The markets showed resilience today and surged in the eleventh hour after a tepid day of trade. For most of the day, the Nifty gyrated between 4,950 and 5,000 levels, but managed to end the day above the 5000 mark. India performed much better than its Asian peers. At closing bell, the Nifty was up 50 points while the Sensex surged 170 points.
Speaking on today's trade, Mitesh Thacker, Technical Analyst, miteshthacker.com, said the Nifty tried to take out 5,000 levels two-three times during the course of the day but failed to sustain above that. "After breaking down with such large force yesterday, it is important that these technical levels recapture as fast as possible. In case we do not get close above 5,010 over the next 3--5 days, then it could be negative. The weight of averages would probably come into play and you would see a re-test of recent lows or probably even lower levels."
Road ahead for markets:
Experts feel the effect of the global crisis can be a good buying opportunity in India as the markets will bounce back eventually after some volatility. Dharmesh Dalal of Antique Stock Broking said India is trading in line with what is happening in the markets. "We have to be in tandem for a short while considering what plays out in the international markets. But we will bounce back that's for sure."
He advises investors to adopt a buying on dips strategy. "I would utilize every dip to buy. Each bad news in the international market provides a good opportunity to add. I would be a cautious buyer and wouldn't be investing the entire money that I have. I would be keeping cash not knowing whether I will get a better opportunity tomorrow again."
Rahul Chadha of Mirae Asset Management too sees the markets correcting in the near-term on global concerns. "The markets would remain volatile for the next couple of months. What we have seen over the last 15 months is strong cyclical recovery and sovereign debt concerns. What we used to talk about has now come to the forefront. We believe that this crisis remains confined to southern Europe. But with sovereign debt concerns, we will see the developed world growing below trend levels of growth and hence we will continue to see a near-term correction in the markets."
Krishna Kumar Karwa, MD, Emkay Global Financial Services, said global concerns remain and we will still see them panning out. "The domestic economy is doing very well and we have projections of almost 8.5% GDP growth. We have seen the kind of robust auto numbers which have come out for May. So, the domestic economy is doing phenomenally well. The question is what about global concerns on eurozone, China, and a possible slowdown in the US. Valuations being where it is, there is hardly any upside on current prices. What we are seeing is a rangebound market with 5,400 being the top and 4,700 on the downside. So, we are in a consolidation kind of a phase."
Courtesy:moneycontrol.com
Wednesday, June 2, 2010
Tuesday, June 1, 2010
Can ULIPs really give 30% returns?
THIS product can give you fantastic returns, Sir. The earlier version of this plan had given a 32 per cent return. It is a fantastic investment option, even though it is an insurance policy”, an insurance agent was telling Ravi when I came in. The agent was just leaving. He had left behind some colourful brochures.
Ravi turned to me and asked skeptically, “Are such high returns possible from this ULIP?”
“Everything is possible in certain timeframes. What you need to have asked is, in which period it gave that return and what was the return of the benchmark in that period. That would have given you an indication of whether this fund has performed well or not.” I continued. “You also need to look at the charges. The charges are supposed to have come down. But the charges in the first few years are still high. In one of the plans, the premium allocation charges for the first three years are respectively, 30 per cent, 15 per cent and 10 per cent”.
Ravi was amazed, “But, I understand that the difference in gross and net yields should be no more than 3 per cent for policies of term 10 years or less and 2.25 per cent for policy term over 10 years. I thought it will be low due to this regulation”. I was able to understand the confusion. “That will apply over the tenure of the policy, not year on year”, I said.
“There are other charges as well, if you want to know. Policy Administration Charges is another head, you would want to look at carefully. In the same policy, the Policy Administration Charges are 0.4 per cent per month, for the entire tenure ie, 4.8 per cent per annum, throughout the policy term”, ventured I.
“That high? “, gasped Ravi. Today was his day of surprises. “Yes. It is. And there are products where it is higher. Policy Administration Charges would be charged as a percentage of the premium, which penalizes those who pay higher premiums. ”, I said.
“So, what has come down then?” Ravi wanted to know. I did not have a readymade answer to this. “ Fund Management Charges have come down a bit. Very high charge products (Premium Allocation Charges in some were as high as 70 per cent) have been weeded out. There are still charges which may not even come under the purview of the new regime. For instance, any cost associated with investment guarantee is excluded from the calculation of net yield. So, guaranteed NAV products have an element of cost that is open to creative use. Also, if you were to surrender after 5 years, most of the front loaded charges would have been paid and yet the regulation restricting the difference between gross yield and net yield, does not apply. Hence, it will be a big handicap for those who want to surrender early.” I concluded. Ravi was absorbing all this intently. I now moved away to get my cup of tea.
Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content
Courtesy-Moneycontrol.com
Ravi turned to me and asked skeptically, “Are such high returns possible from this ULIP?”
“Everything is possible in certain timeframes. What you need to have asked is, in which period it gave that return and what was the return of the benchmark in that period. That would have given you an indication of whether this fund has performed well or not.” I continued. “You also need to look at the charges. The charges are supposed to have come down. But the charges in the first few years are still high. In one of the plans, the premium allocation charges for the first three years are respectively, 30 per cent, 15 per cent and 10 per cent”.
Ravi was amazed, “But, I understand that the difference in gross and net yields should be no more than 3 per cent for policies of term 10 years or less and 2.25 per cent for policy term over 10 years. I thought it will be low due to this regulation”. I was able to understand the confusion. “That will apply over the tenure of the policy, not year on year”, I said.
“There are other charges as well, if you want to know. Policy Administration Charges is another head, you would want to look at carefully. In the same policy, the Policy Administration Charges are 0.4 per cent per month, for the entire tenure ie, 4.8 per cent per annum, throughout the policy term”, ventured I.
“That high? “, gasped Ravi. Today was his day of surprises. “Yes. It is. And there are products where it is higher. Policy Administration Charges would be charged as a percentage of the premium, which penalizes those who pay higher premiums. ”, I said.
“So, what has come down then?” Ravi wanted to know. I did not have a readymade answer to this. “ Fund Management Charges have come down a bit. Very high charge products (Premium Allocation Charges in some were as high as 70 per cent) have been weeded out. There are still charges which may not even come under the purview of the new regime. For instance, any cost associated with investment guarantee is excluded from the calculation of net yield. So, guaranteed NAV products have an element of cost that is open to creative use. Also, if you were to surrender after 5 years, most of the front loaded charges would have been paid and yet the regulation restricting the difference between gross yield and net yield, does not apply. Hence, it will be a big handicap for those who want to surrender early.” I concluded. Ravi was absorbing all this intently. I now moved away to get my cup of tea.
Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content
Courtesy-Moneycontrol.com
The games that insurance agents play-Beware of an Agent
THIS is the third call I’m getting today from an insurance company”, Shashank fretted to his friend Sudhir. Sudhir looked up from his work and just said, ”What’s new? I got four calls today, myself”.
Not surprising. For many it is a new calling (pun unintended). Insurance has become the refuge of many a mutual fund distributor, as that business has folded up since August 2009. The insurance agents have quite a few tricks up their sleeve. Not everyone is bad and uses these unsavory tricks. But, you better know them. Here they are:
1) Old wine in a new bottle
The agent is constantly on the lookout for business. If organic growth becomes a problem, existing patrons come in handy! That is when you get calls to surrender the three year old ULIP (unit linked insurance plan) to put it in, what else but another ULIP or ULIP based pension plan. Only that the insurance product charges are front loaded and you would have just completed paying most of the charges in the first product and now you could start off with the second one.
2) Government guarantee!
This is a ploy used by LIC (Life Insurance Corporation) agents. They keep talking about sovereign guarantee. Guarantee in a traditional product is only for the sum assured. Every insurance company (including private players) guarantees the payout of the sum assured. It is only the bonus payout that is not guaranteed. For ULIPs, this anyway does not apply. So, this is a total con game.
3) New products that no one has heard of
Heard of Jeevan Amrit or Jeevan Sadhana? These are not LIC plans. They are plans conjured-up by putting together a few insurance products of LIC . Also, interestingly, the payouts which come in at various points are assumed to be invested in National Savings Certificate, Public Provident Fund, RBI Bonds etc. Then they calculate the returns and tell you that their Jeeven Amrit or Sadhana gives 8 -10%. Don’t be misled by this. The higher returns are because of these other products, not insurance. I have still not understood why they should show reinvestment in other products, when they are talking about insurance. And, how someone falls for these.
4) 6 & 10% returns in a traditional product
Recently, I found that a client of mine has gone for Jeeven Saral, a traditional policy of LIC. However, the agent had given an illustration with 6% & 10% returns! This was to be used for ULIP policies, where this is a possibility. In traditional policies, 10% return is virtually impossible. You would readily understand, why they use it then.
Must read: Beat your bank deposits with endowment policies
5) Insurance on the child
There are products for the benefit of the child, where the child is the insured. It’s absurd, as the child is a dependant and insurance on the child is of no practical use. Yet, these kind of products are sold and are bought by emotionally charged parents, ending up with a bloomer.
Sudhir clutched his head when he came to know of these. He just bought a child insurance on his daughter and he remembers buying a Jeevan Aradhana or some such product, which is one of those 'intelligently' packaged ones.
For those buying financial products, a basic level of financial literacy would help. Studying and doing some basic research, is a good idea too. If one is not sure, get an unbiased opinion from someone who knows about insurance. Else, it becomes a costly mistake, which lingers around for years.
Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content.
Courtesy-Moneycontrol.com
Not surprising. For many it is a new calling (pun unintended). Insurance has become the refuge of many a mutual fund distributor, as that business has folded up since August 2009. The insurance agents have quite a few tricks up their sleeve. Not everyone is bad and uses these unsavory tricks. But, you better know them. Here they are:
1) Old wine in a new bottle
The agent is constantly on the lookout for business. If organic growth becomes a problem, existing patrons come in handy! That is when you get calls to surrender the three year old ULIP (unit linked insurance plan) to put it in, what else but another ULIP or ULIP based pension plan. Only that the insurance product charges are front loaded and you would have just completed paying most of the charges in the first product and now you could start off with the second one.
2) Government guarantee!
This is a ploy used by LIC (Life Insurance Corporation) agents. They keep talking about sovereign guarantee. Guarantee in a traditional product is only for the sum assured. Every insurance company (including private players) guarantees the payout of the sum assured. It is only the bonus payout that is not guaranteed. For ULIPs, this anyway does not apply. So, this is a total con game.
3) New products that no one has heard of
Heard of Jeevan Amrit or Jeevan Sadhana? These are not LIC plans. They are plans conjured-up by putting together a few insurance products of LIC . Also, interestingly, the payouts which come in at various points are assumed to be invested in National Savings Certificate, Public Provident Fund, RBI Bonds etc. Then they calculate the returns and tell you that their Jeeven Amrit or Sadhana gives 8 -10%. Don’t be misled by this. The higher returns are because of these other products, not insurance. I have still not understood why they should show reinvestment in other products, when they are talking about insurance. And, how someone falls for these.
4) 6 & 10% returns in a traditional product
Recently, I found that a client of mine has gone for Jeeven Saral, a traditional policy of LIC. However, the agent had given an illustration with 6% & 10% returns! This was to be used for ULIP policies, where this is a possibility. In traditional policies, 10% return is virtually impossible. You would readily understand, why they use it then.
Must read: Beat your bank deposits with endowment policies
5) Insurance on the child
There are products for the benefit of the child, where the child is the insured. It’s absurd, as the child is a dependant and insurance on the child is of no practical use. Yet, these kind of products are sold and are bought by emotionally charged parents, ending up with a bloomer.
Sudhir clutched his head when he came to know of these. He just bought a child insurance on his daughter and he remembers buying a Jeevan Aradhana or some such product, which is one of those 'intelligently' packaged ones.
For those buying financial products, a basic level of financial literacy would help. Studying and doing some basic research, is a good idea too. If one is not sure, get an unbiased opinion from someone who knows about insurance. Else, it becomes a costly mistake, which lingers around for years.
Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content.
Courtesy-Moneycontrol.com
Market Insight-Religare
Nifty larger degree trend likely to turn negative
Nifty (4970↓116): As seen from the appended chart Nifty reacted exactly from the 50% retracement level of its previous rise. The pull back following the completion of an “Expanding Triangle” pattern formation was expected to be weak.
Whether, yesterday’s sharp down ward move would be able to sustain the crucial 4786 the support level so far its larger degree trend is concerned.
Nifty broad support level is placed at 4897-4786, it failure to sustain the support or its move below 4786 would turn the larger degree trend to be negative.
On the contrary, Nifty if able to maintain 4897-4786 then the trend would remain in a broader range for next few weeks, the support for the range would be at 4897-4786 and resistance at 5100.
As the Nifty trend is having a negative bias, avoid fresh long position, fresh long position should be initiated only above 5100 levels, until then remain cautious.
SAIL
Strategy Sell Previous Closing Price Rs.198 Target Price Rs.191 Stop loss Rs.202.60
Tata Motors
Strategy Sell Previous Closing Price Rs.721 Target Price RS.705 Stop loss Rs.732
Lupin Strategy Buy Previous Closing Price Rs.1853 Target Price Rs.1900 Stop loss Rs.1820
Nifty (4970↓116): As seen from the appended chart Nifty reacted exactly from the 50% retracement level of its previous rise. The pull back following the completion of an “Expanding Triangle” pattern formation was expected to be weak.
Whether, yesterday’s sharp down ward move would be able to sustain the crucial 4786 the support level so far its larger degree trend is concerned.
Nifty broad support level is placed at 4897-4786, it failure to sustain the support or its move below 4786 would turn the larger degree trend to be negative.
On the contrary, Nifty if able to maintain 4897-4786 then the trend would remain in a broader range for next few weeks, the support for the range would be at 4897-4786 and resistance at 5100.
As the Nifty trend is having a negative bias, avoid fresh long position, fresh long position should be initiated only above 5100 levels, until then remain cautious.
SAIL
Strategy Sell Previous Closing Price Rs.198 Target Price Rs.191 Stop loss Rs.202.60
Tata Motors
Strategy Sell Previous Closing Price Rs.721 Target Price RS.705 Stop loss Rs.732
Lupin Strategy Buy Previous Closing Price Rs.1853 Target Price Rs.1900 Stop loss Rs.1820
Monday, May 31, 2010
Credit card -How to make money-Economic times
Credit cards of late have a negative connotation, and are pronounced as complete no-no by many, because of the high interest rates that are charged on late payments/defaults. Don’t let this negativity cloud perception of the product.
You would be surprised to know that, if you are judicious in using this product, you stand to benefit monetarily, and of course it eliminates the need for you to carry cash everywhere.
More often than not the problem is that people do not understand the product well and hence are not able to use it to their advantage.
The credit card company offers you a ‘free credit period’ of around 50-55 days. The misconception most people have is that this free credit period is from the date of purchase. It is actually from the date of billing.
E.g. Mr. Anand billing cycle date is 28th of December to 27th of Jan and his credit free period is 50 days. If his purchase was on 22nd Jan, he would enjoy credit for 25 days. However if he made the same purchase on say 01st Jan, he would enjoy credit free period of 47 days.
So if you plan properly, you can enjoy maximum credit every month, which will help you manage your cash flows effectively, and will also help you earn the extra bit of interest on the cash that you have currently not spent on making the purchase.
In addition to the free credit period, every purchase made on your credit card, earns you reward points which when accumulated to a big amount can be exchanged for a range of items such as electrical appliances, flight tickets, home ware etc.
These rewards will differ from company to company. Also credit card companies offer discounts, promotional offers with respect to shopping, entertainment etc. E.g If you buy petrol from a particular brand of petrol pumps, you get a small percentage of money credited back to your account after a certain number of days.
For the credit card to make money for you, two key things you need to keep in mind
Cost of default: The interest rate on defaults ranges from anywhere between 2%-3.5% per month. So in effect it is a whopping 24%-42% p.a. Also, the interest starts from the date of purchase and not the billing date i.e. you do not get any interest-free credit period and all future purchases also start attracting the interest charges from the date of purchase.
So use the credit card if and only if you’re sure of having the means to pay the bills in time. Also, don’t forget that your credit score will get impacted too which will impact your future borrowing.
Credit Limit: Keep a tab on your credit limit. Overshooting your credit limit will also have dire consequences for you with respect to the interest charged and your credit score.
Widen the usage of your credit card (small and big purchases): You might as well earn bonus points and interest on the cash that you have not currently used, to make the purchase. You can use the credit card to pay monthly rentals, grocery bills, utility bills, gift expenses, subscription expenses etc. So the cash that you have not used to make the purchase will earn interest for you or will be used for fulfilling other immediate needs.
E.g Maitali purchased an electrical appliance for Rs. 28,000 using the credit card she possessed. The purchase was made such that she could enjoy a credit free period of 45 days. The cash that she would have used to purchase this appliance is now lying in her savings account which is earning her an interest of 3.5% p.a. So if she decides to pay the bill after enjoying 40 days of free credit, she earns an interest of Rs. 107 in her savings bank account. Not only that, she has also earned some reward points on the purchase. The other advantage of using the credit card is your payments are recorded which makes it easier for you to keep track of your expenses.
Appropriate use of Bonus points: Use the bonus points that have accumulated on buying necessities (house hold appliances, clothes, groceries etc.) rather than using it on using it on things (luxuries) that aren’t really important to you. Only if the bonus points are used practically, you are actually saving cash because had to now have the bonus points, you would have to anyways spend cash on buying the same.
Credit cards if used prudently will help you in managing your cash flow better, and at the same time, will provide you monetary benefits. That’s because you get interest free money for some period of time and you also earn reward/bonus points on the same.
But if you use it without deliberation, it can prove to be disastrous as interest rates charged on payment delays are very high. Also, your credit rating will take a beating, as banks report these things to the credit rating agencies, which in turn will include it as part of your credit report.
Don’t forget that credit score will not only determine whether you will get a loan but will also determine at what interest.
Let not easy availability of credit and attractive rewards offered fool you into making impulsive purchases. It will prove to be rather costly.
You would be surprised to know that, if you are judicious in using this product, you stand to benefit monetarily, and of course it eliminates the need for you to carry cash everywhere.
More often than not the problem is that people do not understand the product well and hence are not able to use it to their advantage.
The credit card company offers you a ‘free credit period’ of around 50-55 days. The misconception most people have is that this free credit period is from the date of purchase. It is actually from the date of billing.
E.g. Mr. Anand billing cycle date is 28th of December to 27th of Jan and his credit free period is 50 days. If his purchase was on 22nd Jan, he would enjoy credit for 25 days. However if he made the same purchase on say 01st Jan, he would enjoy credit free period of 47 days.
So if you plan properly, you can enjoy maximum credit every month, which will help you manage your cash flows effectively, and will also help you earn the extra bit of interest on the cash that you have currently not spent on making the purchase.
In addition to the free credit period, every purchase made on your credit card, earns you reward points which when accumulated to a big amount can be exchanged for a range of items such as electrical appliances, flight tickets, home ware etc.
These rewards will differ from company to company. Also credit card companies offer discounts, promotional offers with respect to shopping, entertainment etc. E.g If you buy petrol from a particular brand of petrol pumps, you get a small percentage of money credited back to your account after a certain number of days.
For the credit card to make money for you, two key things you need to keep in mind
Cost of default: The interest rate on defaults ranges from anywhere between 2%-3.5% per month. So in effect it is a whopping 24%-42% p.a. Also, the interest starts from the date of purchase and not the billing date i.e. you do not get any interest-free credit period and all future purchases also start attracting the interest charges from the date of purchase.
So use the credit card if and only if you’re sure of having the means to pay the bills in time. Also, don’t forget that your credit score will get impacted too which will impact your future borrowing.
Credit Limit: Keep a tab on your credit limit. Overshooting your credit limit will also have dire consequences for you with respect to the interest charged and your credit score.
Widen the usage of your credit card (small and big purchases): You might as well earn bonus points and interest on the cash that you have not currently used, to make the purchase. You can use the credit card to pay monthly rentals, grocery bills, utility bills, gift expenses, subscription expenses etc. So the cash that you have not used to make the purchase will earn interest for you or will be used for fulfilling other immediate needs.
E.g Maitali purchased an electrical appliance for Rs. 28,000 using the credit card she possessed. The purchase was made such that she could enjoy a credit free period of 45 days. The cash that she would have used to purchase this appliance is now lying in her savings account which is earning her an interest of 3.5% p.a. So if she decides to pay the bill after enjoying 40 days of free credit, she earns an interest of Rs. 107 in her savings bank account. Not only that, she has also earned some reward points on the purchase. The other advantage of using the credit card is your payments are recorded which makes it easier for you to keep track of your expenses.
Appropriate use of Bonus points: Use the bonus points that have accumulated on buying necessities (house hold appliances, clothes, groceries etc.) rather than using it on using it on things (luxuries) that aren’t really important to you. Only if the bonus points are used practically, you are actually saving cash because had to now have the bonus points, you would have to anyways spend cash on buying the same.
Credit cards if used prudently will help you in managing your cash flow better, and at the same time, will provide you monetary benefits. That’s because you get interest free money for some period of time and you also earn reward/bonus points on the same.
But if you use it without deliberation, it can prove to be disastrous as interest rates charged on payment delays are very high. Also, your credit rating will take a beating, as banks report these things to the credit rating agencies, which in turn will include it as part of your credit report.
Don’t forget that credit score will not only determine whether you will get a loan but will also determine at what interest.
Let not easy availability of credit and attractive rewards offered fool you into making impulsive purchases. It will prove to be rather costly.
Market insight-Religare
Nifty (5086↑19): Nifty initially remained in a range, the last half an hour pull back has led to a close at day’s high, indicating the Nifty pull back rally is intact.
Nifty immediate support is at 5038-5017 if holds and is able to move decisively above 5097 the intraday bias would be positive and next possible target would be at 5146-5170 levels, these levels would also act as a resistance as it is placed at an important Fibonacci 61.8% retracement levels of its previous fall.
Nifty below 5017 levels would have a negative bias for its intraday trend.
Strategy would be to continue to with restricted stock specific positive trades till the Nifty pull back movement is intact, avoid over leverage.
The nature of current pull back is crucial that would decide whether the Nifty larger degree trend, discussed above, would remain intact or not.
The pull back may move higher up to 5010-5079-5149); time-wise, the pull back would remain intact between 9 June and 2 July ’10 i.e. 38.2-100% of the time taken by the entire pattern formation. On completion of the pullback movement, the Nifty, once again, may resume its downward trend to create new lows.
Nifty immediate support is at 5038-5017 if holds and is able to move decisively above 5097 the intraday bias would be positive and next possible target would be at 5146-5170 levels, these levels would also act as a resistance as it is placed at an important Fibonacci 61.8% retracement levels of its previous fall.
Nifty below 5017 levels would have a negative bias for its intraday trend.
Strategy would be to continue to with restricted stock specific positive trades till the Nifty pull back movement is intact, avoid over leverage.
The nature of current pull back is crucial that would decide whether the Nifty larger degree trend, discussed above, would remain intact or not.
The pull back may move higher up to 5010-5079-5149); time-wise, the pull back would remain intact between 9 June and 2 July ’10 i.e. 38.2-100% of the time taken by the entire pattern formation. On completion of the pullback movement, the Nifty, once again, may resume its downward trend to create new lows.
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