Impact 
In order to offset the lower credit off-take due to high interest rates and boost their fee-income, banks are now turning their heads towards selling equity mutual funds through the Systematic Investment Plan (SIP) route. Not only this, some of these banks have set aggressive targets for their branches across the country, and if these targets are met it will surely revive the sagging fortunes of the mutual fund industry.
The State Bank of India (SBI), India's biggest lender with a sprawling network of over 15,000 branches, plans to sell 25 lakh SIP units this financial year ending March 31, 2012. Axis Bank, which has a network of almost 1,300 branches, intends to sell 5 lakh SIP units and state-owned Canara Bank, with 3,250 branches, has set a target of 2 lakh SIP units. Also, banks including Punjab National Bank and Union Bank, which partly own mutual funds, are also selling schemes through their extensive branch networking order to boost their fee income.
We believe that this initiative by banks to promote the SIP route of investing in mutual funds, comes after assessing the fact that it will not only shield investors form the vagaries of the equity markets but will also help them earn better returns. However, care should be taken by these banks that in order to achieve their targets they do not mis-sell mutual fund products which may prove detrimental to investors’ portfolio. Also as investors you need to be vigilant about, from whom you seek your investment advice.
Remember whenever you investors opt for the SIP route to mutual fund investing; go in for diversified equity mutual funds which have at least a 3 year track record and stay invested in the same for the long-term - say 3 to 5 years, so that you get the optimal benefit of rupee-cost averaging as well as compounding. Also, care should be taken while selecting the fund house. Always select a fund house which has well laid out processes and systems for making investment decisions.
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Impact
The group health insurance cover provided by your employer may soon undergo a downward revision as the employers are reducing benefits due to increase in premiums (by 30% to 100%) borne by them.
Thus now an employees’ health cover may undergo revision in some of the critical areas of the policy such as the following:
- Parental coverage may be reduced or only partly paid by the employer
- Hospitals covered under the PPN (Preferred Provider Network) coverage might be reduced
- Number of disease covered by policy may be reduced or the coverage amount would be reduced
- Cashless facility may also be reduced, along with restrictions on hospital room rent
In our opinion, an individual must have his or her own individual mediclaim policy even though there is a substantial cover provided by the employer. Also, employees should have separate coverage for their parents or dependants even if they (parents or dependants) are covered under the group insurance facility provided by the employer (wherein the employee has to shell out the premium component of their parents or dependants). Moreover, while insuring yourself under a separate mediclaim policy (apart from the one provided by your employer), we recommend that you opt for an "individual mediclaim policy", instead of a "family floater policy", since it insures you for a full sum assured, unlike a family floater policy where the other members in the family suffer on their insurance coverage, if of one person has a claim. (This is because under a family floater mediclaim policy the sum assured is jointly available.) | |
Impact
The Indian equity markets once gained the hotspot amongst the Foreign Institutional Investors (FIIs) as in the last month (June 2011) they turned net buyers to the tune of  4,572 crore, thereby contravening their May 2011 selling activity worth 6,614 crore.
In the midst of a "debt overhang" situation in the Euro zone the FIIs are turning their focus towards India as the equity markets here are trading at reasonable valuations, along with the health of the public finances in the country being under control due to prudent policy stance adopted Reserve Bank of India (RBI) as well the Government. Also, corporate earnings are expected to be good by them, and they have evaluated the progress of monsoons as well.
(Source :ACE MF, PersonalFN Research)
But having said that the Indian equity markets are likely to remain range bound as global headwinds remain (such as Euro zone crisis and potential downgrade of the US Sovereign rating), and inflationary pressures continue to haunt RBI.
Hence given the aforementioned factors (despite positive FII flows in the last month), we remain cautious as chances of a slowdown cannot be eliminated (fuelled by global headwinds), unless QE3 is announced by the U.S to safeguard against economic problems they are facing (such as mellowing growth rate and high unemployment rate).
Inflation in India would not be a long-term threat as RBI has already remained vigilant about taming the same (by increasing policy rates 10 times successively since March 2010), and is expected to mellow down by October 2011 as RBI maintains its anti-inflation stance.
While investing we recommend that you investors stagger your investments, and preferable adopt the SIP / STP route of investing in mutual funds as this enable you to manage the volatility of the equity markets well (through rupee-cost averaging) and also provide your investments with the power of compounding. | | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 18,722.30 | 160.4  | 0.86% | | Re/US$ | 44.51 | -
| 0.00% | Gold /10g | 23,140.00 | 390.0  | 1.71% | | Crude ($/barrel) | 117.95 | 0.4 | 0.30% | | FD Rates (1-Yr) | 7.25% - 9.25% | Weekly change as on July 21, 2011
*BSE Sensex as on July 22, 2011
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In an interview with the Mint, Mr. Hans Goetti – Chief Investment Officer for Asia at Finaport Investment Intelligence shared his views on QE3 in the US, Indian equity markets and the consumption story in India.
Mr. Goetti is of the view that the US economy is slowing down for months now and it looks more and more like the stimulus is waning as the QE2 has ended. Further explaining the situation in the US he says, “We have cutbacks at the state and local government levels. We will have cutbacks at the federal level as well, and at the same time, unemployment is rising again. The housing market is in depression. So we are looking at a slowing economy and it is very hard to see how you cannot have QE3 or some form of the liquidity programme. We've been saying this for months and this is probably going to happen and we stick to that view.”
As far as Indian equity markets are concerned, Mr. Goetti believes that the markets have been in a trading range for quite sometime. He thinks that the inflationary pressures still persist and as such the central bank has to respond. He also said that, “We are seeing another two rate hikes at least, because inflationary pressures are still there. But you are going to have a base effect later in the year, and then inflation will start to come down and that should be quite constructive for equities because the interest rate cycle will come to a end, and at the same time, you have a slowing economy in the US and Europe and India being a little bit less export-dependent than the rest to Asia, could see an out performance vis-à-vis Asian markets. That doesn't mean it has to be tremendous performance but it's going to be better than it was in first half.”
Mr. Goetti is very confident about the consumption story in India and believes that the India has a great consumption story in the long-term. As far as oil consumption is concerned, he thinks that it will remain high as there is a lack of spare capacity in the world due to the war in Libya still going on and not much of oil barrels are coming to the market as a result of which there is spare capacity declining.
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Absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the total number of available homes by the average number of sales per month. The figure shows how many months it will take to exhaust the supply of homes on the market. A high absorption rate may indicate that the supply of available homes will shrink rapidly, increasing the odds that a homeowner will sell a piece of property in a shorter period of time.
(Source: Investopedia) | |
QUOTE OF THE WEEK
"You need a plan to build a house. To build a life, it is even more important to have a plan or goal"
-Zig Ziglar
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