Prajna Capital - An Investment Guide

Floating-rate funds are debt funds though they are less affected by the interest-rate fluctuations than the fixed-rate funds. This is because of the underlying investment of these funds. Floating-rate funds invest predominantly (65-100 per cent) in floating-rate instruments. The interest-rate on these instruments is readjusted periodically according to the existing market interest-rate hence reducing the interest-risk considerably. Thus in the prevailing market situation, floating-rate funds are a better option, considering the unpredictable interest-rate movements.

An ETF is like an index fund in terms of its portfolio. The basket of stocks is in the same proportion as the pre-decided index. The initial participants give the fund the basket of stocks and in turn take units of the fund in exchange. These units are then traded on the stock exchange through stock brokers. So investors who wish to take up units of an ETF require a demat account. The price of an ETF fluctuates with the fluctuation in the underlying index throughout the trading day. The NAV is usually a fraction of the value of the index, like one-tenth or one-hundredth. But the value at which it is traded is a function of its demand and supply. So ETF units can trade at premium or at discount. The benefit of an ETF to an AMC is more or less the same as it would be in case of any other mutual fund. But since it tracks an index, it doesn’t require active management of the underlying portfolio.

Some deductions you are eligible for to help you arrive at the right taxable income while filing returns. This time you don’t need to attach any documents to the form. The last date for individuals to file returns is July 31 The time to file the income tax returns is here. July 31 is the last date to file the IT returns for individuals. The returns has to be filed for the previous year - April 2008 to March 2009. So, the transactions should have taken place during that period only. Any subsequent transactions will be taken into account during the next year - 2009-10. An assessee also needs to compute taxes properly and pay off any outstanding dues. This can be done before the date of filing of the returns. It is of utmost importance that one uses the correct form, as is applicable to him. In a radical change from the past, no document (including TDS certificate) should be attached to this form. The officials receiving the returns have been instructed to detach all documents enclosed wi

Here are some channels available to help you file your returns conveniently The financial year 2008-09 has come to an end and it is the time to start filing the income tax returns relevant to the assessment year 2009-10. The income may be from any one or more sources including salary, income from property, business and profession, capital gains, and income from any other source. In case the income from are required to file the tax returns. Tax is payable on the amount of income that exceeds the basic exemption limit. The requirements for filing of annual income tax returns are contained under Section 139 of the Income Tax Act. According to these provisions, every person having income in excess of the amount not chargeable to tax is required to file the returns. The returns need to be filed by July 31. Now it is compulsory to obtain and quote your Permanent all these sources during the financial year exceeds the basic exemption limit, you Account Number (PAN) in the returns. PAN is avai

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to

Sundaram BNP Paribas AMC has an impressive line up of equity funds which are good performers at that. The bulk of this AMC's assets are in equity. Despite putting up a fairly comprehensive product offering on the equity front and delivering on the performance side too, this AMC has not got the attention it deserves. Currently it ranks at No. 13 in terms of assets under management. The funds have a disciplined approach with a focus on risk management. From being an average performer, Sundaram BNP Paribas Growth has put up a better performance in the past two years. This could be the result of changes within the fund house. The AMC has been laying a lot of emphasis on solid research and fund management. They have a team of one economist, seven research analysts and four portfolio managers, not including the head of equity. Though the AMC has much to offer by way of equity funds, it has not been too impressive on the debt front. Sundaram BNP Paribas Bond Saver has not managed to beat

Reliance Mutual has a history of letting its funds get bloated in terms of AUM. And, the firm’s culture places a premium on running a big fund. Ever since its start in 1995, the AMC has rapidly increased its AUM. From being India’s largest private sector mutual fund in 2006 it went to being the largest mutual fund by 2007. Reliance Equity Advantage fund created history by mopping up Rs 2,700 crore in its NFO in 2007. This year Reliance Natural Resources Retail mopped up Rs 5,660 crore. Reliance has managed to garner huge amount of assets because it actively pursues NFOs. The fund house started with the launch of two equity funds–Reliance Vision and Reliance Growth. It’s the performance of these two funds in 2002 and 2003 that made the fund house a hit with investors. The fund house leveraged this along with the Reliance brand to gain investors’ attention. In three years (February 2005 - January 2008), five of the equity launches lost money. The total NFO collection was Rs 17,960 crore

Kotak Mahindra Asset Management is a wholly owned subsidiary of Kotak Mahindra Finance, a leading financial services group. In its initial years, it derived its strengths from debt fund management. Kotak Mahindra Mutual Fund is credited with launching the first ever gilt fund of the country- Kotak Mahindra K Gilt Unit Scheme 98. Till a couple of years back, the fund house still held an edge as far as gilt funds were concerned, with two 5-star gilt funds. Not any longer. Today it has three gilt funds - two are 3-star rated and the other, 2-star rated. Even its debt funds have dipped. Just two have a rating of 4-star and above, a far cry from the earlier statistics. It was only in 2004 onwards that the fund house began to get aggressive on the equity fund. Now they do have a range of equity funds but only two have really impressed - Kotak 30 and Kotak Opportunities. Kotak Mid-Cap did show promise soon after its launch but has turned out to be a below-average performer.

JP Morgan is one of the very new entrants. It launched two equity funds last year and an arbitrage fund in 2008. Equity corners almost half of this AMC's assets. JP Morgan India Equity fund garnered Rs 824.77 crore when it was launched in May 2007. By October that year, its assets were Rs 1,150 crore. They have now dipped to Rs 874.35 crore. In the recent market slump, the fund has fallen in line with the category average. JP Morgan India Smaller Companies has been worse hit. This fund started off with Rs 509.45 crore in November 2007 and is now at Rs 315.48 crore.

Due to its concentrated bets in growth stocks, the returns of JM Financial's funds can deviate substantially from category norms. In a bull run, it may have some of the savviest skippers going. But its dramatic fall in slumps is a turn off. If you find that hard to believe, consider JM Emerging Leaders and JM Basic. Both these funds were amongst the top 5 performers of 2007, JM Basic bagging the coveted No. 1 slot. In this market slump, Emerging Leaders fell by 72.46 per cent and Basic, 66.17 per cent, when the category average was a 49.74 per cent fall (Year-to-date return as on October 13). As for JM Equity, it makes for no comparison with its siblings. It actually underperformed the category average in 2007, when the other two were on a roll, and fell harder than the average when the market slumped. Make no mistake. We think Sandip Sabharwal, Chief Investment Officer-Equity, is a skilled manager who has the courage to ride his convictions. But that said, we think this fund hou

One of the fund industry's sturdiest shops, its performance over time has been strong. Lately, however, it has gravitated towards the back of the pack. The AMC's temperate ways have served it well over the years. It has been a consistent out performer and has also provided a cushion as the racier ones fell precipitously. But the grouse that investors are harbouring right now is that its performance in the second half of the bull run has disappointed. While it is a fact that the risk-adjusted returns were not as impressive, it is certainly no cause for alarm. This AMC's funds will lag the pack when the market's raciest names lead the charge. What investors have here is a fund manager who has proved his mettle over various market cycles. In 2003, HDFC Mutual Fund bought out Zurich Mutual Fund. This move turned out to be extremely smart. The AMC was instantly catapulted to the second largest fund house in India. HDFC Mutual Fund not only managed to get this brilliant fund

Fidelity AMC was set up in July 2004 but has managed quite a following in these few years. It is also very focussed on equity. Based on the brand equity of the Fidelity name, Fidelity Equity, its first fund, started off with a corpus of Rs 1,460 crore in April 2005. It has gone up over the years to over Rs 2,500 crore. While it impressed in 2006, it dipped in 2007 but in the recent slump has held on quite well. This has even been observed in its other domestic equity funds. The funds may be average performers when the market is on a roll, but they don't slump terribly in a downturn. The AMC has just five equity funds. One, Fidelity Tax Advantage, is an Equity Linked Savings Scheme ( ELSS ) and two (Fidelity International Opportunities and Fidelity India Growth) have a global tilt. Of these, only the former has actually started investing abroad-about 10 per cent of its holdings are outside India. The fund house does not have a huge and diverse product offering. Neither does it chas

This fund house has managed to build a fairly sizeable business over a relatively short period of time. Equally impressive is the fact that the fund house did not resort to buying out another AMC. It has stuck to growing organically. Of course, in retrospect, its timing could not have been better. The bull run shortly after the start of operations towards the end of 2002 helped tremendously. The fund house has regularly come out with equity funds. Except for the year 2003, the AMC has launched equity funds every single year from 2002. In the last three years (2006-2008), there have been two equity NFOs in each year. Each of the products have been well defined and thought out. HSBC Emerging Markets is the one with the international flavour. HSBC Equity is the fund that put this AMC on the investment map. The timing being great, its performance in 2003 and 2004 was excellent. The way the fund raced ahead in terms of its size is more of a fund-led success, rather than a brand-led one. The

The Rule of 5 What are the winning traits that helps an succeed? Here are the Entrepreneurs’ Dos and the Don’ts and what to look out for. Do's Ø Always be positive Ø Search for a silver lining even in the most adverse scenario Ø Keep the big picture in mind but retain a sense of humility Ø Always be open to learn, unlearn and relearn Don't Ø Don't blame. As an entrepreneur you can't blame anyone or any situation. Ø Don't be afraid of making mistakes but learn from them Ø Don't complicate matters; the most successful businesses were kept simple Ø Don't depend on numbers alone. Intuition and creativity can play a major role Ø Don't search for perfection, search for excellence Ø Believe in yourself and your colleagues

Following a balanced approach to investing in equities, investors can recoup the amount invested in stocks in few years DIVIDEND IS a tax-free income in the hand of shareholders. However, Indian companies are known for not having a regular dividend paying policy. Nonetheless, dividends are far more profitable today than it would have been in the last four years. This is because the stock prices have crashed in last one year, as result the dividend yield (dividend per share divided by price per share) has gone up. Therefore, the dividend per rupee of investment is much more today than it was earlier. However, investors should not aim at accumulating stocks with high dividend yield because such high yields may not be sustainable in case profit falls due to economic slowdown. Consistent in paying dividends and in some cases have also increased the payout ratio. A high payout ratio means a higher percentage of profits are distributed among shareholders as dividends. The table shows the

Is it necessary to have account with the same DP as broker has? No. Depository / DP can be chosen by you as per convenience irrespective of the DP of your broker. Whether my broker can also act as a DP? Yes he can. In fact most of the brokers are also registered as a depository participant so that they offer both the services and you also get the benefit of synergy in operations. However it is not compulsory for you to open a DP account with your broker. Whether depository participants are governed by any Rules and Regulations? Depository participants are governed by SEBI Act, 1992, Depositories Act, 1996, Securities and Exchange Board of India [Depositories and Participants] Regulations, 1996, Rules, Regulations and Bye laws of the respective depository with which he is registered as well as various directives of SEBI and depository issued from time to time. What are the documents to be signed with depository participant? Before opening an account with a depository participant, you ar

Fall In Interest Rates, Property Prices Makes It Tempting To Invest In A House, But Do A Reality Check WITH interest rates on a downward spiral and prospects of getting a good deal on a house, the real estate sector could witness some buying in the coming months. Though property consultants recommend waiting for a few months for the right price, some home seekers may be tempted to kick off their house hunting expedition soon. Time for short listing While there is no need to rush into a decision, you can start looking out for a house right away. Once the market bottoms out, home-seekers will start making a beeline for properties and loans. If you have identified your ideal home beforehand, you will be a step ahead. You can jump at the earliest opportunity available — in terms of price and interest rate. Lack of buying activity means that the market is skewed towards the buyer at the moment. You can start quoting a price that seems reasonable to you. Try quoting a price that

It is a convenient banking option for pick-up from and delivery to your place of business. You don’t have to risk carrying cash to or from the bank. Deposit / withdraw cash, deliver / collect trade documents and deposit cheques at the safety of your office Key benefits of Doorstep Banking: · It’s convenient. You get service at your doorstep. So no travelling to the branch · It’s secure. Cash-in-transit insurance, multiple verification and reconciliation procedures make the facility foolproof. · It’s flexible. You can choose between daily services or service on call. · It’s hassle-free. Experienced agencies help you with your transactions. How Doorstep Banking works: At a time specified by you, a designated agent will visit your business premises. All you need to do is confirm the agent’s identity, match the unique transaction ID and hand over the cash / cheques / documents in an envelope. Doorstep Banking Service is especially designed for entities having large number of branch transac

HEALTH, THOUGH important, is by far the most neglected aspect when it comes to health expenses. Notwithstanding the rising medical expenses - thanks to the hectic lifestyle - not many people in the country today have adequate insurance covers. While the public may not be concerned, government ensures that citizens protect themselves and their dear ones with adequate medical cover by giving tax breaks on expenses incurred for getting health insured. Premium paid up to Rs 15,000 on a medical insurance policy is exempted from tax under section 80D of the Income Tax Act. A tax-payer paying premium toward insurance cover of dependant parents shall be entitled to an additional tax benefit of up to Rs 15,000. If the parents are senior citizens, then this limit gets enhanced to Rs 20,000. Thus, the maximum tax benefit that a taxpayer can now avail by insuring the health of his/her entire family (including dependant parents) is Rs 30,000 or Rs 35,000 as the case may be. MEDICAL EXPENSES S

IN SIMPLE terms, foreign direct investment refers to the investment made by an entity (generally a company) in an enterprise located in a different country. By virtue of making this investment, the investor gains a certain degree of influence or control over the management of the enterprise. It is generally believed that to qualify as FDI, the investor should be in possession of at least 10% of the shares of the company and have access to voting power in the company. FDI can be both outward and inward. In the case of inward FDI, the investor can enter the country by incorporating a company, either by getting into a joint venture with an Indian company or setting up a wholly owned subsidiary. Alternatively, he could retain the status of a foreign company and simply set up a liaison, project or branch office in India. However, it is generally expected that FDI signals long-term commitment on the part of the investor as there is a lot of physical investment included. What are the benef

By number of funds as well as money invested, one of the most important type of mutual fund in India is something that is generally called a Fixed Maturity Plan. Of the 1920 mutual funds that are currently available, no fewer than 805 are FMPs, as they are known. And of the Rs 5.61 lakh crore that is invested in Indian mutual funds today, 68,000 crore is in FMPs. FMPs are generally used by companies and large investors as an alternative to bank fixed deposits. In general, these funds resemble FDs more than they do other mutual funds. These are closed-end funds, meaning that one can only enter them when they are launched and exit them when their pre-stated term is over. Actually, one can exit them earlier, but generally after paying a load that is high enough to be a serious discouragement. More importantly, fund companies offer an ‘indicative return’ for FMPs. Unlike other types of mutual funds, FMPs are run in such a way that this indicative return actually has some meaning. FMPs inve

Beta is a statistical term ; it measures the volatility of stock (or fund) relative to the market (or the benchmark). The value of beta of a stock or mutual fund is always stated against its benchmark. The beta of benchmark or market is always equal to 1. If a stock is benchmarked against Sensex and has a beta value greater than 1 (say 1.5), this indicates that the stock is 50 percent more volatile than the market as the beta of Sensex is 1. The stated stock will deliver 15 percent return if the market has delivered a 10 percent return in same time period. Its opposite is also true if Sensex delivers 10 percent negative return, then the stated stock will fall by 15 percent in the same time period. A beta of less than 1 implies lesser volatility. The desirable value of beta depends upon the individual risk bearing capacity. So while you can expect a high return from a stock that has a beta of 2, you will have to expect it to drop much more when the stock market falls.

AVOID BIG GIFTS FROM FRIENDS If you are someone who’s used to friends showering you with expensive gifts, there’s some bad news. Postbudget, any gift – in cash or kind (including immovable property) – worth more than Rs 50,000 will attract tax. So, think twice before accepting such gifts. FACTOR IN PERKS If you’ve are rejoicing the increase in exemption limit across categories, here’s a dampener that could have escaped your attention: abolition of Fringe Benefit Tax ( FBT ). While the employers do not have to pay the tax, the tax burden has shifted to employees in case of certain perquisites, puffing up their taxable income. You would do well to take this into account when you undertake your annual tax-planning exercise. PAY LESS WEALTH TAX If you were paying 1% tax on your wealth exceeding Rs 15 lakh, you can afford to relax. Thanks to the Budget, now this limit stands enhanced to Rs 30 lakh. GOLD’S STILL SAFE The hike in customs duty on gold bars from Rs 100 to Rs 200 per 10 gram mea

When the government makes use of its revenue and expenditure programmes (to achieve the above mentioned goals) and affects the aggregate level of demand for goods and services in the economy, then this action is essentially known as fiscal policy. Related to fiscal policy are deficits and surpluses. When the government’s expenditure exceeds its revenue, then there is a fiscal deficit and the opposite of this is known is fiscal surplus. What is the difference between fiscal and monetary policies? Renowned economist Keynes believed that taxes and expenditure decisions, that is fiscal policy, should be used to stabilise the economy. According to him, government should cut taxes and increase spending to bring the economy out of a slump, this kind of a policy action is known is expansionary fiscal policy. On the other hand, government should increase taxes and cut expenditure to bring the economy out of inflationary pressure, that is, it should follow a contractionary fiscal policy. The cla

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is

This blog post explains the difference between Investment and Insurance . Most of the time people confuses both savings and the insurance . Some times without proper knowledge investing in the insurance will eat your money. Here you will see a simple example explains all that. Insurance and Investments A lot of us confuse Investment and Insurance. Investment is something that we save up to use while we are alive . Insurance is something we save up for our family to use once we are gone. The goals of Investment and Insurance are totally different. A lot of us take Insurance policies as investments. This is the reason why there are a whole group of people running behind us telling us how great their new Insurance policies are. Let me explain with a simple arithmetic. Assuming you pay an Insurance policy premium of Rs. 25,000/- for a policy that would mature in 20 years The Insurance agent would have told you that the policy is worth Rs. 5 lacs and you would get a bonus amount equivalent

Ready to take a home loan? The bank may recommend a particular EMI scheme as the best, but one should look at the loan agreement for details before signing on the dotted lines Bear in mind, very little is known to most people about the different EMI repayment options beyond what the banks recommend to you when you take a home loan. Banks and home financing companies such as SBI, HDFC, HSBC, LIC Housing Finance and others may have one or many options that they may recommend as the right scheme for you. The criteria taken into account by the loan-giving agency include age, income, saving history, educational qualifications, job profile, number of dependants, type of property (including the builder) and so on. Here’s what you need to know about different EMI options available in case you are planning to take one. First things first. The simple ground rule for all EMI options is that the longer the term of your loan, the smaller will be your EMI. The EMI also has two components —

IF ONLY life were as good as the ads portrayed it to be. You could travel to exotic locations, shop till you drop, indulge in the choicest delicacies — with nothing but that sleek plastic card in your wallet. In fact, freedom is the trump card that credit card companies always play up to sell their gold, silver and platinum cards. However, the reality is that when you come back home from that fancy vacation or shopping spree, at your doorstep will lie a bill that, as much as you try, you cannot wish away. And if you’re not the kind of person who cares for detail — remembers where or when you spent what — chances are that you may be paying more than you actually spent. To help you guard against fraudulent activities by credit card issuers (generally banks and NBFCs), COMMON ACHES If you’re one of those who haven’t given this a thought, here is a chance for you to find out if you are being victimised or not. You need to know that no bank has the right to forcibly issue a credit card.

This article explains how you arrive at the dividend yield of a share to determine its efficiency as an investment option Equity investors look for two types of returns - Capital appreciation, i.e., the increase in the market value of the shares, and Dividend income. Companies declare dividends on equity shares from the profits. The balance funds left after paying off all expenses is used to create reserves and declare dividends. Calculating dividend yield is important to calculate the true returns from an equity investment. Also, dividend yield helps analysts calculate the value of an investment, and whether it is good to invest in a particular stock. Dividend is declared on the par value of the shares. For example, a 30 percent dividend on a Rs 10 par value equity share means a dividend of Rs 3 per share. However, in case you have paid Rs 30 to acquire the share, the dividend is still payable on Rs 10. So, the dividend yield would be 10 percent only. Dividend yield is not equal

You may not be always right with debt, as some products require timing just like equity While debt has always had its relevance for investors, its performance in the last one year has sent many rushing for it. Equity's under-performance in the last one year has only further made its case stronger with the equity market's weakness wiping out a few years' good performance at one go. While debt gives the comfort of capital safety and assured returns, not all debt options are safe in the real sense. In fact, debt can be a negative earner in a real sense if the choice of product is wrong. Hence, choosing the right debt product is as important as choosing the right stock, and in some cases, could be tougher too. Interestingly, the challenge for many is when to allocate for debt rather than how to choose it. While the bad performance of equity automatically forces everyone to debt, it need not be the case if the investor resorts to asset allocation. If you go by the principl