deduction available for investment in infra bonds
- Reduces current surcharge of 10% on domestic comp to 7.5%
- Automation of excise, service tax already rolled out
- FY11 market borrowing pegged at Rs 3.45 lakh cr
- Govt to set up apex level Financial Stability and Development Council
- FY13 fiscal deficit seen at 4.1%
- Fiscal deficit seen at 4.8% in FY12
- Allocates Rs 1,900 cr for UID project
- Planned expenditure up 15% over 2009-10
- Increase in non-planned exp up only 6%
- Total exp proposed up 8.7% over 2009-10, to Rs 11 lakh cr
- Taskforce to counter problems in Maoist affected areas. Adequate funds will be allocated
- Allocation to Defence over Rs 147,000 crore
- Technology advisory group to be set up under Nandan Nilekani
- Smart card extended to NREGA
- RBI to dole out more banking licences: Pranab
- Sign language training centre for hearing impaired
- Rs 4,500 cr for program of social justice, sr citizens, backward classes, handicapped
- Rs 100 cr allocated for women farmers
- Exclusive skill dev prog in textile and garment sector
- Rs 48,000 cr for Bharat Nirman plan
- Asks state govt to contribute for social security to workers in unorganised sector
- Infra stocks spurt on higher allocation
- To allocate Rs 22,300 cr to Health Ministry
- Allocates Rs 100 cr for new pension scheme, to benefit 100,000 low income citizens
- Khadi institutes get Rs 400 cr
- GOI sign $150 mn deal with ADB for implementing Khadi programme
- Rajiv Awas Yojana now ready' gets Rs 1,270 cr for FY11
- Rs 7300cr in 2011 for backward sections
- GST, Direct Taxes Code from April 2011
- Housing loan: 1% interest subvention scheme extended, allocation Rs 700 cr
- Urban dev allocation up more than 75% to Rs 5400 cr
- Allocates Rs 1,200 cr for drought mitigation
- Indira Awas Yojana: allocation up by Rs 10,000 cr
- NMDC, SVJN stake sale to fetch Rs 25,000 cr in FY10
- NREGS gets Rs 40,100 cr in FY11
- Rs66,1000 cr allocateds for rural development in FY11
- IIFCL disbursements at Rs 9000 cr by March 2010
- School education outlay for FY11 at Rs 31,000 cr
- States to get Rs 3,675 cr for primary education at rural level
- To set up coal regulatory authority
- Spending on social sector at Rs 137,000 cr
- Rs 25,000 cr allocated to develop rural infrastructure
- Growth to exceed 7.2% in this fiscal
- Final FY10 GDP figure maybe higher than estimate of 7.2%
- To set up National clean energy fund
- Plan outlay for Renewable energy ministry up 61%
- Power allocation doubles to Rs 5,100 cr
- To set up 5 more mega food park projects
- Allocation for road tansport Rs 19,894 cr
- Farm loan repayment extended by 6 months
- ECB to be available for cold storage
- To provide Rs 400 cr to boost farm output in eastern India
- Timely repayment of crop loans: subvention raised from 1% to 2%
- Govt is committed to growth of SEZ to promote exports
- Proposes allocation of Rs 200 cr for climate-resilient agricultural program
- Extend 2% interest subvention for exports for another year
- FY11 capital for PSU banks at Rs 16,500 cr
- Extends interest subvention of 2% for handloom, handicrafts for 1 more yr
- Propose new bill to address problems in corpoate sectors
- Will augment assistance to RRBs to strengthen rural sector
- RBI may give license to some more private sector players and NBFCs
- Rs 1,900 cr addl capital in four PSU banks
- Ownership and control clearly defined in FDI policy
- To discuss Kirit Parikh report in due course
- Subsidy for fertiliser sector to increase farm productivity
- Govt to raise Rs 25,000 cr this year to meet cap expenditure requirements
- GST and DTC can be introduced in April 2011
- Steps to reduce public debt, paper to be presented in 6 months
- Signs of food inflation going to non-food items
- Need to review stimulus, move to fiscal consolidation
- Double digit food inflation in 2009
- Export figures encouraging; pvt investments can be expected
- Concerned over emergence of double digit food inflation
- 18.9% growth rate in manufacturing sector in 2009
- Final figure may be higher if earnings in last quarters are strong
- Need to make recovery
- Growth slows down to 6% in Q3 vs 7.9% in Q2 this fiscal
- Focus shifts to non-governmental actors
- 3rd challenge: relates to problems in government system
- 2nd challnge: harden economic growth to make dev more inclusive
- 1st challenge: quickly revert to higher GDP growth path of 9%, cross double digit growth
- Economy is in a better position than a year ago, however, challenges remain
- Uncertainity was there on account of delay in monsoon, concerns about production and food prices
- Pranab Mukherjee starts announcing Union Budget
- Bond yields steady ahead of Budget
INCOME TAX SLABS FOR INDIVIDUAL PAYERS
The finance minister proposed the following slabs for individual tax payers:
There will be no tax for income upto Rs 1.6 lakh. This was the same earlier.
For income between 1.6 lakh - 5 lakh, the tax liability will be 10%. The older slab was 1.6 - 3 lakh.
For income between 5 lakh - 8 lakh, the tax liability will be 20%. Earlier 20% tax was deducted on Rs 3-5 lakh income.
Individuals with income of above Rs 8 lakh will have tax liability of 30%. Earlier 30% was deducted on income of Rs 5 lakh and above.
The government would allow a deduction of up to Rs 20,000 for investments in long-term infrastructure bonds. The deduction would be in addition to Rs 100,000 allowed under Section 80C of India's Income Tax Act.
There will be no tax for income upto Rs 1.6 lakh. This was the same earlier.
For income between 1.6 lakh - 5 lakh, the tax liability will be 10%. The older slab was 1.6 - 3 lakh.
For income between 5 lakh - 8 lakh, the tax liability will be 20%. Earlier 20% tax was deducted on Rs 3-5 lakh income.
Individuals with income of above Rs 8 lakh will have tax liability of 30%. Earlier 30% was deducted on income of Rs 5 lakh and above.
The government would allow a deduction of up to Rs 20,000 for investments in long-term infrastructure bonds. The deduction would be in addition to Rs 100,000 allowed under Section 80C of India's Income Tax Act.
Sunday, February 21, 2010
EDUCATION IS COSTLY AND BIG AMOUNTS
Education is costly and big amounts of money are required often. start planning from your child's birth.
In this era of rapid change, the education of children has become a major component of financial planning. For instance, in 2009, all the Indian Institutes of Management hiked their annual fees by Rs 75,000-4 lakh. In percentage terms, they were quite hefty hikes. Both IIM Calcutta and IIM Lucknow hiked their fees from Rs 5 to Rs 9 lakh in a single year -- a 80 per cent hike. Others like, IIM Ahmedabad increased their fees from Rs 11.5 lakh to 12.5 lakh. No wonder, parents, whose children are aspiring to be management graduates, can suddenly fund their numbers going completely berserk. In such circumstances, it is important that parents start early to ensure that there are no hiccups at the final stages. And that implies planning well in advance. Some points that will help in this planning :
EARLY START
Most people associate financial planning in education only with college and postgraduate expenses. But this is not so. Pre-school attendance in the form of playgroups are now common. There are significant costs from this stage itself, which can easily go up to Rs 25,000 to 50000. In a city like Mumbai, the Poddar Group of schools is charging Rs 90000 per term. The option is safe and secure debt instruments, that have the feature of accessibility when required.
PLANNING FOR EXPENSES
The expenses intensify as the child enters school and this part has to be properly provided for. Apart from admission and tuition fees, there are a lot of additional heads -- uniform, school bus, stationary and so on. These could be in the range of Rs 50,000 to Rs 500,000 a year during the school years. On an average ICSE & CBSE schools are charging in the range of 36000 to 100000 lakh fees a year as tuition fees excluding school bus costs.
With the advent of international education, costs will rise further. IB schools are charging fees ranging from 1 Lakh onwards . Some school insist the parent pay at one go which is difficult for parents having more than one child and taking into consideration the runaway inflation I the last 1 year . One way is through a pay-as-you-go effort, whereby the expense is met from regular income. But this policy is fraught with risks. It is better if a regular amount is set aside each year that becomes available over a period of time. Since the payment requirement for such portfolio will stretch over 10 years, a variety of options like bonds, mutual funds and stocks can be deployed.
AIMING FOR THE SKY
An increasing number are sending their children abroad right from this stage, to get a good education. This stage requires adequate use of equity in the portfolio to deliver growth over the years, as there is a long time frame till this stage comes into play.
The period of college education would mean four-five years, depending on the country where the child is studying. The expense will also vary significantly, but for good universities abroad, it can go up to $50,000 a year, which means Rs 22-24 lakh. The best way to provide for this is by ensuring a lumpsum comes in each year during the period when the child is of this age. An important point is also that parents will need to plan for various stages simultaneously and they do not have the luxury of saying, first we will plan for school and then move ahead.
THE BACKUP
This is the traditional area where educational planning took place, but is now just a part of the overall process. Even in India, these expenses are rising and except for a few courses like chartered accountancy, most of the other areas require spending in lakhs of rupees. For example, a two-year stint at an MBA institute, including IIMs, will mean an expense in the range of Rs 6-12 lakh, depending upon the institute chosen.
There can be a variety of areas used for planning these expenses and there is also a lot of time for the efforts to be put into effect, which can be anything from 15-20 years, depending on when the process is started. A mixture of long-term debt and equity would be essential for this purpose, using a wide array of instruments. The better the planning here, the lower will be the reliance on loans for education. Another point is that at all stages of the planning process, there has to be a safety element built in through the use of insurance on the life of the parent. This is important, as there has to be a situation where there is no disruption of the education
NEW DEPOSIT RATES EFFECTIVE FEB 2010
Banks have started to revise an upward trend in interest rates which are lagging with the current inflation rates after the RBI increased the CRR for banks . Here are the banks which have revised their interest rates on FDS and others are soon to follow .
ICICI BANK
IBDI BANK
J & K BANK
UNION BANK OF INDIA
ICICI BANK
IBDI BANK
J & K BANK
UNION BANK OF INDIA
Strategy to review your MF portfolio
I have some questions regarding portfolio management and review of mutual funds:
— How frequently should I review my portfolio?
— What are the criteria to decide whether a fund is performing or not?
— If it is underperforming should I wait for some more time period or immediately sell it?
I am 30 years old and can invest Rs 5000 per month in mutual funds. What is the allocation to be made across different classes of funds (large-cap, diversified, mid-cap and small-cap)?
Amol Kulkarni
Mumbai
We appreciate your intention to come up with a systematic strategy to review your portfolio. These tricky questions pose a challenge to many investors. We will attempt to answer them by giving you some broad guidelines. As a general rule, you can review the performance of your portfolio at least once a quarter, subject to the following exceptions:
A huge rally in stocks in a short span of time warrants a cautious approach for two reasons: one, it could be a sign of a bubble in which case you would be better off encashing those paper profits; or two, your asset allocation – between debt and equity or amongst large-mid- and small-cap funds - would have gone out of kilter. You may have to review and rebalance the portfolio in such a case. In addition to this, any change in your strategy or risk profile too would warrant a review.
Is a fund performing?
When you review your portfolio, assess the performance of the individual funds and their overall contribution to the portfolio returns. Compare the funds returns with that of its benchmark and with funds belonging to the same category. For instance, mid-cap funds may be compared with their respective benchmarks and schemes with a similar strategy of investing in mid-cap stocks.
For this purpose do not take short periods of say one month. Unless it has been an eventful quarter, even a three-month period does not provide much insight. Look at the performance over 6-month, 1 year and two-year time frame. In markets such as the present one, a one and two-year period would reveal a lot on how the fund has tackled the different market phases. If you have held the fund for a long period of five years or more, then see if the three-year return has seen any significant change since the last time you reviewed it.
What is the extent of underperformance that can be tolerated would be the next logical question. Should you sell a fund because it returned 2-3 percentage points lower than its peer? Perhaps not. You will then have to look at the risk-adjusted return (as represented by Sharpe ratio). The fund which appears to have marginally underperformed may actually be doing so because of its lower risk profile. That means, its risk-adjusted return could very well be superior to some of its peers.
Note that, even between the same categories of funds — say within large-cap funds or mid-cap funds — the risk profile tends to vary. Most funds provide this data in their fact sheet. However, a variance of over 10 percentage points in performance should be a cause for concern.
Once you notice that a fund's performance is dipping, look out for the reasons as well. Has the fund' sector calls not worked well? Is the fund holding too much cash? If the fund is able to beat its benchmark but struggles to keep pace with peers, it could be because of the fund's conservative mandate or the high-risk mandate of its peers. Look for these variances before deciding on the next course of action. However, if the fund continues to be a laggard even after 3-4 quarters, it perhaps may be a time to take a call.
An active equity fund seldom holds over 5-8 per cent in cash and equivalents. It also strives to remain invested in equities at all times. Funds from the HDFC basket are an example of such a strategy. Remember that while wrong sector calls occasionally can be tolerated, underperformance due to prolonged periods of poor participation in equity or high cash holdings isn't a good strategy. It defeats the very purpose of your investing in equity funds.
Sell immediately?
Was your fund in the top-10 list or top quartile of the equity fund list and has now slipped slightly lower in the last three or six month period? First thing: Do not panic and sell right away. You do not have to chase returns at all times. Only prolonged periods of underperformance, as mentioned earlier, should prompt you to sell a fund.
In your entire portfolio, there will always be a few funds that aren't great contributors to the overall returns score. Such funds, unless they are a drag the returns of your funds portfolio, need not be sold. A value-fund or a dividend yield fund for instance, may not be the best performer during bull phases, as was seen in the previous market rallies. However, such funds warrant a definite hold if they outperform their category peers. Besides, their value-investing approach may come in handy during periods of market correction. Gold funds or international funds too qualify as primarily diversifiers. So, do not expect these funds to keep pace with domestic diversified funds.
As for intention to hold across market-cap segments, much would depend on your risk appetite. Given your age, we think it would be safe to assume that you can stomach some risks. You can in such a case go for 10-15 per cent of pure large-cap funds, 40 per cent in mid-cap and thematic funds and the rest in diversified funds with a long-term track record.
— How frequently should I review my portfolio?
— What are the criteria to decide whether a fund is performing or not?
— If it is underperforming should I wait for some more time period or immediately sell it?
I am 30 years old and can invest Rs 5000 per month in mutual funds. What is the allocation to be made across different classes of funds (large-cap, diversified, mid-cap and small-cap)?
Amol Kulkarni
Mumbai
We appreciate your intention to come up with a systematic strategy to review your portfolio. These tricky questions pose a challenge to many investors. We will attempt to answer them by giving you some broad guidelines. As a general rule, you can review the performance of your portfolio at least once a quarter, subject to the following exceptions:
A huge rally in stocks in a short span of time warrants a cautious approach for two reasons: one, it could be a sign of a bubble in which case you would be better off encashing those paper profits; or two, your asset allocation – between debt and equity or amongst large-mid- and small-cap funds - would have gone out of kilter. You may have to review and rebalance the portfolio in such a case. In addition to this, any change in your strategy or risk profile too would warrant a review.
Is a fund performing?
When you review your portfolio, assess the performance of the individual funds and their overall contribution to the portfolio returns. Compare the funds returns with that of its benchmark and with funds belonging to the same category. For instance, mid-cap funds may be compared with their respective benchmarks and schemes with a similar strategy of investing in mid-cap stocks.
For this purpose do not take short periods of say one month. Unless it has been an eventful quarter, even a three-month period does not provide much insight. Look at the performance over 6-month, 1 year and two-year time frame. In markets such as the present one, a one and two-year period would reveal a lot on how the fund has tackled the different market phases. If you have held the fund for a long period of five years or more, then see if the three-year return has seen any significant change since the last time you reviewed it.
What is the extent of underperformance that can be tolerated would be the next logical question. Should you sell a fund because it returned 2-3 percentage points lower than its peer? Perhaps not. You will then have to look at the risk-adjusted return (as represented by Sharpe ratio). The fund which appears to have marginally underperformed may actually be doing so because of its lower risk profile. That means, its risk-adjusted return could very well be superior to some of its peers.
Note that, even between the same categories of funds — say within large-cap funds or mid-cap funds — the risk profile tends to vary. Most funds provide this data in their fact sheet. However, a variance of over 10 percentage points in performance should be a cause for concern.
Once you notice that a fund's performance is dipping, look out for the reasons as well. Has the fund' sector calls not worked well? Is the fund holding too much cash? If the fund is able to beat its benchmark but struggles to keep pace with peers, it could be because of the fund's conservative mandate or the high-risk mandate of its peers. Look for these variances before deciding on the next course of action. However, if the fund continues to be a laggard even after 3-4 quarters, it perhaps may be a time to take a call.
An active equity fund seldom holds over 5-8 per cent in cash and equivalents. It also strives to remain invested in equities at all times. Funds from the HDFC basket are an example of such a strategy. Remember that while wrong sector calls occasionally can be tolerated, underperformance due to prolonged periods of poor participation in equity or high cash holdings isn't a good strategy. It defeats the very purpose of your investing in equity funds.
Sell immediately?
Was your fund in the top-10 list or top quartile of the equity fund list and has now slipped slightly lower in the last three or six month period? First thing: Do not panic and sell right away. You do not have to chase returns at all times. Only prolonged periods of underperformance, as mentioned earlier, should prompt you to sell a fund.
In your entire portfolio, there will always be a few funds that aren't great contributors to the overall returns score. Such funds, unless they are a drag the returns of your funds portfolio, need not be sold. A value-fund or a dividend yield fund for instance, may not be the best performer during bull phases, as was seen in the previous market rallies. However, such funds warrant a definite hold if they outperform their category peers. Besides, their value-investing approach may come in handy during periods of market correction. Gold funds or international funds too qualify as primarily diversifiers. So, do not expect these funds to keep pace with domestic diversified funds.
As for intention to hold across market-cap segments, much would depend on your risk appetite. Given your age, we think it would be safe to assume that you can stomach some risks. You can in such a case go for 10-15 per cent of pure large-cap funds, 40 per cent in mid-cap and thematic funds and the rest in diversified funds with a long-term track record.
Interest rate hikes are not necessarily bad for the equity market
Interest rate hikes are not necessarily bad for the equity market if past experience is anything to go by, feels Mr Nandkumar Surti, Chief Investment Officer, J.P. Morgan Asset Management India. In an interview with Business Line Mr Surti gives his opinion on the short-term concerns in the equity and debt markets and the opportunities the latter offers currently.
Excerpts from the interview:
Have the inflationary/interest hike concerns and credit crisis in certain European economies affected fund flows into emerging markets?
In the short term, the developments in Europe will affect the fund flows to the emerging markets. By and large, Asia will adopt the interest rate normalisation process in the course of CY2010. This is likely to be non-disruptive for most of the markets. What one has to realise is that we are seeing a much better growth in the Asia region as compared to the rest of the world. We believe that once the current crisis is resolved, one should see money chasing growth economies and India along with China is obviously the fastest growing economies.
Even as earnings hobble to normalcy, higher raw material costs and interest rate hikes could be threats once again to corporates. Do you believe the turnaround could be short-lived?
Rising input costs as growth finds a stronghold is obviously something which corporate India will have to contend with. In general, we have seen raw material costs rise and margins compress. But this is likely to be compensated by a gradual rebound in volumes.
Also, as mentioned earlier, we see the interest rate reversal more as a rate rationalisation process rather than a tightening. We see liquidity conditions to be, by and large, comfortable. Even though the RBI will start raising the repo/ reverse repo, we see lending rates, by and large, stable as spreads continue to be very attractive.
There could be some short-term pressures in the first half of the next fiscal on account of the borrowing programme. But that presents more of an investment opportunity on the bond side.
Do you believe that the market has fully factored in inflationary concerns, monetary tightening and the impending rollback of stimuli?
The worst expectations on the street are a close to lower double digit on inflation. The bond markets are more concerned about the imminent government bond supply rather then the rate increase. We expect the government borrowing programme as well as rate hike to be front-loaded in FY2011. Liquidity mismatches amidst higher supply could put some pressures on rates.
However, we see the bond markets at the short end of the curve aggressively pricing in rate hikes of close to 150 bps in the next year. We see this as an investment opportunity. We have seen in the past that interest rate hikes are not necessarily bad for the equity market.
An ascending interest rate scenario can spell trouble for long term debt funds?
We see interest rates more a function of high government bond supply rather then the fear of RBI rate hikes. 10-year government bonds could trade in the range of 8-8.25 per cent in the first quarter of FY-11 on the back of the large supply.
However, we see lot of value in corporate bonds in up to three-year segment where we see bonds trading at a much higher spread compared to our assessment of RBI rate hike.
With improved performance by corporates has the risk perception of corporate bonds come down?
In the worst of 2008, we have seen only a few corporates being affected by the liquidity/ credit crisis. This is largely on account of the derivative/ forex exposure of these corporates. With improved fundamentals, good local and internationally liquidity, we see the worst for the corporate bonds to be over.
With narrowing credit spreads, does corporate bond market offer good investment avenues for debt funds? What is JP Morgan's strategy with its debt fund?
AAA Corporate bond spreads have narrowed in the bench mark 5 and 10 years. In the segments up to 3 years, we see bonds trading at much higher yields on account of temporary factors like CRR hike and impending traditional March tightness. We see value in these segments.
What should a debt fund investor's strategy be at this point in time?
We are advising our clients to increase asset allocation to short-term bond funds. A short-term bond with high current cash exposure stands a very good chance to build portfolio for next 3-6 months by taking advantage of the current high short-term rates. We believe that investors should avoid long bonds for the next three months and wait for more clarity on the borrowing calendar and the RBI's April Monetary Policy Review.
Q What is your reading of the Q3 earnings in India? Have valuations run ahead of earnings growth?
The aggregate financial performance of corporate India for the quarter ending December 2009 was in line to a little better than expected. Excluding oil PSUs (where quarterly data can be misleading due to subsidy etc.), operating profit of Sensex companies rose about 22 per cent YOY, about 1 percentage point higher than estimates. Net profit for Sensex companies rose about 17 per cent YOY, 2 percentage points higher than estimates. A broader universe of corporates delivered faster growth with aggregate operating profit rising 34 per cent YOY (higher by about 3 percentage points) and net profit by about 26 per cent YOY (in line).
With the correction in the equity market from the middle of January we believe that valuations are actually starting to look reasonable. With more evidence of accelerating growth emerging we would expect market to get valuation support in case it continues to correct owing to external or macro factors.
Q. Can India Inc's revenue growth be said to be back on track? Is the growth indicating volume as well as pricing power traction?
GDP for current fiscal is expected to grow at 7.50 per cent and for FY2011 at 8-8.50 per cent and inflation at an average 6 per cent. Given this, a 13-14 per cent nominal growth of the economy is expected. Within that one can expect better managed companies to post a 20-25 per cent earnings growth. Some of the growth we have seen in the last 6-8 months has obviously been aided by the fiscal and monetary policies in India. We have seen latest IIP number at 16.8 per cent, with a sharp upward movement in the index itself. This is a very positive sign. We see fiscal and monetary environment to be reasonably conducive to growth. While we see volumes coming back, we think that corporate India would allow volumes to pick rather then look for aggressive price increases.
Excerpts from the interview:
Have the inflationary/interest hike concerns and credit crisis in certain European economies affected fund flows into emerging markets?
In the short term, the developments in Europe will affect the fund flows to the emerging markets. By and large, Asia will adopt the interest rate normalisation process in the course of CY2010. This is likely to be non-disruptive for most of the markets. What one has to realise is that we are seeing a much better growth in the Asia region as compared to the rest of the world. We believe that once the current crisis is resolved, one should see money chasing growth economies and India along with China is obviously the fastest growing economies.
Even as earnings hobble to normalcy, higher raw material costs and interest rate hikes could be threats once again to corporates. Do you believe the turnaround could be short-lived?
Rising input costs as growth finds a stronghold is obviously something which corporate India will have to contend with. In general, we have seen raw material costs rise and margins compress. But this is likely to be compensated by a gradual rebound in volumes.
Also, as mentioned earlier, we see the interest rate reversal more as a rate rationalisation process rather than a tightening. We see liquidity conditions to be, by and large, comfortable. Even though the RBI will start raising the repo/ reverse repo, we see lending rates, by and large, stable as spreads continue to be very attractive.
There could be some short-term pressures in the first half of the next fiscal on account of the borrowing programme. But that presents more of an investment opportunity on the bond side.
Do you believe that the market has fully factored in inflationary concerns, monetary tightening and the impending rollback of stimuli?
The worst expectations on the street are a close to lower double digit on inflation. The bond markets are more concerned about the imminent government bond supply rather then the rate increase. We expect the government borrowing programme as well as rate hike to be front-loaded in FY2011. Liquidity mismatches amidst higher supply could put some pressures on rates.
However, we see the bond markets at the short end of the curve aggressively pricing in rate hikes of close to 150 bps in the next year. We see this as an investment opportunity. We have seen in the past that interest rate hikes are not necessarily bad for the equity market.
An ascending interest rate scenario can spell trouble for long term debt funds?
We see interest rates more a function of high government bond supply rather then the fear of RBI rate hikes. 10-year government bonds could trade in the range of 8-8.25 per cent in the first quarter of FY-11 on the back of the large supply.
However, we see lot of value in corporate bonds in up to three-year segment where we see bonds trading at a much higher spread compared to our assessment of RBI rate hike.
With improved performance by corporates has the risk perception of corporate bonds come down?
In the worst of 2008, we have seen only a few corporates being affected by the liquidity/ credit crisis. This is largely on account of the derivative/ forex exposure of these corporates. With improved fundamentals, good local and internationally liquidity, we see the worst for the corporate bonds to be over.
With narrowing credit spreads, does corporate bond market offer good investment avenues for debt funds? What is JP Morgan's strategy with its debt fund?
AAA Corporate bond spreads have narrowed in the bench mark 5 and 10 years. In the segments up to 3 years, we see bonds trading at much higher yields on account of temporary factors like CRR hike and impending traditional March tightness. We see value in these segments.
What should a debt fund investor's strategy be at this point in time?
We are advising our clients to increase asset allocation to short-term bond funds. A short-term bond with high current cash exposure stands a very good chance to build portfolio for next 3-6 months by taking advantage of the current high short-term rates. We believe that investors should avoid long bonds for the next three months and wait for more clarity on the borrowing calendar and the RBI's April Monetary Policy Review.
Q What is your reading of the Q3 earnings in India? Have valuations run ahead of earnings growth?
The aggregate financial performance of corporate India for the quarter ending December 2009 was in line to a little better than expected. Excluding oil PSUs (where quarterly data can be misleading due to subsidy etc.), operating profit of Sensex companies rose about 22 per cent YOY, about 1 percentage point higher than estimates. Net profit for Sensex companies rose about 17 per cent YOY, 2 percentage points higher than estimates. A broader universe of corporates delivered faster growth with aggregate operating profit rising 34 per cent YOY (higher by about 3 percentage points) and net profit by about 26 per cent YOY (in line).
With the correction in the equity market from the middle of January we believe that valuations are actually starting to look reasonable. With more evidence of accelerating growth emerging we would expect market to get valuation support in case it continues to correct owing to external or macro factors.
Q. Can India Inc's revenue growth be said to be back on track? Is the growth indicating volume as well as pricing power traction?
GDP for current fiscal is expected to grow at 7.50 per cent and for FY2011 at 8-8.50 per cent and inflation at an average 6 per cent. Given this, a 13-14 per cent nominal growth of the economy is expected. Within that one can expect better managed companies to post a 20-25 per cent earnings growth. Some of the growth we have seen in the last 6-8 months has obviously been aided by the fiscal and monetary policies in India. We have seen latest IIP number at 16.8 per cent, with a sharp upward movement in the index itself. This is a very positive sign. We see fiscal and monetary environment to be reasonably conducive to growth. While we see volumes coming back, we think that corporate India would allow volumes to pick rather then look for aggressive price increases.
REAL ESTATE TAMILNADU AND KERALA
True Value Homes (TVH), a leading engineering, construction and project management firm, plans to launch affordable housing projects in Kochi, Coimbatore, Tiruchi, Tirupati, Madurai and in multiple locations in Chennai in the next three months.
According to a press release from the company, the demand for affordable housing in India is still far outstripping the supply. The shortage in the low-income housing segment is estimated to be around 2.1 crore households. This presents a Rs13-lakh crore opportunity for developers. The affordability of a house for an average middle-class household has been defined to be in the Rs 3-10 lakh range. At this price, there could be a potential of 21 million buyers.
Mr N. Ravichandran, Chairman, True Value Homes India Pvt Ltd, said in the press release, “Addressing the growing demand of the affordable homes segment, TVH Svaya is poised to provide world class housing, which is now within the reach of the middle class.”
In Chennai the company has launched TVH Svaya, a $60-million residential project spread over 13 acres with 840 apartments of 555-1,085 sq.ft and priced between Rs14 lakh and Rs 23 lakh. TVH Svaya is situated in Sriperumbudur, a suburb to the west of Chennai on Kundrathur High Road. It targets the middle class family earning a cumulative income of Rs 5 lakh per annum. The apartments would be ready for occupation within six months of booking. TVH is a professionally managed company based in Chennai which has completed more than 4 million sq.ft of built-up space, with about 6 million sq.ft under construction and 28 million sq.ft in the pipeline covering residential and commercial property across Tamil Nadu.
‘Infrastructure thrust vital'
India's economic growth has to be supported by adequate and sustainable infrastructure development, according to a report “Infrastructure Development in India: An Assessment of Status and Strategies” by NCAER. The report provides a review of the progress of infrastructure development for seven sectors.
As the economy has accelerated growth, the utilisation rates of infrastructure have gone up whereas infrastructure building is itself lagging. There is a need to improve implementation performance. The report suggests full exploitation of the current potential of the infrastructure sectors; slack capacity in one sector also implies less than full utilisation of capacity elsewhere.
The report covers seven sub-sectors of infrastructure — power, telecommunication, roads, railways, airports, ports and irrigation.
The release, quoting Mr Suman Bery, Director General, NCAER, said “The Eleventh Five year plan (2007 to 2011) projected investments in infrastructure development to the tune of $500 billion. The current economic slowdown has cast some doubts on the scale of investments that may be possible in a short period of time, but there is a wide recognition that infrastructure development would be essential for sustaining high rate of economic growth over a longer term which in turn is necessary to achieve developmental goals.
“This study points to areas which require attention to improve performance in infrastructure development. It is hoped that this report will act as a useful source of reference to policy makers, academics, corporate sector and the public-at large on Infrastructure development in India.”
According to a press release from the company, the demand for affordable housing in India is still far outstripping the supply. The shortage in the low-income housing segment is estimated to be around 2.1 crore households. This presents a Rs13-lakh crore opportunity for developers. The affordability of a house for an average middle-class household has been defined to be in the Rs 3-10 lakh range. At this price, there could be a potential of 21 million buyers.
Mr N. Ravichandran, Chairman, True Value Homes India Pvt Ltd, said in the press release, “Addressing the growing demand of the affordable homes segment, TVH Svaya is poised to provide world class housing, which is now within the reach of the middle class.”
In Chennai the company has launched TVH Svaya, a $60-million residential project spread over 13 acres with 840 apartments of 555-1,085 sq.ft and priced between Rs14 lakh and Rs 23 lakh. TVH Svaya is situated in Sriperumbudur, a suburb to the west of Chennai on Kundrathur High Road. It targets the middle class family earning a cumulative income of Rs 5 lakh per annum. The apartments would be ready for occupation within six months of booking. TVH is a professionally managed company based in Chennai which has completed more than 4 million sq.ft of built-up space, with about 6 million sq.ft under construction and 28 million sq.ft in the pipeline covering residential and commercial property across Tamil Nadu.
‘Infrastructure thrust vital'
India's economic growth has to be supported by adequate and sustainable infrastructure development, according to a report “Infrastructure Development in India: An Assessment of Status and Strategies” by NCAER. The report provides a review of the progress of infrastructure development for seven sectors.
As the economy has accelerated growth, the utilisation rates of infrastructure have gone up whereas infrastructure building is itself lagging. There is a need to improve implementation performance. The report suggests full exploitation of the current potential of the infrastructure sectors; slack capacity in one sector also implies less than full utilisation of capacity elsewhere.
The report covers seven sub-sectors of infrastructure — power, telecommunication, roads, railways, airports, ports and irrigation.
The release, quoting Mr Suman Bery, Director General, NCAER, said “The Eleventh Five year plan (2007 to 2011) projected investments in infrastructure development to the tune of $500 billion. The current economic slowdown has cast some doubts on the scale of investments that may be possible in a short period of time, but there is a wide recognition that infrastructure development would be essential for sustaining high rate of economic growth over a longer term which in turn is necessary to achieve developmental goals.
“This study points to areas which require attention to improve performance in infrastructure development. It is hoped that this report will act as a useful source of reference to policy makers, academics, corporate sector and the public-at large on Infrastructure development in India.”
Long-term investing is about objectives not risk
Investors typically believe that stocks are less risky in the long run.
Some lean on this belief to extend their time horizon when faced with unrealised losses.
As one investor argued, stocks mean-revert and, hence, carry lower risk over the long term. Does mean reversion justify long-term holding of stocks?
This article discusses mean reversion and explains why it is counter-intuitive to hold mean-reverting assets for the long term.
It then argues that investors hold assets for the long-term because they are intuitively aware of asymmetric returns-compounding effect.
It also shows how the core-satellite framework helps in moderating these factors, encouraging holding stocks for the longer term.
Mean reversion
The argument that stocks are less risky in the long run is puzzling. For, if stocks are risky in the short run, where does the risk disappear in the long run? One argument could be that investors are able to predict variation in stock price over the longer horizon. This type of variation that reduces long-horizon risk is called mean reversion.
This means that a short-term downtrend in asset prices will be likely followed by an uptrend, as prices correct to their long-run average. Likewise, a short-term uptrend in prices will lead to lower returns expectations, causing price correction in the future. All of this means that price risk reduces over the longer horizon.
Now, the basic principle of financial market is the risk-return trade-off.
This means that the investors can only expect returns that are commensurate with the associated risks.
If mean reversion were indeed true, the long-run price risk for stocks will be low. And that would translate into lower long-run returns.
So, why then do investors extend their time horizon? The answer, perhaps, rests in the fact that investors are intuitively aware of asymmetric returns-compounding effect.
Asymmetric compounding
Suppose an investor buys a stock for Rs 10,000. Assume that the stock can only take two states — it can either rise 50 per cent or decline 50 per cent. If the stock declines in the first year by 50 per cent to Rs 5,000, it has to move up 100 per cent in the next year to recover the initial capital. Can it?
Even if the stock were currently way below its long-run average, it may take a long while for it to claw back the initial loss. Suppose instead the stock had risen 50 per cent in the first year to Rs 15,000.
It has to lose only 33 per cent to fall back to its initial investment.
The above example demonstrates a fact about returns-compounding — it takes a lot of effort to recover capital than it is to lose it!
Returns-compounding can, hence, have a devastating effect on the portfolio.
Investors intuitively understand this effect.
That is why they conveniently convert their short-term holdings into long-term investments when there is a large loss in the portfolio.
The problem, however, is that mean-reversion questions long-horizon investment while asymmetric compounding encourages such investments. What then should investors do?
Conclusion
Investments should be driven by liability structures such as buying a house or protecting pre-retirement lifestyle, post-retirement.
Mean reversion and asymmetric returns-compounding would then be drivers for the strategic asset allocation decision during the portfolio construction phase and later, for portfolio rebalancing.
The debate on whether stocks are less risky in the long run arises from the need to shift assets from short to long horizon.
The core-satellite portfolio overcomes this need for horizon-shifting by separating short and long-horizon exposures.
The core retirement portfolio, for instance, is passively-constructed with a horizon to match the retirement date while the satellite is structured to provide excess returns through continual rebalancing.
Such structures do not settle the debate on whether stocks are less risky in the long run; they help investors' side-step the issue and construct meaningful portfolios.
Some lean on this belief to extend their time horizon when faced with unrealised losses.
As one investor argued, stocks mean-revert and, hence, carry lower risk over the long term. Does mean reversion justify long-term holding of stocks?
This article discusses mean reversion and explains why it is counter-intuitive to hold mean-reverting assets for the long term.
It then argues that investors hold assets for the long-term because they are intuitively aware of asymmetric returns-compounding effect.
It also shows how the core-satellite framework helps in moderating these factors, encouraging holding stocks for the longer term.
Mean reversion
The argument that stocks are less risky in the long run is puzzling. For, if stocks are risky in the short run, where does the risk disappear in the long run? One argument could be that investors are able to predict variation in stock price over the longer horizon. This type of variation that reduces long-horizon risk is called mean reversion.
This means that a short-term downtrend in asset prices will be likely followed by an uptrend, as prices correct to their long-run average. Likewise, a short-term uptrend in prices will lead to lower returns expectations, causing price correction in the future. All of this means that price risk reduces over the longer horizon.
Now, the basic principle of financial market is the risk-return trade-off.
This means that the investors can only expect returns that are commensurate with the associated risks.
If mean reversion were indeed true, the long-run price risk for stocks will be low. And that would translate into lower long-run returns.
So, why then do investors extend their time horizon? The answer, perhaps, rests in the fact that investors are intuitively aware of asymmetric returns-compounding effect.
Asymmetric compounding
Suppose an investor buys a stock for Rs 10,000. Assume that the stock can only take two states — it can either rise 50 per cent or decline 50 per cent. If the stock declines in the first year by 50 per cent to Rs 5,000, it has to move up 100 per cent in the next year to recover the initial capital. Can it?
Even if the stock were currently way below its long-run average, it may take a long while for it to claw back the initial loss. Suppose instead the stock had risen 50 per cent in the first year to Rs 15,000.
It has to lose only 33 per cent to fall back to its initial investment.
The above example demonstrates a fact about returns-compounding — it takes a lot of effort to recover capital than it is to lose it!
Returns-compounding can, hence, have a devastating effect on the portfolio.
Investors intuitively understand this effect.
That is why they conveniently convert their short-term holdings into long-term investments when there is a large loss in the portfolio.
The problem, however, is that mean-reversion questions long-horizon investment while asymmetric compounding encourages such investments. What then should investors do?
Conclusion
Investments should be driven by liability structures such as buying a house or protecting pre-retirement lifestyle, post-retirement.
Mean reversion and asymmetric returns-compounding would then be drivers for the strategic asset allocation decision during the portfolio construction phase and later, for portfolio rebalancing.
The debate on whether stocks are less risky in the long run arises from the need to shift assets from short to long horizon.
The core-satellite portfolio overcomes this need for horizon-shifting by separating short and long-horizon exposures.
The core retirement portfolio, for instance, is passively-constructed with a horizon to match the retirement date while the satellite is structured to provide excess returns through continual rebalancing.
Such structures do not settle the debate on whether stocks are less risky in the long run; they help investors' side-step the issue and construct meaningful portfolios.
Plan and track to grow your money
The world is changing, and so is world of money. Finance and personal finance rank first and third, respectively, in the most searched keywords by Indian netizens.
Statistics show that most people could manage very well on the income they have if they are able to keep their bills and expenses within the income. Sadly, too many people do not understand how to do this.
Simply having a budget in place or keeping up with your checking account isn't enough anymore. Our research shows that a person earning Rs 1 lakh per month has 50–100 financial transactions across all instruments each month. It's difficult to track these spends and get a clear picture of where your money is going.
Goal-setting
How many times have you made a New Year's resolution to stay within your financial budget? Started out with gusto on January 1 and lost steam by January 31?
An important aspect of financial planning is setting limits or thresholds for your spends at the beginning of the month and tracking it against your actual expenses.
Goal setting is a great planning tool that brings in discipline and rigour to your financial management. Try classifying goals as either wants or needs.
Go a step further and add long-term or short-term to the description. For instance, say you want to buy a new car soon. Gathering the money for a down payment without borrowing or dipping into savings would be a short-term need; call it priority number one. Longer-term needs, such as contributions to a retirement fund, can get priority two.
Choose goals you can get excited about. Do you need to save for your dream car or that house you've been wanting for years? To motivate yourself to spend less, always visualise your future with your dreams coming true.
It is important you know where your money's going so you know where you can save. Make a budget that will meet your financial duties. If you have to cut down on certain expenses to live within your budget, then do so. Spend money that has been set aside for a particular expense only for that purpose.
We all know what it is like to have our money dribbling away one coin or one note at a time. It can be very helpful to record all expenditure for a set period of time.Once you know where your money is going, you can curtail unnecessary expenses.
While the easiest way to manage money is to put a piece of paper in your wallet or check book and check what happens with every rupee you spend. But practically does this really work? And, what if you have accounts across multiple banks? How do you remember your transactions ?
In such a situation, the best tool one can the one that organizes your financial information by bringing your accounts together in one place – including banking, credit card, loan and investing accounts. And lets you check in anytime to see exactly where your personal finances are for the week, month or year.
Mobile phones are almost life savers today. Try and setup bill reminders to not miss payment dates and input expenses on your phone's calendar. So when you sit down during the weekend with your accounts, you know exactly where you spent during your last outing.
If you break down your personal finances, they are less overwhelming. And you have learnt that you can keep them organised if you take a few minutes each day. A predictable financial future will leave you with more money in your pockets.
Statistics show that most people could manage very well on the income they have if they are able to keep their bills and expenses within the income. Sadly, too many people do not understand how to do this.
Simply having a budget in place or keeping up with your checking account isn't enough anymore. Our research shows that a person earning Rs 1 lakh per month has 50–100 financial transactions across all instruments each month. It's difficult to track these spends and get a clear picture of where your money is going.
Goal-setting
How many times have you made a New Year's resolution to stay within your financial budget? Started out with gusto on January 1 and lost steam by January 31?
An important aspect of financial planning is setting limits or thresholds for your spends at the beginning of the month and tracking it against your actual expenses.
Goal setting is a great planning tool that brings in discipline and rigour to your financial management. Try classifying goals as either wants or needs.
Go a step further and add long-term or short-term to the description. For instance, say you want to buy a new car soon. Gathering the money for a down payment without borrowing or dipping into savings would be a short-term need; call it priority number one. Longer-term needs, such as contributions to a retirement fund, can get priority two.
Choose goals you can get excited about. Do you need to save for your dream car or that house you've been wanting for years? To motivate yourself to spend less, always visualise your future with your dreams coming true.
It is important you know where your money's going so you know where you can save. Make a budget that will meet your financial duties. If you have to cut down on certain expenses to live within your budget, then do so. Spend money that has been set aside for a particular expense only for that purpose.
We all know what it is like to have our money dribbling away one coin or one note at a time. It can be very helpful to record all expenditure for a set period of time.Once you know where your money is going, you can curtail unnecessary expenses.
While the easiest way to manage money is to put a piece of paper in your wallet or check book and check what happens with every rupee you spend. But practically does this really work? And, what if you have accounts across multiple banks? How do you remember your transactions ?
In such a situation, the best tool one can the one that organizes your financial information by bringing your accounts together in one place – including banking, credit card, loan and investing accounts. And lets you check in anytime to see exactly where your personal finances are for the week, month or year.
Mobile phones are almost life savers today. Try and setup bill reminders to not miss payment dates and input expenses on your phone's calendar. So when you sit down during the weekend with your accounts, you know exactly where you spent during your last outing.
If you break down your personal finances, they are less overwhelming. And you have learnt that you can keep them organised if you take a few minutes each day. A predictable financial future will leave you with more money in your pockets.
STOPPING YOUR SIP IN THIS VOLATILE MARKET - IS IT WISE VIEWS FROM READERS
Sanjay Gupta says
You give your hard earned money to a mutual fund, SIP etc for higher returns. The Fund or the Company which has taken your company has people with high pay checks, advertisement etc.
Will it be in a position to give you the returns as promised, I doubt. Better to invest in A group shares and forget or invest in FDR,PPF, NSC You investments would be safe and sure.
If you speak to people you would find 90% of people have lost their money taking interest into account. Why let others to train and earn at your expense.Why not do it on your own.
Every Investment in Equity is Risky by Jagan P James says
Even SIP is as risky as any other investment, only console is you don't feel the pinch of it till you go for closing it. No matter, which equity based investment you enter, you make money only when the market is in an up-move.
Say you invest 10000 on a NAV of 100, when you want to en cash if the NAV is less than 100, no matter how much ever NAV has increased in the mean period, ultimately you wont even get your principle.
Even if 10000 was invested as sip over a period as 1000 each , still if you en-cash when the market is in a down-slide, there is an equal chance of getting lesser than the principal.
You give your hard earned money to a mutual fund, SIP etc for higher returns. The Fund or the Company which has taken your company has people with high pay checks, advertisement etc.
Will it be in a position to give you the returns as promised, I doubt. Better to invest in A group shares and forget or invest in FDR,PPF, NSC You investments would be safe and sure.
If you speak to people you would find 90% of people have lost their money taking interest into account. Why let others to train and earn at your expense.Why not do it on your own.
Every Investment in Equity is Risky by Jagan P James says
Even SIP is as risky as any other investment, only console is you don't feel the pinch of it till you go for closing it. No matter, which equity based investment you enter, you make money only when the market is in an up-move.
Say you invest 10000 on a NAV of 100, when you want to en cash if the NAV is less than 100, no matter how much ever NAV has increased in the mean period, ultimately you wont even get your principle.
Even if 10000 was invested as sip over a period as 1000 each , still if you en-cash when the market is in a down-slide, there is an equal chance of getting lesser than the principal.
Thursday, February 18, 2010
HEMAL PAREKH OF ARIHANT INVESTMENTS MUMBAI REPLIES TO QUERIES
Pavan Pal Singh asked, I have investing more amount than required in ELSS MF's , can I redeem my excess units if I don't claim any Tax saving on them
Shripad Bhatt asked, Please suggest which 2-3 of the following funds are best to start SIP for 2000 each. 1. Sundaram SMILE 2. SBI contra 3. ICICI discovery 4. Birla Frontline 5. Franklin bluechip 6. IDFC premier equity. I already have SIP with HDFC top-200, DSPBR top-100 and Sundaram Midcap. Please comment. Thanks in advance.
Sudesh Ghosh asked, Sir can i invest in mutual funds in the name of My Wife & Daughter Kindly advice
Mod N K asked, I have invested in SBI Infrastructure fund, HDFC Mid cap Opp. fund and Morgan Stanley A.C.E Fund. The former twos are performing not up to my expectation. Should I continue or exit after lock in period
J Rao asked, Good afternoon. My son is 10 months old and we have put 1.1 lakh Rs. in his kid's account which he got as cash gifts from our friends and relatives. I want to invest this money with an investment horizon of 15 years for his higher education. Please suggest a plan.
Raj K asked, Dear Mr Hemal, I pay House Loan Rs 8500 per month and i can save only 10000 total in a month, please advise if i can invest remaining Rs 1500 in ELSS or SIP Mutual fund and which are good one.
Balkrishna Anpat asked, is icici pru tax fund is good
BHUSHAN asked, HemaljiI, PLEASE ADVISE SAFE INVESTMENT OPTIONS FOR LUM SUM AMOUNT FOR TIME HORIZEN TWO TO THEE YEARS. HOW SAFE IS INVESTMENT IN MIP HDFC LONG TERM OR ANY OTHER GOOD MIP.
Viji Pitambar asked, hello sir.. I'm looking to invest in any fund mainly which gives tax benefits and also good returns for short term. can u please suggest me a good option for the same
Sheetal Kaikaini asked, what is your view on the markets. how do you look at them in this calendar year
Badshah Sheikh asked, sir 25 year from now i am 36 yrs old, i want my wealth Rs.1 crore that time how much i invest per month through sip. and suggest few company's have already sip in hdfc top 200.idfc premier equity, sundaram select focus.
BHUSHAN Parmar asked, PLEASE ADVISE WHETHER MIP IS GOOD OPTION OR DEBT FUND FOR SECURE INVESTMENT WITH LITTLE LOWER RISK.
Umesh More asked, sir, i need help in planning my investments for retirement age--i am 40 yrs old--how can you help me
Deepak Despande asked, Hello sir. Please clarify. I have a investment of rupees two lacks in 5 funds equally. now my return is around 21% and i want to book it. What is the procedure to only take my profit out but not the investment. Is it possible?
Haris G asked, I have invested 1.5Lac in post office MIS in Jan this year and planning another 1.5Lac in march do you think it's wise to invest in PO Mis or is there any other alternative
Riddhima Sharma asked, i am 38yrs. Annual earnings 7lac. what will be the best term insurance policy for me
HARIIYER asked, I am investing Rs.2000/- PM thro SIP in each of HDFC Growth, HDFC prudence & IDFC Premier equity plan A. Pl advise shall i stay with this funds.
Cajetan Serpao asked, Can you please let me know is it worth to have Birla Sun life insurance dream plan which is a term plan compared to other term plan, since this provides a guaranteed maturity benefit. Thanks in advance.
Maneka Rang asked, Why don't you suggest index funds any reasons for specific aversion to INDEX funds ?
Nageswar Uppludu asked, R/Sir, Suggest one best Pension fund.
Trikkanad Dilip asked, Hi Sir, I am investing in SIP and i plan to take out money after 10 years (my goal). Some analysts say that if you don't take out money in proper time, SIP is not useful. Should i keep withdrawing in between or let corpus build? Your comments please.
MAYANK asked, Hello sir I have 2Lacs rupees of disposable Income.. I want to Invest it for 2-3 Months Time horizon.. I want to invest it in safe hands.. Want to gain maximum by Investing in less risky assets. Pls let me know the various alternatives where i can look upon? Thanks
N Venkat asked, i have been investing last 2 years in DSP BR Equity Fund and Reliance regular saving equity fund? is good to invest in these two using SIP mode?
Lalit Shah asked, is it beneficial to redeem tax saving MF after three year
MANISH BANSAL asked, what is effect of price rise on share market
Kore Ashish asked, Sir, please tell me the future prospects of Sundaram Thematic fund & Tata-indo global infrastructure fund which i presently own.
Ramesh Kavaskar asked, hdfc prudence and hdfc balance what is the difference and which is better why
Rama Magazine asked, what r the smart tips considering the forthcoming budget & the introduction of direct tax code.
Sakshi k Jain asked, I have almost 10 lacs in hand. I already have fds worth 15 lacs, PPF quota is full for the year, what are the good options to invest where I can get 10-12% return without much risk
Avinash K asked, Kindly suggest some of the good mutual funds for SIP for long term holdings (10 t0 12 years).
Hanuman Singh asked, How is HDFC standard life policy? Can we go for it?
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Wednesday, February 17, 2010
ELSS DECODED
ELSS Decoded
With the current fiscal year coming to an end, fund houses are back to marketing equity-linked tax saving schemes (ELSS) aggressively. Traditionally, it is during February and March that many investors buy into these schemes to avail of the tax breaks these schemes offer.
Going by the historic data, close to 50% of the annual net inflows into ELSS are recorded during the past two months of the fiscal year (April to March).
Fund houses try to lure investors to put money in such schemes with tag lines such as, "Yeh tax bachaye, investment ka fayda bhi laye" or "Get triple tax benefits and doosra income advantage". If you too are tempted to invest in one of these equity mutual funds (MFs), which offer tax advantages. ETIG offers you a few tips to make the best out of your hard-earned money.
ELSS OR (NON TAX-SAVING ) DIVERSIFIED EQUITY?
What differentiates the two is the tax deduction of up to Rs 1 lakh under Section 80C of the Income-Tax Act available to ELSS. This tax benefit is not available for investors who put money in other diversified equity schemes. However, as far as the investment objective is concerned, there is no fundamental difference between these two categories.
Having said that, it is important to note that historically, the average returns in the category of diversified equity schemes have always been relatively better than those of ELSS. (See Table). The Table is only indicative of the average category performances. The performance of the tax saving scheme may be relatively better than their diversified equity peers on an individual fund house level.
ELSS OR (NON TAX-SAVING ) DIVERSIFIED EQUITY?
Given the mandatory three-year lock-in period in the case of ELSS, many people assume that in the absence of any immediate redemption pressure, fund managers lack the kind of enthusiasm to manage an ELSS which they otherwise do while managing other (non tax saving ) diversified equity schemes. This presumption is however subjective for each fund house and every fund manager.
But having said that, one can not also deny the fact that the mandatory three-year lock-in period helps promote the habit of long-term saving among investors. For instance, this mandatory lock-in period may have turned boon in disguise for many investors when the markets passed through a transitory phase in 2008. Those who continued to remain invested (mandatory or otherwise) in their equity schemes would have recouped most of their losses in 2009.
DIVIDEND OR GROWTH?
If the thought of locking in investments for three years puts you off, investors can opt for dividend rather than the growth option for their ELSS investments. This will ensure that any appreciation in capital is returned back to the investor periodically ensuring that capital is intact and locked in for three years.
For instance, Rs 10,000 invested in an ELSS appreciates by about 20% in a year and if the fund declares a dividend of, say 10%, an investor would get back Rs 1,000 while the balance Rs 11,000 continues to remain invested next year. Periodic dividends received annually can then be re-invested by the investor in any other financial instrument or product.
IMPLICATIONS OF RE-INVESTING DIVIDEND?
Dividend re-investing is an option where instead of paying back the dividend declared to the investor, the fund house uses the money to buy additional units of the scheme for the investor. The option is thus pretty similar to the growth option where the money grows within the scheme itself.
There is, however, a flip side to this option, especially as far as ELSS is concerned. Each time the fund declares a dividend and purchases additional units of the scheme, the same will be considered as a fresh investment for the purpose of tax deduction under Section 80C of the I-T Act, which provides for tax deductions on specified investments.
Investors can thus claim a deduction to the extent of new units purchased, up to a maximum limit of Rs 1 lakh. Each such purchase of fresh units will be treated as a new investment and thus locked-in for three years starting from the date of their purchase or date of dividend reinvestment. Thus, if the dividend is re-invested in, say the third year of investment, the money will be locked in for a further three years.
SIP OR LUMP-SUM INVESTMENT?
A systematic investment plan (SIP) is ideally the best route to make periodic investments in equity schemes. Working on the principle of a recurring deposit scheme of any bank, a SIP ensures that a small number of units of an MF are purchased each month, irrespective of market volatility. Investors can thus get a larger number of units with the same monthly investment when the markets slide and a lower number when the markets are rallying.
In the case of an ELSS, however, each SIP is a new investment that means a lock-in period of three years. A lump-sum amount of say Rs 1,00,000 invested in an ELSS in March 2007 can be redeemed by the investor by the end of March 2010.
However, if the same amount is invested through a monthly SIP of Rs 1,000 each, only the first SIP will be redeemable in March 2010. Thus the SIP that got invested in September 2008 will be available for redemption only by the end of September 2011.
Diversify and evaluate costs for better returns
Diversify and evaluate costs for better returns
Basically, a mutual fund is a collection of money (funds) from many investors. This pool of money is managed by professional money managers, for investments in market instruments. Investors who pool money by buying mutual fund units are its shareholders (unit holders).
Fund managers invest this money and buy securities such as stocks and bonds. A mutual fund can make money from its securities in two ways - a security can pay dividends or interest to the fund or it can rise in value.
Advantages of investing in mutual funds include professional management of funds, research of securities, investment diversification, variety, liquidity, affordability, convenience, government regulation etc.
On the other hand disadvantages of investing in mutual funds include payment of charges regardless of fund's performance and lack of control on investments made by fund managers.
Diversify and evaluate costs for better returns
First of all it is important to ascertain and identify your financial needs and goals before taking investment decisions.
Financial needs/goals could be short or medium-term goals like planning for a vacation, creating an emergency fund etc, and long-term goals like a child's education, retirement planning etc.
Identifying your financial needs and goals helps in selecting the investment instruments and quantum of investments.
There are many flavours in mutual funds available in the market and their offerings vary from low risk and low return to high risk and high return funds.
Liquid mutual funds
Liquid mutual funds invest in safe instruments like government securities. This a good option for investors looking at parking their money for a short term.
Investments in liquid funds are fairly liquid. An investor can enter or exit from the fund at any point in time. Thus, if short-term liquidity is your highest priority you can look at investing in liquid mutual funds.
Debt funds:
Debt funds and balanced mutual funds are safer investment instruments. Balanced funds invest a certain portion of their corpus in blue-chip stocks and hence they provide better returns. Investors with a low risk profile should invest in balanced mutual funds.
Equity funds
There are various schemes and investment instruments available in the market in this category. Investors should be careful while investing in equity mutual funds.
Usually, the high beta funds perform very well in good market conditions but on the flip side, they under-perform the market in adverse conditions. Investors should go in for a basket of equity funds with different themes in order to diversify their risk in the market.
Tax-saving mutual funds:
These are also known as equity-linked savings schemes (ELSS). Investments in a tax-saving fund provide rebate under Section 80C of the Income Tax Act.
These funds come with a lock-in period of three years and invest a major portion of their funds in equity and equity-based instruments. Investors should select a scheme carefully after studying the fund performance, expenditures likely to be incurred, and method of investments.
Unit-linked insurance plans (ULIP)
Investments in these funds come bundled with insurance. These funds invest the money in equity or related instruments and deduct a portion of the investors' funds to provide them insurance cover. Investors have the option to select a debt fund or equity fund for their investment.
Investors should select the scheme carefully after studying the fund performance, management fees and chances offered to switch between funds, based on market conditions.
Gold funds:
Investments in commodities, especially gold, have picked up in recent times. The gold-based investments add another dimension to a portfolio. It acts as a debt instrument and usually provides good returns during uncertain economic conditions. Investments in gold based funds (exchange-traded funds) are a good way to take positions in gold rather than physically holding it. It is much safer to hold than the metal and is easy to liquidate in the market.
Points to keep in mind
Here are some points investors should keep in mind while planning a mutual funds portfolio:
Diversify: Don't put all the eggs in one basket. Look for diversification of your investment instruments.
Targets: Always have realistic expectations of the investment's performance. Try to understand why a fund has the capability to out-perform (could be due to the sector or experienced fund manager). Remember, the past performances of the instrument may not be repeatable.
Charges: Consider the fees, loads and taxes applicable on the investment
IDEA CELLULAR WILL HIT 77 NEXT WEEK
Idea Cellular will go up to Rs. 77 within next week before budget by Mittal kawita
Motilal Oswal has maintained buy rating on Idea Cellular with a price target of Rs 77 in its Feb 25, 2010 research report.
Idea Cellular's 3QFY10 PAT of Rs 1.7b (down ~23% YoY and QoQ) was significantly above estimates. Consolidated revenue grew 15.3% YoY and 5.9% QoQ to Rs 31.5b led by robust traffic growth of 14.9% QoQ (vs 3.3% QoQ growth in 2QFY10). RPM decline of 7.8% QoQ also surprised positively (our est of 10% QoQ decline). Consolidated EBITDA grew 16.7% YoY and remained flat QoQ despite higher new circle losses and ESOP provision. While competitive intensity remains high, we are positively surprised by the robust volume pick-up and sustained EBITDA margin in established circles.
Solid operating metrics: Idea (ex-Spice) reported 3QFY10 ARPU of Rs 200 (vs est Rs 192), down 24.8% YoY an 4.3% QoQ. RPM declined 19.6% YoY and 7.8% QoQ to Rs 0.51. Total volumes carried on the network increased 43.7% YoY and 14.9% QoQ to 57.8b minutes. This is the highest traffic growth reported by Idea in the past six quarteRs . Minutes of use per subscriber increased 3.7% QoQ to 389 minutes, likely on seasonal strength, MOU elasticity and regain of volume market share post tariffs cuts. This is the fiRs t instance of MOU growth for Idea in the past six quarteRs . Churn rate increased to 9.1% per month, reflecting significant volatility in the pre-paid market.
Motilal Oswal has maintained buy rating on Idea Cellular with a price target of Rs 77 in its Feb 25, 2010 research report.
Idea Cellular's 3QFY10 PAT of Rs 1.7b (down ~23% YoY and QoQ) was significantly above estimates. Consolidated revenue grew 15.3% YoY and 5.9% QoQ to Rs 31.5b led by robust traffic growth of 14.9% QoQ (vs 3.3% QoQ growth in 2QFY10). RPM decline of 7.8% QoQ also surprised positively (our est of 10% QoQ decline). Consolidated EBITDA grew 16.7% YoY and remained flat QoQ despite higher new circle losses and ESOP provision. While competitive intensity remains high, we are positively surprised by the robust volume pick-up and sustained EBITDA margin in established circles.
Solid operating metrics: Idea (ex-Spice) reported 3QFY10 ARPU of Rs 200 (vs est Rs 192), down 24.8% YoY an 4.3% QoQ. RPM declined 19.6% YoY and 7.8% QoQ to Rs 0.51. Total volumes carried on the network increased 43.7% YoY and 14.9% QoQ to 57.8b minutes. This is the highest traffic growth reported by Idea in the past six quarteRs . Minutes of use per subscriber increased 3.7% QoQ to 389 minutes, likely on seasonal strength, MOU elasticity and regain of volume market share post tariffs cuts. This is the fiRs t instance of MOU growth for Idea in the past six quarteRs . Churn rate increased to 9.1% per month, reflecting significant volatility in the pre-paid market.
VISHAL MENGANANI OF TRIDENT FINANCE REPLIES TO QUERIES
Dutta asked, is there any limit of tax benefit on pension plan, i want to invest 1 lakh every year what is my tax benefit
Vishal MengananI answers, ideally don’t go for off the shelf products as your needs are unique to you, go for a customized retirement plan with a financial planner. ________________________________________
Pasad D K asked, hello sir, I'm planning to invest 1Lakh. Can you please suggest me which FD is best? (time frame 3-4yrs)
Vishal Menganani answers, Network 18 FD
________________________________________
Abhishek asked, Hello Sir, I have now joined as Management trainee in a finance Co. I just want to know which scheme will be more beneficial for me for investment monthly. I am now drawing salary 15k per month. Apart from SIP is there anything beneficial? If it is SIP then should I go for SBI or any other organizations?
Vishal Menganani answers, look for the track record of the scheme apart from the fund house. you can go for franklin bluechip, HDFC top 200 and DSP BR 100
________________________________________
Pravakar asked, Hello Sir, good afternoon. i am in confusion i.e. shall i go for Recurring Deposit for 5 year with an amt of 1000 or invent 15000/yr in HDFC for 5 yrs.
Vishal Menganani answers go for HDFC Ltd announced a Systematic Saving Plan (SSP), which will pay variable interest rates on recurring deposits to investors.
________________________________________
Reddy asked, Hello Sir, I have started investing SIP in HDFC TOP 200 (Rs. 1000), DSPBR TOP 100 (rs. 1000),HDFC Prudence Fund(Rs. 1000), DSP BR Balanced Fund (Rs. 1000), IDFC Premier Equity FUND (Rs. 2000).Kindly tell me about my portfolio.
Vishal Menganani answers stay invested
________________________________________
TIWARI asked, HELLO SIR, KINDLY ADVISE WHETHER LUMP SUM AMOUNT IS GOOD OR SIP'S ARE GOOD FOR INVESTMENT IN MUTUAL FUNDS.PLEASE ADVISE TWO BEST INCOME FUND & TWO BALANCE FUND / EQUITY FUNDS
Vishal Menganani answers it is always advisable to go via SIP as the load on your pocket is less, you manage volatility better and you could stay invested for longer terms. I would advise you to stay away from income funds for the year. HDFC Prudence/DSP Balanced are my picks.
________________________________________
ND Roy asked, Pl suggest a life insurance policy
Vishal Menganani answers go for term plans
________________________________________
Deep Dutt asked, II understand that its mandatory to invest in ULIP's for 3 years, is it advisable to take the money out after 3 years? or should i continue with the investment?
Vishal Menganani answers explore the option for "reduced paid up" with your insurer and invest in a term plan and mutual fund
________________________________________
Mansha K asked, I understand that its mandatory to invest in ULIP's for 3 years, is it advisable to take the money out after 3 years? or should i continue with the investment?
Vishal Menganani answers explore options of "reduced paid up" policy with your insurer and invest the amount in a combination of term plan and mutual funds
________________________________________
Amit Karp asked, Where should I invest Rs 1 Lac for 10 years for my child's education ?
Vishal Menganani answers you could start with an equity heavy portfolio and annually reduce your exposure to equity by say 10% per annum.
________________________________________
Vikas asked, Sir, I have 3 lakhs rs at my disposal which i want to invest. I need them may in next 1-2 years for my MBA fees. As i cant go for long term bets kindly suggest some scheme, MFs etc. As markets are too volatile these days i don’t want to go into schemes fully exposed to equities.
Vishal Menganani answers go for bank FD as you need to preserve your capital.
________________________________________
Siddhu asked, According to you is it wise to invest in single premium insurance policies say for example LIC's Bima Bachat? For a working professional who already have enough insurance say approx. 65 lacs of sum assured.
Vishal Menganani answers the minimum cover should be 15 times your take home, if you are exceeding it then don’t invest any further in insurance.
________________________________________
Thatgartha asked, Sir your suggestion on Birla SL BLUCHIP (G), DSP TOP 100 (G), HDFC Growth Fund, DSP BR Tiger(G), Rel Div power sector Fund (G), DSP BR Equity (G)
Vishal Menganani answers stay invested
________________________________________
Misal Pavan asked, Sir your suggestion on Birla SL BLUCHIP (G), DSP TOP 100 (G), HDFC Growth Fund, DSP BR Tiger(G), Rel Div power sector Fund (G), DSP BR Equity (G)
Vishal Menganani answers stay invested
________________________________________
Praveen Sankhe asked, Hi Sir, I am investing in HDFC ULIP and HDFC Equity Fund. Please suggest me some other funds (1 diversified, 1 balanced and 1 MIP) to make my portfolio complete.
Vishal Menganani answers exit ULIP and invest in HDFC top 200 (Diversified) HDFC Prudence Balanced) Principal MIP Plus (MIP)
________________________________________
Deepak Singh asked, Sir I have around 10 MFs with investment around 7 lakhs. Some of them are giving very good return but on average my returns is 15 % in two years. Please suggest
Vishal Menganani answers compared to the markets you seem to have fared well. when we advise our clients we assume equity to give you 12-15% approx. so stay invested
________________________________________
Rambabu asked, Hello Sir, I am interested to invest in SIP with an amount of Rs 1500/- per month. Can you suggest 4 to 5 mutual funds?
Vishal Menganani answers HDFC top 200 and DSP top 100
________________________________________
Sourav asked, Hello Sir, I am 37 years old and started investing SIP in equity diversified mutual fund of Rs.12500/ per month from December 2009. I am looking forward to invest for 23 years in mutual fund. My quarry is after how many years will I start to transfer from equity to debt fund and how much will I expect to get after 23 years of SIP investment.
Vishal Menganani answers as a general rule your age number should be the minimum exposure to debt i.e if you reach age 40 then atleast 40% should be invested in debt instruments, however as you near your goals then you can reduce your equity exposure to under 10%.
________________________________________
Argi K asked, Dear Visal I m a NRI guy. Want to invest some 8 lakh rupees in India for next 4-5 years. Kindly suggest some good options except property. Thanks
Vishal Menganani answers invest in Equity MFs with a large cap bias.
________________________________________
Satish Shetty asked, Hi Vishal, I am new to investments and illiterate on the subject. My monthly salary is Rs. 20000/- after expenses i can save 10000 a month. Where can i save and how can i benefit from this.
Vishal Menganani answers align your savings and investments to your goals and proceed accordingly.
________________________________________
JC Gupta asked, WHY EXPERTS ADVISE TO KEEP OUT OF ULIPS? I HAVE ABOUT 1.50 LCS PER ANNUM TO INVEST PLEASE SUGGEST SOME GOOD MUTUAL FUNDS.. IS RELIANCE REGULAR SAVINGS EQITY GROWTH A GOOD OPTION? ADVISE
Vishal Menganani answers ULIPS are sold as combination of insurance and investments. The insurance cover is maximum 5 times if it has to enjoy 80C benefit. Also ULIPS take away a lot of ur investments under mortality charges, fund management charges and commissions to agents. Thus out of 100 rupees you pay in the first year only 75 rupees on an average gets invested. In MFs on the other hand it is close to 99 rupees. As of reliance regular savings its a good funds and you should stay invested.
________________________________________
Sundara Iyer asked, Most of the ELSS are losing it's charm; is there any investment(Tax benefit) can replace ELSS in the near term for 3 years?
Vishal Menganani answers For all its flaws ELSS has one of the lowest lock ins. Bank FD has 5 years, NSC has 6, PPF 15 years (partial withdrawal at 5). Thus even if you have chosen a wrong scheme you could exit the earliest from an ELSS
________________________________________
Raj asked, I want to know about ELSS, for how many years we can invest here and which ELSS is best now a days, Is it a best option to invest here. Please advise.
Vishal Menganani answers ELSS is an equity linked instrument which provides tax benefits under section 80C. They have a lock in of 3 years.It is a good option factoring in the power of equity and tax benefits. Some good schemes are HDFC Tax Saver and Franklin Tax Shield
________________________________________
Ashfaq Khan asked, Sir, I want to save Rs.10,000 per month, which is the best investment option for me
Vishal Menganani answers you could invest in a mix of debt instruments like debt funds, bank FDs etc and equity MFs via the SIP route.
________________________________________
Sunder Bhamgara asked, currently i am doing SIP in Kotak opportunities 1000, DSP TIGER - 1000, Principal Emerging BlueChip - 1000, ICICI Discovery phase - 1000; are these funds are o.k.? shall i make change in my portfolio? If yes, please suggest good funds; Thanks
Vishal Menganani answers exit principal and ICICI fund and invest in HDFC top 200 and DSP top 100 as that would reduce the risk of variation in returns.
________________________________________
Ravi Kiran asked, Hello sir, please tell me investment apart from shares &insurance investment rs one lakh. short-term period.
Vishal Menganani answers investment horizon less than 6 months should go for liquid plus funds, for a longer tenure upto 1 year you can go for floating rate fund
________________________________________
Modink asked, I have recently invested Rs15000/- in Tata Equity PE fund Trigger 10%,Rs15000/-in Fidelity India Value fund and Rs.30000/-in Sundaram BNP Paribas PSU OPP. Fund. My time horizon shall be 5 years. Whether Investment is right or should I Exit?
Vishal Menganani answers Although we are averse to thematic funds, but your time horizon allows you to stay invested with an otherwise good choice of funds.
________________________________________
Santhosh asked, I have few units of reliance pharma mutual fund exactly invested 1 year before and now it shows nearly 50% profit. Is it right time to sell or hold it for some more time.
Vishal Menganani answers you can book profit but do not exit.
________________________________________
Srinath Kasargod asked, hello sir, I'm planning to invest 1Lakh. Can you please suggest me which FD is best? (time frame 3-4yrs)
Vishal Menganani answers there is a possibility of the deposit rates being hiked and hence my advise would be to park your money ion savings bank account with sweep in facility and invest in FDs post the rate hike. In corporate FDs we advise for HDFC Ltd Systematic Saving Plan (SSP), which will pay variable interest rates on recurring deposits to investors.
________________________________________
Archana asked, Hi Vishal .....Please tell me with a small amount like 1 lakh rupees where I can invest...except insurance policies & mutual funds
Vishal Menganani answers you could invest in bank FDs, post office MIS, Tax Free Bonds etc. However do note that if for low risk investments the returns would be commensurately lower too.
________________________________________
Vishal MengananI answers, ideally don’t go for off the shelf products as your needs are unique to you, go for a customized retirement plan with a financial planner. ________________________________________
Pasad D K asked, hello sir, I'm planning to invest 1Lakh. Can you please suggest me which FD is best? (time frame 3-4yrs)
Vishal Menganani answers, Network 18 FD
________________________________________
Abhishek asked, Hello Sir, I have now joined as Management trainee in a finance Co. I just want to know which scheme will be more beneficial for me for investment monthly. I am now drawing salary 15k per month. Apart from SIP is there anything beneficial? If it is SIP then should I go for SBI or any other organizations?
Vishal Menganani answers, look for the track record of the scheme apart from the fund house. you can go for franklin bluechip, HDFC top 200 and DSP BR 100
________________________________________
Pravakar asked, Hello Sir, good afternoon. i am in confusion i.e. shall i go for Recurring Deposit for 5 year with an amt of 1000 or invent 15000/yr in HDFC for 5 yrs.
Vishal Menganani answers go for HDFC Ltd announced a Systematic Saving Plan (SSP), which will pay variable interest rates on recurring deposits to investors.
________________________________________
Reddy asked, Hello Sir, I have started investing SIP in HDFC TOP 200 (Rs. 1000), DSPBR TOP 100 (rs. 1000),HDFC Prudence Fund(Rs. 1000), DSP BR Balanced Fund (Rs. 1000), IDFC Premier Equity FUND (Rs. 2000).Kindly tell me about my portfolio.
Vishal Menganani answers stay invested
________________________________________
TIWARI asked, HELLO SIR, KINDLY ADVISE WHETHER LUMP SUM AMOUNT IS GOOD OR SIP'S ARE GOOD FOR INVESTMENT IN MUTUAL FUNDS.PLEASE ADVISE TWO BEST INCOME FUND & TWO BALANCE FUND / EQUITY FUNDS
Vishal Menganani answers it is always advisable to go via SIP as the load on your pocket is less, you manage volatility better and you could stay invested for longer terms. I would advise you to stay away from income funds for the year. HDFC Prudence/DSP Balanced are my picks.
________________________________________
ND Roy asked, Pl suggest a life insurance policy
Vishal Menganani answers go for term plans
________________________________________
Deep Dutt asked, II understand that its mandatory to invest in ULIP's for 3 years, is it advisable to take the money out after 3 years? or should i continue with the investment?
Vishal Menganani answers explore the option for "reduced paid up" with your insurer and invest in a term plan and mutual fund
________________________________________
Mansha K asked, I understand that its mandatory to invest in ULIP's for 3 years, is it advisable to take the money out after 3 years? or should i continue with the investment?
Vishal Menganani answers explore options of "reduced paid up" policy with your insurer and invest the amount in a combination of term plan and mutual funds
________________________________________
Amit Karp asked, Where should I invest Rs 1 Lac for 10 years for my child's education ?
Vishal Menganani answers you could start with an equity heavy portfolio and annually reduce your exposure to equity by say 10% per annum.
________________________________________
Vikas asked, Sir, I have 3 lakhs rs at my disposal which i want to invest. I need them may in next 1-2 years for my MBA fees. As i cant go for long term bets kindly suggest some scheme, MFs etc. As markets are too volatile these days i don’t want to go into schemes fully exposed to equities.
Vishal Menganani answers go for bank FD as you need to preserve your capital.
________________________________________
Siddhu asked, According to you is it wise to invest in single premium insurance policies say for example LIC's Bima Bachat? For a working professional who already have enough insurance say approx. 65 lacs of sum assured.
Vishal Menganani answers the minimum cover should be 15 times your take home, if you are exceeding it then don’t invest any further in insurance.
________________________________________
Thatgartha asked, Sir your suggestion on Birla SL BLUCHIP (G), DSP TOP 100 (G), HDFC Growth Fund, DSP BR Tiger(G), Rel Div power sector Fund (G), DSP BR Equity (G)
Vishal Menganani answers stay invested
________________________________________
Misal Pavan asked, Sir your suggestion on Birla SL BLUCHIP (G), DSP TOP 100 (G), HDFC Growth Fund, DSP BR Tiger(G), Rel Div power sector Fund (G), DSP BR Equity (G)
Vishal Menganani answers stay invested
________________________________________
Praveen Sankhe asked, Hi Sir, I am investing in HDFC ULIP and HDFC Equity Fund. Please suggest me some other funds (1 diversified, 1 balanced and 1 MIP) to make my portfolio complete.
Vishal Menganani answers exit ULIP and invest in HDFC top 200 (Diversified) HDFC Prudence Balanced) Principal MIP Plus (MIP)
________________________________________
Deepak Singh asked, Sir I have around 10 MFs with investment around 7 lakhs. Some of them are giving very good return but on average my returns is 15 % in two years. Please suggest
Vishal Menganani answers compared to the markets you seem to have fared well. when we advise our clients we assume equity to give you 12-15% approx. so stay invested
________________________________________
Rambabu asked, Hello Sir, I am interested to invest in SIP with an amount of Rs 1500/- per month. Can you suggest 4 to 5 mutual funds?
Vishal Menganani answers HDFC top 200 and DSP top 100
________________________________________
Sourav asked, Hello Sir, I am 37 years old and started investing SIP in equity diversified mutual fund of Rs.12500/ per month from December 2009. I am looking forward to invest for 23 years in mutual fund. My quarry is after how many years will I start to transfer from equity to debt fund and how much will I expect to get after 23 years of SIP investment.
Vishal Menganani answers as a general rule your age number should be the minimum exposure to debt i.e if you reach age 40 then atleast 40% should be invested in debt instruments, however as you near your goals then you can reduce your equity exposure to under 10%.
________________________________________
Argi K asked, Dear Visal I m a NRI guy. Want to invest some 8 lakh rupees in India for next 4-5 years. Kindly suggest some good options except property. Thanks
Vishal Menganani answers invest in Equity MFs with a large cap bias.
________________________________________
Satish Shetty asked, Hi Vishal, I am new to investments and illiterate on the subject. My monthly salary is Rs. 20000/- after expenses i can save 10000 a month. Where can i save and how can i benefit from this.
Vishal Menganani answers align your savings and investments to your goals and proceed accordingly.
________________________________________
JC Gupta asked, WHY EXPERTS ADVISE TO KEEP OUT OF ULIPS? I HAVE ABOUT 1.50 LCS PER ANNUM TO INVEST PLEASE SUGGEST SOME GOOD MUTUAL FUNDS.. IS RELIANCE REGULAR SAVINGS EQITY GROWTH A GOOD OPTION? ADVISE
Vishal Menganani answers ULIPS are sold as combination of insurance and investments. The insurance cover is maximum 5 times if it has to enjoy 80C benefit. Also ULIPS take away a lot of ur investments under mortality charges, fund management charges and commissions to agents. Thus out of 100 rupees you pay in the first year only 75 rupees on an average gets invested. In MFs on the other hand it is close to 99 rupees. As of reliance regular savings its a good funds and you should stay invested.
________________________________________
Sundara Iyer asked, Most of the ELSS are losing it's charm; is there any investment(Tax benefit) can replace ELSS in the near term for 3 years?
Vishal Menganani answers For all its flaws ELSS has one of the lowest lock ins. Bank FD has 5 years, NSC has 6, PPF 15 years (partial withdrawal at 5). Thus even if you have chosen a wrong scheme you could exit the earliest from an ELSS
________________________________________
Raj asked, I want to know about ELSS, for how many years we can invest here and which ELSS is best now a days, Is it a best option to invest here. Please advise.
Vishal Menganani answers ELSS is an equity linked instrument which provides tax benefits under section 80C. They have a lock in of 3 years.It is a good option factoring in the power of equity and tax benefits. Some good schemes are HDFC Tax Saver and Franklin Tax Shield
________________________________________
Ashfaq Khan asked, Sir, I want to save Rs.10,000 per month, which is the best investment option for me
Vishal Menganani answers you could invest in a mix of debt instruments like debt funds, bank FDs etc and equity MFs via the SIP route.
________________________________________
Sunder Bhamgara asked, currently i am doing SIP in Kotak opportunities 1000, DSP TIGER - 1000, Principal Emerging BlueChip - 1000, ICICI Discovery phase - 1000; are these funds are o.k.? shall i make change in my portfolio? If yes, please suggest good funds; Thanks
Vishal Menganani answers exit principal and ICICI fund and invest in HDFC top 200 and DSP top 100 as that would reduce the risk of variation in returns.
________________________________________
Ravi Kiran asked, Hello sir, please tell me investment apart from shares &insurance investment rs one lakh. short-term period.
Vishal Menganani answers investment horizon less than 6 months should go for liquid plus funds, for a longer tenure upto 1 year you can go for floating rate fund
________________________________________
Modink asked, I have recently invested Rs15000/- in Tata Equity PE fund Trigger 10%,Rs15000/-in Fidelity India Value fund and Rs.30000/-in Sundaram BNP Paribas PSU OPP. Fund. My time horizon shall be 5 years. Whether Investment is right or should I Exit?
Vishal Menganani answers Although we are averse to thematic funds, but your time horizon allows you to stay invested with an otherwise good choice of funds.
________________________________________
Santhosh asked, I have few units of reliance pharma mutual fund exactly invested 1 year before and now it shows nearly 50% profit. Is it right time to sell or hold it for some more time.
Vishal Menganani answers you can book profit but do not exit.
________________________________________
Srinath Kasargod asked, hello sir, I'm planning to invest 1Lakh. Can you please suggest me which FD is best? (time frame 3-4yrs)
Vishal Menganani answers there is a possibility of the deposit rates being hiked and hence my advise would be to park your money ion savings bank account with sweep in facility and invest in FDs post the rate hike. In corporate FDs we advise for HDFC Ltd Systematic Saving Plan (SSP), which will pay variable interest rates on recurring deposits to investors.
________________________________________
Archana asked, Hi Vishal .....Please tell me with a small amount like 1 lakh rupees where I can invest...except insurance policies & mutual funds
Vishal Menganani answers you could invest in bank FDs, post office MIS, Tax Free Bonds etc. However do note that if for low risk investments the returns would be commensurately lower too.
________________________________________
Sunday, February 14, 2010
Buy Transport Corporation of India
Buy Transport Corporation of India, tgt Rs 145 by Ganesh
Gaining strength in the express cargo services.
TCI operates in express distribution through its brand XPS, which is the fastest growing brand in that business. Brand XPS boasts of excellent quality service and integrated solutions to provide efficient key customer management. The company has created super hubs in the north and is in the process of establishing them in the south. TCI focuses on high value-added and high yield air and express services. Going forward we expect the revenues of the XPS segment to grow at CAGR of 27.5% over FY07 - FY09E.
Supply Chain solutions to be major growth driver.
TCI provides the entire gamut of supply chain solutions like distribution, clearing and forwarding, warehousing, cold chain logistics and other value-added services consultancy. Strong growth is expected from this segment due to larger volumes from existing clients. New clients are being added in a variety of verticals that include retail and cold chain solutions. Going forward we expect the revenues of the supply chain solutions segment to grow at CAGR of 44.9% over FY07 - FY09E.
Expanding operations in coastal shipping.
Currently, TCI has a fleet size of five vessels with a total capacity of 16444 DWT. The company also has plans to buy one ship every year for the next three years. All of them would be second-hand ships. This is expected to lead to strong growth in terms of revenues form the coastal shipping business.
Gaining strength in the express cargo services.
TCI operates in express distribution through its brand XPS, which is the fastest growing brand in that business. Brand XPS boasts of excellent quality service and integrated solutions to provide efficient key customer management. The company has created super hubs in the north and is in the process of establishing them in the south. TCI focuses on high value-added and high yield air and express services. Going forward we expect the revenues of the XPS segment to grow at CAGR of 27.5% over FY07 - FY09E.
Supply Chain solutions to be major growth driver.
TCI provides the entire gamut of supply chain solutions like distribution, clearing and forwarding, warehousing, cold chain logistics and other value-added services consultancy. Strong growth is expected from this segment due to larger volumes from existing clients. New clients are being added in a variety of verticals that include retail and cold chain solutions. Going forward we expect the revenues of the supply chain solutions segment to grow at CAGR of 44.9% over FY07 - FY09E.
Expanding operations in coastal shipping.
Currently, TCI has a fleet size of five vessels with a total capacity of 16444 DWT. The company also has plans to buy one ship every year for the next three years. All of them would be second-hand ships. This is expected to lead to strong growth in terms of revenues form the coastal shipping business.
STOCK MARKET FORECAST FOR MONDAY 15-02-2010
FRIEND DON'T INVEST NOW , IT IS NOT THE GOOD TIME TO INVEST WAIT FOR CORRECTION
by shivA
Market will open big gap down on Monday
If Europe market open green means people are less loss,but there is an large chance of opening in red only , so one week is volatile for Asian & Indian market so square off all position with little loss
I am repeating from the last week now who are taking my words with little loss so beware friends
I am not telling always negative words this is the time to giving negative message
so beware
by shivA
Market will open big gap down on Monday
If Europe market open green means people are less loss,but there is an large chance of opening in red only , so one week is volatile for Asian & Indian market so square off all position with little loss
I am repeating from the last week now who are taking my words with little loss so beware friends
I am not telling always negative words this is the time to giving negative message
so beware
RNRNL MATHS
MATHS PROVES RNRL UPTO 100 !!! Dr abdul hameed
The total number of shares in RNRL is 163 crores.But the floating number of shares (shares held by the public) is just 48.8 crore shares.
RNRL has been trading in a range of 62-75 rupees,that is just a maximum of 13 points up or down for the past 3.5 months(from 28th OCT 2009 to 11th FEB 2010). But RNRL traded as one of the most active counters during the period.Hence we can conclude that this was accumulation that was going on in the 3.5 months period.
The total number of shares traded during the above 3.5 month period is 74 crore shares.
Now let us go back to the floating number of shares.The total traded shares(74 crores) is more than1.5 times the floating number of shares(48.8 crores).Hence what does this finding of ours indicate? RNRL which is Rs 65 now can increase upto a minimum of 65*1.5=97.5
Now have not i proved that RNRL can at least reach upto Rs 100. What it requires is only an initial spark!!!!!
The total number of shares in RNRL is 163 crores.But the floating number of shares (shares held by the public) is just 48.8 crore shares.
RNRL has been trading in a range of 62-75 rupees,that is just a maximum of 13 points up or down for the past 3.5 months(from 28th OCT 2009 to 11th FEB 2010). But RNRL traded as one of the most active counters during the period.Hence we can conclude that this was accumulation that was going on in the 3.5 months period.
The total number of shares traded during the above 3.5 month period is 74 crore shares.
Now let us go back to the floating number of shares.The total traded shares(74 crores) is more than1.5 times the floating number of shares(48.8 crores).Hence what does this finding of ours indicate? RNRL which is Rs 65 now can increase upto a minimum of 65*1.5=97.5
Now have not i proved that RNRL can at least reach upto Rs 100. What it requires is only an initial spark!!!!!
L&T Finance NCD — Ideal for those looking to diversify debt
L&T Finance's secured non-cumulative debenture (NCD) can be considered only by investors who are looking to diversify their debt portfolio.
The rates offered by L&T Finance are 8.4 per cent and 8.5 per cent for semi-annual payout and annual payout respectively. However, better options with a superior credit profile may become available given the rising interest rate expectations. The rates are higher compared to the (much safer) bank deposits (7.75 per cent is the highest offered by bank deposits for a 3 year tenure).
However, asset financing companies such as Mahindra & Mahindra Financial Services, Shriram Transport Finance and Dewan Housing Finance offer better rates while enjoying similar credit rating as that of L&T Finance.
Other deposits also offer higher rate of interest to senior citizens which is not the case with the current non-cumulative debenture issue.
Having said this, the advantage of the non-cumulative debenture option over deposits is its superior liquidity; it can be traded in the market and is secured and enjoys priority over public deposits.
The company
L&T Finance is an asset financing non-banking financial company (NBFC) that provides equipment financing, tractor and commercial-vehicle financing, micro-financing and lending against shares.
The company entered mutual fund business by acquiring DBS Cholamandalam AMC recently. The company has 432 branches and points of presence. L&T Finance has a loan book size of Rs 6,016 crore with 87 per cent of the book secured.
Investment grade credit rating (ICRA LAA+), capital adequacy ratio of 15.6 per cent and a strong parent who is ready to pump in capital from time to time lend confidence to the issue.
L&T Finance's loan book comes to the extent of 38 per cent from corporate financing, with the balance from retail loans.
Asset quality has witnessed some slippages but is till in manageable with NPA ratio at 2.7 per cent.
The company's net interest income and net profits for the first half of 2009-10 stood at Rs 212 crore and Rs 57 crore respectively.
Earnings seem to be improving after witnessing a fall for the year ended March 31, 2009.
Options
Investors can choose between the three-year semi-annual and annual payouts with pre-tax coupon rates of 8.4 per cent and 8.5 per cent respectively.
While post-tax returns will be lower, lack of a cumulative option exposes these instruments to reinvestment risk (the risk that you have to invest the interest receipts at a lower rate). The payout options are also not monthly which doesn't provide regular income required.
The previous tranche of L&T Finance NCD (five year) currently trades at a yield-to-maturity (assuming reinvestment) of 7.7 per cent, which is indicative of slight premium on listing for this instrument.
However, capital gains on this instrument appear less likely as rising interest rates and widening corporate spreads may impact bond prices.
Issue Details
The non-cumulative debenture offer plans to raise Rs 500 crore (including the green shoe option of Rs 250 crore) with 30 per cent or Rs 150 crore reserved for retail investors.
The offer opened on February 9, 2010, and closes of February 22, 2010. But the allotment to investors is on a first-come-first-serve basis.
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