  | | April 25, 2014 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 22,688.07 | 59.23 | 0.26% | | Re/US$ | 61.09 | -0.7 | -1.16% | | Gold Rs/10g | 30,000.00 | 350 | 1.18% | | Crude ($/barrel) | 109.41 | 0.64 | 0.59% | | FD Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on April 23, 2014
*BSE Sensex as on April 25, 2014 | |
Impact 
Gold has a traditional importance in India. Investment in gold is considered safe and secure by many Indians. This has been one of the reasons why it has remained one of the most preferred investment choices of Indians. But as far as buying gold solely from investment perspective is concerned, of late the trend has changed slightly.
In the Financial Year (FY) 2013-14, investors pulled out about Rs 2,300 crore from gold Exchange Traded Funds (ETFs). Almost 1 in 5 folios were closed. As per data publish by Association of Mutual Funds of India (AMFI), investor base in gold ETFs has been eroded by almost 18% since May 2013.
So what has led to such a decline?
Well, the following are the main reasons:
- Weaker gold prices in international market (due to recovery in the global economy);
- Appreciation in the value of Indian rupee against the U.S. dollar; and
- Curbs on gold imports in India affecting the inflows in Gold ETFs
What should investors actually be doing?
PersonalFN is of the view that, although gold prices are down and rupee is doing reasonably well against U.S. dollar at present, you shouldn’t avoid putting money in gold. In India with inflationary pressure imminent, mainly due to below normal monsoon (on account of the El-Nino phenomenon), gold could come to your recue during such times. PersonalFN believes you should have 10%-15% of your portfolio in gold. Gold is a portfolio diversifier and provides hedge against inflation. However, you should avoid skipping gold or investing aggressively based on any speculation about future price trends.
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Impact
If you invest in shares, you need to keep a track of companies you invest in. However, if you take exposure to equity markets by investing in mutual funds, you are benefited by the expertise of the fund management team and even diversify well. Fund manager takes all investment related decisions on your behalf. Sometimes, it may happen that you may not sight opportunity in a particular company or a sector, which otherwise a mutual fund may do.
Take this example; the auto companies have been reeling under pressure for almost last two years. Car sales are down by almost 4.7% in Financial Year (FY) 2013-14. In the fiscal year before that too, car sales were down by around 6.7% as compared to the preceding year. Auto industry has been hit hard by low demand on account of high inflation and high interest rates on loans. Cost of fuel and overall downturn in the economy, are among other factors that have negatively affected the auto industry.
But you would be surprised to know that, recently mutual fund houses have started hiking their exposure to auto and auto ancillary companies.
S&P BSE Auto vs S&P BSE Sensex
NAV as on April 23, 2014
(Source: ACEMF, PersonalFN Research)
For almost last one or two years mutual funds were neutral on the sector, but lately they have been investing aggressively. As per data published by Securities and Exchange Board of India (SEBI), mutual funds collectively have invested about Rs 17,000 crore in auto companies. Now the sector stands third on the list of mutual funds after Banking and Information Technology.
So what has changed suddenly in the auto sector?
Rejuvenated buying interest in auto companies is on hopes that industry may recover, going forward. How? There are expectations that interest rates may start ease from October this year (until which a rate hike or status quo may be possible). There are also hopes that festive demand may also push auto sales up.
Is it worth betting on auto sector?
PersonalFN is of the view that while mutual funds may be right in building positions in the auto sector, it would be wise for investors to take exposure via opportunities funds. This is because they are well capacitated by their investment mandate to take exposure across specific sectors / themes and market caps, which can enable investors tap wider opportunities and at the same time reduce risk (through diversification). But while selecting a opportunities fund for your portfolio, you must thoroughly analyse its performance, and consider only those which have completed a 3 year track record. Also, you would be better off investing in a consistent performing fund, coming from a process and systems driven fund house.
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Impact 
Serving a patient was once considered to be equivalent to serving God. But these days, with increasing commercialisation, the nobility of the medical profession seems to be on a decline. You visit a hospital for any treatment, more often, the first question you will be asked would be whether, do you have a health insurance policy and how much is your coverage under it, or you are going to pay from your own pocket. Now, if you have health insurance coverage, in all possibility, the hospital could charge you a different rate than what it would have charged you otherwise. Of course, there are exceptions. Not all hospitals are alike and there are still a number of hospitals and clinics which run on ethics. But, what is worrisome is, the number of hospitals following malpractices and billing their patients exorbitantly is growing. But to address to this issue, the Insurance Regulatory and Development Authority (IRDA) has now stepped in with an initiative which could help you identify hospitals offering you affordable treatments.
Here is how?
IRDA is planning to establish a system to rate hospitals. This will help track charges levied and procedures followed by hospitals. You see, it has been observed by the regulator that due to lack of availability of consolidated data on health insurance segment some hospitals have been charging their patients irrationally. Moreover, cost of a particular treatment differs significantly from hospital to hospital. Keeping a track of costs associated with treatments would make it easy for the regulator to identify abnormalities in the cost structures of medical treatments.
As suggested by IRDA, insurers would be asked to map every chain hospital with a unique identification code. The unique identification code assigned to a respective hospital will be integrated with the pin code of the area and name of hospitals, which will facilitate easy tracking.
To read more about this news and the view of PersonalFN over it, please click here.
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Impact
A few months ago, the Securities and Exchange Board of India (SEBI) elevated the minimum net worth criterion to Rs 50 crore for mutual fund houses. The rationale of the regulator was to weed out players who are not serious about doing business. Another change that SEBI brought in was requirement of seed capital, which they believed would encourage mutual fund houses to perform better if their own capital is at stake in the funds they introduce.
Taking another step forward, SEBI is now planning to place minimum corpus criterion for debt funds. The regulator is of the view that all open-ended debt oriented schemes should maintain average Assets under Management (AUM) of at least Rs 20 crore on a half-yearly basis. And if they fail to comply with the same, SEBI is likely to ask them either close down or merge such schemes with other existing debt schemes.
At later stage, SEBI may also impose similar condition on equity oriented schemes keeping Rs 10 crore as minimum AUM criterion.
To read more about this news and the view of PersonalFN over it, please click here.
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Lot: In general, any group of goods or services making up a transaction. In the financial markets, a lot represents the standardized quantity of a financial instrument as set out by an exchange or similar regulatory body. For exchange-traded securities, a lot may represent the minimum quantity of that security that may be traded.
(Source: Investopedia)
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Quote : "Investing is laying out money now to get more money back in the future." - Warren Buffett
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