Prajna Capital - An Investment Guide

The country's largest insurer LIC on Tuesday said it will pump in about Rs 10,000-crore in the stock markets by March-end, taking its annual equity investment to Rs 60,000 crore this fiscal. LIC's investment in the equity market so far has already crossed Rs 50,000 crore and expect to close the fiscal (2009-10) with an investment of Rs 55,000-60,000 crore. During 2008-09, LIC invested Rs 40,300 crore in the equity market, Mr Mohanraj said. This fund infusion in the market by the country's biggest domestic financial institution boosted the sentiment at bourses, which witnessed volatility, especially after the collapse of Lehman Brothers in America in 2008.

How much Amount to Invest? There is no fixed rule as such which says the minimum amount to invest. Ideally if you are able to start with 100K also it would be good but there are small investors who cannot afford that. If you have even 25K or 10K you can start investing but remember that the returns will not be significant. If you invest 100K and if you make 20% profit then you get 20,000 Rs where as for 10K investment the return is only 2000 Rs. However you can start with 25K and then slowly increase the amount. How much money can we make? At present stock markets are giving great returns. Some stocks have returned even 100% in one month time. However you should be happy if you get 25% returns per annum. Contentment is important and if you try to make fast bucks remember that you can loose money also quickly. Many investors would like their investment to become 10 times in one year. Remember that this kind of returns are rarely possible and so one should have contentment and should be...

Primary and Secondary Markets, How to do trading ? Buy and Sell.Primary and Secondary Markets Shares which are bought in IPO are called primary market shares. Once IPO is over and shares are listed in stock exchange and if you buy them, they are called secondary market shares. Opening a Demat Account : A person should open a demat account ( dematerialised account) with any of the brokers available so that trading can be started. ICICI direct, Reliance Money, Share khan, India Bulls, Geojit, 5 Paisa, HDFC securities are few of the brokers available with whom you can do online trading. Pan Card is must for opening demat account. You should also have address proof and Id proof so that the demat account can be opened. It takes upto 15 days to open a new online trading account. Your broker will create an online account for trading, demat account for your shares, bank account for your cash transactions. ICICI direct offers 3 in one account but brokerage is bit high. Reliance Money has flat ...

Here is the analyses of potential of various debt instruments this year    As the global economy slowly pushes itself out of recession with the help of extensive stimulus programmes and records an impressive growth, the process of normalisation of key policy rates and gradual withdrawal of the stimulus can be expected during the year. Some countries such as Australia have already raised the key policy rates and others are expected to follow suit in 2010. The emerging markets such as India, China and Canada can be expected to hike rates in the first half of the calendar year.     The domestic economy grew at an impressive 7.9 percent in the second quarter backed by huge government spending and improvement in consumption and investments. The downer, however, has been the inflation numbers which have been rising steadily on account of increases in prices of food products. The annual Whole Price Index (WPI) inflation which stood at 1.34 percent in October rose to 4.78 percent in Nov...

What are shares? Shares are the number of units that indicate the ownership you own in a company. If you and your freind together would have started a business then you would have 50% partnership in the business as you both are equal partners. Here since there are only two persons involved the number would be in terms of percentage. The profits earned would be divided equally. If there are 4 partners then the percentage would be 25% each. If there are 10 partners then the percentage would be 10%. If there are say 100 partners then each one would get 1%. Imagine the case where the number of partners involved is say 1 crore. It will be difficult to give the partnership in terms of percentage. For this sake, shares or stocks are created in units. Each Stock has a face value with 10 Rs as being the common. Face value of a stock will be useful for calculation of dividend and for stock splits. Now a company ABC wants to raise say 1 crore. It will then issue 10 lakh shares of 10 Rs face value...

The Pension Fund Regulatory Development Authority ( PFRDA ) is taking ing various measures to increase the number of subscribers under its New Pension Scheme ( NPS ). It is in discussions with the General Insurance Council, various industry bodies and companies to offer the plan to their employees. Under the recent deal between the Indian Banks' Association (IBA) and the pension regulator, all new recruits of banks will join the defined contribution system from April 1, 2010. Already 20 nationalised and 12 private sector banks have joined the new system. National Aluminium Co (Nalco) was the first public sector entity to join NPS. While 24 per cent of Nalco employees ' salary will go towards Employees Provident Fund, 6 per cent will be invested in NPS. PFRDA has written to the department of public enterprises to enable all central public sector undertakings (PSUs) to bring their 1.5 million workers into the NPS fold. Sources said BHEL, NTPC and DVC are next in line to j...

   IN A bull market, there are certain sectors that outperform broader markets. If you are overweight on such themes or sectors, it may give added drive to your portfolio. The attempt is to outperform the broader market by increasing the weight of a sector or theme over and above the weight allocated by the diversified equity fund portfolio. Of course, there are tradeoffs. If the call goes wrong, there is a risk of capital loss in the worst case. Given the higher risk, sectoral investing is only for those who have graduated from investing in diversified equity funds that investors invest across sectors.     Clearly, 2010 is going to be a year of stock pickers as none of the experts are betting on a rally as broad based as in 2007. Picking stocks is one thing and needs intricate analysis. However, the smarter mutual fund investors want to identify sector bets and leave the stock picking within the sector to fund managers. Here are some savvy choices: INFRASTRUCTURE As the government...

At no time in recorded financial history has the benefit of portfolio diversification been so evident as today. The expression “ don’t put all your eggs in one basket ” is most apt for investing, and diversification is one of the most important principles to keep in mind when constructing an investment portfolio. We are in a truly global investment environment and the definition of portfolio diversification too is constantly changing. It used to be just equities, bonds and cash but over the last few years, partly due to increased risks as well as opportunities, the list now includes commodities, currency, art, foreign market investments and a host of other options which were once termed exotic or ‘ alternative’ . An ideal diversified portfolio should contain different asset classes, investment styles, and mixed assets from different geographic regions. Studies have conclusively shown that a diversified portfolio of non-correlated investments reduces risk and improves overall return....

  Besides being an ace tax-saving tool, PPF provides a disciplined and steady approach to savings. For those who have missed it, it's not too late to start investing in a PPF    JANUARY calls for the revelries in the new year but it also reminds one about the investments to be done to avail tax benefits before the financial year comes to an end. The most commonly known options for tax planning are equity linked schemes of mutual funds, home loans, tax-free bank deposits, public provident fund ( PPF ) and national savings certificate (NSC), among others. However, there are certain instruments that need to be looked at schemes that go much beyond just being a tax shield. For example, PPF not only provides tax benefits but also serves as a retirement planning tool for those private sector employees and self-employed who don't have the advantages of an employer-provided retirement benefits such as employee provident fund ( EPF ), gratuity and pension. In an endeavour to help our...

Keeping multiple credit cards can be a great saving instrument, if used wisely and timely Young people thrive on credit cards. He has as many as seven credit cards of different banks and uses all of them very extensively. Apart from doing regular shopping, many pay for their electricity bill and all other sundry expenses using their cards. For all the cards they uses, he has not paid any interest on the credit availed of, thereby not allowing himself/herself to be harassed by banks for payment. And that’s why banks hate customers like them. Actually, credit card companies hate two types of customers — those who pay before due date of payments and those who don’t pay at all . So how do they actually manage free credit every month to finance his purchases. There is surely no magic working for him. It’s just that he knows the art of managing multiple credit cards efficiently. What he does is simple. He meticulously makes a purchase a day after his statement is generated. For example, ...

ASSET reconstruction was evolved as an answer to the distressed debt management problem faced by banks and financial institutions in this country. So, has the experiment succeeded? Going by the improvement in non-performing assets (the all banks’ gross NPA ratio declined to 2.3% in 2008 from 4.6% in 2002) and the number of players it has attracted, the experiment has certainly succeeded. But what needs to be emphasised is that no other country in the world operates an ARC (asset reconstruction companies) model like we do. Internationally, ARCs were set up as centralised government agencies for tackling the bad-debt problem in a banking crisis. Funded by the government, ARCs generally enjoyed special powers to cut short legal procedures and engaged in wholesale purchase of banks’ bad loans. By contrast, Indian ARCs are private sector entities that operate under a tightly-controlled regulatory regime and enjoy no special powers. They acquire NPAs through a transparent bidding pr...

MAN Infraconstruction is coming out with its maiden public offer of around 5.63 million equity shares of the face of value of Rs 10 each. The issue is being made through a 100% book-building process in the price band of Rs 243 to 252 per share. The issue includes 9.72 lakh equity shares reserved for anchor investors, which has already been subscribed by a clutch of institutional investors at the upper price band. The issue represents 11.4% of the post-IPO equity capital of the company and the promoter's stake in the company will decline to 63.5% after the IPO. The main objective of issue is to raise funds for augmenting the company's equipment bank. Access of in-house construction equipments is a key competitive advantage in the construction sectors and the issue proceeds will help the company more than double its stock of equipments. This in turn will significantly increase its project execution capabilities and the gains will visible from the second half of the next financial...

   Under the Income Tax Act, interest paid on a home loan is deductible from your total income, provided the conditions specified are complied with. The deductions are available while computing your income under the Head 'Income from House Property'. The deduction on interest paid is available even if the house is not rented out, and is either vacant or self-occupied. The loan can be for construction, acquisition, repair or reconstruction of property.    The main condition is that you should acquire property on borrowed money, and the interest should be payable on the borrowed capital. Interest paid on a home loan is allowed as a deduction on accrual basis i.e. on due basis. It need not have been actually paid during the year.    The deduction on home loan interest paid can be claimed subject to an upper limit of Rs 1.5 lakhs in a financial year. The interest on a loan taken for repair or reconstruction also qualifies for this deduction.    For the purpose of computing in...

This article explains how medical insurance is tax deductible under Section 80D of the IT Act With increasing medical costs, mediclaim policies are a good option to hedge medical costs. Mediclaim policies are offered by almost all insurance companies - both in the private sector and the public sector. These policies provide insurance cover for the treatment of most of the ailments and hospitalisation. In addition to the basic coverage, add-ons are available on payment of extra premium. You should go through the coverage and exclusions clauses carefully. In some cases, pre-existing ailments are also covered on payment of additional premium. The cover may be enhanced to ailments which are not normally covered also. Some insurance companies provide cover for day care and annual medical check-ups as well. Mediclaim insurance is a good investment avenue offering tax savings and medial cover. You can insure against medical expenses for yourself or for your dependents. Mediclaim cov...

The chief advantage of stock futures is the ability to buy on margin. Investing on margin is also called leveraging, since you're using a relatively small amount of money to leverage a large amount of stock. For example, if you have $1,000 to invest, you can by 10 shares of IBM stock. But with the same $1,000, you can buy a futures contract for 50 shares of IBM stock. It's true that you can also buy traditional stock on margin, but the process is much more complicated. When buying stock on margin, you're essentially taking out a loan from your stockbroker and using the purchased stock as collateral. You also have to pay interest to your broker for the loan. The difference with stock futures is that you're not buying any actual stock, so the initial margin payment is more of a good faith deposit to cover possible losses. I­t's also much easier to go short on a stock future than to go short on traditional stocks. To go short on a futures contract, you pay the same i...

There’s no secret or magic to investing. Ignore the fads, and keep your eye firmly on your goals IF YOU dig in the same spot long enough, you’ll eventually find water, goes an old saying. But a lot of people dig in one place for a while, and then get impatient or distracted and start digging in another place, and then another... When they don’t find water in any of those, they blame their luck. It’s surprising that more people haven’t figured out the simple trick. Of course, there’s no denying the importance of choosing the best place to dig in the first place! In my line of work, I often encounter people who seem to dart in a new direction randomly. Many get caught up in the latest investing fads. There are broad trends like equity and mutual fund investing. Then, real estate, commodities, gold. And then there are micro-trends—read “fads”—like going overboard on midcaps, banking stocks, the communications sector, and infrastructure. In pursuit of the latest trend, investors chu...

Paying a dividend costs the company and as such will decrease the value of the company and the stock. If all other factors are equal, a buyer would prefer a stock that is expected to pay the higher dividend. If Company A is expected to pay $10 per share annually and Company B $8, an investor who wants to make 8% would be willing to bid $125 for a share of Company A but only $100 for Company B. On the date that a dividend is effective, a company's stock will drop by the amount of the dividend because that amount will be paid to the person who owned the stock at the beginning of that day.  

  NOW is the time to work out the best tax-saving schemes. Equity Linked Saving Schemes (ELSS) and ULIPs (Unit Linked insurance Plans) have had been the flavour for past couple of years and all traditional saving instruments were relegated. But the things sound different this year. The retail investors are still cautious about investment in equities as revealed by MF industry's AUM (assets under management) composition in the past few months. Obviously, investors are looking for alternative tax-savings instruments, which are safer and steadier than high volatile equities.      Most of such assured returns on tax-saving products are offered by schemes floated by the Indian Postal department. One such product is National Saving Certificate (NSC). This scheme is specially designed for IT (Income Tax) assessees. The amount invested under NSC (maximum up to Rs 1 lakh per annum) is exempted from tax liability. Such invested amount fetches a fixed rate of interest at 8% compounded hal...

Collection Of Applications Via ASBA Route Is Just 13% THE merits of Application Supported by Blocked Amount ( ASBA ), splashed across public issue advertisements, have done little to popularise the facility among retail investors. Lack of investor awareness, non-availability of forms and the tussle between banks and brokers are said to be the main reasons for the tepid response towards ASBA. Collection of retail application through the ASBA route has been around 13-15%, despite primary market intermediaries and capital markets regulator Sebi striving to make the option more popular. ASBA refers to an application mechanism for subscribing to initial public offers ( IPO ), which ensures that the applicant’s money remains in his bank account till the shares are allotted. The mechanism requires the applicant to give an authorisation to block his application money in the bank account. The bank account is debited only after the allotment is finalised, or the IPO is withdrawn or fails....

If we can be disciplined to do that — prioritise our needs over our wants — we would be on the way to achieving financial freedom as well as peace of mind. Here then is a primer on setting of your goals so that you can provide the same in a meaningful manner to your financial planner. Preparing A Laundry List     The first step in financial planning is communication. That's within the family first, so that a laundry list of all objectives is prepared. Your spouse surely needs to be involved, as much as your children, if they are at least teenagers. Let each one write all that they aspire for or dream about; reminding them not to forget their basic needs.    Against each of the desires, write down the amount and the time (year) when you wish to fulfil them. If you cannot estimate the future value of the objective, write the current value — make sure that is uniformly done for all items on the list. Separate The Needs And Wants     Next, ask each one to bifurcate these desires int...

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...

It's difficult not to like DSP BlackRock Equity fund. Ever since 2003 it has beaten the category average every year. Its charm lies in the fact that it impressed in both favourable and unfavourable market conditions.   The fund's performance in 2007 was impressive at 70 per cent (category average: 59%). A high mid- and small-cap exposure along with considerable allocation to Energy helped. What's even more impressive is that fund manager Apoorva Shah managed this return despite being heavy on Technology. In the crash that followed, he resorted to defensives and cash, though not abnormally high.   Ever since Shah took over (June 2006), its performance in declining quarters improved considerably. In the bear phase spanning January 8, 2008 to March 9, 2009, it shed 49.5 per cent (category average: 55%).   But when markets started rising in March 2009, Shah was not quick in lowering cash allocation and did so mainly in May. "We were caught unaware by the sharp ris...

Want to buy a new car in 2010? Well, the process itself is not very arduous. But you certainly need to take the right steps to garner a good deal. For starters, get in touch with as many lenders as possible. Once they have made the offers, negotiate for the best interest rate. If there are any special offers, go through them carefully for the fine print. After finalising the lender, you will need to provide a whole lot of supporting documents. These would include identity proof, proof of income and residence proof. You will be required to produce copies of your I-T returns, salary slips, bank statements, passport, driving license and other relevant documents. These vary from lender to lender. As proof of identity, you can furnish acopy of your passport, drivers license, voter ID or PAN card. Any one of these documents (with your photograph) is proof that you are indeed the person you profess to be. A document is considered valid if it bears the address of your current residence. If you...

HDFC Mutual Fund has started offering its investors the facility to register up to five bank accounts in the folio for receiving redemption payouts. The investor needs to specify any one bank account as the 'default' account and register a maximum of four additional bank accounts. They can opt to receive future redemption payouts into any one of these registered bank accounts of their choice.

Insurer Promises A Guaranteed Return Of 275% Of The First Year Premium, But An FD Will Earn More In Similar Period KOTAK Smart Advantage plan is a ULIP plan launched by Kotak Life Insurance. The unique selling points of the plan is the insurer promises a guaranteed return of up to 275% of the first year premium. HOW DOES THE 275% RETURN WORK?     As per the policy wordings, the first year's premium does not get allocated to your fund. Instead, it will contribute towards the fixed return, which you earn at maturity. This fixed return could be from 100% for premium payment term of less than 10 years to up to 275% for 30 years. The premium payment terms are 3, 5, 10, 15, 20, 25 or 30 years for this plan.    The plan rewards customers with long-term commitment as shorter premium payment tenure would reduce your fixed return. Financially disciplined customers would be rewarded with this guarantee. If you miss out on the premium payments, the fixed return would be reduced proportio...

Here are some tips for investors for the new year    New Year eve always brings in hope in addition to excitement. It is time for retrospection, resolutions and perhaps making new road maps. Among other things in life this is true for your investments too. It is time to review your portfolio and plan for the new year ahead to achieve even higher ground. Tax planning investments     The first quarter of the calendar is incidentally the last one for the financial year and hence it is usually heavy with investments in tax-saving instruments such as specified mutual funds, provident funds, tax-saving bonds etc. However, if you are going to do most of your tax-related investments in the last three months then you should resolve for the change in this habit next year.     It is prudent to plan your tax-related investments right from the start of the financial year. For instance, provident fund investments should be made before fifth of every month to reap maximum interest and compounding...