  | | December 20, 2013 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 21,079.72 | 364.1 | 1.76% | | Re/US$ | 62.12 | (0.3) | -0.47% | | Gold Rs/10g | 29,850.00 | (580.0) | -1.91% | | Crude ($/barrel) | 109.26 | (0.0) | -0.04% | | FD Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on December 19, 2013
*BSE Sensex as on December 20, 2013 | |
Impact 
Companies belonging to big business houses do not necessarily are good businesses. Unfortunately many investors fail to realise this. If you recollect, many such business houses raised huge money from public when markets were zooming during the bull phase of 2002-07. Many companies that went public during this golden period of Indian equities failed to power the portfolios. The greed to make smart listing gains often lured investors to invest in Initial Public Offers (IPOs) without even bothering about fundamentals. Failure of big bang IPOs taught investors lessons, but probably very hard way. To help investors understand fundamentals of the businesses, Securities and Exchange Board of India (SEBI) made it mandatory to obtained grading for all companies desirous of going public. Besides, the independent grading was expected to guide investors to understand meaning of disclosures in the offer. This was much needed. But now it seems that SEBI, turning blind eye to investors' security, wants to allow companies raise money without securing any grading.
It is said that, this move may boost the primary market. Seemingly, many companies are reluctant to raise money as they want to save the cost they would have to incur to obtain a grading from an independent agency. SEBI is of the view that, even though, Indian economy is growing at sub 5% rate, funding requirements are high. Development of primary market is important for meeting funding requirements of companies.
PersonalFN is of the view that, making the IPO grading voluntary would put investors' security at risk. Even when grading system was mandatory, grading didn't give investors any idea about pricing of the IPO. But grading atleast talked about business fundamentals. Now that it is no more compulsory for a company to get its IPO rated, investors would be blindfolded, if are in capable of doing analysis on their own. PersonalFN believes, not the lack of capital is keeping primary market dry but lack of trust is certainly. Not all people are interested in making quick bucks. Such people are affected when companies go bust within few years of listing.
PersonalFN is of the view that, primary markets will develop only when companies with good fundamentals go public and not the companies which chalk out fund raising through IPOs only when they are left with no option but to dilute equity. For this very reason PersonalFN believes those who don't have time or inclination to do analysis on their own, should invest through mutual funds for taking exposure in equity. In absence of grading requirement IPO opportunities would be better assessed by professional managers such as mutual funds. Mutual funds help you generate long term wealth but there too rating matters.
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Impact 
Surging markets amidst uncertain conditions must have confused you as many economic indicators are still negative. Over past 3 months markets have rallied significantly and twice made a new high. Steep fall in Current Account Deficit (CAD) in the second quarter and outcome of state assembly elections were cheered by the market. But there have been several concerns too such as persistently high inflation and mounting fiscal deficit. As far as mutual funds are concerned they are keeping it very simple. Sell the rallies and buy only dipper corrections.
Investment trends of mutual funds...
(Source: ACE MF, PersonalFN Research)
Now that Federal Reserves (Fed) in the U.S. has decided to partially taper the monetary stimulus; flows of foreign capital are expected to be volatile. This would make it even more difficult for individual investors to decide upon the investment strategies.
PersonalFN believes that you shouldn't try to time the market and instead of bothering about entry and exit levels; you should focus on your financial goals. Once goals are identified and the amount you may need to satisfy those goals is ascertained; you need to follow right asset allocation. When you are unsure about how much exposure you need to have to various assets classes you may take professional help. Mutual funds are managed by professionals and thus they are an essential tool in your financial planning. Opting for Systematic Investment Plans (SIPs) may help you beat the market volatility.
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The Most Awaited Tax Planning Guide 2014 - Released!
Waiting till the eleventh hour for tax planning would lead you to the path of mere "tax saving" resulting in sub-optimal tax reduction.
So undertake your tax planning activity well in advance this year.
PersonalFN's Tax Planning Guide (2014 Edition) shows you how you can save your hard earned money prudently from the tax-man.
Download Your Copy Now! (It's FREE!!) | |
Impact
If you are a seasoned investor in equity oriented mutual funds, you must have experienced effectiveness of Systematic Investment Plans (SIPs). As you might be aware, equity as an asset class is volatile and thus investing all your savings at one go is a risk since value of your investments would reduce with every fall in the market. Many of you might be wondering if SIPs is an effective way of investing in case of equity then would it be equally beneficial to invest in debt funds through SIP route. Before we assess if opting for SIPs is ideal for investing in debt funds, we must consider factors that affect debt markets and debt funds.
What affects debt markets?
Value of bonds goes down when interest rates rise and vice versa. Therefore, if someone keeps buying in a piecemeal manner when interest rates are rising; would gain when rates start falling. But it is rare to see interest rates in the economy going up or down in a straight line. Monetary policy considers variables such as economic growth, budgetary deficits, liquidity position, inflation and currency stability before taking a call on policy rates. Whenever policy rates are hiked, usually borrowing cost goes up. Demand for papers that are already circulated goes down with rising interest rates as investors want to lock money at higher rates.
To read more about this news and the view of PersonalFN over it, please click here.
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Impact
Having an optimal insurance cover is an integral to one's financial planning, as life is surrounded by uncertainties and contingent events occur when we least expect them. While many buy a life insurance cover recognising its importance, the products which they opt for and / or the Sum Assured they are covered are at most times sub-optimal. Our experience reveals that most people hold insurance-cum-investment plans, in their endeavour of killing two birds in one shot; but what they fail to understand is that they are sub-optimally insuring themselves. And thus by doing so, they are risking their dependent family members (who are financial dependent) and even upsetting the financial goals (such as children's education, their marriage, amongst others) if at all they are planning for them. You see, none of us are immortal and thus in case of an untoward event such as death, our family needs to be well indemnified. Insurance by definition refers to indemnification against risk; but merely buying an insurance policy isn't enough. It is imperative to have the right one, which optimally covers you in accordance to your Human Life Value (HLV).
To read more about this news and the view of PersonalFN over it, please click here.
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- The recent narrow down in India's Current Account Deficit (CAD) to 1.2% (or U.S. $5.2 billion) in Q2FY14 mainly aided by turnaround in exports and moderation in imports, particularly gold; has got the Government contemplating a move to reduce import duty on gold.
If the action in that direction is indeed taken, it could bring some cheer for gold buyers and traders as in present times the landing cost of gold is rather elevated. In fact due to this reason, smuggling activity in gold has surged. It is noteworthy that upto October 2013, gold worth Rs 208 crore of has been seized from smugglers as against Rs 107 crore last year and Rs 42.38 crore in 2011-12. Gold smugglers reckon that Indians have an insatiable appetite to own gold for emotional and financial reasons (making the demand inelastic to an extent).
PersonalFN is of the view that if at all the Government wants to reduce the illicit channels through which gold is imported in the country and therefore is contemplating reduction in import duty on gold, it should be done in a very calibrated manner to preclude a detrimental impact on the system; or else the efforts would be futile leading to widening CAD and depreciation in the Indian rupee.
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Dilution: "A reduction in the ownership percentage of a share of stock caused by the issuance of new stock. Dilution can also occur when holders of stock options (such as company employees) or holders of other optionable securities exercise their options. When the number of shares outstanding increases, each existing stockholder will own a smaller, or diluted, percentage of the company, making each share less valuable. Dilution also reduces the value of existing shares by reducing the stock's earnings per share."
(Source: Investopedia)
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Quote : "Although it's easy to forget sometimes, a share is not a lottery ticket… it's part-ownership of a business." - Peter Lynch
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