Turbulent market? Take advantage!

Markets have been turbulent and have been going down since January, so much so that, investors have sort of got used to the lower levels! Many have reconciled to the fact that it is now a long haul and one needs to wait it out. However, there are very few out there, who are willing to stick out their necks now and invest. Hence, investment has turned into a trickle. Even informed and professional investors like Mutual Funds are not buying much. And the major investor – FIIs, hedge funds – from abroad have turned into sellers in the past few months, as the domestic situation in their countries have turned turtle.
The only silver lining was that SIPs were still happening in Mutual funds. Also, there was some bottom fishing in stocks whenever the markets fell precipitously. So, are these good strategies then - when the markets are in a state of flux ? There are a few low risk strategies, which can be implemented now.

Systematic Investment Plan
This is a strategy advocated by many in this market. Indeed, SIPs will work in every kind of market (except, when the markets are in a slide mode for several years in a row!). This works on the Rupee cost averaging principle, where you keep investing a specified amount every month without consideration of whether the market is up or down. When the markets are down, more units are allotted and when up less units get allotted. Over a period of time, the average acquisition price tends to be less than the market price, thus benefiting investors. Without the need to time the markets, investors could invest money without cause for worry with SIPs.

Systematic Transfer Plan (STP)
If there is a lump-sum to be invested, it would be a good idea to consider investing in a debt fund and then transferring it systematically over several weeks and months, into equity funds. STPs also happen automatically on pre-designated dates. Again, this method cuts down the risk of timing the markets for investors and help them to take advantage of any fluctuations in the markets.

For investors who want to play it very safe, they could invest in debt funds and can transfer only their earnings to equity funds. This will ensure that their principal is safe. However, since debt funds could give a 6-7% return, only that amount will get invested in Equity funds over time, thus depressing the upside.

Averaging
In stocks, one could keep buying small quantities, every time there is a big correction in the market. This is also referred to as bottom fishing. The important thing here is to execute this strategy over a period of time so that there are several such small purchases, which helps the investor to average out the prices.

Capital protection oriented funds
There are capital protection oriented funds which are being launched these days, for obvious reasons. Here, the scheme has a predominant debt portion, which ensures capital protection and the balance equity portion gives a chance of participating in the potential upside of equity. There are even funds which are promising a guaranteed return and also the chance to participate in the stock market rally. Having the cake and eating it too has never been easier.
Investors need to participate in the market and deepen the market. It is the lack of retail participation when the markets turn, which is the problem. By responsibly investing, investors will create wealth for themselves, whether the markets are up or down. And they can also be a stabilizing factor for the equity markets.

Courtesy UTV.Com

Know you Bank

In a trait commonly found across nationalities and communities, people typically consider the trustworthiness of banks and other companies when it comes to depositing their hard-earned money.
That, however, is not the case when it comes to borrowing money. Most would ask — how does it matter whether the institution one borrows from is trustworthy or not? I was a part of this school of thought until a few months ago. But, some recent events have forced me to rethink.
Incident 1I had signed as a guarantor for an education loan taken by my brother from a leading housing finance company, which also has a relatively lesser known education loan programme, for pursuing an MBA at the Indian School of Business (ISB), Hyderabad. The loan did not require any repayment (either of interest or principal) during the first 15 months.
However, towards the end of his one-year programme, my brother informed me that there was a problem. A lot of his fellow students had taken loans from the same institution and it seems its “system” could not handle the repayment holiday built into the structure of this loan (probably since it was built for home loan and not education loan) and continued to generate bills for the interest month after month.
And since the bills were generated but not paid, given the repayment holiday, they showed up as overdue (obviously since the education loan agreement clearly provided for the payment holiday) and eventually got reported as a default to the Credit Information Bureau (India) Ltd (Cibil). Incidentally, the loan request of another student’s guarantor had been turned down on account of this “default,” my brother informed.

I have always understood the importance of a good credit record and have taken great care to maintain a spotless repayment record. Hence, I was shocked by this. Fortunately, my brother and his fellow affected students took up the matter strongly with the lender and given the clout of ISB, the lender took these complaints seriously. It promised to officially inform the credit bureau of the “system” error and ensure that the so called “default” was wiped off the records for both the student as well guarantor.
In practice, however, they just got the credit report of my brother. They dismissed the requirement for my credit report saying their “system” showed they had not reported the “default” in my account to the credit bureau.
However, I insisted on getting the report and despite their reluctance — perhaps because it cost Rs 50 or so to get one - they obliged. Fortunately, the credit report itself was clean, but I had spent a good four weeks being tense over it.
Incident 2A bulky open envelope of my home loan lender with my name and address on it was handed over to the watchman of my building by a passerby who claimed to have found it on the road near my house. The watchman promptly delivered the envelope to my home.
I was horrified upon examining the contents - it had the entire documentation (fortunately, only photocopies) of my loan-against-property account, besides my income-tax returns and bank statements. What’s more, there were similar papers for seven other borrowers of the same bank. What were they doing in an envelope with my name on it? Who in the bank had access to these papers and what were they doing on the roadside? Did anyone in the bank miss those papers at all?

What would have happened if the papers had fallen into unscrupulous hands? There was no way I could have known.
What links these two incidents is operational failure. The operation-preparedness of most lenders has lagged their appetite for making advances. And yet, the lack of stringent punitive provisions helps them get away with violations.
An aggrieved consumer can complain to the Reserve Bank. However, the regulator lacks adequate teeth.
One could also approach the consumer courts, but that is time consuming. Besides, the compensation provided is peanuts.
The Credit Information Companies Regulation Act provides that banks will exercise due caution in reporting the correct figures to the bureau. Unfortunately, even this Act does not lay down any remedy the consumers can pursue directly against the lenders for wrong reporting of information.
However, the regulatory environment is now far more sensitive to these concerns and we should see gradual progress in ensuring lenders adopt the required operational procedures to minimise the occurrence of such incidents. A small beginning has already been made with the appointment of the banking ombudsman.

Courtesy DNA Money

B-school students add CFA edge for finance base, postings abroad

Amid pressing project deadlines and a continuous flow of assignments, Amit Sharma somehow manages to squeeze out a couple of hours daily. He’s been doing this for the last three months.
But it’s not work-life balance or hobbies that are occupying these couple of hours. He’s actually preparing for his chartered financial analyst (CFA) exams, level I.
Offered by the US-based CFA Institute, this one is an international designation offered to those who complete a series of three exams, or levels. But this isn’t all Sharma is doing. He is a second-year MBA student at New Delhi’s Indian Institute of Foreign Trade (IIFT) and did his summer internship at Edelweiss Capital.
After working for two years with Infosys post his graduation, Sharma opted for an MBA to secure a bright future. But somewhere along the way, the BTech in information technology (IT) from Dehradun decided to strengthen his base in finance through the CFA course.
The level I of the course cost him $1,100 and the exams were held in June. Sharma is sure he will pass the exams and in the process, hike his stake in the job market with the ‘level I CFA’ tag.
He’s not the only one to think this way. Many others too are looking at this course because a management degree is no longer the only ticket to a bright career. Even though an MBA degree can secure jobs with a six-figure monthly salary, it may not be enough to get a graduate the kind of profile he or she wants or even a posting abroad. This is where a CFA tag comes in.
Rajiv Krishnan, the managing director of HR firm Development Dimensions International (DDI), says that CFA helps people strengthen their foothold in finance and get international job offers.

This, despite the fact that it is not too different from an MBA course, says Saurabh Kapoor, an Indian Institute of Management Lucknow (IIML) student, who has also taken the level I CFA exams. “It’s more or less a recap of what we study in the first year of MBA but it affirms a candidate’s interest in finance,” he says.
CFA scores over an MBA from an Indian institute in that it gives a global exposure to the area of finance, says Sharma. Its recognition value abroad too is better than an MBA from an Indian institute and this makes it attractive to those seeking foreign postings.
However, the CFA level I doesn’t necessarily upsize the pay packets offered to students during campus placements even though it is considered a bonus by employers, says Madhavi Lall, the India head of HR at Standard Chartered Bank.
“A CFA qualification provides an edge in terms of the candidate’s knowledge base. But career movements and international postings are determined more by his or her performance on the job,” she adds. Standard Chartered recruits about 200 MBA grads annually from 40 institutes.
As a CFA makes the candidate’s CV stand out, more and more students are opting for it, show numbers. IIML and IIFT have over 20 students doing a CFA and Mumbai’s Jamnalal Bajaj Institute of Management Studies (JBIMS) has eight. The IIMs at Calcutta and Bangalore have seven-eight students each.
The qualification, however, hasn’t impressed the faculty of B-schools. According to IIMC professor Anindya Sen, doing a CFA simultaneously can take away much value from the MBA degree as students may end up distracted and unable to perform to the best of their abilities.
“A CFA during the course of a MBA can throw doubts on the veracity of the management degree. We create CEOs and managers. We don’t want students to get pigeonholed into just finance,” she says.

Courtesy DNA Money

Market Watch 06/09/07

SENSEX	15616.31	(170.16)
NIFTY	4518.60	(42.75)
DJIA	13305.47	(143.39)
NASDAQ	2605.95	(24.29)
RS/$	40.94	(0.03)

Market Watch 4/09/07

SENSEX	15465.40	43.35
NIFTY	4479.25	4.50
DJIA	13357.74	119.01
NASDAQ	2596.36	31.06
RS/$	40.88	-0.08

Best Wishes....

Finance and Economics Club wishes all the Best of Luck for all those aspirants who are apperaring for Interview with HCL.