  | | April 17, 2014 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 22,628.84 | -0.12 | 0.00% | | Re/US$ | 60.39 | -0.32 | -0.53% | | Gold Rs/10g | 29,650.00 | 225 | 0.76% | | Crude ($/barrel) | 108.77 | 1.44 | 0.34% | | FD Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on April 16, 2014
*BSE Sensex as on April 17, 2014 | |
Impact 
Foreign Institutional Investors (FIIs) have been pumping money into Indian equities but domestic investors, especially the retail investors are shying away from markets. With markets rising to new highs, retail investors have become cautious and are opting to exit from stocks and equity oriented mutual funds.
A per the data published by the Association of Mutual Funds in India (AMFI), investors have pulled out over Rs 8,000 from open-ended equity oriented funds in March 2014, which is the highest number since September 2010. Moreover recently an article published by The Economic Times reported that 53,000 demat accounts were closed down in February this year as per data published by Central Depository Services (CDSL) and National Securities Depository (NSDL).
Are equity markets in a trap?
Data as on April 11, 2014
(Source: ACEMF, PersonalFN Research)
Many in the market feel, investors are booking profits and exiting markets. However, PersonalFN is of the view that people have not earned enough profits and that's why they are exiting fearing probable losses, if the market slips going forward. As depicted in the chart above, markets have largely stayed sideways over last 4 years and have hardly generated any meaningful returns for their investors.
Should you exit now?
PersonalFN believes a common mistake that many retail investors make is they look at the index level and decide whether to enter or exit, without paying attention to the market valuations. Another common mistake is, they easily get carried away with market momentum. It's a well-known fact that New Fund Offers (NFOs) launched when markets are surging up strongly, get a good response from retail investors. However, looking at redemptions happening at this juncture; it seems retail investors don't want to put fresh money now when markets are near all-time high.
PersonalFN is of the view that although it is important to pay attention to market valuations, your entry or exit should be determined by the investment objectives you set and the investment horizon you have. Also while investing it would be wise to follow your personalised asset allocation, rather than investing in an ad-hoc manner. Speculating on the market direction is harmful. Those who are avoiding equity altogether might regret over long-term, as equities tend to outperform most other asset classes over long-term.
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Impact 
Many of you may agree that young brigade of digital savvy children is smarter than their previous generation. However, it is often said that, the new generation spends unwisely without thinking about their future. But don't be surprised if your children prove you wrong on this count. Soon they might start using financial jargons and talk about financial planning at an age at which even you probably didn't bother about your finances. This may actually come true, if the Securities and Exchange Board of India (SEBI) gets success in persuading Central Board of Secondary Education (CBSE) and the HRD ministry for making an inclusion of subject on capital markets in school syllabi.
Why SEBI wants to do this?
In a country like India which has a huge population and fast-growing economy, it is imperative to have a stable financial system. The proposal given by SEBI to CBSE and the HRD ministry is a part of its effort to spread financial literacy among people.
PersonalFN believes, lack of awareness, fear of loss and history of scams make investors nervous about capital markets. If Indians are made aware about their finances and if their children start understanding financial concepts and financial markets right from their childhood, achieving an objective of vibrant and stable financial system would become easy. Moreover, PersonalFN is of the view that, parents should also encourage children to learn concepts about finance and capital markets. Teaching your children about financial matters, taking them on shopping for giving them real world experience, exposing them to banking transactions and at a little later stage involving them in financial decisions; may help them being responsible and prudent while managing their finances.
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Free Guide: The Ultimate Guide to Successful Equity Investing
The turbulent times encountered by equities over the past few years has sent shiver down the spine of many.
While many investors seem to have lost their faith in equities, those who have ignored fundamentals of investing, have been let down rather badly!
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Impact
Everyone is concerned about earning high returns on their investments. Isn't that the primary reason why you invest your savings in the first place? Most people diversify their investments across various asset classes (viz. equity, debt and gold) to avoid concentration risk in any particular asset class. Your risk appetite and risk tolerance level determine your investment behavior, if you are a prudent investor. You put in a lot of efforts to invest your hard earned money in investment avenues that may help you satisfy your long term goals. But if you do not rebalance your portfolio at regular intervals, all your efforts in creating a prudent investment portfolio would go in vain.
What is portfolio rebalancing?
In simple words, portfolio rebalancing is nothing but correcting the deviations in the original allocation. For example, initially you invested 70% in equity, 20% in debt and 10% in gold. After a few years, equity became 80% of your portfolio and gold became 15% of your portfolio due to an increase in their value. As a portfolio rebalancing exercise you would cut exposure from equity and gold and put the money into debt to achieve the asset mix you had started off with.
Why is it necessary to rebalance your portfolio?
It is possible that an asset class drifts significantly away from the initial allocation due to appreciation / depreciation in its own value or appreciation / depreciation in the value of other assets. If you do not rebalance your portfolio from time to time, it is possible that it might not yield the desired results. There is a possibility that unbalanced portfolio may be skewed towards a particular asset class, exposing you to a risk of concentration.
To read more about this news and the view of PersonalFN over it, please click here.
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Impact
If you keep deposit with a bank, it may not offer you indiscriminately higher or lower interest rate than it offers to other depositors. But when you visit a bank as a borrower, it may offer you loan on terms different than those offered to other borrowers. Nonetheless, the Reserve Bank of India (RBI) seems concerned over discriminatory practices and has come down heavily on banks charging different interest rates on loans to customers with similar profiles.
The central bank in order to study credit pricing has formed a working group to suggest stringent norms in order to make loan pricing more transparent and have in place an appropriate credit pricing under the floating rate regime. Moreover, it has suggested host of other measures which are intended to improve transparency and lead better customer satisfaction.
To read more about this news and the view of PersonalFN over it, please click here.
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- If you find it difficult to track your investments, soon you would be relieved. The Securities and Exchange Board of India (SEBI) is planning to make available a consolidated investment statement to investors. This statement will show details of investments you have made across equities and other asset classes. While speaking at IMC's seminar on Investment Outlook in 2014, Chairman of SEBI has indicated that such statement is likely to be available to investors from December this year.
PersonalFN is of the view that a unified statement would enable investors to track their investments better on account of better collation of data, provided investment across asset classes are reflected rightly in the statement. But possibly, the scope of such statement would be restricted only to investments coming under the purview of SEBI. If all regulators come together and provide exhaustive data of investments, it would be more helpful to investors to track their investments and even review their portfolio at timely intervals.
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Net Interest Rate Spread: The difference between the average yield a financial institution receives from loans and other interest-accruing activities and the average rate it pays on deposits and borrowings. The net interest rate spread is a key determinant of a financial institution's profitability (or lack thereof).
(Source: Investopedia)
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Quote : "Anything can happen in stock markets and you ought to conduct your affairs so that if the most extraordinary events happen, that you're still around to play the next day." - Warren Buffett
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