S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
33,626.97 |658.29 2.00%	64.87 |0.29 0.45%	30,491.00 | -1019.00 -3.23%	68.33 |-1.20 -1.73%	5.00% - 6.90%

 

Is it justified to reshuffle your portfolio every time you hear some positive or negative announcements on the policy front? Or shouldn’t you care at all about policy actions and other important events?

Well, the answer lies in what has changed. PersonalFN covers almost all important policy actions, but rarely deviates from its orientation. Then why, in the first place, do we track these events so closely?

The simple answer is to check, if the underlying assumptions about the return expectations of a particular asset class, or has its risk profile changed; and if yes, to what extent, due to fresh news flow.

Recently, RBI announced its first bi-monthly monetary policy for FY 2018-19. On the backdrop of PNB scam, perennially high levels of bad debts of Public Sector Banks (PSBs), increased volatility in the financial markets and shaky political equations in the country, RBI’s monetary policy stance was extremely crucial. Even more important was its forward-looking commentary.

Since the retail inflation of 4.4% in February was lower than expected, the experts’ fraternity was expecting the central bank to maintain the status quo on the policy front. In line with these expectations, the RBI held policy rates unchanged along with its neutral stance on the future policy action.

With this, repo rate at 6.0%, reverse repo rate at 5.75%, Marginal Standing Facility (MSF) rate and bank rate and 6.25% each remained unchanged. Out of 6 members of the Monetary Policy Committee (MPC), 5 voted in favour of status quo while one member recommended a rate hike of 25bps (basis points).

Factors that drove RBI’s decision are as follows:

• After adjusting for the impact of House Rent Allowance (HRA), the retail inflation is forecasted to remain in the range of 4.7% to 5.1% in the first-half 6 months of FY 208-19 and around 4.4% in the next six months of the current fiscal. The inflation expectation excluding the transient impact of HRA appears more benign. The RBI is working with an objective of maintaining inflation at 4% over the medium term with +/- 2% margin for error.

• The surplus liquidity in the monetary system has fallen sharply and the system has been experiencing liquidity deficits off and on.  In the recent times, the weighted average call rate (WACR) has moved up and is much closer to the repo rate.

• There are clear signs of the economic revival. Credit off-take has also been climbing up steadily.

• Food prices are expected to remain moderate on the back of a forecast of normal monsoon.

RBI may keep the policy rates unchanged, unless there’s a threat to its medium term inflation target of 4%.

Factors that may change RBI’s policy stance…

• Although the baseline assumption of RBI on global crude oil prices for FY 2018-19 is US$ 68 per barrel; RBI has advised a cautious monitoring of price trends and has warned against volatility.

• Similarly, RBI has flagged against the possible escalation in food price inflation due to higher Minimum Support Price (MSP) announcement.

• Higher fiscal and current account deficits may push inflation on the upward trajectory.

• RBI expects Indian economy to grow at 7.4% in FY 2018-19. It is likely to swing into action if this assumption comes under severe threat.

Has anything changed for you?

Unless RBI’s policy stance changes from neutral to hawkish, nothing is likely to change significantly for investors.

Other factors might still continue to influence the return potential and risk profile of various asset classes, but interest rates are likely to remain stable in FY 2018-19.

You should continue to follow your personalised asset allocation plan that takes into account your financial goals and also considers your risk appetite.

Why Is Gold Gaining All The Attention These Days? Know Here...

The calendar year 2018 started with a bang for equity investors. The effervescence of optimism overflowed across the global equity markets. Indian markets too participated in the global rally and the key indices touched their life-time high in January.

Those who missed the bus felt dismayed and fearing the permanent loss of opportunity, invested in equity when the markets rallied at steep valuations.

 But soon after the budget was announced, the tide turned against equity.

Long term capital gain tax on equity, PNB scam, fear of political instability in India, geo-political tensions at the global landscape, possibility of escalation of tariff wars made guest appearances. These factors pricked the balloon of equity.

But as they say, one man's loss is another man's gain. Gold shot into the limelight.

Gold is already up close to 5% in India and is expected to exhibit sheen in 2018.

To read more and to know where gold is headed, click here.

How LTCG Tax On Equity Investments Can Derail Your Financial Plan…

Indian investors are still trying to absorb the effect of the Long Term Capital Gain (LTCG) tax on their investments in equity shares and equity mutual funds.

Until March 31st, investors enjoyed tax-free gains on their equity mutual fund units held for over a year. However, long-term gains on equity mutual funds realised after April 1st will attract tax @10%.

Yes, 10% of your gains may work out to a huge chunk of money

Take this for example: You invest Rs 10 lakh in an equity mutual fund. Over the next 10 years, the mutual fund delivers a compounded return of 13%, converting the Rs 10 lakh investment to Rs 33.95 lakh - A gain of Rs 23.95 lakh!

Assuming the prevailing tax laws remain unchanged, 10% tax will be charged on the gains of Rs 23.95 lakh, which works out to as much as Rs 2.40 lakh. YES! That is the cost of a superbike today

And like Mr Benjamin Franklin says, "In this world nothing can be said to be certain, except death and taxes."

Given the current tax implications, we need to take note how it influences our financial goals and take necessary action to ensure we achieve our investment needs

To read more and Personal FN’s views, please click here.

Is Including Gold In NPS A Good Idea? Find Out Here…

Generating inflation-beating returns is crucial for a sound retirement plan. But, what’s equally important is how safe is the corpus you’ve accumulated

After all, you can’t take risks with your retirement savings. That’s because the quality of your life during retirement completely depends on how you have treated your savings during your earning phase

Though seeking higher returns is okay, but striking the balance between risk and returns is more important.  A well-rounded asset allocation is the key of any investment plan

As you know, India’s social security system is in an abysmal condition compared to some developed nations.  In fact, India ranked 43rd on the Global Retirement Index in 2017—making it one of the worst places to retire in

To read more and Personal FN’s views, please click here.

5 Things SEBI Needs To Do Right Away For Mutual Fund Investors

The Securities and Exchange Board of India (SEBI) has safeguarded investors’ interest by making mutual fund houses more accountable.  Guidelines governing the industry are strict, clear, and one of the best in the global context

But there is still more to do

Although instances of mis-selling have been curbed, they haven’t stopped completely. Every time the capital market regulator comes out with stricter regulations, mutual fund houses and their channel partners find a way to achieve their objectives, perhaps, compromising the investors’ interest

The ideas in this article are inspired by Mr Pankaaj Maalde, and first appeared on ET and his blog.

To read more, please click here.

Reliance Growth Fund: Will The New Aggressive Strategy Give A Fillip To Its Performance?

Reliance Growth Fund is among the few schemes with a track record of over two decades. Launched in 1995, by Reliance Mutual Fund, it is one of the flagship schemes of the fund house. Last year, ace fund manager Mr Sunil Singhania and then CIO moved out of the AMC and gave way to Mr Manish Gunwani, another well-known fund manager, and erstwhile Deputy CIO of ICICI Prudential Mutual Fund. 

As Mr Gunwani took over as CIO-Equity, Reliance Mutual Fund and the fund manager of Reliance Growth Fund in September 2017, there has been a drastic shift in the portfolio holdings and market-cap allocation. There has been a significant reallocation of assets from large-caps into mid-cap stocks. This comes especially at a time when most fund managers have been doing the opposite

Click here to read the complete note

All You Need To Know About Robo-Investing

Accommodative Monetary Policy: Accommodative monetary policy occurs when a central bank (such as the Federal Reserve) attempts to expand the overall money supply to boost the economy when growth is slowing (as measured by GDP). The policy is implemented to allow the money supply to rise in line with national income and the demand for money.

Quote: "Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future."‒Warren Buffett