  | | April 04, 2014 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 22,359.50 | 19.53 | 0.09% | | Re/US$ | 60.18 | 0.14 | 0.23% | | Gold Rs/10g | 28,620.00 | -120 | -0.42% | | Crude ($/barrel) | 103.95 | -2.67 | -2.50% | | FD Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on April 03, 2014
*BSE Sensex as on April 04, 2014 | |
Impact 
Recently, RBI gave in-principle approval to issuing banking licenses to IDFC and Bandhan. These companies have been given 18 months to comply with RBI guidelines. Setting up a bank would require substantial capital investments in physical as well as I.T. infrastructure. This would mean huge business opportunities for companies operating in other sectors such as I.T., construction and real estate and service providing industries. It would also lead to new job creation.
To be able to compete with existing banks, new banks would have to ensure that they are technologically sound and competitive. Such opportunities may come once in many years for technology companies. New banks may also give them regular business for maintaining infrastructure and back-office support.
PersonalFN believes those who invest in opportunities funds are benefited when such opportunities come up. When you invest in a mutual fund, a team of professionals manages your money. There are analysts tracking sectors and likely impact on business of companies of such developments. However, it is noteworthy that you must invest in opportunities funds which have a long term track record of consistent performance.
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Impact 
While equity markets are going up in anticipation that BJP led NDA will form the new government, property prices in Mumbai are expected to go down. As per stamp duty and registration department of Maharashtra, number of property sale transactions fell by 3051 in February 2014, as compared to January. This resulted in a revenue loss of nearly Rs 19 crore to the state. According to National Housing Bank (NHB) residex, property rates in Mumbai are stagnant for over a year now. Real estate prices in the city have come under pressure mainly because of;
- Higher interest rates
- Higher inflation
- Already high property prices
- Huge unsold inventory
- A number of new property launches
Throughout 2013, trend of new property registrations remained downwards and inventory levels were way above normally accepted level. It is now speculated that, if BJP comes to power, there would be a price correction in Mumbai. It is expected that, the central government would expedite the process of granting clearances, especially related to environmental clearances along with introducing some important changes in policies. As more properties would be developed, there would be pressure on property prices due to increased supply. It is also said that, since last time property prices in Mumbai had corrected when BJP-led government was formed at the centre; this time too they might see some correction.
PersonalFN believes that, although these assumptions may have some merits, if you are buying property for dwelling purpose, speculating on property prices may prove to be disadvantageous to you. Prices may move up contrary to your expectations. Having said this, chasing real estate without being cautious to prices may be a bad idea as well. Following a personalised financial plan always provides you a roadmap to your financial security and also helps you keep away from speculation.
Do you think the new government can bring in policies to revive the slump in property market, especially in Mumbai or the prices will correct after elections? Share your views here.
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Impact
If you live in metro cities areas and hold a savings bank account with a private bank, you are required to maintain minimum monthly / quarterly balance of Rs 10,000 in most cases. If you fail to satisfy the minimum balance requirement, you are charged some penalty which is Rs 250 per month with some major private sector banks. On the other hand, public sector banks keep a moderate or no minimum balance requirement. State bank of India, in July 2012 had waived off minimum balance requirement on savings bank account to attract new customers. Most of other public sector banks have a minimum monthly / quarterly balance requirement of Rs 1,000 and charge you Rs 100 for not maintaining the same. As a part of a bigger initiative of protecting consumers, RBI, in its first bi-monthly monetary policy, proposed that banks should do away with minimum balance requirement in ordinary savings bank account and inoperative accounts. The central bank has also suggested that, until account holders do not comply with the minimum balance requirement, services to these accounts can be restricted.
Would banking customers benefit?
If the proposal becomes a norm, customers would get an access to money which otherwise would have been locked. However, there is a possibility that banks will charge fee for provided services which are currently rendered as value added services. Banks provide cheque book (with a limit on number of cheques) and pass book facility free of cost. ATM transactions using the ATM centers of the same bank are free of cost, but when performed using other ATMs, first 5 transactions are also free of charge. In case banks withdraw the minimum balance requirement, they, especially private banks, may find it difficult to continue providing aforesaid services free of cost. Unless a customer maintains minimum balance in the saving bank account, cost of funds to the bank goes up. Furthermore, maintaining dormant accounts with lower than minimum required balances, would also add to the cost to banks as customers may become less keen on closing these accounts.
To read more about this news and the view of PersonalFN over it, please click here.
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Impact
Your equity diversified mutual funds must have generated attractive returns for you over last six months. As markets are rising incessantly to touch new highs every week; Net Asset Values (NAVs) of mutual funds are also rising. However, performance of all funds is not alike. On an average, largecap oriented funds have generated about 18.2% returns over last 6 months. Returns generated by multi, flexi and opportunities funds have averaged at 21.3% over the similar time period. The best performing category has been that of midcap oriented funds. The average returns generated by the category of midcap oriented funds have been 31.0%. This indicates that, midcap focused funds have outperformed by a substantial margin. Investment strategies and market capitalisation preferences have made a significant difference to the returns generated by various mutual funds.
Outperformance of midcaps over largecaps
Data As on March 28, 2014
(Source: ACE MF, PersonalFN Research)
S&P BSE sensex has generated 13.2% returns over last six months whereas S&P BSE Mid-Cap has generated 24.7% returns over similar time period.
To read more about this news and the view of PersonalFN over it, please click here.
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- These days, people are keen on buying insurance online. But the online channel contributes just about 5% in total sales of insurance companies. Through market research, insurance companies observed that, people access product related information online but for buying insurance, they preferred off-line route. Looking at the potential for online business, insurance companies want to encourage buyers to go for online route.
Recently, the Life Insurance Council gave a proposal to Insurance Regulatory and Development Authority (IRDA) for allowing 'assistance model' for online buyers. In this model, the insurance companies would provide assistance to online buyers. Under this dedicated staff would be appointed to resolve all quires that a buyer may have. It is claimed that this would be distinctly different than call centre services which are currently offered mainly to deal with customer grievances.
Online route may prove to be the simplest and cost effective way of buying insurance products. However, PersonalFN believes you would be better of considering only term insurance. To ascertain amount of insurance cover you need, you should follow human life value approach. Buying policies online certainly has advantages. If people are assisted rightly and their queries are addressed promptly, proposed model may prove to be beneficial to insurers as well as policy buyers.
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Human-Life Approach: A method of calculating the amount of life insurance a family will need based on the financial loss the family would incur if the insured person were to pass away today. It is usually calculated by taking into account a number of factors including but not limited to the insured individual's age, gender, planned retirement age, occupation, annual wage, employment benefits, as well as the personal and financial information of the spouse and/or dependent children.
(Source: Investopedia)
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Quote : "Stop trying to predict the direction of the stock market, the economy, interest rates, or elections" - Warren Buffett
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