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| November 15, 2013 |
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| Weekly Facts |
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Close |
Change |
%Change |
| BSE Sensex* |
20,399.42 |
(266.7) |
-1.29% |
| Re/US$ |
63.12 |
(0.7) |
-1.12% |
| Gold Rs/10g |
31,065.00 |
330.0 |
1.07% |
| Crude ($/barrel) |
106.92 |
2.2 |
2.14% |
| FD Rates (1-Yr) |
8.00% - 9.00% |
Weekly change as on November 14, 2013
*BSE Sensex as on November 14, 2013
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Impact 
With the Indian equity markets having scaled a new high in the recent past on Muhurat trading day this Diwali, mutual fund houses are busy launching New Fund Offers (NFOs) of close-ended equity schemes, banking on the positive mood of the equity markets.
At present, mutual fund houses such as Axis and Pramerica have floated their closed-ended NFOs - Axis Small Cap Fund and Pramerica Mid Cap Opportunities Fund; both focusing on building a portfolio with stocks in the small and mid cap domain of market capitalisation. Reliance Mutual Fund too, has the launched of Reliance Close-ended Equity Scheme - Series A, starting today (i.e. November 15, 2013), focusing on building its portfolio by investing across market capitalisations. The lock-in period for these products is between three and five years.
Why are fund houses launching such funds now?
Well, as mentioned earlier they are banking on the positive mood prevailing in the Indian equity markets and perceive that they would get investors to subscribe to their products. Moreover, hit by redemption in other equity mutual fund schemes they are turning to close-ended mutual fund schemes for bringing stability to their Assets Under Management (AUM). Also they are of the view that it would facilitate better management of portfolios with the scheme being close-ended in nature.
So should you invest?
The fact is, most close-ended scheme launched in 2007 just before the financial crisis of 2008, which led to the markets slump; have not created wealth for investors. The launch of aforesaid close-ended equity scheme on offer, are again at a time when the Indian equity markets have touched an all-time high of 21,239.36 points on November 3, 2013. During such times, construction of portfolio could be challenging task with valuations seem to have been stretched in some cases; and more so when some macroeconomic variables such as economic growth, inflation and fiscal deficit remain a concern. Thus while the broader markets have touched an all-time high, the margin of safety seems to have narrowed. Hence given the aforesaid, PersonalFN believes that investors would be better-off avoid investing in such funds and instead prefer existing diversified equity mutual funds having a consistent and appealing performance track record.
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Impact
Often on account of being busy, many often miss doing some of the tasks on our 'To-do list'. And if one of the task missed is renewing the insurance policy, the fear of rigmarole to be faced while renewing it, haunts many. But here's some pleasant news.
In a bid to spruce-up renewal premiums some life insurance companies are rushing to revive lapsed insurance policies. Besides, they aren't levying any penalties and instead offering incentives to those who have missed out on paying their insurance policy premiums on time. At Reliance Life, for instance, the revival initiative allows policyholders to renew their lapsed policies by simply paying their due premium without any penalty or medical tests.
It is noteworthy that according to the Insurance Regulatory and Development Authority (IRDA) recommendations, a uniform grace period of 30 is extended for annual, half-yearly and quarterly renewals, while 15 days is extended for monthly renewals. Moreover, a lapsed policy can be only be revived by payment of due premiums along with applicable interest and Declaration of Good Health by the policyholder.
So why are some insurers rushing to revive lapsed policies?
You see, by reviving lapsed policies and accepting renewal premiums, for insurers it means pure business as that, not only increases their premium income but also increases their 'persistency ratio'; which is nothing but the percentage of policies that an insurer is able to renew.
Also such a move is in anticipation that 4th quarter of the financial year - which is generally busy period product sales (due to tax saving season) - may not see much traction in the backdrop of tough scenario in the wake of new product norms (which will have to be implemented).
PersonalFN is of the view that, while executing task in a 'to-do list', one should first complete those which provide a long-term benefit and which secure yourself along with your family. Since pure insurance products offer indemnification of risk, renewing insurance premium should be a priority as it is an essential aspect of one's financial plan and therefore shouldn't be ignored.
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Released Session 6: Introduction to various asset classes - Equity, Debt, Gold
As an investor you need to be well aware about the investment instruments before investing your hard earned money.
This Money Simplified session talks about three major asset classes Equity, Debt and Gold, which are popular amongst investors & explains the merit and demerits and their suitability for investors.
We strongly recommended you to watch this Video Now. Its Free!
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Impact
The Indian equity markets depicted an impressive impulse in the month of October 2013 posting a gain of +9.2% on the S&P BSE Sensex. But overall in the calendar year thus far, the Indian markets have shown rampant volatility with host of domestic and global macroeconomic variables in play. Retail investors seem nervous about investing in Indian equity markets (with their participation in the equity markets at a 10-year low), although the markets have scaled a new high in the recent past (on the Muhurat trading day). The story for High Networth Individuals (HNIs) isn't any different. They too seem less convinced about investing in India story with not having seen meaningful returns.
So where are HNIs investing?
With the equity markets in the developed economies - U.S., Japan and some markets in Europe - having done very well (as depicted in the table above) aided by some improvement in fundamentals, the wealthy investors are looking at investment opportunities in such markets.
*Defined as individuals investing Rs 5 lakh and above
(Source: AMFI, PersonalFN Research)
According to the data available from the Association of Mutual Funds in India (AMFI), the Fund of Funds (FoFs) investing overseas have seen a rise of 15.3% in folios held by HNIs. Now this a sharp contrast to 11.0% drop in folios in the previous six months ending March. To read more about this news and the view of PersonalFN over it, please click here.
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Impact
Adversities can catch anyone unawares but what matters is how you face them. However, when it comes to money matters, adversities are often a result of lack of planning. Many people invest only to build corpus for retirement. There are many expenses which should ideally be accounted for, but are often underestimated. This leads to frequent withdrawals from retirement savings. Salaried people often withdraw money from Employee Provident Fund (EPF) or Public Provident Fund (PPF). Those withdrawing from shares and mutual funds often pop off profit making investments. Although there is no harm in dipping in any of the resources, more systematic approach needs to be followed.
True, many of you may not be ignorant but still might have faced some difficult situations wherein you had to break your investments (which were actually assigned for some other purpose) to meet emergencies. PersonalFN explains how one can effectively utilise available resources for meeting such emergencies.
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- As the Indian rupee came under pressure against the greenback and stock markets retraced from their recent all-time high of 21,239.36 points made on November 3, 2013 (on Muhurat trading day), the finance ministry has swung into action by mulling ways to increase participation of Foreign Institutional Investors (FIIs) in the capital markets and boost the Indian rupee. It is said that some of the measures which could be taken in this direction are:
- Liberal conditions for use of collateral on par with domestic investors;
- Clarity on permanent established rules;
- Clarity on taxation issues;
- Deepening the bond markets; and
- Allowing greater participation of FIIs in the currency derivative market
Moreover, the Government is likely to come out with clarification on definitions of FIIs and Foreign Direct Investment (FDI) in a couple of weeks.
PersonalFN is of view that, India's macroeconomic variables such as high fiscal deficit, pressure on Current Account Deficit (CAD), unpredictable tax regime and slowing economic growth remain a concern for FIIs. So until these structural problems aren't addressed in a prudent manner, FIIs would cautiously participate in the Indian capital markets. Also until macroeconomic fundamentals do not improve, the rupee would continue to remain under pressure against the greenback. It is noteworthy that, for the U.S with signs of economic vigour seen, it would not be too long before the U.S. Federal Reserve starts winding down its bond buying programme in early 2014. And if that indeed takes place, the U.S. dollar would get stronger and Indian capital markets may also witness a detrimental impact in the form of FII outflows. So, the Government needs to address to structural problems in a prudent way first, to attract FII flows in the long-term and boost rupee.
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Currency Futures: "A transferable futures contract that specifies the price at which a currency can be bought or sold at a future date. Currency future contracts allow investors to hedge against foreign exchange risk."
(Source: Investopedia)
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Quote : "Risk comes from not knowing what you're doing." - Warren Buffett
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Disclaimer: Quantum Information Services Pvt. Limited (PersonalFN) is not providing any investment advice through this service and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. All content and information is provided on an 'As Is' basis by PersonalFN. Information herein is believed to be reliable but PersonalFN does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. PersonalFN and its subsidiaries / affiliates / sponsors or employees, personnel, directors will not be responsible for any direct / indirect loss or liability incurred by the user as a consequence of him or any other person on his behalf taking any investment decisions based on the contents and information provided herein. This is not a specific advisory service to meet the requirements of a specific client. Use of this information is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This is for your personal use and you shall not resell, copy, or redistribute this newsletter or any part of it, or use it for any commercial purpose. The performance data quoted represents past performance and does not guarantee future results. As a condition to accessing PersonalFN's content and website, you agree to our Terms and Conditions of Use, available here.
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