Prajna Capital

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• Know more about Exclusions in Insurance Policies
• Is selling Gold all that easy?
• Multi-manager fund can put asset allocation on auto pilot
• Mutual Fund Review: Reliance MIP
• Stock Review: ASHOK LEYLAND
• Equity to debt transfer can yield good returns
• Mutual Fund is SIP good in volatile markets
• Stock Review: HDFC BANK
• Checklist for Those Switching Jobs
• Mutual Funds & Risk
• Car Insurance – Basics
• Mutual Fund Review: Quantum Long Term Equity Fund
• Do the due diligence when Buying a new home
• Mutual Funds: Closed End v/s Open End
• Why credit history is critical?
• Foreign Retail Investors Buying Mutual Funds PAN is Must

Know more about Exclusions in Insurance Policies Posted: 23 Aug 2011 04:39 AM PDT An insurance contract promises to pay the sum assured in return for a premium paid if an insured event takes place during the term of the contract. But to limit losses and to discourage anti-selection, insurance companies also make it clear that there will be some 'exclusions' to the cover offered. Exclusions are thus conditions that are not covered by the insurance company. This can best be understood with an example. An individual may choose to buy a life insurance policy and then commit suicide. Though the life insurance policy promises to pay the nominee a sum assured upon the death of the life assured, a suicide is specifically not insured. It is an exclusion under the life insurance policy. This will help limit the losses of the life insurance policy. Individual life insurance policies do not pay the sum assured in case the death has taken place due to suicide in the first year of the policy term. The same applies to group term life insurance policies, except in policies issued in lieu of employees' deposit linked insurance where the sum assured is limited. Exclusions are also applicable to additional benefits or riders available with the policy. Consider the benefit payable under the accident disability rider, where the insurance company promises to pay an additional sum assured if the life assured dies in an accident. Individual life insurance policies will not pay the sum assured if the accidental death happens when the life assured was drunk and driving or was a participant in a car-racing event. There are a host of other exclusions such as deaths caused by war, terrorism, draughts or accidents incited by the actions of the life assured. The waiting period in a policy is also a type of exclusion. This is used widely in non-life insurance policies. For example, a critical illness cover will insist on a waiting period of 180 days from the date of issuance of the policy. The waiting period protects the life insurance company from a fraudulent claim. Some insurance companies cover pre-existing diseases after a waiting period of four years. A set of daycare surgeries is also covered after a waiting period of two years. While buying a policy, a buyer should read the exclusions in detail. The same is available in the policy brochure. If you need further clarification, you may check the policy wordings and contact the insurance company. If you are moving from one insurer to another for health insurance, double-check the exclusions in the new policy. Under the portability benefits, you are entitled to some exclusion waivers.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Is selling Gold all that easy? Posted: 23 Aug 2011 04:01 AM PDT Buying gold is not a problem, if you have the money. But once you go out to reap benefits of price appreciation by selling the yellow metal in its various forms such as jewellery, coins, ETFs or futures, you realise a plethora of charges robs you of the gain THE investors' interest in gold has increased manifold in recent times and there are several avenues available for an individual to buy it in the metal or paper form. However, it need not be that easy when it comes to selling the asset. Further, one may not be able to fully benefit from the price appreciation due to the additional charges involved in each instrument. Financial Chronicle takes a quick look into the intricacies of buying and selling gold in different formats. Jewellery generally known as the house wife's investment, jeweler is the traditional and still the most popular form of investment involving the yellow metal. Apart from being a growing asset, it also serves a functional purpose of adornment. The gold selling rate in different parts of the country will be slightly different from each other at any given point of time. This is determined by taking the London spot price as the base rate, plus the import and customs duties, domestic transportation costs, one per cent margin, one per cent VAT for bullion dealers and one per cent fluctuation risk of the jeweller. Upon this rate, a buyer will have to pay making charges or value addition costs varying from eight to 30 per cent, depending upon the intricacy of the craft on the jewellery. A plain machine-made bangle or a handmade bangle can invite the least making charge while branded jewellery will have the maximum making cost and are sometimes sold on a maximum retail price. At the time of purchase, one will have to pay one per cent VAT too. Now, when you want to sell your jewellery, if it is hallmarked one you can exchange it for another piece of ornament with a reduction of two to three per cent from the prevailing selling rate. If it is non-hallmarked jewellery, the jeweller will gauge the purity and then fix the price accordingly. Generally, most of the jewellers decline to pay cash for jewellery as theft gold also could be involved. However, if it is a known customer, cash is paid after deducting four to five per cent from the selling price. In short, you pay eight to 30 per cent more on buying jewellery and while selling it for cash lose four to five per cent from the prevailing rate of gold. Studded jewellery has the least resale value as one has to pay for the precious, semi-precious or synthetic stones while buying and when selling it off, the price of the stones are not calculated at all. Coins and bars nowadays there are several N avenues to buy gold coins and bars other than jewellery and bars other than jewellery stores. Banks, post offices and micro finance institutions also sell gold in these forms. While buying coins and bars from jewellery stores, three to four per cent making charges have to be paid over the prevailing rate. Banks charge eight to 12 per cent making charges and post offices charge six to eight per cent. Besides, banks or post offices do not offer facility of buyback. When you approach a jeweller to sell the coin or bar bought from his own store for exchange of jewellery, he may not charge you any additional charge whereas when you sell it for cash, he will charge three per cent as melting charges. If the coin or bar were bought from elsewhere, the jeweller would deduct four to five per cent off the selling rate for cash. Gold savings plan - Jewellers, post offices as well as J micro finance institutions are offering gold savings plan. Generally, the jewellers adopt the plan in which a specific amount is deposited with the jeweller at regular intervals. At the end of the tenure, jewellery or gold coin is given for the deposited amount based on the prevailing rate. Some jewellers also forego the making charges in such cases. The savings plan launched by some of the micro finance institutions in collaboration with World Gold Council has a different scheme for the lower income groups. The MFI buys the specific quantity of gold and keeps it with itself. The buyer has to pay 15 per cent of the price upfront and the rest is paid as fixed instalments on a daily, weekly or monthly basis for a fixed tenure. This is considered as a loan and paid with 18 to 24 per cent annually calculated decreasing interest rate. The buyer can take the delivery of the coin at the end of the tenure or get cash as per the prevailing gold rate. Gold futures old futures is mostly G used by traders and speculators who want to hedge the risk on the commodity. There are brokerage charges and other exchange levies accounting to about one per cent that have to be paid at the entry and exit of every contract. A margin amount of four to five per cent of the contract value is paid initially. The contract value is based on the prevailing futures rate. According to the daily price variations, the difference in the prior agreed price is credited and debited from the account. If the margin amount goes beyond the desired level, it has to be replenished. The least time needed to take delivery for futures contract is one month by paying the remaining amount of the contract value. The position can also be squared off at the end of the contract period. Futures trading involve gaining on the investment or carry the risk of losing as per the gold price movement. If the seller or buyer fails to make the delivery before the stipulated time, they have to pay a penalty, which can also go up to four per cent. E-gold - Gold by National Spot Exchange E (NSEL) is a suitable product for the retail investor. The e-gold rate at the NSEL is determined by the daily average spot market prices in different cities of the country and by the buyer-seller interests at the exchange. When one wants to buy an e-gold contract at the spot exchange rate, he has to pay five per cent of the total value upfront and the rest when the trade is done. The exchange charges Rs 10 for every Rs 1,00,000 turnover and there is an additional 0.2 or 0.3 per cent charge payable to the broker, which is generally negotiable. The delivery is made on a T+2 basis. One can also sell the e-gold after paying the same charges at the prevailing rate. Usually, if one buys and sells on the exchange rate, the trade can be completed on the same day. But, if one quotes his own rate during the buy and sale, he will have to wait till there are buyers ready at the quoted price. Gold ETFs - Old ETFs operate like mutual G funds with gold as an underlying asset. The brokerage charges are similar to that of e-gold. There is an additional one to two per cent annual expense charge. The landed rate at the ETF counter is arrived at based on the London bullion market rate, converting it to Indian rupee and adding charges like octroi and VAT. Some of the gold ETFs hold gold as well as liquid instruments and so may not exactly reflect the gold price appreciation. While selling gold ETFs also one has to pay the brokerage charges and the transaction usually closes in a T+2 cycle. The seller does not usually face the problem of absence of a buyer.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Multi-manager fund can put asset allocation on auto pilot Posted: 23 Aug 2011 03:32 AM PDT   MOST investors love to construct a portfolio of different products on their own. They take inputs from various sources, which maybe advice from a financial advisor, a friend or a website. However, in all such cases, the discretion to invest in a particular asset class or scheme remains with the customer and the portfolio performance is his own responsibility. Experience shows that in most cases, more true in case of retail investors, an investor would take a decision to invest in a particular asset class/scheme when the story is over. Just imagine how many retail investors would have allocated additional money to equities in October 2008 when the market was at its multi-year low? How many retail investors and HNIs foresaw double digit returns from income/gilt funds between October 2008 to December 2008? Research shows more than 80 per cent of returns on any asset class is achieved through right asset allocation. However, this is very difficult and even the smartest of individuals is not able to do it successfully. So, what is the solution? The trick is in disciplined asset allocation across asset classes. A typical investor would have allocation to equities, gold, fixed income, real estate in various forms such as mutual funds, physical gold, house, office, shares and debentures. Disciplined asset allocation means review of allocation to these asset classes at market values, and not at purchase prices, at regular intervals. Whether rebalancing is to be done every quarter or not would be a function of market conditions and client requirements. When asset allocation is done through independent instruments such as mutual fund schemes, the rebalancing could involve tax incidence and exit loads. However, a part of this problem can be resolved through multi-manager asset allocation products, which have exposure to equities, gold and fixed income. In such cases, the expert would do rebalancing between equities, fixed income and gold with no tax impact and minimum cost to the customer. Most customers and rating agencies rate mutual fund schemes on the basis of past track record. Historical numbers are a good way to start with, but not the only data to rely on. Let us take case of equity markets in 2008 and 2009. Most of large-cap funds outperformed mid-cap funds in 2008 as they fell lesser. So, if an investor would have assumed that 2009 will be a repeat of 2008, his equity portfolio would have underperformed by 20 ­ 50 per cent as mid-caps did far better than large-caps during this period. Within a category too, there is a range. Across large-caps, the range for 2009 could be 20 to 35 per cent, as many fund managers never believed in the global economic recovery in the first and second quarters of 2009, and they remained overweight on cash and defensive sectors such as FMCG and telecom. Also, many fund managers could have changed jobs during this period. In normal market conditions, the range of difference between good and bad managers is small, but in market-turning situations, it is substantial and can have significant impact on returns from a portfolio. So, if a customer would not have rebalanced his managers in asset classes after reviewing their portfolios and market conditions, the return impact, especially in case of equities, could have been between 20 -30 per cent at the least. A customer could largely solved this problem by outsourcing to a multi manager expert the tasks of choosing a manager and reviewing and rebalancing the portfolio. The expert would choose the manager after looking at past data, current market conditions and future market outlook. When the expert does the rebalancing of schemes, it would not involve any tax impact and, thus, minimise the transaction cost, which the investor would have to do on his own otherwise. This is where a multimanager fund comes in. The product allows a fund manager to choose managers for an investor across asset classes, depending on the investment objective of the fund. In simple terms, in a multi-manager fund, the investor hands over his decision to choose the managers to an expert, in return for a better performance of the portfolio vis-avis his own, over the medium to long term. A multi-manager fund can be of two types, fund of funds and manage the managers. In the first case, the expert will invest in a range of existing funds available in the market while in the second, the expert will appoint other managers/advisors to run different parts of the portfolio according to a specific mandate. In India, funds of funds are popular and are offered by various asset management companies. An additional benefit of choosing a multi-manager portfolio is the reduction in paper work. One does not have to track statements from various fund houses for schemes invested in, check if the redemption money has been credited on time, or calculate tax outgo on periodic intervals.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Mutual Fund Review: Reliance MIP Posted: 23 Aug 2011 03:04 AM PDT   The aggressive approach of Reliance MIP has rewarded its investors well… Investors may encounter slight hiccups in returns but the fund's ability to bounce back has paid off over the long run. It has been a top quartile performer in five out of around seven years of its existence.   The fund manager actively manages the debt portfolio as per the interest rate scenario and takes opportunistic bets whenever he sees one. He does not hesitate in taking higher maturity bets. For example, the fund moved up the average maturity of its debt portfolio from mid 2008 while the 10-year benchmark yield was rising. From an average maturity of 1.27 years (June 2008) it went to 10.24 years (December 2008). As the yield came down in the last quarter, the fund delivered 14.62 per cent in that period (category average: 1.47%).   But if the bets go wrong, the outcome works accordingly. In the first quarter of 2009, the fund manager wasn't quick enough to lower the portfolio maturity when the 10-year benchmark yield again started moving up. The fund lost 2.84 per cent that quarter (category average: 0.21%).   Similarly, in the March 2008 quarter the fund manager increased the portfolio maturity to 7.99 years (March 2008). But with no rate cut, the move backfired and it lost 6.21 per cent (category average: -3.89%). Currently the average maturity of the fund's portfolio at 2.44 years is on the higher side.   Though the fund largely sports high rated papers, there has been lower quality occasionally to boost returns. In January 2009 real estate companies like Unitech and Sobha Developers accounted for 18 per cent of the portfolio.   A similar aggressive approach is seen in the equity portion which has averaged at 16.23 per cent since launch. His bold moves into mid- and small-caps are what helped the fund deliver 21.17 per cent in 2009. The fund manager, however, does attempt to diversify the risk with a bloated portfolio of 52 stocks. The latter is also the result of tremendous inflows into the fund. From Rs156 crore (March 2009) it has grown into Rs8,322 crore (December 2010).   This has resulted in a downward revision of the expense ratio of the fund which is now 1.55 per cent (September 2010) and is on the lower side in its category.   The fund is pretty regular in its dividend payments and has managed to pay dividends in 74 out of the total 85 months. However, it's only natural to expect the quantum of dividend to vary.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Stock Review: ASHOK LEYLAND Posted: 23 Aug 2011 02:19 AM PDT Ashok Leyland results for the June 2011 quarter were broadly in line with analysts' estimates. Its operating profit margin fell marginally on a y-o-y basis to 9.8% in the first quarter of FY12, while net sales improved 6.3% to . 2,495.5 crore. The quarterly results of the country's second largest player in the commercial vehicle (CV) segment have to be viewed in the context of a rather difficult operating environment for the broader CV sector. The company had hiked prices earlier for its CV range, given the higher input prices. However, pressure on its margins in the quarter under review was due to higher employee costs. The company's total vehicle sales (CVs and passenger buses), including exports, fell 9.9% y-o-y to 19,277 units in the quarter under review. And in its key medium and heavy (M&H) CV segment, the company witnessed a 14.2% y-o-y decline in unit sales in the quarter. Analysts highlight the impact of rising auto finance rates and sluggish growth in the broader industrial sector, which impacted demand for Ashok Leyland's M&H commercial vehicle range. Also, smaller players have become rather aggressive and have eaten into Ashok Leyland's market share in the M&H vehicle segment. Higher finance costs also contributed in the 29.6% y-o-y decline in the company's net profit in the June 2011 quarter. Growth in net sales in the first quarter of FY11 was considerably weaker than that reported in the trailing four quarters ended March 2011. The stock fell 2.7% to . 50.7 on Tuesday, in broad contrast to the bullish sentiment on the Street. Going forward, analysts are increasingly skeptical whether Ashok Leyland would be able to achieve its earlier target of total vehicle sales of 108,000 units during the year ended March 2012, a rise of nearly 14.8% y-o-y. Also, the company had guided for an operating profit margin of around 10.5% during FY12, and once again there is little clarity on that, given key commodity input prices are still at elevated levels. Ashok Leyland trades at a P/E of 11.3 times on a trailing basis and we are neutral on the stock.

Equity to debt transfer can yield good returns Posted: 23 Aug 2011 02:18 AM PDT    A joke in the equity markets is that when everyone expects the markets to move up, a correction phase sets in and vice-versa. During the just concluded week, the domestic stock markets, like their global peers, had this happy situation of proving the experts wrong and scaled a level of 19,000 (Sensex) after a fairly long time. The domestic markets' recovery story is not in isolation and is in line with the good performances shown by other markets. Challenges ahead     But what should be heartening for investors, is the fact that the recovery has come at a time when there are clear signs of non-performances on the government's front. It is difficult to remember when the government made any major announcements last. Caught by various challenges ranging from battling corruption to inflation, the government at the centre hasn't found time to focus on the reforms process. In fact, many attributed the lack of foreign institutional investor (FII) participation in the month of June to the lack of focus on governance.    However, the turnaround in mood aided by a drop in crude oil price has been a pleasant surprise though one is not sure how long the good mood will continue on Dalal Street. Results season factor     The major worry for the markets in the coming weeks is the announcements of the quarterly results. While a below-par performance has already been factored in, the actual announcements when published are unlikely to be ignored. The high cost of funds has been a dampener of sorts though it has managed to serve the central bank's aim of cooling down the economy. Hence, it will be interesting to observe the impact of the tight money policy during the last few quarters on the performance of India Inc.    A few sectors that would be interesting to watch are banking, automobile, and chemicals and fertilizers. Banking has been under pressure during the previous quarter due to a spike in interest rates. The rise in deposit rates was much steeper than that in lending rates in the last few months and there were also clear signs of a slowdown in the economy. As an indicator of things, the credit growth projections have been scaled down to 18-20 percent from an earlier target of over 20 percent by many bankers. Markets hold potential     Despite the lowerthan-expected growth rate, India still offers an opportunity for investors as the overall growth rate of the economy continues to be impressive. On the back of lack of turnaround in other economies like the US, the global investors are likely to find the domestic markets attractive over the long term. However, the risk for this story to sustain would be the political risk as the government seems to be hopping from one crisis to another. Hence, the global investors have been blowing hot and cold in the last few months.    From a domestic and retail investors' point of view, the next few months, like in the recent past, will have to be managed on a more active basis as volatility has been on a wide range. An exit and entry strategy at regular intervals could boost the overall portfolio returns though timing them is never an easy task. Debt attractive     Investors can look at the option of exiting at the 20,000 levels and be in debt as the fixed returns products in themselves have been offering good returns. Despite their tax component, they have the potential to offer 5-6 percent returns, and if one were to take into account a profit booking strategy, the overall returns can be in double digits.    For instance, if an equity investor reinvests his holding after an 8-10 percent dip in prices, the overall returns can be in the range of 15-16 percent which is very good in the current environment. The key, of course, is to get the timing right, which requires plenty of patience.

Mutual Fund is SIP good in volatile markets Posted: 23 Aug 2011 01:39 AM PDT    A systematic investment plan (SIP) is an option where you invest a fixed amount in a mutual fund at regular intervals. It could be monthly or quarterly. The minimum investment amount in most mutual funds is Rs 1,000 per month. The money may be transferred through ECS with standing instructions also. Because it's systematic, a SIP helps you plan for your long-term goals along with the short-term ones.    A SIP is a disciplined investment plan and helps reduce susceptibility to market fluctuations. It is a powerful tool that helps you preserve capital and also translates into substantial wealth creation in the long run.    The tenure may be different under different schemes. Usually, you should stay invested for a long enough period, so as to maximise your returns.    In the case of a SIP, you will be investing irrespective of the market conditions. This ensures that cost averaging comes into play and allows you to benefit from volatility. Of late, the stock markets have been volatile. It is very difficult for individual investors to decide on when to invest - time their investments.    When you buy more units at a lower price (when the market falls) and lesser number of units at a higher price (when the market goes up), you average out your investment costs. Suppose a monthly SIP is for Rs 10,000 and the fund's net asset value (NAV) is Rs 10. This will result in 1,000 units being credited to you. However, next month, on account of volatile market conditions, if the fund's NAV falls to Rs 5, you will get 2,000 units. This will lower your average purchase cost. A SIP helps you buy more when the stock market is falling and less when it is rising.    A SIP is an excellent tool for investors to build wealth. There is no need for a one-time lump sum investment. A regular investment pattern helps build discipline in investors. You can go for a SIP according to your goal - marriage of children, their education needs or your retirement corpus. The 'rupee cost averaging' makes the market fluctuations work for you, and reduces the risk of investing all your money just before a market downturn.    Rupee cost averaging works best with investments that tend to fluctuate in price regularly. So a SIP can be most effective when used in buying equity-based funds. The NAVs of these funds can vary widely. Through rupee cost averaging a SIP can make this volatility work for your benefit. However, rupee cost averaging may not work well if the market keeps on an uptrend.    SIPs can be used by investors of all ages. You should never discontinue a SIP in weak market conditions or when the markets fall sharply, as this will defeat the very purpose of investing in a SIP. An investor who does not have a large amount to invest in one go and one who does not want to take much risk should go for a SIP. This will enable him to invest periodically to suit his budget.    A SIP offers flexibility and helps you identify funds that suit your risk-returns profile. In case of a SIP, the asset allocation keeps pace with your changing risk-returns profile. Besides, investing this way offers liquidity whenever required.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Stock Review: HDFC BANK Posted: 23 Aug 2011 01:39 AM PDT HDFC Bank's June quarter results were in line with the Street's expectations. The net interest income of India's second-largest private bank grew by 19 per cent year on year (YoY) and net profit by 34 per cent YoY. Despite an unfavourable macroeconomic scenario, the bank maintained its margins and focused on asset quality improvement. Angel Broking's banking analyst, Vaibhav Agrawal, says the bank has managed its book well and kept its asset quality strong, in spite of a slowdown in operating income growth. The management of the HDFC Bank is bullish about the bank's prospects. Executive Director Paresh Sukthankar says: "We expect credit growth to be at least 2022 per cent for this financial year with equivalent growth for retail and corporate segments. The current account savings account (Casa) ratio is likely to remain between 46 and 50 per cent." Though the bank is expected to post an earnings growth above 30 per cent in this financial year, the positives are already priced in the stock. The scrip, which touched a 52-week high on Tuesday, is likely to underperform peers like Axis Bank, says Agrawal. LOAN BOOK GROWTH SLOWS DOWN Compared to the same quarter ayear ago, banks' loan book growth halved to 20 per cent in the June 2010 quarter. This was primarily due to the 3G loans disbursed last year, leading to a higher base for the June 2010 quarter. Even on a sequential basis, loan growth fell 712 basis points (bps) due to rising interest-rate scenario. Thus, its NII grew at the slowest pace in the last five quarters. Deposit growth of 15.4 per cent YoY also came in lower, as the bank raised `3,650 crore of Tier-II capital through bonds, instead of pushing for wholesale deposits growth. The management expects deposit growth to pick up in the September quarter. MARGIN, NET PROFIT STRONG Strong Casa ratio of 49.1 per cent, along with a higher focus on retail deposits (vis-à-vis higher interest rate wholesale deposits) enabled the bank to maintain its net interest margins (NIMs) on a sequential basis. The good NIM performance came despite a 50-basis-point increase in savings rate (30 per cent of overall deposits), as well as higher cost of funds. Both the cost of funds and yields grew 30-40 bps sequentially, enabling the bank to hold on to its margins. For 2011-12, the bank's management expects NIMs to stay in the narrow range of 3.9-4.3 per cent. A fall of 20.1 per cent YoY in provisions to `444 crore due to improvement in asset quality was the key driver of bottomline growth, which came in slightly ahead of the Street's expectations. Fee income and forex revenues also posted decent growth of 16 per cent and 34 per cent YoY, respectively. However, it booked losses on its investments in bonds due to rising yields. The cost-to-core income ratio also improved by 40 bps over June 2010, due to effective management of operating expenses by the bank. ASSET QUALITY HEALTHY The bank continued to witness an improvement in asset quality as its gross as well as net non-performing asset (NPA) ratio were stable sequentially. On a y-o-y basis, both these ratios were down by 10 bps and 20 bps, respectively. While the provision coverage ratio came in at a healthy 83 per cent, its capital adequacy ratio was also stable. The bank registered astrong traction in its retail segment, which grew 45 per cent YoY, while growth in corporate and treasury revenues was above 40 per cent each.

Checklist for Those Switching Jobs Posted: 23 Aug 2011 12:41 AM PDT "Careful planning is the key to safe and swift travel". – Ulysses The rule applies to many young executives, especially those who are forever looking for better job opportunities. But only a careful planning and following a financial checklist will give them all the benefits of the change. For smooth transition from one job to the other, you need to carefully follow this checklist: OLD SALARY ACCOUNT Most companies would ask you to open a new salary account. This will leave you with an extra account to maintain. The old account you opened when you were in your earlier company would lose the benefit of zero-balance facility of a salary account after three months. If you fail to maintain the required average quarterly minimum balance, it would invite penalty charges. If the account becomes non-operational for over two years, it could become dormant or inoperative, inviting additional yearly charges as a penalty. If your old salary account is linked to various investments like mutual funds, shares and loans, you may want to update the records with the respective investment company and financial institutions by giving them the new account number. EMPLOYEES PROVIDENT FUND You could either transfer your existing EPF account to the new employer or close the old account and open a new account. However, withdrawing the corpus and opening a new account could take around three to six months. In addition, you would be left with a smaller retirement corpus because you would lose the advantages of compounding. You would also have to pay taxes if it is withdrawn before five years. So, transferring the corpus is the better option as it would give you better tax benefit and retirement benefit. HEALTH INSURANCE You should check the features and benefits of the health insurance cover provided by your new employer. Check the coverage amount, whether the coverage is on a floating or individual basis, the total number of dependents covered, the list of hospitals for cashless facility and so on. Most importantly, check the availability of the health cover during the notice period. The notice period is the period from the day one submits the resignation letter to the day one gets relieved from the job. It is normally three months. Some employers don't provide health cover to employees serving the notice period. So before entering into the notice period, one needs to make alternative arrangement for health insurance. TAX COMPUTATION Most employers would be computing your tax liability after taking into consideration the basic exemption limit of . 1.8 lakh and also the exemption availed under Section 80C. So there is a possibility that your previous employer and present employer may give you these exemptions for the same financial year. You should make sure that the deductions and exemptions regarding tax liability are made only once. Always report the income earned from your previous employer for that financial year to your new employer. This would avoid duplication and make sure one is not taxed twice or given the benefit twice, which could result in payment of a lump sum amount as taxes later. It is essential to collect the Form 16 from the previous employer as proof that one has received the tax benefits and paid the tax liabilities.

Mutual Funds & Risk Posted: 23 Aug 2011 12:05 AM PDT There are no Zero Risk mutual funds.   You want two things. Safety and the best returns in one package. Not possible. Firstly, there are no funds that can be termed safest when investing in mutual funds. The risks can be high or low, but mutual funds without risk do not exist. You should understand this at the onset. Risk is often misunderstood as well. For instance, "safe" investments such as bank deposits also carry the risk of a bank going under. Morever, there is the risk in terms of interest rates.   Equity funds have the potential to give you the highest returns, when compared to other mutual funds, over a long-term. However, they carry the maximum amount of risk as they invest in stocks. On the other hand, liquid funds are the safest amongst all mutual funds, but they invest in securities that mature within a day to three months and, therefore, yield very modest returns. Within equity funds, pure large-cap offerings are safer than funds which invest in mid- and small-cap stocks. Based on your risk appetite and the time frame of your investments, make your selection.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Car Insurance – Basics Posted: 22 Aug 2011 11:19 PM PDT If you have a car, chances are you have car insurance for it. But how much do you understand about what kind of policy you have and what policy is best for you, given the risks that you want to protect against? Here we share with you basics that you must know if you want to make smart decisions about your car insurance policy. Why do you need car insurance? You need car insurance because its mandatory — its the law. For any vehicle to drive on Indian roads, it must have a valid insurance policy, that at a minimum covers the cost of damage that you might cause to other people or vehicles. Rather than have to pay from your own pocket, if you have a valid car insurance policy, the insurer will assume the liability, as long as the damage is covered under the terms of the insurance contract and there is no case of fraud. Situations where a car insurance policy can cover costs are damages arising from an accident, theft, fire and any natural calamities like flood, earthquake, or cyclone. Car insurance policies are valid only for a year and need to be renewed annually. Even though the law requires every car to have a valid policy, the reality is that there are still lakhs of vehicles in India that are not insured. This is because people want to save money by not paying insurance and the policing system to check if every car is insured is not perfect. Nevertheless, its worth spending a few thousand rupees to get car insurance, so that you don't put yourself under any out of pocket risk if you are in the unfortunate situation of an accident or injury. What are the different types of insurance? There are to types of car insurance policies: third party and comprehensive. Third party insurance: If someone else is injured or their vehicle is damaged as a result of your driving, then this "third party" needs to be compensated for it. So, the law requires that at a minimum you have third party insurance to protect against the risk of damage you might cause to others, so that they are not financially worse off. For instance, if you meet with an accident while driving, a third party insurance policy will meet any claims for damage to the other car and take care of any medical expenses for the individuals in that car. The premium for this type of policy is calculated on the basis of the engine capacity of your own vehicle. Since the cover only includes third party damage, the premium is less compared to a complete coverage policy. A third party policy will not cover any damage that you or your car suffers. Comprehensive insurance: Unlike a third party policy which covers damage that you cause to "third parties", a comprehensive policy as the name suggests offers complete coverage for both third party and own damage liability. Comprehensive insurance can include damage to your own vehicle and the other party's vehicle in case of an accident, medical expenses for the other party, you, and passengers in your vehicle. In addition to this, the policy also covers any damage to your vehicle due to any natural calamity, loss or damage to your vehicle due to reasons like theft, burglary, terrorist activity, and any repair in transit. You can even opt for a cover for your car accessories like music system and air conditioner under this policy. The premium in comprehensive insurance is calculated on the basis of the insurable value of your vehicle. Since the cover in this policy is wide, the premium is also higher compared to a third party policy. How should you decide what coverage to get? When deciding the policy you should get, you must have two things in mind: Your capacity to pay the premium: In case you have existing loans, and any other monetary obligations to meet, you should analyse if you have the capacity to meet the premium due for your car insurance. Also, keep in mind that third party insurance is the legal minimum cover that you need. Anything you want above that depends upon what kind of risk you can afford to protect. Additional scope of coverage: You might want an all-inclusive policy for your car for a wider protection. This can be done by getting an additional coverage. Depending upon the kind of situations you want to cover, the premium amount will vary as you keep extending the range of coverage and damages. The types of coverage that you can get include the following: a)      Personal injury protection: This covers you and any passengers in your car against any harm at the time of an accident. If you want to get coverage for a driver then that is another feature. b)      Uninsured/Underinsured coverage: This covers any expense if you are hit by someone whose vehicle is either not insured or underinsured. c)      Collision: This covers repairs to your car in case of an accident by another vehicle, or object. It will take care of expenses on the repair of your vehicle excluding the voluntary amount that you want to pay on your own. d)      Car accessories: You can have an additional cover against damage to your car accessories like music system and air conditioner. Indicative Premium for a New Car The following premium information is indicative of rates in the industry for a new car (ex-showroom). It will vary depending upon discounts you might be eligible for and which city the car is registered in. Sample new car Third party insurance (in Rs.) Comprehensive insurance (in Rs.) Maruti Alto 795 8,376 Hyundai Santro 925 8,697 Maruti Swift 925 13,924 Honda City 925 19,783 Toyota Corolla 2,625 20,327 With every successive year, as the car ages, the value of the car will also go down. This will get reflected in a lower premium for your car insurance if you get a comprehensive policy. If, however, you have only a third party cover, the premium amount will generally not vary by age, as the engine size of your car will stay the same. In the third party premium amount shown above, the premium comprises the minimum amount you pay for third party cover and then some add on top of that.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Mutual Fund Review: Quantum Long Term Equity Fund Posted: 22 Aug 2011 10:30 PM PDT Name: - Quantum Long Term Equity Fund -Growth Type: Open-ended equity Fund Fund Manager: Mr. I.V. Subramaniam Inception Date: February 25, 2006   Quantum Mutual Fund is one of its kinds in the industry with unique direct-to-investor approach. Its direct approach means that there are no intermediaries involved in selling of the fund and thus investor can avoid financial distributors and save on commission and other distribution expenses. As a result larger proportion of the investor's money is available for investing which may enhance the returns.   The AMC ventured into the asset management space six months back with the launch of Quantum Long Term Equity Fund. It is an open ended growth scheme whose investment objective is to achieve long-term capital appreciation by investing primarily in shares of large and mid-cap companies that will typically be included in the BSE 200 and are in a position to benefit from the anticipated growth and development of the Indian economy and its markets.   The scheme has just now completed six months of operation and has grown at a CAGR of 12.3%. It has predominantly witnessed volatile market since its launch and thus took some months deploy the funds as a result it was protected from the sharp market gyrations witnessed in recent past and could perform better compared to the peers. Though it is too early to compare the performance of the scheme with its peers but the scheme has made good beginning and has managed to deliver market linked returns so far except 3 months period. The scheme began with a corpus of Rs 11.25 crore and has now grown to Rs 22.25 crore as on August end.   The scheme is mandated to invest 65-99% of its net assets in equity and equity related instruments, 1%-35% in money market instruments, 0% -3% in unlisted equity and equity related securities, 0%-5% in units of liquid schemes of the Fund or of other mutual funds. As on August 2006, the scheme has allocated 82% of its assets in equities, 6.3% in debt and rest in cash and equivalent. Average equity allocation since its inception has been at 61.6% of assets under management of the scheme and is not yet fully invested.   Its equity portfolio includes 28 stocks as on August 2006 with Bajaj Auto in top place. Top 10 holdings account for 37.39% of the equity portfolio and exposure to any single stock is restricted to less than 6%. Other top holdings are SBI, ONGC, Ranbaxy Laboratories and Infosys. This month it made fresh exposure to the stock of Raymond Ltd. Oil& Gas, Bank and IT are its top sectoral picks and account for less than half of the equity portfolio. Over a period of six months it has further hiked exposure in Banking, Oil & Gas and Auto sector while marginally trimmed in Power Generation & Equipment sector. The scheme follows value investing with investments across market captilisation. Such strategy focuses on undervalued stocks and may take little longer to return.   Minimum investment required to enter the scheme is Rs 5000 and offers both dividend and growth options. The scheme charges no entry load however it levies high load charges for early withdrawals in order to encourage long term investing. For instance it charges an entry load of 4% if redeemed within 6 months of allotment, 3% after 6 months but within 12 months of allotment-3%, 2% after 12 months but within 18 months of allotment- 2%, 1% after 18 months but within 24 months of allotment- 1%, and nil after 24 months of allotment. The scheme is benchmarked against BSE Sensex. Expense Ratio of the scheme as on July 31, 06 is 2.5% and is higher than the category average of 2.21%.   The scheme has given reasonable performance so far and investors are advised to retain their investments in the scheme in order to reap the true potential of equities in longer term.     -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Do the due diligence when Buying a new home Posted: 22 Aug 2011 07:59 PM PDT   It's better to go for a bank-approved project, construction-linked payment plans and ensure that there are no disputes on the property WHEN you buy a home, you are investing precious resources in an asset. Most potential new homebuyers live on rent and the home financed by a bank loan leads to an outgo of an equated monthly installments (EMI). In most cases, this EMI ends up being higher than the amount spent on monthly rent. So, it's essential that homebuyers conduct as much due diligence as possible before signing on the dotted line. With the recent cases of housing projects turning turtle, experts advise most homebuyers to go through a checklist. Here's how: Under-construction means under lens: An under-construction property will invariably come cheaper than a ready-for-possession property. Depending on the stage of construction and also the response that the project has already elicited from other buyers/investors, the rates can be from anywhere between 15-30 per cent lower. To begin with, if one is buying an under-construction project, the developer's bona fides and market standing should be carefully researched and verified. Next, a buyer is entitled to ask for a copy of the project's drawings, duly stamped by the municipal authorities. At present, experts advise buyers to check on the option to choose construction-linked payment plans that are usually structured on a project-to-project basis. Next, the buyer should be aware of changes in the original development plan. Certain necessary changes are usually permitted and also mentioned in the agreement. Once actual construction begins, there may be grey areas on the blueprint that come to light only later. Sometimes, this may involve new regulations with regards to parking space or other aspects beyond the developer's control. Use bank intelligence and your lawyer: The process of buying a residential property can be an extremely tedious process because it involves a number of nuances starting soon after an individual identifies a property he or she likes. The first and most important step to ensure is that there are no disputes on the property or land, whether it is located in an apartment complex or an independent house. A few things, which should be checked, are the title papers, in case of an apartment, construction certificate, approvals from the local authorities, clearances from the water works and power and all other necessary legal clearances. Once this due diligence is done to a certain level of satisfaction the homebuyer can proceed to purchase a residence. However, making all these checks may not be easy or, perhaps, even possible for an individual. Therefore, the best way to ensure that the property of choice is clear of all legal and environmental issues, a good way to approach the same would be through banks. Financial institutions who lend money, usually do the necessary due diligence on the properties before clearing them for loans. Before both parties sign, the agreement should be vetted by a lawyer to ensure there are no loopholes and at the earliest instance, the agreement should be registered. Past record often an indicator of future: In financial markets, past performance is often no guarantee of the future. But, looking in the past, usually tells us a thing or two about what the future may shape up to be. This is also true for homebuilders. A prospective buyer should check into the developer's credibility, past projects and performance and delivery record. There are many instances where the delivery of the home is often delayed by as long as six-12 months. Generally, a new builder or developer will offer better prices since his track record will be zero. He has to build reputation. That's why the price of the home should not be the only criteria to select it. It's a personal decision whether to invest in a rookie or trust a veteran. While some old developers may also have blemishes, it is important to find out what has led to the delay. Please don't ask the builder or his officials about delays in other projects. Ask others who don't have any motive behind seeing the transaction through.

Mutual Funds: Closed End v/s Open End Posted: 22 Aug 2011 10:06 AM PDT     An open-end fund is one that is available for subscription all through the year and investors can buy and sell units at Net Asset Value (NAV) related prices. Compared to this, closed-ended funds are those that have a limited time period when they are open to subscription. The risk involved between these two types of funds hinges on liquidity. While open-ended funds are highly liquid, as per stipulated Sebi regulations; closed-ended schemes have to offer an exit route to investors, which is in the form of the AMC buying back units or the units being listed on the stock exchange for investors to buy or sell. You should look at starting with an open-ended fund scheme to invest.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Why credit history is critical? Posted: 22 Aug 2011 08:57 AM PDT Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing their loans and repayments will find that this is captured in their credit history, and their past behaviour can adversely affect their ability to get loans in the future. Let us understand this better with an example. There are two credit card customers — Shubham and Diven who are colleagues at a software company and have an identical salary package.  Shubham has been very cautious of making timely payments on his card and has regularly paid all the bills. After a year, Shubham applied for a Rs. 3 lakh personal loan and the loan got approved quickly since Shubham had a good repayment track record. Diven, on the other hand, used his credit card carelessly and was always late in paying his dues, and even defaulted on his outstanding balance, after which he moved residences as he thought it would be difficult for the credit card company to track him After a few months when Diven applied for a personal loan, his application was rejected. The lender reviewed Diven's credit history and observed that his past repayment behaviour was poor, and so the lender did not want to risk giving him a fresh loan. Why have a clean credit history? Good borrowers who repay their debt on time and in full over time develop the reputation of being lower risk. Lenders will be willing to offer such borrowers such concessions that they will not give to riskier borrowers who have a bad credit history. Better bargain with the lender: If you have a clean credit record, then you can bargain with the lender for slightly cheaper rates for home, car, personal or any other loan. You might also find that the lender is willing to get give you better terms such as a slightly higher loan amount, or better repayment tenure. Loans will be processed faster: If the credit bureau's databases show that you have a good credit history, the lender will have no reason to delay processing and thereafter sanctioning your loan. This can give you a lot of peace of mind and save you a lot of time and running around, especially when your need to get a loan is time sensitive (for instance, where you need a home loan approved to apply for a property transaction before a certain deadline). Where can you find your credit history? You can find your credit information report from credit reporting agencies like Credit Information Bureau India Ltd (CIBIL), Equifax India and other such credit bureaus. Each of these credit agencies captures your credit history by means of a score. If you wish you see your score, you can apply to one of these agencies and get your credit history by paying a fee that could be as low as Rs 150. They usually take up to 2-3 weeks to despatch it to you. What are the good habits for a clean credit history? Every one can work towards building a clean credit record with a little bit of effort. So whether you have a lot of debt outstanding or have never had debt before, building and maintaining a credit history is totally within your control. Some good habits that you should follow are: Pay your bills on time: Maintain a good repayment record on all your payments due as that is the first step to a clean credit history. These payments can be monthly instalment towards your house or car, a personal loan or a credit card. Sometimes, credit bureaus might even track how timely you are in paying your utility bills like for water and electricity, as these can serve as a proxy for how you behave when you owe money to someone. Check your credit score: If you are going to be in the market to apply for a loan, it might be worth your effort to get your credit score from one of the bureaus. If you see that something has been captured in error or is wrong, you can ask for it to be corrected or at least you can ask for a clarification before you make your loan application Keep the number of loans to a minimum: Credit is easily accessible in India now, but just because its available does not mean that you should take multiple loans. Credit bureaus also track the number of loans you have outstanding and if its seen that you take a loan for everything then it will suggest that you are living beyond your means. Clear off existing debts before you take on fresh loans. If you take too many loans you might enter a vicious cycle of having to take fresh loans just to pay off old debts. Maintaining account balance to avoid cheque bounces: If certain EMI payments or bills are due, make sure you have enough in your savings account to meet these payments. The last thing you want is to suffer from late payment just because of a cheque bounce. What are the bad habits that you should avoid that could impact your credit history? Some common habits to should avoid are: Using credit card to withdraw cash: Don't use your credit card to withdraw cash, use only your debit card. This way you know you are accessing only that cash that is within your means by virtue of being in your account. Avoid too many loan applications: Lenders track the loan applications that you make. If one lender has rejected you, doesn't mean you apply to a dozen other lenders so that you can improve your chances of getting a loan. Credit agencies also capture the number of times you make loan applications. The more applications you make, the more is suggests that you are desperate for a loan and this can be interpreted that you might be high risk

Foreign Retail Investors Buying Mutual Funds PAN is Must Posted: 22 Aug 2011 07:56 AM PDT   Individual foreign investors seeking entry into Indian stock markets will now have to acquire Permanent Account Number, or PAN, the passport to all financial transactions. The mandatory PAN was announced recently by the finance ministry while outlining the framework for foreign retail investment in mutual funds, a promise made in the February budget. "The Central Board of Direct Taxes, the apex direct taxes body, will soon issue an instruction in this regard," a finance ministry official said. However, to ensure that the requirement does not make investing cumbersome, PAN will be issued on the basis of know your customer (KYC) scrutiny of the investor. KYC conditions prescribed by the market regulator, Sebi, are quite stringent making them PAN plus, said the official. However, experts say tax authorities should clarify that acquiring a PAN will not trigger an obligation to file income tax return here. "Primary concern these investors have is that PAN could trigger an obligation to file return," said Amitabh Singh, partner, Ernst & Young. PAN is a 10-digit alpha-numeric tax payer identification number that is allotted to an individual and is increasingly required to be quoted with financial transactions. The government has allowed individual foreign investors to invest in domestic MFs, thus creating a new class of investors called Qualified Foreign Investors. Sebi is expected to notify the norms governing these investors soon. These investors would be able to put money into domestic MFs through Unit Confirmation Receipts (DPs) or Depository Participant route. QFIs could be individuals and bodies, including pension funds, and cumulatively they can invest up to $10 billion (about . 45,000 crore). Dividend income earned by these investors would be tax-free. At present, only FIIs, sub-accounts registered with SEBI and NRIs are allowed to invest in MF schemes in the country.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

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