Showing posts with label Investment strategies. Show all posts

RBI POLICY MEASURES :

• CRR hiked by 75bps to 5.75% in two stages
• Reverse Repo, Repo Rate kept unchanged
• CRR hike of 75bps to impound 360 bln rupee from banks
• First stage of CRR hike to be 50bps effective Feb 13
• Second stage of CRR hike to be 25bps effective Feb 27
• FY10 GDP forecast raised to 7.5% vs 6% earlier
• FY10 inflation projection raised to 8.5% vs 6.5% earlier

Reliance Mutual Fund as come up with new fund called Reliance Infrastructure Fund, an open ended Equity Scheme. The New fund will close on June 23, 2009. The units will be available at Rs. 10/- per unit (subject to applicable load) during the New Fund Offer and Continuous offer for Units at NAV based prices.

It pre- dominantly invests in the infrastructure sector, with the government spending more on the same and foreign investments coming into Indian infrastructure companies. Infrastructure spending has witnessed a sharp acceleration, with most of the segments in the economy constrained in terms of capacity availability. Riding on the back of the fourth consecutive year of 8%+ GDP growth, a balanced increase in the gross capital formation (GCF) in infrastructure as a proportion of GDP emerges as the most important key in sustaining high economic growth. Currently, the GCFI is at 5% of GDP. As per the Planning Commission, the GCFI need to be increased to 9% of the GDP to sustain growth momentum in the economy.

Infrastructure sector plays important role in country’s development and GDP growth. India has already negotiated the difficult transition from public infrastructure creation to a market determined model. This will give room for more rural developments and spending.


NFO Details:

Mutual Fund Family: Reliance
Mutual Fund Fund Type: Open Ended Equity Scheme
Minimum Investment: Rs. 5000/-
Entry Load:
Below Rs. 2 Crs - 2.25%
Rs 2 Crs & above and below Rs 5 Crs - 1.25%
Rs 5 Crs & above- Nil

If anyone interested to go with that, do reach me at 9886803739 or
chethan.st@gmail.com or write2chethan@gmail.com

These days pledging shares in India has grown significantly. Recently I heard many people talking about "Pledging shares", even 5 to 6 members asked me also. So this time I would like to give basic gyan on this.

Basically pledging is just like you going to banks/financial institutions, keeping the gold and borrowing money from them. You can get ur gold back when you return the money/loan back with interest. I think many people are aware of this.

Just like that “Pledging shares” means giving your shares as collateral to the Institutions/Banks that lend money to you. In simple, you can call it as collateral loan.

Once you pledge ur shares, as and when the stock falls down, you will have to pay the marginal money to the institutions from which u borrowed the money. In case you dont pay the amount, the institutions have the authority to sell your stocks. That implies, in the falling market pledging shares will be high risk.

If promoters are pledging shares, then there may be chances where they will go for manipulating company's balance sheet to keep the stock price high, so that they can escape from paying marginal amount.

Will pledging shares by promoters have an impact on the market ??

Yes,Usually promoters will have some _ % stocks (bole tho some crores together shares); in the falling market paying marginal amount on that will be very difficult. If the promoter failed to keep that amount, then selling a huge chunk of those stocks by institutions, will lead to a big fall in that stock price. This will have a huge impact on the small investors.

Recently SEBI has made it ‘ mandatory for all the companies to disclose the shares pledged by the promoters’ till last year it was not there…!. May be that’s the reason sometimes we never come to know why some XXX company stocks fall all of a sudden without any news.

Not only promoters, even we can pledge our shares by submitting the written pledge statement to our bank (where you have ur DP account). Pledged quantity of shares will be blocked in your DP account and you will get a loan amount on that.

Loan amount will depend on the current stock price, it doesnt mean that they will give loan on full amount. For example, suppose XXX company is trading at 300Rs currently,and if it wants to pledge 100 shares then they may get around Rs 15000(100 * 150)as loan. pledge amount will be decided by Institutions/Banks.

Upon the closure of your loan, the pledge is closed on your DP account and bank will return back your shares to your DB :) .

Dr Reddy's Lab, Aban Offshore, Asian Paints, Godrej Consumer Products, Great Offshore and JB Chemicals ,Mytas Infra, UTV software , Lanco Infratech , TV-18, PVR, Balaji Telefilms, Radaan Media, Shree Ashtavinayak Cine Vision, UTV Software and Crest Ganesh Housing, J Kumar Infraprojects and Peninsula Land and many more....are names of some of the prominent indian companies whose promoters have pledged shares against loan.

For any queries/suggestions please contact write2chethan@gmail.com.

Good news for Satyam investors and employees

A Three member board was named by sebi on Sunday to bring back financial order to the fraud hit Satyam and to restore confidence of employees, investors and clients.

The new board comprises former National Association of Software and Service Companies (Nasscom) chief Kiran Karnik , HDFC chairman Deepak Parikh and former Securities and Exchange Board of India (SEBI) member C. Achuthan.

On this news, today Satyam Stock price rose by 54% and now trading firmely at 36.65.

National Stock Exchange will remove Satyam from its Nifty 50-share index from 12th of Jan. On the news of Ramalinga Raju’s resignation and disclosure of profits falsely for years, Satyam stock price was crashed nearly 80%. From Jan 12th Anil Ambani group's co Reliance Capital will replace Satyam in the nifty. It will also be excluded from the CNX 100 index, CNX 500 index and the CNX IT index.

PunjLloyd is one of the good pick in engineering sector. Today they have got an order worth Rs264 crore from the Airport Authority of India (AAI) for building a greenfield airport at Pakyong in Sikkim. It’s a 2 year contract.

Even last month one of its subsidiary company bagged an order for Jurong Strategic Study project at Jurong Lubes Terminal, Singapore for a value of S $ 44,700,000 . On Dec 23rd Punj Lloyd had informed that, they had secured a contract from Municipal Corporation of Delhi for a value of Rs 303.95 for development of parking facility near Jawaharlal Nehru Stadium for the forthcoming Commonwealth Games -2010.

So one can go for buying this stock as it is a fundamentally very strong company and also they keep getting good orders.

Stock Market (NSE/BSE) Holiday List for 2009

Moharram----------------- January 8th 2009
Republic Day-------------- January 26th 2009
Mahashivratri------------- February 23rd 2009
Id-E-Milad---------------- March 10th 2009
Holi ----------------------- March 11th 2009
Sri Ram Navmi------------ April 3rd 2009
Mahavir Jayanti----------- April 7th 2009
Good Friday--------------- April 10th 2009
Dr. Ambedkar Jayanti----- April 14th 2009
Maharashtra Day---------- May 1st 2009
Ramzan Id----------------- September 21st 2009
Dasera--------------------- September 28th 2009
Gandhi Jayanti-------------October 2nd 2009
Diwali ( Bhaubeez)--------- October 19th 2009
Gurunanak Jayanti-------- November 2nd 2009
Christmas----------------- December 25th 2009
Moharram---------------- December 28th 2009

Inflation came down by 0.23% from 6.61% in the last week to 6.38%. Declining in food and fuel prices pushed the inflation down in succession. I think this fall in inflation will force RBI to go for further cuts in key policy rates to strengthen the economy. This will be good news for market to go up for short period of time.

As Q3 '08' results are round the corner, there could be decline of at least 10% in the earnings of the big firm. And also technical analyst's are expecting the GDP growth of US, JAPAN and other developed countries to fall by 1 or 2 % in the next year. I also read an article saying "Market cap of ten Indian firms drops by $12.2 Billion in a week", six public sector and four private sector entities (Source:Silicon India).It means currently market is trading high. So we may re-touch the bottom (2300) which we had seen during the month of Octobers. Since the elections are also near, we may not see much higher level from here onwards. So market may be range bound between 2300 to 3100 and Sensex around 7800 to 10200.

So what I mean to say here is, this quarter market will be highly volatile, so short-term-traders should be more cautious about this. Always have a stop-loss of 2-3% otherwise you may end up in mess or else wait for another 2 months for the better investments.

If any of you people have bought the ULIP'S and if it is in growth scheme, what I suggest is switch over the fund from growth to death and revert back in the month of Feb. By doing this you will get more units/more profit...

Happy Investing...

They say, “It’s not what you earn; it’s what you save is what matters.” Investing is not a race. You are not in competition with anyone else. All you need to do to make more money is simply focus on becoming a better investor. If you focus on improving your experience and education as an investor, you will gain tremendous wealth. If all you want to do is to get rich quickly, or have more money than your friend, then the chances are you will be the big loser. It’s OK to compare and compete a little, but the real objective of this process is for you to become a better and more educated investor. Anything other than that is foolish and risky.

Usually nowadays agents are cheating the customers by showing wrong results about their respective funds to attract the customers and to make good commission out of it. Usually what mistake we do is, we start thinking about TAX and INVESTMENTS in the month of January or February. In order to save the tax, we will invest at the nth moment without knowing about mutual funds and their operations based on the agents recommendations.

So it’s a small effort from my side to educate and elucidate on basic idea regarding this. So lets start with ELSS first.

Equity linked saving scheme (ELSS) is a kind of mutual fund which is diversified in nature with Tax benefits. It is just like any other tax saving schemes such as NSC (National Savings Certificate) and PF (Public Provident Fund). Apart from ELSS scheme there is another scheme called ULIP.

ULIPs are nothing but unit-linked insurance policies. It works like a mutual fund with a life cover on it. They invest the premium in market-linked instruments like stocks, corporate bonds and government securities. Investments in ULIPs attract tax benefits under Section 80C.

People always get confused with these two. Agents can misguide when it comes to this topic so here I will try to explain how exactly ULIPS and ELSS works.

I hope by now you people have got the basic idea of ELSS and ULIPS. Always think about your requirements first and then choose the best instruments (investment).

If you go deeper into ULIPS there are 2 types in that and many not aware of it.

Type I: - A Type I Ulip pays the higher of sum assured or fund value as death benefit.

Type II: - While Type II pays the sum assured as well as the fund value.

Usually type II funds are very less in market. If you feel you need a higher cover, ask your insurer to increase the sum assured in your existing plan. However, it is subjected to certain limits and fresh medical tests.

As I mentioned earlier ULIP’s are typically long-term instruments, so you need to stay in the party for long. Your money will touch new highs only after 8^th or 10th year, when the benefit of compounding really kicks in.

So what I suggest is, if you have bought an ULIP, do not surrender it even if you can do at zero or minimal cost after the third or the fifth year unless you are in a dire situation. If you really need cash, make a partial withdrawal.

ULIP’s also provide different schemes; one can go with that based on their Risk Profile. It also allows the investor to change the options from one to another at a later date.

Growth / Equity Oriented Scheme

The aim of growth fund is to provide capital appreciation over the medium to long- term. These schemes normally invest a major part of their corpus (amount) in equities. Such funds have high risks comparatively other schemes. These schemes provide different options to the investors like dividend option, capital appreciation, etc. this scheme is good if you are going for longer period of time.

Balanced Fund

The aim of balanced funds is to provide both growth and regular income by investing corpus into equities and in security funds in proportions which differs from company to company. These schemes are good for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. When compare to growth fund NAVs of balanced funds are likely to be less volatile.

Debt / Death Oriented Scheme

The aim of death funds is to provide steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, and government securities funds and are less risky compared to equity schemes. These funds are not affected by fluctuations in equity markets.

Some people might argue that a ULIP is same as buying a term plan plus investing in a tax-saving fund i.e.

ULIPS = ELSS + Term Plan.

A point to be considered is before individuals plunge into tax-saving funds is that they invest 100% of their corpus in equities. Balanced or debt schemes are not available for availing the tax benefits under Section 80C. Therefore, people who do not want to take risk in equities could opt for a balanced ULIP, as tax-saving funds would be too risky for them. Also, a ULIP offers an individual the 'protect' his portfolio based on his risk profile. Based on your requirements you can tune your profile from high-risk equities to debt or go for a balanced portfolio which is not available in ELSS. Usually every ULIPS provides 4-8 switches per year as free then later on they used to charge 150-200 Rs (depends on companies).

ULIPS and ELSS (with Term plan) both will work exactly similar except few things which I had mentioned above. But what I suggest is when you are getting everything in single package why you want to look out at 2 options? And sometimes people end up with paying more premiums for term plans when it is available with fewer prices in ULIPS.

So where does all this talk lead to? People who have the stomach for taking risk can separate their investment and insurance. They can go for a term plan separately and investing in tax-saving funds. While investors who do not have an appetite for risks, but like to add equity to their portfolio they can go for balanced ULIP.

Advantages of ELSS/ULIPS over NSC and PPF

• Main advantage of ELSS/ULIPS is its short lock-in period when compare to NSC or PPF where you have to wait for 6 or 15 years for the maturity.
• Since the amount will be invested in an equity scheme earning potential is very high.
• Apart from ULIPS life cover. These days some ELSS schemes also offer personal accident death cover insurance.
• In short term it Provides 30 to 40% returns compared to 8% in NSC and PPF if the market performs very well.
• Irrespective of the market you will get around 15-18% per year in long term view.
• Investor can go for dividend option and get some gains at regular interval of time.
• Investor can go for Systematic Investment Plan. So that investing at peak time will be avoided. With SIP investor can take advantage of fluctuations in the stock market. So investor will get more units when the market is down and get less units when the market is up.

Disadvantages of ELSS/ULIPS

• Risk factor is very high as it is invested in equity compared to NSC and PPF
• Premature withdrawal is not allowed within the lock-in period of time.

Here I am giving you a sample snippet of tax calculation.

For example: - if your total annual income is Rs 4,00,000.

Case 1:- Without any investments

Up to 1,50,000 tax exempt so 4,00,000 -1,50,000 =2,50,000

So according to new Revised Tax Slabs for the FY 2008-09:

Upto Rs. 1,50,000 - Nil

Rs. 1,50,001 to Rs. 3,00,000 - 10%

Rs. 3,00,001 to Rs. 5,00,000 - 20%

Above Rs. 5,00,000 - 30%

Therefore the tax payable amount is: Rs.25,000( 10% tax on Rs. 2,50,000)

Case 2:- With investments

Up to 1,50,000 tax exempt so 4,00,000 -1,50,000 =2,50,000

Your savings 1,00,000 so 2,50,000-1,00,000= 1,50,000

Therefore the tax payable amount is: Rs.15,000( 10% tax on Rs. 1,50,000)

I would also like to add a few words on open ended scheme and close ended scheme.

Based on the maturity period mutual fund scheme can be classified into two types open-ended scheme or close-ended scheme.

Open-ended Fund

An open-ended Mutual fund is one which is available for purchasing the unit for continuous basis. Usually funds which come under these schemes don’t have fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis.

Close-ended Fund

A close-ended Mutual fund has a maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period of time. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed.

In both the schemes there will be an exit charges if you withdraw the amount within a particular period of time (Again it varies based on funds).

For more suggestions/ queries please contact write2chethan@gmail.com.