Don’t go ‘bottom fishing’, wait 'n watch

New Delhi: The unabated free fall in markets, post the US rating downgrade by Standard and Poor’s, is likely to tempt the average investor to go for ‘bottom fishing’. Analysts, however, do not agree on one single strategy to deal with the current Indian equity market situation. They say that before one goes out shopping for stocks, a wait-and-watch approach might come in handy.

“The traders and short-term investors should stay away from the market for at least 2 months, as one can expect some more adverse news from the Western world. However, the medium- to long-term investors, with investment horizon of 6 to 12 months should start accumulating the stocks,” said G Chokkalingam, ED & CIO, Centrum Wealth Management. Head of Investment, India Fidelity International, Alexander Treves, said, “Despite a strong growth outlook and lack of imminent government debt issues, the Asia Pacific region and India in particular, have not been immune to the negative sentiment. However, any companies’ balance sheets are healthy, and we’re finding opportunities to buy stocks on low valuations.”

Dharmesh Pancholi, senior manager at Sharekhan said, “Strategy for long-term investors should be of accumulating quality stocks on declines in staggered way. Investor should be ready to exercise patience.”

Source: Financial Express

Read more »

RBI issues operational guidelines for financial inclusion

The Reserve Bank of India (RBI) on Friday issued operational guidelines for the implementation of a transfer system for servicing low-value accounts and extending banking infrastructure to under-served low income areas.

The regulator asked banks to follow the 'one district-many banks-one leader bank' model in villages in which the designated bank under the financial inclusion plan and the fund-transfer system varied.

According to guidelines, the state government shall designate the leader bank, in consultation with RBI's regional office and the state-level bankers' committee. The leader bank would secure funds from the state government and arrange to transfer funds through inter-bank transfer to other banks.

Source: Business Standard

Read more »

5 years on, MF SIPs hold their own

Mumbai: True, the stock markets have been battered and investor sentiments badly hit. But systematic investment plans (SIPs) of mutual funds still seem to be generating modest returns for retail investors who reposed their faith in the stock markets over the long term.

In the last five years or even over a three-year period, the Bombay Stock Exchange’s (BSE’s) benchmark index Sensex witnessed high volatility and saw the highs of 21,000 (in January 2008 and November 2010) and deep lows of 8,160 (in March 2009). But, the systematic investment style has held its own and retail individuals who continued with their monthly investments have got reasonable returns.

For example, if you had invested Rs 5,000 at the beginning of every month starting August 2006 till July 2011 in Sensex, then at a Sensex closing of 17,130 on Tuesday, your total investment of Rs 300,000 over the 5 year period would have grown to Rs 4,04,892 yielding an annualised return of around 12 per cent. Similarly, a Rs 5,000 monthly investment in Sensex over the last three years would have generated a return of around 10.25 per cent.

Against this, a lumpsum investment five years back in Sensex would have grown at a compounded annual growth rate (CAGR) of 9.8 per cent and that three years back would have grown at a CAGR of 5.3 per cent.

“Timing the market is tough and SIP takes away the human bias as investors rush to invest when the market is moving up and start pulling out when the market is down which is opposite of what they should be doing,” said Sundeep Sikka, CEO, Reliance Mutual Fund. “Every retail mutual fund investor should invest through SIPs and even the lumpsum investments should be broken down and invested in 4-5 parts.”

Having scaled the peak of 21,000 in January 2008, the markets are yet to reach the level, but SIP investors have seen good returns since it offers the advantage of rupee cost averaging when the chips are down.

During the same period, no fixed deposit generated a double digit return. Gold, however, has generated far superior returns compared with most investment products.

Gold prices have risen at a CAGR of over 28 per cent over the last three years and at a CAGR of 21 per cent over the last five years.

by: SANDEEP SINGH

Source: Financial Express

Read more »

HDFC Bank to raise rates from tomorrow

New Delhi: India's second largest private lender HDFC Bank has decided to raise its lending rates by 50 basis points in line with its peers making its home, auto and corporate loans more expensive.

The base rate, or the minimum lending rate, of HDFC Bank will become 10 per cent from the existing 9.50 per cent, sources said.

At the same time, the benchmark prime lending rate (BPLR) of the bank is expected to be increased by similar percentage points to 18.50 per cent.

The bank has also decided to raise fixed deposits rates by up to 75 basis points on the select maturities effective tomorrow, sources said.

HDFC Bank's fixed deposit rate in the 1 year 1 day to 1 year 15 days basket is likely to be 9 per cent per annum as against existing 8.25 per cent, an increase of 75 basis points.

Besides, interest rate for term deposits between 46-60 days will go up by 25 basis points to 7 per cent from the prevailing 6.75 per cent.

However, interest rates on other fixed deposits have been left unchanged.

Yesterday, country's top two lenders SBI and ICICI Bank announced hike in lending rates by 50 basis points each in response to tight monetary policy of the central bank.

Both SBI and ICICI have increased the base rate, or the minimum lending rate, to 10 per cent from the existing 9.50 per cent.

Following the Reserve Bank's decision to raise short-term key rates in its first quarter review of monetary policy last month, lenders have responded by increasing interest rates.

Major lenders, including Punjab National Bank, Bank of Baroda, Oriental Bank of Commerce, have raised interest rates. Almost all major banks have hiked their interest rates in the range of 25-100 basis points.

The RBI had hiked its key short-term lending rates by a higher-than-expected 50 basis points on July 26 to tame the uncomfortably high inflation number, which stood at 9.44 per cent in June.

This was the 11th hike by the central bank since March 2010, when it switched over from the monetary policy loosening stance adopted during the financial slowdown to one for curbing inflation.

Source: Financial Express

Read more »

Irda releases norms for stake transfer by insurance firms

The Insurance Regulatory Authority of India (Irda) today made it mandatory for insurers to seek prior approval in case of stake transfer to domestic entities or financial institutions and set guidelines for seeking approval.

As per an Irda circular, the regulator will carry out the requisite due diligence of the proposed transferee or shareholder prior to grant of approval for registration of transfer of shares under the provisions of section 6A(4) of the Insurance Act, 1938 and for issue of shares to the proposed transferee or shareholder.

The circular assume significance in the light of Bharti-AXA Reliance Industries deal and Punjab National Bank proposing to pick up 30% stake in the Metlife India.

The regulator would also examine various issues including the minimum lock-in period of the proposed stake stake holder before granting approval.

Besides, the Irda will also look into additional capital in proportion of its shareholding at periodic intervals to ensure that the insurance company is compliant with the regulatory solvency requirements.

"No registration of transfer of shares of the insurer as specified under the provisions of Section 6A(4) of the Insurance Act, 1938 and issue of capital which would result in change in the shareholding pattern of the insurance company, as indicated at clause A, shall be made except with the previous written approval of the Authority," the Irda circular said.

Source: Business Standard

Read more »