  | | November 30, 2012 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 19,339.90 | 833.3 | 4.50% | | Re/US$ | 54.83 | 0.4 | 0.69% | | Gold Rs/10g | 31,650.00 | (260.0) | -0.81% | | Crude ($/barrel) | 110.28 | (1.6) | -1.42% | | FD Rates (1-Yr) | 7.50% - 9.00% | Weekly change as on November 29, 2012
*BSE Sensex as on November 30, 2012 | |
Impact 
Many of you may be aware that with effect from January 1, 2013 mutual fund houses will have to will have to provide direct plans in their existing and new schemes with a separate Net Asset Value (NAV), for investors who do not want distributor support.
But mutual fund distributors seem to unveiling some discomfort over this move and requesting mutual fund houses to go slow with the roll-out of this plan. In fact some of them are looking apprehensive and have also started contemplating to look at other alternative sources of business (viz. insurance and real estate) which earns better commissions for them.
It is expected that treasury of several big banks and corporate houses (which comprise the largest investor group in MFs) will sidestep intermediaries and opt for direct plans in mutual funds since they save onto their cost by about 50-75 basis points (bps), provides flexibility and earns them better returns.
We are of the view that, the direct plan could go a long way in benefiting long term investors in mutual funds who are well-versed with how to select winning mutual fund schemes. The direct plan indeed saves onto cost for investors, and therefore could also aid them to obtain better returns. However, the investors should exercise such options only after they have thoroughly studied the different schemes in mutual funds. At present, there are more than 4,500 schemes to select from, and so an investor who has not done his or her home-work may not be able to invest in the right mutual fund scheme depending on the risk appetite. So remember, self-service may not be the best service if you do not have the wherewithal. If you are a new investor, it is recommended to take help of a mutual fund expert who considers your investment objective and risk appetite amongst host of other facets, and then provides you with an unbiased and independent advice.
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Impact
After exhaustion in the Indian equity markets in October 2012 (where the BSE Sensex descended by -1.4%), November saw a recovery as the BSE Sensex registered a gain of +1.5%. The liquidity easing measure taken by the Reserve Bank of India (RBI) by effecting a CRR (Cash Reserve Ratio) cut of 25 bps helped in uplifting the sentiments of the market. Likewise the focus on fiscal consolidation from the Government (to restrict the fiscal deficit target to 5.3%) also aided to infuse confidence in market. The victory of Mr Barack Obama in the U.S Presidential election too was supportive for the Indian equities, although worry of fiscal situation in the U.S did remain. The other domestic worries risk events also persisted, as the Index of Industrial Production continued it see-saw movement while the WPI inflation bug continued to look sticky and over the comfort zone of the RBI. Apprehension whether important bills would be passed in the winter session of the Parliament also remained a concern, due to political backlash and opposition parties flagging their own ideologies onto several important policy decisions.
BSE Sensex vs. FII inflows
Data as on: November 27, 2012
(Source: ACE MF, PersonalFN Research)
But amid of all of this and the risk event prevailing in the Euro zone, the Foreign Institutional Investors (FIIs) continued to exude confidence in the Indian equity markets, recognising the fact that although economic growth has slowed down in India as well, it continues to remain one of the attractive investment destination since the Government is giving enough emphasis on reforms. Until November 27, 2012 they (FIIs) net bought to the tune of Rs 6,420 crore. The last couple of trading sessions of the month, the Indian equity markets witnessed an exuberant impulse since European Union (EU) and the International Monetary Fund (IMF) agreed to unblock Greek bailout with a package of measures worth €40bn, aimed at bringing an immediate 20% reduction to the country's debt. Likewise with the European Commission (EC) also approving restructuring of Spanish bank loans (which would inject around €37 bn into the Euro zone) also helped to revive sentiments in the markets.
We are of the view that, the FIIs would continue to exude confidence in the Indian equities since they offer promising prospects supported by reforms measure adopted by the Government. However, FIIs would continue to monitor the risk-events (both economic and political) in the global markets and take positions accordingly.
Thus for individual investors too while investing, it is imperative to be cognisant about all such macroeconomic and political factors, and then take a prudent investment decision which is congruence to your investment objective and risk appetite.
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Impact
Many of you would agree that technology has become very much a part of our daily life. Be it booking a movie ticket, travel, or even accessing bank account(s) can all be done via your beloved smart phone or tablet. So, it can be said that technology has become an enabler / facilitator. It has infused ease in the way we transact and kept ourselves abreast with host of things.
Perhaps recognising the importance which technology holds today and its potential going forward, Finance Minister, Mr P. Chidambaram at the annual bankers' conclave (Bancon) in Pune, outlined the Government's strategy to shift most transactions to the electronic mode. The Government is pushing "mobile banking" in its endeavour to provide those in the rural areas the opportunity to access their "Aadhar accounts" even if banks are not around nearby.
Very soon, as bank account holders you will be able to access your accounts, transfer funds, check balances and request for a cheque book, by simply dialing *99# from even the most basic GSM mobile phone handset, irrespective of the cost, operating system and telecom provider. To read more about this news and know our view over it, please click here.
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Impact
The lustre depicted by gold in the last five years with an ascending trend in prices, is attracting many to the precious yellow metal and encouraging them to approach it as an alternative asset class. The situation of debt-overhang in the Euro zone, sovereign rating downgrade, fiscal cliff confronted by the U.S. and dismal global economic growth, has inspired many investors to take refuge under the precious yellow metal due to its trait of being a safe haven and a store of value during uncertain times. Many investors have also been investing through the unorganised sector of the market, in their desire to hold in the physical form (i.e. gold coins / gold bars /jewellery). As per the World Gold Council, 986 tonnes gold, valued at about Rs 3.2 lakh crore at current price, is estimated to have been sold in the country in 2011. Out of this, about 75% gold is sold through unorganised market, with rural and urban market almost evenly divided.
So reckoning the potential in the unorganised market, recently Reliance Money launched a new daily gold accumulation plan - named "Reliance My Gold Plan" under which customers can invest as low as Rs 1,000 per month. To know more about the plan and to read our view over it, please click here.
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- The rise in cost of healthcare (or medical inflation) is seemingly nudging health insurers to hike up their insurance premiums. Recently New India Assurance, a market leader in the public sector general insurance space has filed new rates for which it is seeking approval from the Insurance Regulatory and Development Authority of India (IRDA).
We believe that, the IRDA's insistence that all health plans be made renewable for a lifetime has instigated upward revision in health insurance premium rates. Moreover such a move is expected to be precedent for the other players in the health insurance space, and thus they too may follow suit. Such a move could help health insurance companies to reduce their claims to premium ratio as well.
- Canada Securities Administrators (the securities market regulator in Canada), recently barred Indian Asset Management Companies (AMCs) from selling their investment products to local investors. The Canadian regulator mandated a registration process for investment managers, which also includes AMCs managing monies of local residents outside Canada.
"Non-resident investment fund managers that manage one or more investment funds that have distributed securities to residents of a local jurisdiction will have to register as an investment fund manager in that local jurisdiction unless an exemption from registration is available," a note circulated by the Canadian regulator said.
We are of the view that, the ruling is intended to protect the interest of local investors in Canada, but will have a significant impact on the Indian mutual fund houses, as they raise a significant amount of money from that country. Moreover, the regulation could also impede Qualified Foreign Investors (QFIs) scheme of the Government of India which allows direct investment in stocks, mutual funds and bonds.
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Health Insurance: A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. Health insurance is often included in employer benefit packages as a means of enticing quality employees.
Source: Investopedia
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Quote : "Wisdom is not a product of schooling but of the lifelong attempt to acquire it" - Albert Einstein
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