Sunday, October 30, 2016

10 things Indians are eagerly waiting for in samvat 2073

Happy Diwali n a prosperous new year 2073 friends. May God bless everybody with all the pleasures in life. With the new samvat we have new beginings, expectations and dreams. In this post, I decided to list down 10 important global and Indian events which will be closely watched by Indian investors.

1. Results of US Presidential election - The most anticipated event of the year set to unfold on 6th/7th November 2016. The fate of two presidential candidates, United States and economy worldwide is set to be deciding its new course. Though Hilary Clinton enjoying a better mindshare of audience, one never knows if Trump wins the battle at last moment and how investors react to it.

2. FED rates - This is one more game changer card US holding close to its  chest. Its been long time that FED is holding rates at 0.5% and the bonds have started yielding negative returns, FED time and again promising to increase the interest rates to boost economy, push inflation upwards to 2% (In the US), if this happens, the funds may see a return to US moment. The event is set for a december date. Hoever, there are many constraints on the same owing to various economic restraints. One need to keep a close eye on this.

3. The BASEL III norm for Indian Banks - Basel III focuses on the capital adequacy of banks primarily on the capital requirements of the banks to deal with various risks potentially faced by the businesses. Banks have been trying various methods from issuing perpetual bonds to selling preferential shares. Having the dates set for attaining the requirements at 31st Macrh 2018, this samvat will give a clear picture as in how efficiently our banking system braces for it.  

4. Defence Initiatives by India - This had been a priority for Mr. Modi for last year as well. Prime minister has been strengthening global alliances of all kinds. Be it developing and improving diplomatic associations or buying global arms and ammunitions. Modi is all set to corner Pakistan. India succesfully conducted surgical strike against terrorists as well as stopped a Hydel Dam project in Pakistan occupied Kashmir. This year Indians will eager to see consolidated action on thhe notorious neighbors. 

5. UP Elections - The most populous state of India, with maximum MP seats and having PM's constituency set for hottest election battle in 2017. The event is already a hot topic with a intternal spat in Samajwadi party, it also can be a game changer of central governement as they have failed in the last five polls.  

6. Real progress @ Make in India - This has been a pureplay by our prime minister. The centre  has gone all out, all major and developing economies has been approached to collaborate and set manufacturing units in last two years in India. This samvat will be eagerly watched out for the real results.

Thanks to Patanjali boom and Pakistan terrorism, there is a common theme growing in general public about avoiding chinese products and buy "Desi". This is easier said than done. But we will definitely more curious on what we are and will be making in India than ever. 

7. GST roll out- GST has been a parliament battle and with each states in terms of revenue sharing. This is a well covered topic by media. All indian states, industries, sectors and economists eagerly waiting for its implementation and the real outcome.

8. TATA &MISTRY Saga - This is just not a corporate battle, this will be a maker or breaker for Tatas, Will there be any change in the way the corporate history been written in India so far? How about investors Trust?? 

9. Reality check on avoiding Chinese goods - China is not sitting back. With  chinese companies investmenting in  Indian startups, PayTM, collaboration with OLA, China gradually but steadily entering India, now with Money. Just saying that "not to use chinese goods" is not at all a sensible talk. We are dependent on them from mechinaries to tubelights, mobile phones to door locks. It is much more deep rooted in our system than we can see. It will be a long time before we see a complete make in India. Matching their prices will be another ball game all together. 

10. The Harvests - Voila! this cannot be the last topic. Definitely not in my mind. The raingod has been generous to India this year. Having doubled my money on Escorts, and the big run I missed on fertilises and fodder socks, there is still much story left. The coming year expected to be a gala for the agriculture Industry. The rural India is smiling again. And we hope for a joyous year ahead.

To conclude, the stocks in technology, banking, agriculture and defense will be on top of my mind.

Have a great year ahead. Wish you all a happy diwali and a prosperous new year. :)

Friday, October 28, 2016

Gold is an important asset class, don't miss it in your portfolio

Last few decades or as we may call it, the past century has seen a drastic development in world economy and finance. Launching of equity market, ever improving banking systems, bond markets, insurance, mortgages followed by derivatives, mutual funds, currency markets has brought in a complete new era in the way world economics function.

Through these diversification the investors has got many high yielding and super high yielding instruments to invest. Especially the mutual funds concepts of SIP, SWP, power of compounding has investors lured in one direction. That is high yield, higher yield and higher yields, every investor seems busy calculating how soon their SIP will make them "Crorepati". By virtue of it, undoubtedly it is hand a down best product in the market to create long term wealth. But we need to continuously reiterate ourselves that financial planning is not only about money minting.

A health financial portfolio is proportionately diversified keeping in mind about the life goals and addressing emergencies. A portion of portfolio should be allocated for wealth creation, some portion for insuring against unforseen emergencies, some for socio-political emergencies. The personal emergencies could be covered by insurance, like medical, natural calamities etc. But we need understand that there are certain emergencies which doesn't come up in general discussion. 
The emergencies like sovereign debt crisis, bank failures, inflation, deflation, depressions, a war. If we go back to history pages in gold, we will find that in these kind of emergency situation "gold" has often enjoyed a status of being reliable.
5 reasons we must hold gold.

1. It gives a hedge against inflation

2. In many economic cycles, gold gives better return than equities in short term

3. It is relatively independent class compared to other instruments

4. It is considered a reliable asset class, can be used for loan 

5. Adding gold helps diversifying your portfolio, hence reducing risk

Read more on gold investments -

10-15% investment in gold is ideal for an individual investor. Do check with your financial advisor before investing.

Monday, October 17, 2016

Fixed Income funds should be part of your portfolio

Economic Times reported today, that fixed income schemes losing sheen, find here how quietly a category "credit opportunities fund" is replacing the other debt funds as a investment option and debt mutual fund schemes remains attractive. We will discuss the topic in this post.

As usual, once the redemption pressure comes, suddenly a hot cake fund/ category becomes stale and out dated, same thing is happening with the fixed income fund category. Before making these odd judgments with half knowledge, we must look at what prompted the outflow, take away and the opportunities ahead.

Key take away -
1. Unlike equity mutual funds, where we talk about SIP and staying invested for a long term, debt funds/fixed income funds considered for short -medium term and the funds see an upsurge in returns in the falling interest rate scenario.

2.Series of rate cuts by #RBI over last 2 years, the long term debt funds, medium term short term debt funds saw big upswing, giving investors handsome returns, and the chances for further rate cuts may not be aggressive as last few quarters hence it's wise to book profits. And wise investors did so.

3. There is no panic situation in the debt fund category just because guilt funds, long term debt funds saw redemption. Investors are parking their money in credit opportunities fund (category - you can find in moneycontrol. Mutual funds section)

What is credit opportunities funds? Why should I invest? 

Credit opportunities fund is a category within the fixed income funds, investing in high credit quality corporate bonds by mostly non financial companies which offer higher returns compared to the g-sec, tax free bonds, government entities.
A good mutual fund company with a strong compliance team would invest in companies with high credit rating papers ntssuch as AAA or AA, will ensure asset backing for the debt. These funds also come in brackets of short term, long term category depending on the tenor of the debt investments,there are about 57 credit opportunities funds in the list however with a basic research would easily guide is on which tenor funds we should look at this point in time.

Mutual funds companies like ICICI PRU, Franklin Templeton, DSP BR are my personal favorites because of their meticulous processes. Don't go by past returns of the funds, higher returns could also mean higher risks fund manager might have taken deviating from the mandate and could lead to extreme volatility in returns.

By no mean I am saying put all your cash in this instrument, every instrument comes with its own set of risks, so do corporate debts. These debts run higher credit risk, market risk and liquidity risk. All I am saying is debt funds are not a high and dry category and investors can look at allocating some portion of their investments in these funds to see some upside compared to bank FDs.

Check the list of funds for reference-

Thursday, October 6, 2016

TOP NRI Investments in India - FCNR deposits

Dear NRI and PIO investors, get more tax free return from fixed income options in India
TOP NRI Investments in India - FCNR deposits

With dwindling interest rates globally, it has become impossible to earn any interest in the fixed income category, however, #NRI investors have various options available back in their own country for earning a good fixed return on their investments. There are options of NRE, NRO accounts for savings, fixed deposits and recurring deposits, which are in the indian currency, #FCNR is one more option available which offers lower interest compared to #NRE, #NRO accounts, however, protects the investor from currency fluctuation risk.    

What is an #FCNR Deposit?
FCNR stands or Foreign currency Non-resident bank account. Currently it is available in USD, British Pound, Euro, Japanese Yen, AUD and CAD. This account is actually a short term fixed deposit with tenure 1-5 years. The major booster for this is, apart from NRIs, Persons of Indian Origins as well can avail this facility. The interest earned in this account is not taxable in India.

Documents required for FCNR account
Copy of passport and visa, overseas bank statement, overseas electricity/telephone bill

Premature Withdrawal
There could be a penalty charge of 1%, withdrawal within 1 year would lead to non-payment of interest.  


Interest Rates for FCNR Deposits
With many countries including US, keeping interest rate near zero, FCNR acts like a bonus element. The chart for FCNR deposits is as below -  

FCNR interest rate chart

Negative bond yield in countires – Japan, Italy, France, Germany piling on bonds with negative yield, shrinking the investors’ funds. Major countries also have kept the interest rate near zero, making it impossible to earn any interest income.

There is been news of negative yield for last three months in many major countries worldwide, Negative-Yielding Bonds Jump to Almost $12 Trillion - Bloomberg,

Dollar rupee movement doesn’t bear any consequence to the investor

FCNR accountholders doesn’t have the risk of currency fluctuation as the account remains in the original currency of deposit and the accountholder earns at fixed rate of interest.  So, if dollar appreciate or depreciate against rupee in the said tenure, doesn’t hold any bearing to the investors. 

Tuesday, October 4, 2016

NRI investment patterns become realistic - source - moneycontrol

As compared to ultra-luxury properties or saturated locations, mid-segment apartments in relatively affordable markets, seem to be witnessing high demand.
According to data available with Track2Realty, Malayalees and other south Indian NRIs are now investing in Kochi and Coimbatore, rather than Bengaluru or Chennai. Similarly, Gujarati NRIs are investing in Ahmedabad and Vadodara, rather than Mumbai, while Mumbai-born NRIs are investing in Pune and Nashik. North Indian NRIs are investing in properties in Noida and Ghaziabad, instead of Gurgaon.

What NRIs want
Kaizad Hateria, brand custodian and chief customer delight officer, Rustomjee Group, says that nowadays, in a majority of the cases, the clients who buy luxury and super-luxury properties are end-users. However, every end-user, may not have the budget to invest in luxury or super-luxury developments.
The self-employed segment of NRIs, prefer to have an investment portfolio of different projects, instead of putting their money in large developments. They divide their money among various small projects, which enables them to sell easily if they want to, or earn good rental from their various investments, Hateria elaborates.
Manju Yagnik, vice-chairperson of the Nahar Group, points out that in the prevalent market conditions, NRIs are avoiding big-ticket projects. NRIs are investing in properties worth Rs 60 lakhs to Rs 2 crores, depending on their social strata, as this is an attractive and safe option. Most of the affordable luxury housing projects, fall in this price bracket in the metro cities.
NRIs also like to keep the option of exiting open, based on the movement of the global economy. A project with a large ticket size, takes longer time to liquidate. Over the years, NRIs have largely invested in properties across metropolitan cities, as it provides them with the lifestyle that they are used, in addition to appreciation and healthy returns, says Yagnik.

Ground realities
Does it mean that the luxury and ultra-luxury properties, will no longer attract the NRIs? While the analysts opinions remain divided, everyone agrees that the days of speculative investments, may be over.
See also: Dos and donts for NRIs investing in Indian realty
A survey conducted by Pravasi Bandhu Welfare Trust, a Dubai-based non-governmental organisation, working to improve the lives of Indian workers in Gulf Cooperation Council (GCC) countries, finds that a whopping 95% of NRIs in the Gulf do not save anything and return empty handed to India, even after working for a decade. A majority of them fail to save sufficient money, due to low wages and high cost of living. The study also found that only 10% of Indian workers in GCC nations, live with families. Consequently, the demand for housing from NRIs, now reflects ground realities.
This augurs well for the housing market, as it may indicate the end of speculative buying and the evolution of an end-user-driven market.

NRI preferences in home buying 95% NRIs are employees and wage earners and cannot afford luxury property in India. Rich NRIs have burnt their fingers or have learnt from the bitter experiences of theirpeers and hence, avoid luxury properties. Small-ticket investments, provide easier options for exit and better rental returns. Insecurity in the global job market, is forcing NRIs to be realistic in their housing investments, back home.
(The writer is CEO, Track2Realty)

Sunday, October 2, 2016

10 parameters to select best equity mutual fund

How to select the best equity mutual funds for your portfoli

10 parameters to select the best #equity #scheme.
It’s a hair tearing task to shortlist mutual funds, taking expert advice, friends’ suggestions, father’s ideology and so on to figure out the best #equity #mutual funds in India. But, the more you discuss, the more complicated it gets. I have found my way of selecting the mutual funds with a little bit of help from the mutual funds fact sheets and the publicly available information.
I have divided the topic in simple 10 segments, once we put our shortlisted equity mutual funds of
our choice, we just simply need to check if its matching the parameters checklist and we are done.  While investing in equity funds, we must remember that the investment horizon should be long enough realise the benefit of equity investment, ideally above seven years. The ideal way of investing is through Systematic investment plan (SIP) to get cost average and benefit of compounding.

Before I begin with the headings, I must explain what a good equity mutual Fund is. It is the fund which consistently beat the index and stays ahead of the curve. Equity mutual funds should be considered for long term (minimum 5 years), within equity mutual fund there are several categories as below, based on the core objective of the fund. According to Indian system any mutual fund maintains equity holding above 60% is treated as equity mutual Funds. Every class and subcategory of mutual funds has a defined objective, hence the returns.

In this article we intend to only concentrate on the parameters for selecting a right equity fund.

1. The Fund house and the AUM– I personally prefer funds from top 5-7 Asset Management Company. So, once I am sure of the category, I would choose a good pedigree. The volume and pedigree cannot predict a fund’s performance, but it definitely shows the investors trust and an established history and record of fund management.

Asset under management is not true indication of future performance, largest AUM doesn’t ensure maximum return. However, a good equity mutual fund will have assets over multi hundred crore. Funds with lower assets may feel stress of volatile market movements or high redemption pressure. Also, bigger funds will likely have lesser expense burden.   

2. Fund manager – A fund manager is the person responsible for complete management of the mutual fund. With his team of analysts and trading desk he ensures smooth functioning, investments, churning of portfolio based on opportunities and threats in the stock markets keeping up with the investment objective of the fund. His experience gives an indication of his working style, and a seasoned manager is assumed to see few stock market cycles.

3. Standard deviation ratio – A mutual fund scheme is expected to give returned aligned to its bench mark index and its investment philosophy. The standard deviation ratio indicates the possible deviation between the historical mean return of the scheme. If a fund has historical mean return of 10% and standard deviation of 2%, it indicates the fund’s future return could be 10±2%

4. Sharpe Ratio –Sharpe ratio is an indicator of fund’s performance compared to the risk taken by it. It captures the excess return the fund has earned. Higher sharpe ratio indicates better fund performance.

5. Expense ratio – This particular ratio gives you an idea how much money is getting into the operational expense for managing the fund. This is indicated in percentage term in any fund fact sheet. Though #regulators have capped the ratio, a lower ratio indicates it is not eating much into the return on your investment. A average expense ratio could be at 1.5%

6. Alpha: The simplest definition of an alpha would be the excess return of a fund compared to its benchmark index. If a fund has an alpha of 10%, it means it has outperformed its benchmark by 10% during a specified period.

7. Beta: Quite like equity stock the Beta refers to fund's volatility compared to that of a benchmark. For example if beta of a fund is 2, for every 10% upside or downside, the fund's NAV would be 20% in the respective direction.

8. Portfolio turnover ratio – This particular ratio specifically highlights the churning in the portfolio. Higher churning indicates higher cost. Until and unless the fund is giving exorbitant returns compared to its peers and benchmark, it could become a point of contention.   

9. Fund rating – No harm in looking at it once, but it may or may not help with a true reflection and you can skip this parameter if your fund analysis doesn’t match with their rating. Ratings are assigned annually and every year the 5star rating changes and their criteria of analysing could differ from your long term objective.  

10. Read the SID
Go to the mutual fund website and check for fund fact sheet (For example, find Franklin India Blue Chip Scheme Information document)
2. Check for analysis by few independent websites like – valueresearchonline, mutualfundsinddia etc.

Do your own homework with the 10 points mentioned above or any other reference points. 

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