Finance Aug 12

Headlines…..
RBI / MoF / Govt. Policies

RBI panel wants tech upgrade to check fake notes
Thorat panel lays out plans to counter fake note menace
Post-2011, bank books to carry real numbers
Govt: Latest debt instrument not to fund fiscal deficit
Central banks looking to ending monetary expansion: Y. V. Reddy
Credit card balances' growth declines to all-time low
Govt may give Rs 10,000 cr for debt waiver scheme
Arms help SBI enter new areas sans govt equity
Regulatory Bodies / IRDA / SEBI

SEBI suspends 578 brokers’ registration
Private / Public Sector Banks

Public sector banks pip private peers in growth in staff cost
SUUTI won't participate in Axis Bank pref issue
Axis Bank adds 31 lakh shares in open interest
LVB sees gains from re-pricing high cost deposits
ATMs with in-built note detectors soon
M&M, Syndicate Bank tie-up
Banks raise Rs 900 cr via CDs
PNB to cut home loan rate to 8.5% this week
Foreign Banks / FIIs

StanChart to hire 850 for priority banking
Rating & Research

Allahabad Bank bonds rating
Credit & Pre-paid Cards

Credit card slump tells slowdown tale
NBFCs / FIs
MAGFIL may raise Rs 3,250 cr
PTC Fin may raise Rs 1.5k cr through IPO by FY11-end
Brokers / Distributors
Tata Capital to launch private equity fund
Life & General Insurance

Postal cover funds set for stock-market delivery
SUUTI won't participate in Axis Bank pref issue
Life insurers may soon invest in infra SPVs
Future Generali implements Newgen solution
Citizens insure road for quality
Insurers gear up to meet flu claims
Existing health policies to cover swine flu hospitalization
Health insurers: Super smart or born losers?
Mutual Funds & AMCs

MF sales, new fund launches rebound
MFs cut distributors’ fee
Mutual funds may roll back exit load rates after Sebi ruling
Rising market makes investors look at FMPs
Shinsei to continue Indian fund operations
Pvt. Equity & Hedge Funds
Pension Funds / PF / EPF

Poor response to pension scheme till July 31
Govt Securities & Bonds

Bonds rise on new short-term instrument
Call rate ends at 3.25-3.30%
International News
BoJ keeps interest rate unchanged
Economy
Rupee falls by 14 p against dollar
Sensex snaps losing streak
Weak monsoon to impact growth, inflation, says Crisil
The News in detail…
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RBI / MoF / GOVT. POLICIES -Top-
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RBI PANEL WANTS TECH UPGRADE TO CHECK FAKE NOTES

The Economic Times
See similar story in: Business Standard, The Hindu, Deccan Herald, The Pioneer
Mumbai: A Reserve Bank of India (RBI)-appointed committee has said that the central
bank should constantly upgrade security features on currency notes stay ahead of
counterfeiters. The panel has also said that the public should be educated on these
security features, which will enable them to detect fake notes.
The panel has recommended progressive adoption of technology, both in respect of cash
handling and security to counter the growing menace of fake notes in the country. The
committee, however, noted that the number of fake notes in the country could be in the
range of at 3-6 pieces per million, one of the lowest in the world.
Some of the key suggestions of the group include installation of note sorting machines at
all bank branches in a phased manner so that fake notes are promptly detected as soon as
they enter the banking channel. To ensure that ATMs and other outlets dispense clean
and good notes, the group has suggested switching over to ‘cassette swapping system’
where cash in transit (CIT) companies — agents that help in running ATM — have
minimum involvement in handling currency.
In August 2008, RBI had constituted a group headed by deputy governor Usha Thorat,
with a view to enhancing the efficiency of currency systems and suggesting appropriate
measures for the same. The recommendations follow five meetings that the group had
during September 2008 — May 2009, a release on the RBI website said.
This group has pointed out that to counter the fake notes menace, security features have
to be constantly upgraded and public have to be educated on how to detect a fake note. It
envisages that information on detection has to be shared promptly with enforcement
agencies and security systems for cash storage. If the committee has its way, banks
finding a few fake currency notes also will not have to file any FIR as is the current case.
“Copyright © 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"
http://economictimes.indiatimes.com/Economy/RBI-panel-urges-to-check-fake-
notes/articleshow/4883504.cms
http://www.business-standard.com/india/news/rbi-may-get-crackingfake-notes/366664/
http://www.hindu.com/2009/08/12/stories/2009081255751300.htm
http://www.deccanherald.com/content/19150/only-3-6-million-have.html
http://www.dailypioneer.com/195149/Snapshots.html
THORAT PANEL LAYS OUT PLANS TO COUNTER FAKE NOTE MENACE

The Financial Express
Mumbai: A high level group set up by the Reserve Bank of India on currency distribution
headed by Usha Thorat, deputy governor has said that the number of fake notes in India
is estimated at 3 to 6 pieces per million which is one of the lowest in the world.
The group has noted that the RBI appointed Nayak Committee (1988) has calculated that
the actual notes in circulation by the year 2000 is Rs 1,69,000 crore.
Towards further strengthening the measures to combat the menace of fake notes, the
group recommended, installation of note sorting machines at all bank branches in a
phased manner and banks giving a roadmap to the RBI to achieve this, switching over to
‘cassette swapping system’ so that replenishment of currency notes in ATMs is done in a
highly secured manner and waiving the current requirement of filing an FIR by banks in
case one gets possession of a few fake currency notes.
The sharp increase in the number of physical notes in circulation as also the increase in
the number of cases of fake notes detected/seized in recent period, have clearly
underscored the need for increased vigil by all stakeholders to address the menace of fake
notes, said the panel.
From the RBI’s side, the priority has been to ensure that fake notes are promptly detected
as soon as they enter into the banking channel. It is equally important to ensure that
ATMs and other outlets for currency distribution dispense clean and good notes.
At the same time, the security features have to be constantly upgraded, public have to be
educated on how to detect a fake note, technology needs to be used in greater measure to
improve the integrity and efficiency of the currency operations, information on detection
has to be shared promptly with enforcement agencies, security systems for cash storage
and handling at banks strengthened further and note sorting machines installed at all bank
branches and other locations.
The panel has recommended that Note Sorting Machines (NSMs) / Desktop Sorters may
be installed in all bank branches in a phased manner for early detection of counterfeit
notes. Banks may ensure the quality of the notes fed in ATMs. They may conduct
periodic audit of the agents used for outsourcing this activity viz. the CIT companies.
http://www.financialexpress.com/news/thorat-panel-lays-out-plans-to-counter-fake-note-
menace/500834/
POST-2011, BANK BOOKS TO CARRY REAL NUMBERS

Sangita Mehta
The Economic Times
Mumbai: Banks will soon have to shift to a new, more accurate, accounting standard
where the value of assets will be based on current rather than historical cost.
At a meeting with select bank chief executives on Monday at the RBI headquarters in
Mumbai, RBI deputy governor Usha Thorat said banks will have to adopt the
International Financial Reporting Standards (IFRS) by 2011. In the meeting, the central
bank also rejected requests by banks to extend the July 31 deadline for restructuring bad
loans under a one-time dispensation as standard assets post the global meltdown.
A bank CEO said adoption of IFRS would require banks to put in place core banking
solution—moving from branch to centralised banking with IT support—across the entire
banking network.
“The move towards IFRS will require banks to computerise and become connected
because database and management information system (MIS) would be key to
implementing IFRS,” said a senior banker who was present at the meeting.
This is in line with a directive issued by the Institute of Chartered Accountants of India
(ICAI), the apex body that sets accounting standards in the country, that all listed
companies and entities dealing with public funds must adopt IFRS accounting principles
by April 2011. IFRS has turned out to be more popular than the US GAAP, and has been
adopted by over 100 countries.
Among public sector banks, State Bank of India has already taken the initiative to shift
from the current Indian standard of accounting to IFRS.
During the meeting, the central bank also directed Indian Banks’ Association, the
representative body of banks, to issue suggestions on enhancing lending to infrastructure
companies and on measures that could be taken to support the local textile industry,
among the worst-hit sectors due to the global recession.
The RBI also sought IBA’s view on ‘advance measurement approach’ and ‘supervisory
review’, both of which are part of the Basel-II accord on capital requirement.
http://economictimes.indiatimes.com/News/News-By-Industry/Banking-
Finance-/Banking/Post-2011-bank-books-to-carry-real-
numbers/articleshow/4879995.cms
GOVT: LATEST DEBT INSTRUMENT NOT TO FUND FISCAL DEFICIT

Business Standard
Mumbai: A day after announcing the latest debt instrument to tide over temporary cash
flow problem, the government and the Reserve Bank of India (RBI) have tried to clear
the air on the cash management bills and said that the tool would not be used to fund the
Centre’s fiscal deficit.
Finance Secretary Ashok Chawla in the morning said that the new short-term instrument
would add more flexibility to the cash management process.
Asked if the new instrument would supplement the government’s existing borrowing
plan, Chawla said, “Cash management bills are part of the overall programme.”
By evening, the central bank joined in saying that the new bills were not aimed at funding
the government’s fiscal deficit and would not increase the size of the borrowings. “Cash
management bills only provide an additional instrument to the government for its cash
management operations in a cost-effective manner,” Deputy Governor Shyamala
Gopinath told reporters.
The government borrowing has been budgeted at Rs 4,51,000 crore for the current
financial year.
“We are not taking a view either on (interest) rates or on liquidity. We have not issued the
notification with that intention,” she said.
The deputy governor said the cash bills would be in addition to the short-term loans that
the RBI gave to the government in the form of ways and means advances (WMAs) for
managing its fund mismatches. “This is an addition to the ways and means advances and
treasury bills. So to that extent, it (government) can take a view whether to go for a cash
management bill or WMA,” she said.
Government officials, however, said the Centre would prefer cash management bills to
tide over temporary cash mismatches instead of borrowing under WMA, whenever yields
were low. “Typically, WMA has been a costlier option for the government in the past. So
with the introduction of this new instrument, we will prefer to borrow under this tool
rather than borrowing under WMA,” the source said.
“In the current environment, for instance, when the yields are low and if we were to face
a temporary cash mismatch, we will borrow under the cash management bills,” he said.
The source, however, said the government was unlikely to see any cash management
mismatches in the near term.
Yesterday, the government had said that it would issue cash management bills aimed at
bridging its temporary cash flow mismatches. The cash management bills will have the
generic character of treasury bills, but will be non-standard, meaning the tenure will vary
as per the need of the government.
These bills would be of less than 91-day tenure and issued at a discount to the face value
through auctions, as in the case of treasury bills, said the government.
http://www.business-standard.com/india/news/govt-latest-debt-instrument-not-to-fund-
fiscal-deficit/366668/
CENTRAL BANKS LOOKING TO ENDING MONETARY EXPANSION: Y. V.

REDDY
The Hindu Business Line
See similar story in: The Hindu
Bangalore: Banking regulators worldwide are faced with the dilemma of finding exit
strategies from the massive monetary expansion made in the wake of the global financial
crisis.
Addressing the inaugural session on the ‘Public Policy and Management’ at the Indian
Institute of Management here on Sunday, the former Reserve Bank of India Governor, Dr
Y.V. Reddy, said, “An exit cannot be done too early nor can it be too late. Early exit will
lead to instability and too late an exit inflation. Any exit therefore would need to be timed
right.”
Exit: Status quo ante?

Exit implied gradually reversing the monetary expansion. In working out exits, he said,
countries have to take into account their specific characteristics; they would also have to
take “concerted action, he added. But in making such exits, Dr Reddy also raised the
possible scenario, “When you exit, does it mean going to status quo ante?” This is a big
debate world wide, he added.
Giving a backdrop to the global financial crisis, he said excessive deregulation by central
banks world wide was one of the major causes. This led to regulatory imbalances and tax
arbitrage. “Financial activity is footloose. Financial activity goes where regulation is soft
and taxes are low.” The soft regulation was particularly in the US and the UK for
becoming global financial centres.
Basel norms
The soft regulatory regime, in turn, he pointed out, resulted in excessive financialisation
and excessive leverage in the global economies. Referring to the Basel norms — that
govern supervisory norms in the global banking industry — Dr Reddy said they were
essentially “pro-cyclical” in character.
The resultant shadow banking and financial innovations were largely made to circumvent
capital regulations, he observed. “Off-balancesheet items consequently became on-
balancesheets,” he said, when the crisis began unfolding.
The crisis also exposed the balancesheets of the central banks that were the first lines of
defence, through large liquidity injections. “This in turn translated into a fiscal crisis,” he
added.
The crisis also exposed the underbelly of governance. Dr Reddy observed, “By and large
governance and policy did not do too well. The crisis exposed serious issues of failure by
governments, regulators, audit committees, rating agencies, markets and the media.”
Referring to the G-8 and G-20 meetings that had suggested uniform regulations or
common taxes, he said they were not practical. This was because both regulation and
taxes were sovereign subjects. “Instead, policy solutions should target segments of
excessive leverage.”
Dr Reddy cautioned that while a recovery in the financial market world did not
necessarily imply that the crisis had been resolved. “It does not imply that we have
moved out of distress. Instead the problems in the financial sector are a reflection of a
different problem.”
http://www.thehindubusinessline.com/2009/08/12/stories/2009081251810600.htm
CREDIT CARD BALANCES' GROWTH DECLINES TO ALL-TIME LOW

Sudeep Jain
Business Standard
Mumbai: As banks examine the viability of credit cards as a product and find ways to
curb losses under this portfolio, the annual growth in credit card balances has fallen to an
all-time low.
According to the Reserve bank of India (RBI) data, year-on-year growth for credit card
out standings, or the total balance due to issuers on credit card spends by customers, has
plummeted to 1.4 per cent as on May 22, 2009. During the year to May 23, 2008, the
growth rate was 36.5 per cent. And, for the preceding year, it was 45 per cent.
This flat growth comes despite an increase in rollover of credit from around 60 per cent a
year ago to around 65 per cent now.
Banks, already on a culling spree, have cancelled nearly 3 million credit cards in 2008-
09. However, bankers said most of the cancelled cards were inactive ones, which cost
them money to hold in terms of billing and postal charges. There was also the potential
for misuse since inactive cards could be used in case the owner fell in financial trouble
and needed cash without having to put up collateral.
Apart from whittling down their existing card base, some of the most aggressive players
have slowed new issuances too.
For instance, ICICI Bank, which has the largest credit card base in the country, has
slashed the number of new credit cards to about 1,000 a month, according to a senior
executive who declined to be named. Questions are also being raised about the financial
viability of this product in its current form. “This category is going to be ring-fenced for
some time and we are examining if it is sustainable without an annual fee,” the bank’s
executive said.
ICICI Bank’s cards in circulation have dipped from 8.5 million a year ago to about 7
million now.
SBI Cards, a joint venture between State Bank of India (SBI) and GE Money, has kept its
cards base more or less constant over the past 12 months at around 3 million. According
to Diwakar Gupta, chief executive officer, SBI Cards, card spends barely sustain the cost
to the issuer.
“We offer 50-day credit to the customer, but the cost of holding that card is equal to the
interchange earned on that card. Without an annual fee, this model is not really
sustainable,” said Gupta.
Citibank, with the fourth largest credit card base, has reduced its credit card base to 2.5
million from 3.8 million in July last year. When contacted, the lender declined to
comment.
Most banks have made it a policy to issue credit cards only to existing customers.
Parag Rao, head - product, portfolio and service delivery, credit cards of HDFC Bank,
said that the private sector lender’s policy to source 85 per cent of the business from
customers with existing relationships had helped it keep delinquencies at a much lower
level than the industry average.
As a result, it is the only large issuer to have seen its credit card base increase, from
around 3.8 million a year ago to around 4.5 million now. “Incrementally, there is no
issuer which is issuing over 15,000 cards a month,” said Rao.
But the overall credit environment has also forced HDFC Bank to tighten norms for
certain geographies and segments, besides focusing on more stringent verification.
According to industry estimates, delinquency rate for the credit card business has shot up
to 20 per cent, from around 15 per cent a year ago.
Shyam Srinivasan, country head for consumer banking at Standard Chartered Bank, said
credit cards should not be looked as a standalone product. “The product does remain
viable if it is seen as part of a wider relationship with the customer,” he said.
According to Srinivasan, Standard Chartered Bank is the largest issuer of premium

segment cards in the market. The bank has kept its credit card base flat at 1.3 million over
the past few quarters.
While fewer issuances is one part of the story, banks have also resorted to reducing
sanctioned credit limits, which in some cases have been slashed by half. In many cases,
cash withdrawal facility has been dispensed with.
Besides, HDFC Bank’s Rao said that card holders have also resorted to lower spends on
their cards due to the uncertain economic environment.
http://www.business-standard.com/india/news/credit-card-balances/-growth-declines-to-
all-time-low/366666/
GOVT MAY GIVE RS 10,000 CR FOR DEBT WAIVER SCHEME

PTI
See this story in: The Hindu Business Line
New Delhi: The Government is likely to release Rs 10,000 crore to banks and financial
institutions as part of compensation for writing off loans under the farm-debt waiver
scheme.
"The Finance Ministry is considering to release Rs 10,000 crore to lending institutions in

a month or so,'' official sources said. This would be over and above Rs 5,000 crore, which
was given earlier this fiscal to the banks and financial institutions to wards the debt
waiver scheme.
The government had announced that it would pay Rs 15,000 crore to the lenders during
the current fiscal. The debt waiver scheme, announced by the government in 2008-09
Budget, was implemented by June 30, 2008, entailed a burden of Rs 71,000 crore on
bank s and financial institutions which the government promised to reimburse in stages.
During 2008-09, the government gave a total of Rs 25,000 crore to lending institutions as
compensation towards the Agricultural Debt Waiver and Debt Relief Scheme.
Under the debt waiver and relief package, for small and marginal farmers (with holdings
up to 2 hectare) there was a complete waiver of all loans due on December 31, 2007, and
which remained unpaid until February 29, 2008.
http://www.thehindubusinessline.com/blnus/07111861.htm
ARMS HELP SBI ENTER NEW AREAS SANS GOVT EQUITY

Subhomoy Bhattacharjee, Sunny Verma
New Delhi: The State Bank of India has fleshed out a robust expansion plan that neatly
complies with the government rules on keeping its shareholding structure unchanged and
stops just short of the RBI-set limit on setting up a financial holding company.
The bank has, therefore, decided to hive off each of its foray into a new business as a
subsidiary. The latest to join the set is its planned foray into the private equity business.
SBI chairman OP Bhatt told FE the RBI is expected to give its approval for the venture
soon. “RBI has asked for some clarifications, which we are sorting out”, he said.
According to him, the banking model allows the subsidiaries to expand without facing
any capital constraints. “We have not set up a holding company, but all new forays after
approval from the board of directors (of the bank) are being established as independent
entities”, Bhatt said.
The SBI Act does not permit the government stake to dip below 55% in the bank but
there is no such restriction on the subsidiaries. SBI can dilute and become a minority
shareholder in subsidiaries when they need to raise capital, said Jagannadham
Thunuguntla, head of Delhi-based SMC Capital, a private equity company. The business
of the parent bank spans insurance, mutual funds, pension, treasury trading, broking,
venture investment, besides the separate private equity venture.
“In SBI, (the government) has to have a minimum stake of 55%. But it does not apply to
subsidiaries. So SBI can have, let’s say, 40% stake in SBI Life, with up to 34% with
another domestic and 26% with a foreign firm,” said US Roy, former MD & CEO, SBI
Life Insurance.
While Bhatt was unwilling to call it a new model, the process has allowed the company
to raise capital and avoid the complexities of an intermediate holding company structure,
said a senior official, who formerly worked with the RBI. The extent to which SBI, the
country’s largest bank, manages to keep the model going is significant for the way the
country’s financial sector evolves. The SBI stock was up 1.04% at Rs 1,729.70 on the
Bombay Stock Exchange on Tuesday.
In a discussion paper in August 2007, the RBI has favoured a financial holding company
model as opposed to an intermediate company model. A source close to the RBI said SBI
corporate strategy has implicit endorsement of the banking regulator. In fact, in its
discussion paper said, “There are considerable advantages in having (a fully capitalised
holding company structure) in as much as the banks would be much better protected from
the possible adverse effects from the activities of their non-banking financial subsidiaries.
In fact, it may also be possible to consider allowing non-banking subsidiaries under the
structure to undertake riskier activities hitherto not allowed to bank subsidiaries such as
commodity broking.”
SBI’s net profit grew 42.03% in April-June 2009 to Rs 2,330 crore from Rs 1,641 crore
in the same quarter last fiscal. Its balance sheet expanded by 31% to Rs 9,76,989 crore in
June 2009. The banks’ consolidated profit grew 68.11% to Rs 2,759 crore in April-June
2009.
Among the subsidiaries, SBI Life posted a net profit of Rs.39 crore in April-June 2009.
The insurance company’s new premium collection stood at Rs 1,568 crore against Rs
1,385 crore in June 2008. SBI Mutual Fund recorded a 29% growth with net profit at Rs
14.14 crore in April-June 2009. It had Rs 34,601 crore of assets under management as in
June 2009. SBI CAPS profit grew at 11.3% to Rs 48.18 crore in April-June 2009.
SBI Factors and GTF, which together formed the largest factoring company in India,
recorded net profit worth Rs 28.72 crore in the first quarter of this financial year. April-
June 2009. SBI DFHI, which was formed after merging SBI Gilts Ltd and the RBI-
promoted Discount & Finance House of India in 2004, registered a growth of 46.86% in
gross income with a profit of Rs 35 crore in April-June 2009.
http://www.financialexpress.com/news/arms-help-sbi-enter-new-areas-sans-govt-
equity/500894/2
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REGULATORY BODIES / SEBI / IRDA -Top-
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SEBI SUSPENDS 578 BROKERS’ REGISTRATION

Mumbai: The Securities and Exchange Board of India has suspended registrations of 578
stockbrokers for defaulting on payment of registration fees.
The suspension is for six months or till the outstanding fees are cleared.
The order will come into force on the expiry of 21 days from the date of the order, SEBI
said.
In August 2005, the regulator had appointed officers to conduct investigations against
those 578 brokers who had defaulted in the payment of registration fees.
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PRIVATE / PUBLIC SECTOR BANKS -Top-
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PUBLIC SECTOR BANKS PIP PRIVATE PEERS IN GROWTH IN STAFF

COST
PK Dey
Mumbai: The growth in staff cost of public sector banks vis-à-vis private banks was
significantly higher during April-June ’09, reveals a study of the growth in staff cost of
25 PSBs and 17 private sector banks during April-June ’09 and April-June ‘08. As per the
study, staff cost in the case of PSBs rose by 37.6%, whereas private banks’ staff cost rose
by only 8.4%.
The total staff cost of 25 PSBs increased from Rs 7,291 crore during April-June 2008 to
Rs 10,032 crore during April-June 2009.
Among the PSBs, the highest increase in staff cost was seen in the case of Vijaya Bank,
where it increased by 104.6%, from Rs 101 crore to Rs 207 crore. This can be explained
from its performance. The total income of Vijaya Bank increased by 15.2% during April-
June 2009. On the other hand, the net profit was Rs 143 crore during April-June 2009, as
compared to a loss of Rs 76 crore during April-June 2008.
In Central Bank’s case, the staff cost increased from Rs 292 crore to Rs 469 crore.
Andhra Bank had a staff cost of Rs 141 crore during April-June ’08, which rose to Rs 211
crore during April-June ’09. In April-June ‘09, SBI had the highest staff cost of Rs 3,411
crore, followed by PNB (Rs 907 crore) and Bank of Baroda (Rs 594 crore).
In April-June ’09, the increase in staff cost of private sector banks was lower compared to
public sector banks. Among the 17 private sector banks, six banks, including South Ind
Bank, IndusInd Bank, Axis Bank, Dhanalakshmi Bank, Lakshmi Vilas Bank and Federal
Bank, showed over 40% increase in staff costs during April-June ‘09.
On the other hand, between April-June ’09 and April-June ’08, staff cost of 17 private
sector banks increased to Rs 2,134 crore from Rs 1,969 crore. All the private sector
banks’ staff costs increased during April-June ’09, except three—Kotak Mahindra Bank,
Development Credit Bank and ICICI Bank.
The staff cost of ICICI Bank declined from Rs 523 crore during April-June ’08 to Rs 466
crore during April-June ’09. This can be explained from its performance. The total
income of ICICI Bank decreased by 2.2% to Rs 9,223 crore during April-June ’09, as
compared to Rs 9,430 crore during April-June ’08.
In April-June ‘09, HDFC Bank had the highest staff cost followed by ICICI Bank and
Axis Bank The highest increase in staff cost was seen in the case of Axis Bank.
http://www.financialexpress.com/news/public-sector-banks-pip-private-peers-in-growth-
in-staff-cost/500837/
SUUTI WON'T PARTICIPATE IN AXIS BANK PREF ISSUE

Business Standard
Mumbai: The Special Undertaking of Unit Trust of India (SUUTI), which was carved out
of the erstwhile Unit Trust of India in 2003, will not participate in the proposed
preferential offer of Axis Bank (formerly UTI Bank). The shareholding of SUUTI in the
bank will come down from 27.02 per cent to 22.54 per cent.
The other promoters are Life Insurance Corporation of India (LIC), General Insurance
Corporation of India (GIC) and the other four general public sector companies — New
India Assurance, United India, Oriental and National Insurance. Axis Bank is likely to
raise around Rs 5,000 crore by issuing 71.4 million shares through preferential allotment,
private placement, including qualified institutional placements, and private offerings
through global depository receipts from domestic and international markets. The bank
will close the offer within 15 days of passing the resolution.
According to a source, there is an issue of lock-in period if the undertaking participates in

the offer. The shares may be locked in for a minimum two years, if SUUTI takes part in
the issue. In Budget 2008-09, the government granted SUUTI five more years of
exemption from liquidating state liabilities.
http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-
issue/366730/
AXIS BANK ADDS 31 LAKH SHARES IN OPEN INTEREST

Chennai: Turnover slipped to Rs 63,519.97 crore in the F&O segment on Tuesday. The
Nifty August future ended in discount at 4464.45 against the spot close of 4471.35. It also
shed 6.24 lakh shares in open interest positions, indicating lack of conviction in today’s
gain.
Among the calls, 4700 shed 3.64 lakh shares – an indication of writing activity –
suggesting that market Nifty might find difficult to breach that level. On the other hand,
4400 and 4300 puts witnessed sharp accumulation, suggesting that Nifty might move in
4300-4700 range.
Stock futures
It was once again lacklustre day. Among the individual counters, Axis Bank added 30.81
lakh shares in open interest and closed at 868 against the spot close of 869.9.
The other counters that saw sharp accumulation were JP Associates (26.77 lakh shares)
and Unitech (25.96 lakh shares).
SBI and Reliance Capital shed open position.

Futures of Tata Motors, JSW Steel, Tata Steel and DLF closed in discount with respect to
spot close.
FII activity
Overseas investors remained net buyers to the tune of Rs 688.73 crore, thanks to their
strong buying in stock futures worth Rs 498.08 crore.
LVB SEES GAINS FROM RE-PRICING HIGH COST DEPOSITS

Chennai: Lakshmi Vilas Bank expects better performance in the current quarter as close
to Rs 700-crore high-cost deposits are coming up for re-pricing.
The bank’s Managing Director and CEO, Mr V.S. Reddy, told Business Line the bank is
offering 7.5 per cent on one-year deposits, compared with 10.5 per cent last year.
He said he did not anticipate any liquidity problems, or flight of deposits, because LVB’s
rates are still better than its peer banks.
The bank has about Rs 2,500 crore high-cost deposits and half of it will come up for
renewal this year. This should fuel the bank’s growth in profits, he said.
Five-fold rise in net

Lakshmi Vilas Bank reported a five-fold jump in net profits to Rs 22.6 crore for the first
quarter of 2009-10 compared with Rs 4.28 crore for the same period last year. The rise in
net profits was aided by the growth in other income than treasury income.
Other income increased 64 per cent to Rs 25.7 crore (Rs 15.6 crore).
During the first quarter of 2009-10, LVB’s gross non-performing assets (NPAs) ratio was
2.71 per cent (3.64 per cent). Net NPA was 1.32 per cent (1.66 per cent).
Mr Reddy said, “We have recovered about Rs 23 crore in the last four months and have
plans to bring down gross NPA to Rs 120 crore by the year-end from Rs 150 crore
currently.”
Meanwhile, LVB has signed an MoU with BSNL, under which the bank would enjoy a
‘preferred customer’ status. This will enable the bank to speed up its ongoing projects
with enhanced bandwidth requirements, says a press release from LVB.
ATMS WITH IN-BUILT NOTE DETECTORS SOON

See similar story in: The Times of India
Mumbai: Are you worried about the possibility of ATMs spewing out fake currency
notes? Well, a remedy may be at hand. A High Level Group on Systems and Procedures
for Currency Distribution has recommended that new ATMs be provided with in-built
note detectors.
Over a period existing ATMs may also be required to have in-built note detectors,
according to the Group, which was headed by Ms Usha Thorat, Deputy Governor,
Reserve Bank of India.
The Group was set up in August 2008 after the detection of 76,273 pieces of counterfeit
notes (in Rs 500 and Rs 1,000 denomination) aggregating to Rs 4.02 crore in July 2008
from the currency chest attached to the Dumariaganj (Uttar Pradesh) branch of the State
Bank of India.
The absolute number of counterfeit notes detected at bank branches and the RBI offices
has increased from 1,02,687 pieces or 3 per million in 2000-01 to 3,98,111 pieces or 8
per million in 2008-09.
Given that the present system used by cash in transit (CIT) companies for replenishing
cash in the ATMs leaves some scope for counterfeit notes gaining entry into ATMs, the
Group recommended that “In order to reduce the incidence of forged notes at ATMs,
banks may ensure the quality of the notes fed in ATMs by CIT companies. Banks may
switch over to the ‘cassette swap system’ for feeding ATMs as it minimises manual
intervention and is a more secure option.”
Note sorting machines

The Group is of the view that banks should install note sorting machines (NSMs) in all
branches in a phased manner. All branches with average daily cash receipt of Rs 1 crore
and above, and more than Rs 50 lakh may be equipped with NSMs by March 2010 and
March 2011 respectively. Banks should provide the RBI a roadmap for equipping the
remaining branches with NSMs.
To rationalise the current number (4,299) and spread of currency chests across the
country, the Group recommended that Regional Directors of RBI may in consultation
with a cross section of banks assess the level of activity of the chests and recommend
rationalisation of chests.
To tap advantages arising out of economies of scale, minimise overnight cash risks at
bank branches and benefit from sophisticated logistic techniques, banks may be
encouraged to establish currency processing centres (CPCs) at convenient locations.
The CPC should be equipped with high-speed sorting capacity and provide services to all
its linked branches in such a way that cash collections at each of the serviced branches is
received by the CPC on a daily basis and there is no overnight cash balance in that
branch.
To make CPCs viable, and also to take advantage of the built-up capacity, the Group
suggested that CPCs should be permitted to serve the branches of other banks which are
not equipped with NSMs. The CPCs could also render services to others such as
merchant establishments, petrol pumps, etc, which handle large volumes of cash. CPCs
should be permitted to charge for the services to other banks.
To tackle eventualities such as thefts/ robberies of treasure at bank branches/ during

transit, the Group said, the RBI may explore the possibility of introducing the technology
that enables self-inking/ marking of all bank notes in transit or in chests which would
automatically trigger-in if there is an attack/ attempted robbery etc.
Elaborating on the action to be taken by citizens who come in possession of counterfeit

note without knowledge of it being counterfeit, the Group said when any person
inadvertently in possession of fake notes up to five pieces tenders the same at a bank
counter, banks should impound such notes and provide acknowledgment to the tenderer
as per current guidelines. Further, banks need not file a first information report in such
cases. However, they should obtain approved ID documents of the tenderer.
http://timesofindia.indiatimes.com/news/business/india-business/RBI-panel-for-note-
checking-at-ATMs/articleshow/4883524.cms
M&M, SYNDICATE BANK TIE-UP

Mahindra & Mahindra Limited’s multi-brand pre-owned car company Mahindra First
Choice Wheels Limited has signed a pact with state-owned Syndicate Bank for financing
vehicle purchases by dealers and retail customers. Syndicate Bank will be a preferred
financier for dealers buying vehicles for inventory. Mahindra First Choice, a part of
Mahindra group’s after-market sector, is the country’s only organized multi-brand player.
BANKS RAISE RS 900 CR VIA CDS
Reuters
See this story in: The Economic Times
Mumbai: Indian banks on Tuesday raised Rs 900 crore via Certificates of Deposit (CDs),
Thomson Reuters data showed. Bank of Baroda raised Rs 350 crore by selling notes
maturing on April 9, 2010, and yielding 5.50 per cent.
State Bank of Bikaner and Jaipur raised Rs 300 crore by selling notes maturing on July
23, 2010, and yielding 5.80 per cent.
Punjab & Sind Bank sold Rs 250 crore of 5.05 per cent notes maturing on February 9,
2010.
The yield on the Reuters benchmark 3-month CD eased to 3.80 per cent from Monday's
3.90 per cent, and secondary market volumes rose to Rs 725 crore from Rs 390 crore on
Monday. Indian banks issued Rs 75 crore of CDs on Monday.
http://economictimes.indiatimes.com/News/News-By-Industry/Banking-
Finance-/Banking/Banks-raise-Rs-900-cr-via-CDs/articleshow/4882197.cms
PNB TO CUT HOME LOAN RATE TO 8.5% THIS WEEK

Sandeep Singh
Hindustan Times
New Delhi: As the festival season kicks off, so does the battle for the home loan market.
Punjab National Bank (PNB) is all set to announce a competitive home loan rate to
counter State Bank of India’s (SBI) low rate offering for the three months beginning
August 8.
But at 8.5 per cent for three years, it is marginally higher than SBI’s offering. This rate
will be for loans of upto Rs 30 lakh; for bigger loans, the rate would be 9.25 per cent or
25 basis points (100 basis points make 1 percentage point) lower than the current rate.
The bank is expected to announce this “festive offer” this week.

“This will be a part of the festive offering by the bank,” said a senior official who did not
wish to be named.
Despite repeated attempts, top officials at the bank were unavailable for comment.
Between the two, SBI’s offer --- 8 per cent in the first year for loan between Rs 5 lakh
and Rs 50 lakh and 8.5 per cent for the next two --- is cheaper. For Rs 5 lakh and below,
the bank charges 8 per cent for five years.
PNB and SBI are not alone. Housing Development Finance Corporation (HDFC) reduced
its rates in July to 8.75 per cent for loans upto Rs 15 lakh and 9 per cent for loans
between Rs 15 lakh and Rs 30 lakh.
These are still higher than what is being offered by SBI and what PNB has planned.
Market leader ICICI Bank, however, has not revised its home loan rates — it charges an
interest rate of 9.25 per cent for loans upto Rs 30 lakh and 9.75 per cent for loans
between Rs 30 lakh and Rs 1 crore; beyond that it charges 10 per cent.
http://www.hindustantimes.com/StoryPage/StoryPage.aspx?
sectionName=NLetter&id=cebec58a-d7e1-4caa-9ba5-
bc3403770551&Headline=PNB+to+cut+home+loan+rate+to+85+this+week
====================
FOREIGN BANKS / FIIs -Top-
====================
STANCHART TO HIRE 850 FOR PRIORITY BANKING

Reuters
See this story in: Yahoo India, Business Standard
Singapore: Standard Chartered plans to hire about 850 bankers over the next 12-18
months for its 'priority banking' arm that focuses on the mid-tier wealth segment, taking
on Citigroup and HSBC in the quest for more affluent customers.
StanChart, which has emerged relatively unscathed from the global financial crisis, has
been hiring staff from rivals to grow its Asian operations at a time when many
competitors are distracted by problems in their home markets.
"Priority has outperformed the market in the last few years," StanChart's Singapore-based
Global Head of Premium Banking Foo Mee Har told Reuters in an interview on Tuesday.
"We have aspirations to double the industry growth rate and double our customer
numbers in three years."
Foo said household wealth in Asia excluding Japan is expected to grow by 12 percent per
annum between 2008 and 2012, and Asia-focused StanChart hoped to expand its priority
banking business at twice the pace.
She said about 430 of the new relationship-manager hires will be in Greater China, while
about 120 will be in Singapore and about 110 in Malaysia.
The new hires, who Foo said will typically have some banking experience, will boost the
bank's number of priority banking relationship managers by 65 percent from around
1,300 now.
StanChart has already relaunched its priority banking service in Hong Kong and
Singapore. It will launch the service in China this week, and in Taiwan, Korea, Malaysia,
India and the United Arab Emirates over the coming months.
Priority banking services are aimed at owners of small and medium enterprises as well as
senior executives who typically can invest assets of more than $100,000 with the bank.
The services for such clients include access to personal relationship managers, separate
queues at bank branches, preferential loan rates and help in setting up new accounts in
different countries.
"A lot of banks are more distracted from what is happening in the U.S. or UK, Standard
Chartered is not," said Daniel Tabbush, a CLSA banking analyst based in Bangkok.
"There are lots of wealthy people in Asia who want the better service than normal retail
banks but there are not a lot of banks in Asia which offer this," he added.
Many lenders in Asia provide special perks to wealthier customers but only a handful
have the ability to service this customer segment on an Asia-wide basis. The more
aggressive players in this area include Citigroup, HSBC and Singapore's DBS Group.
UK-based StanChart, which derives two-thirds of its revenue from Asia, is also currently
in talks to buy India and China assets from Royal Bank of Scotland.
More mortgages
Foo, a yoga enthusiast who was previously CEO of Standard Chartered Thailand, said the
British bank has benefited from the financial crisis and was attracting new deposits amid
a "flight to quality" as customers shifted savings to stronger lenders.
While the sale of investment products had fallen over the past year, Standard Chartered's
priority banking service has benefited from a growth in mortgage loans.
"We have been able to capture increased market share in the mortgage area where we
have seen, in the first half, strong property transactions in Hong Kong, Singapore and
Korea."
The bank estimates its share of new mortgages in Hong Kong at 19 percent currently, up
from 13 percent last year. In Singapore, its share of new home loans has grown to 22
percent.
Foo declined to reveal the number of customers at StanChart for priority banking, which
the bank has identified as a key area.
"There is more and more pressure for people working in the consumer division to try to
get better performance," CLSA's Tabbush said. "The consumer division is under such a
spotlight because it lagged the wholesale division so much."
Standard Chartered last week reported a 10 percent rise in pretax profit for the six months
to June, but the consumer banking operation chalked up lower earnings.
http://in.biz.yahoo.com/090811/137/bau0wu.html
=====================
RATING & RESEARCH -Top-
=====================
ALLAHABAD BANK BONDS RATING

Care has assigned a ‘CARE AA+ rating to the proposed Tier II Bond issue (Series IX) of
Rs 450 crore of Allahabad Bank. The bonds would have a bullet repayment after 120
months form the date of allotment. Further, CARE has revalidated the ‘CARE AA' rating
assigned to the proposed perpetual debt (PD) issue (series l – tranche II) of Rs 150 crore
of AB. CARE has also reaffirmed the existing ratings for outstanding tier II bonds (series
IV-VIII) aggregating Rs 2,161.9 crore, outstanding upper tier II bond (series I) of Rs 500
crore and outstanding perpetual debt (series I – tranche I) of Rs 150 crore.
========================
CREDIT & PRE-PAID CARDS -Top-
========================
CREDIT CARD SLUMP TELLS SLOWDOWN TALE

Mahua Venkatesh
Hindustan Times
New Delhi: Credit cards are telling the story of an economic downturn. Both the issue of
cards and spending on them have seen sharp reductions in recent months, say industry
officials.
With the corporate world tightening its belt to tackle pressures arising from the industrial
slump and the fallouts of the Western financial meltdown, corporate cards – the kind
important-looking executives flaunt and spend largely on travel and entertainment – are
not what they used to be.
Roughly every fourth credit card issued in the country is for corporate usage in India,
which has some 2.5 crore (25 million) cards. Though there is no clear data yet, industry
officials say payments on these accounts have fallen drastically in the past four months.
Companies have cut back on perks for employees as part of their larger cost-cutting
drives, hitting the average monthly expenditure on corporate cards which a year ago
ranged between Rs. 25,000 and Rs. 75,000 a month.
“Most entertainment and travel related spendings comprising air fare and hotel bookings
were earlier taken care of by plastic money, but now we have seen that there has been a
significant drop in this area,” said Vijay Mehta, director, Credit Card Management
Consultancy.
To stop loan defaults that could raise their non-performing assets, banks and credit card
issuers have started blocking inactive and dormant cards, which could be about 40 per
cent of the total number of cards.
Inactive cards add to the cost for the banks. Reserve Bank of India data shows that about
three million credit cards were withdrawn in 2008-09. The number of cards fell by 3.32
lakh in the month of April alone.
The default rate for plastic money has gone up to over 10 per cent as against 6 per cent
four years back.
However, the growth rate in number of cards in 2008-09 dropped to only about 10 per
cent from a 30 per cent clip for the earlier five years.
However, Standard Chartered Bank’s head of credit cards, RL Prasad, said his bank had
not been affected by the slowdown.
“Though there has been a curb in corporate spending, our portfolio has not been
significantly impacted,” Prasad told Hindustan Times.
http://www.hindustantimes.com/StoryPage/StoryPage.aspx?
sectionName=BusinessSectionPage&id=f78e208c-a312-4b25-8635-
3257078eda88&Headline=Credit+card+slump+tells+slowdown+tale
==========
NBFCs / FIs -Top-
==========
MAGFIL MAY RAISE RS 3,250 CR

TE Narasimhan
Business Standard
Chennai: The country’s first listed gold loan company, Manappuram General Finance and
Leasing Ltd (MAGFIL), is planning to raise around Rs 250 crore from the capital market
and a loan of Rs 3,000 crore from banks. The proposed money infusion was to achieve
the target of Rs 5,000 crore business by 2010-11, said VP Nandakumar , chairman and
managing director, Manappuram Group of Companies.
He said in 2007-08, the non-banking finance company disbursed loans worth Rs 700
crore, which has risen to Rs 1,200 crore. The target for the current fiscal is Rs 2,500
crore.
The Kerala-based NBFC is a flagship company of the Manappuram group. Its exposure
to gold loans is about 96 per cent. The average ticket size was around Rs 18,000 and
duration a minimum of three months and a maximum 18 months, he said. “Our yield is
around 30 per cent,” he added.
On fund-raising, Nandakumar said the company would raise Rs 250 crore from the
capital market and had tied up with banks to avail of a Rs 3,000 crore loan.
The company was planning to open 250 new branches and recruit another 1,000 people,
he added. At present, the company operates 700 branches and employs 4,500 people.
We were looking at foraying into Singapore and UK by 2010-11, said Nandakumar.

Nandakumar said at present, 20,000 tonnes of gold was privately held in the country, of
which only 10 per cent was pledged. The industry size is estimated at around Rs 3 lakh
crore, while the potential size is Rs 30 lakh crore.
http://www.business-standard.com/india/news/magfil-may-raise-rs-3250-cr/366672/
PTC FIN MAY RAISE RS 1.5K CR THROUGH IPO BY FY11-END

PTI
See this story in: Business Standard
New Delhi: PTC Financial Services, a subsidiary of Power Trading Corporation, is

mulling to raise Rs 1,500 crore by divesting 26 per cent of the promoters’ stake.
The initial public offering (IPO) of PTC Financial Services could be expected by the end
of the next financial year, a company official said, adding that according to the
shareholders’ agreement, the company should come up with an IPO within three years of
its formation.
The present equity capital of PTC Financial Services is Rs 600 crore, 77 per cent of
which is held by PTC India and 11.5 per cent each by Goldman Sachs and Australian
company Macquarie.
PTC Financial Services, a diversified entity, was formed in 2008-09 for providing equity
support to power projects in the country.
PTC India Chairman and Managing Director T N Thakur has said that PTC Financial
Services is looking at acquiring coal blocks abroad and has shortlisted mines in Australia
and Indonesia, where the fuel is available in abundance.
The company will import the dry fuel from its overseas properties and sell it in India.
PTC Financial Services recently sanctioned Rs 521 crore for funding power projects in
the country. The assistance will help seven 3,350 MW projects whose estimated
investment is Rs 16,750 crore.
http://www.business-standard.com/india/news/ptc-fin-may-raise-rs-15k-cr-through-ipo-
by-fy11-end/366665/
=========================
BROKERS & DISTRIBUTORS -Top-
=========================
TATA CAPITAL TO LAUNCH PRIVATE EQUITY FUND

PTI
See this story in: The Economic Times
Mumbai: Tata Capital, the financial services arm of the Tata group, is likely to come out
with a private equity fund shortly. This was announced by Tata Capital Managing
Director, Praveen P Kadle, here on Tuesday.
Kadle declined to say what could be the size of the private equity fund, but according to
early indications, the fund-size will initially be of USD 350-400 million. Tata capital has
an Rs 8,500 crore alliance with the Japanese Mizuho Financial Group.
And Kadle said the alliance with Mizuho provided the right platform for Indian
corporates to tap the Japanese market. He said Japan offered tremendous opportunities
for Indian companies to raise capital through equity as well as debt.
Yukata Endo, deputy president of Mizuho, said Japanese corporations and retail investors
saw India as a major investment destination. "The Japanese retail investment has touched
USD one billion and they are mostly through mutual funds," Endo said, adding that the
time is ripe for Japanese investors to invest in India, cashing in on the opportunities the
market offers.
He said the Japanese were looking at India for big investments now as they felt the
country along with China are poised for sustained high-growth. Asked if Mizuho was
looking at an equity stake in Tata Capital, Endo said "we have not discussed this.
http://economictimes.indiatimes.com/News/News-By-Industry/Banking-Finance-/Tata-
Capital-to-launch-private-equity-fund/articleshow/4881108.cms
===========================
LIFE & GENERAL INSURANCE -Top-
===========================
POSTAL COVER FUNDS SET FOR STOCK-MARKET DELIVERY

Arindam Ghosh & Souvik Sanyal
The Economic Times
New Delhi: Come October and the life insurance division of the postal department will
start investing its premium collections in revenue-generating instruments including
stocks, a government official said.
Postal Life Insurance will follow the investment norms set by the Insurance
Regulatory and Development Authority (Irda) from October 1 to ensure maximum
returns for investors through a systematic and well-charted investment policy, said
the official, requesting anonymity. At present, the department’s collections are
transferred to a special deposit scheme on which it earns a secure interest of 8%
from the government.
As per the plan, the department can invest a maximum of 15% of its daily net collections,
averaging Rs 6-8 crore, into equity schemes. The balance 85% will go into secured
instruments with at least 50% of the sum invested in government securities and a
minimum 15% in infrastructure bonds, said the official, requesting anonymity. Postal
Life Insurance makes an annual net collection of Rs 2,000-2,500 crore.
Net collection is the revenue generated in the form of premium minus costs like interest
payment and maturity claims. The department will hire professional asset managers for
deployment of its premium kitty in financial instruments. It has zeroed in on SBI Mutual
Fund and UTI AMC as fund managers, the official said. They will be paid on a
commission basis.
Once the new scheme takes off, the department may see equity investments equal to 15%
of its average daily collections, the official said. The department will have its investment
division in Mumbai. The funds for setting the office are being raised from within, the
official added.
“By and large, the equity investments will be done on a day-to-day basis, with exceptions
on days when the quantum of the net collection is very less,” the official said.
SUUTI WON'T PARTICIPATE IN AXIS BANK PREF ISSUE

Business Standard
Mumbai: The Special Undertaking of Unit Trust of India (SUUTI), which was carved out
of the erstwhile Unit Trust of India in 2003, will not participate in the proposed
preferential offer of Axis Bank (formerly UTI Bank). The shareholding of SUUTI in the
bank will come down from 27.02 per cent to 22.54 per cent.
The other promoters are Life Insurance Corporation of India (LIC), General Insurance
Corporation of India (GIC) and the other four general public sector companies — New
India Assurance, United India, Oriental and National Insurance. Axis Bank is likely to
raise around Rs 5,000 crore by issuing 71.4 million shares through preferential allotment,
private placement, including qualified institutional placements, and private offerings
through global depository receipts from domestic and international markets. The bank
will close the offer within 15 days of passing the resolution.
According to a source, there is an issue of lock-in period if the undertaking participates in

the offer. The shares may be locked in for a minimum two years, if SUUTI takes part in
the issue. In Budget 2008-09, the government granted SUUTI five more years of
exemption from liquidating state liabilities.
http://www.business-standard.com/india/news/suuti-won/t-participate-in-axis-bank-pref-
issue/366730/
LIFE INSURERS MAY SOON INVEST IN INFRA SPVS

Gunjan Pradhan Sinha , Suneeti Ahuja
The Indian Express
New Delhi: To avoid an asset-liability mismatch in the life insurance space, the regulator
is chalking out ways to expand the ambit of long-term investment vehicles for the
industry. “The Insurance Regulatory and Development Authority (IRDA) is working out
norms to allow life insurers to invest in special purpose vehicles (SPVs) of infrastructure
companies,” officials in the ministry of finance told The Indian Express.
As per the current investment guidelines, life insurers can invest only in the infrastructure
companies or rated entities and not in the SPVs set up by them. The move, therefore, will
ensure greater funds for infrastructure projects in the country and also provide a long-
term investment vehicle for insurers. The reason is that the concession period for
infrastructure projects such as roads and ports can go up to 30 years providing the life
insurance companies a long-term investment option. Even though the construction period
may be limited to three-five years, the operation and maintenance costs run up to the end
of the period.
The move assumes greater significance in the light of the asset-liability mismatches that
the regulator foresees in the industry. Life insurance business has long-term liabilities.
However, there are not many investment instruments of tenures more than 20 years that
are available in the markets. Some long-term tools that are available to the industry are
10-year corporate bonds, 30-year government securities, etc. According to data available
with the Clearing Corporation of India, life insurance companies invest heavily in 30-
year paper and very less in corporate bonds.
Though insurers review their portfolios frequently to keep in check any mismatches, the
regulator a few months back had voiced some concerns on this front. “We are getting into
an asset-liability mismatch of varying degrees and this is likely to surface in the next
four-five years,” IRDA chairman J Hari Narayan had said at a conference in Delhi.
According to finance ministry officials, IRDA will also issue guidelines for credit rating
agencies and investment will be allowed only in rated SPVs.
http://www.indianexpress.com/news/life-insurers-may-soon-invest-in-infra-spvs/500861/
FUTURE GENERALI IMPLEMENTS NEWGEN SOLUTION
The Hindu
Chennai: Newgen Software has announced the successful implementation of document

management solution based on Newgen OmniDocs at Future Generali to mange new
business and policy servicing documents. According to a release, the solution will
provide a systematic method for scanning, creating, categorising, storing, locating and
retrieving structured and unstructured documents.
CITIZENS INSURE ROAD FOR QUALITY

Kestur Vasuki
The Pioneer
Bangalore: Believe it or not, a public asphalted road has been insured for the third year in
a row to keep it safe and damage-free.
The 50-year-old Timmasagara Temple Road is nine metres wide and 385 metres long and
connects two arterial roads one of which leads to NH4.
This initiative by residents of Vidyanagar under the Hubli-Dharwad municipal

corporation in north Karnataka, led by Hubli doctor Mruthyunjay Sindhur, has paved the
way for public audit of road quality.
The road has been insured by Oriental Insurance Company for Rs 6 lakh at a premium of
Rs 910 per annum, setting a novel example of people’s auditing of a public road.
Speaking to The Pioneer from Hubli, Sindhur said that this was an effort by local
residents to keep the road pothole-free for smooth movement of pedestrians and traffic.
According to him, this is for the first time in the country that a public road has been
insured in a collective effort for the purpose of audit.
“I have my clinic and my residence on this road and I was quite pained at its poor
condition. The apathy of the municipal corporation made me take this step. This way, the
road quality will be maintained and it will also help the State exchequer save a lot of
revenue,” Sindhur said.
It was in 2007 that Sindhur organised the move with the help of then district
commissioner, Mannivanan, who helped convince the insurance authorities that it was
indeed possible to insure a road. The road was insured for the first time in 2007 for Rs
two lakh and a premium of Rs 303.
“This is the third year in a row we are insuring this road. For me it has become a
movement and I want this message to go everywhere. All corporations must follow this
to save crores on road repairs,” Sindhur said, adding the methodology is simple
consisting of the insurance company inspecting the quality of the road before signing of
papers and the claims going directly to the civic bodies.
Hubli is a city covered by JNNURM and is situated on the Golden Quadrilateral. This
initiative even entered Limca Book of records in 2007. A group of citizens has now
joined him in propagating this initiative which has assumed movement status. A log
www.insuredroad.blogspot.com is being used to campaign for this initiative.
Any road can be insured, the doctor said. “When the country is planning to spend more
than Rs one lakh crore on the laying of new roads, a small percentage of this money for
insurance can help maintain their quality,” he added.
http://dailypioneer.com/195355/Citizens-insure-road-for-quality.html
INSURERS GEAR UP TO MEET FLU CLAIMS

Mumbai: The domestic insurance industry is gearing up to meet any eventualities out of
the of Swine flu casualties in the country. M Ramadoss, CMD, Oriental Insurance
Company said as the disease is not mentioned in the excluded disease list while
underwriting health insurance policy, the company will be giving all the required cover
for the flu, which involves treatment, hospitalisation and room rent cost to the
policyholder.
“Suppose a person has taken a policy of Rs 50,000, then he can claim the full amount in
case of swine flu,” he explained. V Vaidyanathan, MD & CEO, ICICI Prudential Life
Insurance said the company is ready to pay compensation due to any policyholder, who
has received company’s health insurance policy in case of death, no matter if it is due to
the swine flu.
Balaji Cuddapah, vice-president, property & engineering, Bharti AXA General Insurance
said the customers who have been covered under company’s various health insurance
policies are automatically covered for all the epidemic diseases. Only the condition being
that the customer has to complete the period of 30 days after purchasing the policy for the
first year, which falls under standard exclusion.
“Also, we will provide cashless treatment to the customer as prescribed by a qualified

doctor. In Pune alone, we have covered 20,000 persons under our health insurance
policies, but so far none of our policyholder has approached us in this connection,” he
said. G V Nageswara Rao, MD & CEO, IDBI Fortis Life said his company would clear
the claims of next of kin if any policyholder died of swine flu despite the disease not
being listed as one of those for which such a payment can be made.
Rajesh Sud, MD & CEO, Max New York Life Insurance said in case of unfortunate
death, only the company could pay the compensation as the disease has not been listed in
the list of diseases in any of the health insurance policy underwritten by us so far. “As
regards awareness, we have told all our agents to reach out to our clients in case of any
kind of required assistance,” he said.
http://www.financialexpress.com/news/insurers-gear-up-to-meet-flu-claims/500835/
EXISTING HEALTH POLICIES TO COVER SWINE FLU HOSPITALIZATION

Remya Nair
Mumbai: Existing comprehensive health insurance policies will also cover hospitalisation
expenses of patients affected by swine flu, insurance company officials said.
Some insurers have already received claims for hospital expenses, though the number is
not very large. However, given the fact more people are being hospitalised, insurance
companies expect the number of claims to go up in the future.
“Hospitalisation expenses of swine flu patients will be covered under the existing
comprehensive health insurance policies of the insurance companies. There is no upper
limit on the expenses. The customers can avail themselves of the amount commensurate
to the sum assured,” said an Oriental Insurance company official.
The hospitalisation charges will be borne by the insurance company subject to the cap on
the room rent charges, a New India Assurance Company official said.
Few claims so far

Swine flu will be covered under all the health insurance and travel insurance policies
offered. A few claims have been received but the number is not large, said Mr Sanjay
Datta, Head Health Vertical, ICICI Lombard General Insurance Company.
Insurance companies are also expecting claims in the health segment to go up, but not by
much.
The claims in this segment will go up as the number of instances of hospitalisation

increases. However, the outbreak is in the initial stages and the number of people who
have taken a health insurance policy is also very low. Also, a very small proportion of
people who have been diagnosed with the flu have to be hospitalised, Mr Datta said. “At
this point in time, the incidences of swine flu have not reached any threshold to have a
significant impact on the number of claims logged. However, we have robust IT
infrastructure and comprehensive network of providers to counter any exigencies that
may arise in the near future,” said the spokesperson of Apollo DKV, a standalone health
insurance company.
Most of the general insurance companies are operating through Third Party
Administrators to settle claims.
Currently, more people are getting themselves tested for the flu rather than being
hospitalised. Since the Government is bearing all the costs for the detection tests, the
insurance companies are not burdened with that cost. Also, very few insurers offer
policies covering OPD expenses, said a TPA official.
Some of the insurers such as ICICI Lombard and Apollo DKV also offer health insurance
policies that cover the OPD expenses.
HEALTH INSURERS: SUPER SMART OR BORN LOSERS?

Rahul Aggarwal
The Economic Times
Most of us wonder how insurers make money in health insurance. Finance managers,
human resource (HR) managers, and other decision makers have still not figured out
whether the insurers are super smart chaps who can somehow turn apparent losses into
profits or whether they are born losers who get up in the morning with a motive to lose a
couple of crores.
Well, the truth lies somewhere in between. Health insurance premiums have not moved
in tandem with healthcare inflation for the past 10 years. The result is that all insurers
have been bleeding on this portfolio. While private insurers experience 110% claim ratios
on an average, government-owned insurers see average claims of 160%. Then why have
the premiums not increased? It is an open secret that the insurers made fat profits by
selling fire insurance policies on government-regulated pricing. This pricing was way
beyond the international market rates. Insurers used a part of these profits to subsidise
group health insurance and gain market share.
The beginning of 2007 witnessed the partial deregulation of non-life insurance products
pricing, which was bound by the tariff prescribed by the Insurance Regulatory and
Development Authority (IRDA) till then. IRDA has gradually moved towards complete
price deregulation since then and removed pricing controls in 2008. As a result, fire
insurance prices have fallen by up to 80% while motor insurance rates have fallen by up
to 50% in the past one year.
At the current prices for most non-life insurance products, Indian insurers are doing their
best to remain in red. This has had a direct fallout on health insurance premiums. With no
cushion available for cross-subsidy, health insurance premiums have started increasing in
the past one year. Private sector companies have virtually withdrawn from this market,
which has witnessed intense competition among state-owned insurers.
Large underwriting losses in the 2008-09 balance sheets of stateowned insurers forced the
ministry of finance to bring the four stateowned insurers together to hammer out a non-
compete agreement in May. This agreement become into force from June 1 and restrains
the state-owned insurers from competing for any group health insurance policy with a
premium exceeding Rs 1 crore. State-owned insurers have agreed that only the insurer
which has underwritten the expiring policy will bid for the renewal of the policy and all
the four insurers will get a pie of the business in a pre-determined ratio.
So what does this mean for corporates? Over the past one year private insurers have been
unwilling to accept premium at rates at which they do not make money. Now with no
competition from the other stateowned insurers, the insurer with the expiring policy is
bound to charge more than the claims paid over the expiring policy period to cover the
expected claims, management cost, delivery cost and a small profit is possible. It appears
that companies can no longer play one insurer against the other and get coverage at loss-
leading rates . Hence, the cost of group health insurance is bound to go up for companies.
The question that finance managers, HR managers and procurement managers have to
address is how to reduce this cost if insurers now start charging premium on the basis of
claims experience.
Till now the insurers’ loss was the customers’ gain. Will it now be the other way round?
Can a win-win situation for both the customer and the insurer be created? A stable and
vibrant health insurance market can emerge only if all the stakeholders gain. The answer
lies in managing the claims. Corporates will have to engage teams which can actively
help them in claims management to keep this cost under control. Policy design, active
claims management and preventive care will become important. The focus will have to
move from one-time premium negotiation to smart year-round vigil.
The author is CEO, Optima Insurance Brokers, (Views expressed are personal)
POOR RESPONSE TO PENSION SCHEME TILL JULY 31

PTI
Mumbai: Lack of tax incentives and inadequate awareness about the New Pension
System (NPS) has resulted in only 1,109 subscribers filing their applications as on July
31.
The Pension Fund Regulatory Development Authority (PFRDA) rolled out the NPS for
all citizens from May 1. Till July 31, only 1,109 forms were collected by the 22 points of
presence (POPs) appointed by the interim pension fund regulator.
“Initially, when NPS for the private sector was launched, we expected it to grow at a slow
pace but it grew at a much lesser pace then expected,” ICICI Prudential Pension Fund
Management Director-on-Board, Mr Tarun Chugh, told PTI here.
ICICI Prudential Pension Fund Management, which has 49 branches authorised by the
PFRDA to act as points of presence, collected 218 forms, the highest among all 22 POPs.
He further said the lack of tax-breaks for NPS is one of the major reasons for it not
picking up. “At the time of retirement one can withdraw 33 per cent of the contribution
and the rest 67 per cent is used for annuity, which is taxed. There should not b e any tax
at the time of withdrawal,” Mr Chugh said.
Taxation on annuity at the time of withdrawal under NPS is not in line with provident
fund, he said.
======================
MUTUAL FUNDS & AMCs -Top-
======================
MF SALES, NEW FUND LAUNCHES REBOUND

M Allirajan
The Times of India
Coimbatore: With capital markets on a roll, mutual funds (MFs) are seeing a rebound in
sales from new and existing equity schemes. New equity schemes brought Rs 2,394 crore
in July, the highest so far in the year. Sales from existing equity schemes were also the
highest in July topping Rs 6,343 crore, data with the Association of Mutual Funds in
India (AMFI) shows.
New equity scheme launches almost came to a halt early this year after the markets
tanked following the global financial crisis. There was no launch in February and for
January-April new schemes could garner only Rs 57 crore.
The better-than-expected corporate earnings for the June quarter and the upswing in
several sectors have brought hope back to investors who were badly hit by the downturn,
say officials.
“The perception about (equity) markets has changed for the better. Retail participation
and inflows have been improving,’’ says Vikram Kaushal, head (retail sales and
distribution), ICICI Prudential MF. “Investor interest has grown considerably in the past
two-three months due to the buoyancy in capital markets
,’’ says a top official with a leading fund house.
Sale from existing equity schemes have been steadily improving since May after hitting a
low of Rs 1,409 crore in January. The lacklustre response continued in February and
March as well with MF existing scheme sales hovering around Rs 1,500 crore.
But ever since the markets started rallying there has been an improvement in sales.
Existing scheme sales in the equity category more than doubled to Rs 4,796 crore in May
and new scheme offers netted Rs 813 crore in the month, the best showing in six months,
AMFI data shows.
Fund houses also rushed to launch several NFOs (new fund offers) in July before the new
regulation banning entry loads came into place. The rush in NFOs also helped fund
houses net good inflows.
http://economictimes.indiatimes.com/Personal-Finance/MF-sales-new-fund-launches-
rebound/articleshow/4880587.cms
MFS CUT DISTRIBUTORS’ FEE

Suresh Parthasarathy
Some fund houses have reduced commissions to distributors drastically in the face of
entry load being abolished. Mutual funds have proposed upfront commissions of between
0.40 per cent (of the investment) and 0.70 per cent on new investments into equity funds,
against the 2 per cent being paid until last month.
Wait-and-watch
A few fund houses are waiting for their ongoing new fund offers to close, while others
have sent informal communications to their distributors.
Reliance Mutual Fund and HDFC Mutual have told distributors the new commission
structure is valid for two months starting August 1.
These funds may adopt a wait-and-watch policy and rejig structures once others decide
on the incentive.
The commission is based on business. For investments of less than Rs 5 crore, HDFC
Mutual Fund has offered to pay an upfront commission of 0.70 per cent. For the same
investment value, Reliance Mutual has said the distribution “incentive” will be 0.40 per
cent.
The commissions paid by the fund houses will also suffer surcharge and education cess.
For business above Rs 5 crore, distributors will receive “trail fee” (annual recurring fee
paid to distributor), instead of upfront commission, as applicable to retail business.
Incentives on big-ticket investments may be informally negotiated.

UTI Mutual Fund is said to be planning to offer 0.65 per cent as commission, with trail
fee at 0.5 per cent. Distribution industry sources said DSP BlackRock Mutual Fund is
considering an incentive of 0.75 per cent as upfront commission and 0.5 per cent as trail
fee.
Holding period
Funds opting for higher upfront commissions, such as HDFC Mutual Fund, have fixed
lower trail commission. HDFC has also planned to increase the trail fee based on the
holding period of the assets.
As the lock-in period of three years is applicable on tax saving schemes, the trail fee
payable on them is higher than plain diversified funds. For systematic investment plans,
HDFC Mutual Fund has offered same commission structure as lump sum, whereas
Reliance Mutual Fund has offered a higher incentive for SIP investments.
MUTUAL FUNDS MAY ROLL BACK EXIT LOAD RATES AFTER SEBI
RULING
Anirudh Laskar & N. Sundaresha Subramanian
mint
Mumbai: A number of mutual fund (MF) companies are gearing up to roll back recent
hikes in exit load after capital market regulator Securities and Exchange Board of India
(Sebi) said last week that they could not have different exit loads for different classes of
investors under the same scheme. An exit load is a fee collected at the time an investor
withdraws money from a fund.
At least four MF firms told Mint they were working on ways to protect the interest of
institutional investors, most of whom did not pay exit loads earlier.
The MF houses are required in the next few days to announce a new structure with lower,
uniform rates for all schemes.
Before Sebi’s latest rule, investors of over Rs5 crore did not have to pay any exit load,
while big-ticket investors who invested less than Rs5 crore could bargain for lower exit
loads. Small investors thus usually ended up paying the highest rates to exit a scheme.
Now, while some MF companies are looking to reduce the lock-in period, others are
planning to reduce the percentage rates of exit loads.
An official at SBI Funds Management Pvt. Ltd, which manages Rs34,158 crore, said:
“We have to roll back and make it equal for all. We will continue to focus on long-term
assets and will try to prevent exits before three years. For this, we may not reduce the
lock-in period.”
He added that some MF firms might also launch separate institutional plans to protect the
interest of corporate entities and high net worth individuals. “We are waiting for internal
approvals and will come up with the new structure in a few days,” he said on condition of
anonymity.
Following a Sebi ban on entry loads effective 1 August, many MF houses rushed to raise
the span for which exit load became applicable to one-three years, from the earlier six
months to one year. An entry load is initial charges collected by an MF company, which
are not refundable.
This expanded the scope of premature withdrawals, allowing MF companies to charge

exit loads and offset losses from the ban on entry loads. Until now, these firms typically
charged up to 1% exit load for retail investors for premature redemption.
“We had raised the period to three years on all our schemes. Now we are discussing ways
to get in line with this latest Sebi directive,” said the chief executive officer (CEO) of a
mid-sized fund house, who did not want to be named.
“We have two options: one is to charge the same load for everyone or reduce the load
applicability to a lower period. We will take a decision in a couple of days,” he added.
Sebi’s new rule to have uniform exit loads will also likely upset MF houses’ cash flow
calculations, as incentive structures for distributors are finalized after factoring in the
load rates. In this case, they would have had used the new, higher exit rates to determine
the incentives.
“The move is helpful for the retail investors. We are working on new exit load structures
for various schemes and will inform all investors in the next few days,” said Nimesh
Shah, managing director of ICICI Prudential Asset Management Ltd.
According to Dhirendra Kumar, CEO of Value Research India Private Ltd, a New Delhi-
based MF tracking company, Sebi’s ruling will have three consequences. First, some
fund houses will launch new schemes for institutional investors with higher minimum
investments. Secondly, some companies will reduce the existing load structure. Thirdly,
some companies may roll back the current lock-in period of three years.
“The move will act as a dampener for the large investors. Fund houses will have to strike
a balance and work on ways to protect the interest of big-ticket investors,” he said. But
fund houses are caught between a rock and a hard place, say industry experts.
“If MFs reduce the exit load, all classes of investors would start churning (prematurely
exiting) frequently. And, if they increase the exit load for institutional investors, their
participation would go down,” said Rajeev Deep Bajaj, managing director of New Delhi-
based fund distributor Bajaj Capital Ltd.
“Although this will give confidence to the retail investors as they would be treated on a
par with institutional investors, fund houses will be under pressure,” he added.
According to industry lobby group Association of Mutual Funds in India, equity schemes
contribute about 25% of the Rs6.97 trillion industry. According to Value Research, 30-
40% of this comes from institutional investors.
“It is an advantage to the retail investors. We are in the process of rationalizing the
existing exit load structure for all,” said Sundeep Sikka, CEO of Reliance Capital Asset
Management Ltd, adding that since institutional participation in his firm’s equity-oriented
schemes is not much, Sebi’s rule will likely not have a big impact.
http://www.livemint.com/2009/08/11214859/Mutual-funds-may-roll-back-exi.html
RISING MARKET MAKES INVESTORS LOOK AT FMPS

Vandana
Business Standard
Mumbai: Fixed Maturity Plans (FMPs) seem to be generating some amount of interest
among mutual fund investors once again. These plans were the target of investors’ ire
during the later part of 2008.
With equity markets moving up sharply over the last few months, lots of investors are
unwilling to take higher risks. Experts say there will be more investor interest in FMPs if
interest rates move up from here.
FMPs are close-ended funds with maturity period ranging from three months to five
years. These plans are predominantly debt-oriented, while some of them may have a
small equity component. The objective of such schemes is to generate steady returns over
a fixed-maturity period and make the investor immune to market fluctuations.
“With call money rates hovering around 3-3.5 per cent, people are moving from liquid
funds to short-term debt funds. Long-term rates have become unattractive. So, for
somebody who gets locked in an FMP of 12 months, it still offers him/her better returns
and protection from volatility,” said Rupesh Nagda, head of Alchemy Wealth
Management.
Perhaps gauging the investors’ mood, fund houses such as Deutsche, Franklin Templeton
and Kotak Mutual Fund have filed FMP offer documents with the Securities and
Exchange Board of India (Sebi).
FMPs had fallen out of favour with both investors and fund houses after Sebi tightened
norms governing such schemes. In its new guidelines on FMPs, the market regulator had
stopped fund houses from giving indicative yields and made listing of such schemes
mandatory. To minimise the asset-liability mismatch risk, fund houses were also barred
from holding papers with maturity of more than the tenure of an FMP.
In 2008, FMPs had felt the redemption heat when a large number of investors started
redeeming due to poor credit quality of some of the schemes. Some FMPs had huge
exposures to the real estate sector and non-banking finance companies (NBFCs), which
led to the panic.
“We have seen revival of investor interest. While now there would not be the same
frenzied interest to invest in FMPs as we saw in 2006-07, but certainly there is a section
of investors looking at it. In a rising inflationary scenario, FMPs give better yields. There
is not much return left at the shorter end of the curve, so it makes sense for investors as
FMPs are offering 7.5-9.5 per cent annualised, tax-efficient returns,” said a distributor.
http://www.business-standard.com/india/news/rising-market-makes-investors-look-at-
fmps/366690/
SHINSEI TO CONTINUE INDIAN FUND OPERATIONS

Bloomberg
See this story in: Business Standard
Shinsei Bank, the Japanese lender backed by Christopher Flowers, said a planned merger
with Aozora Bank would not disrupt operations at its Indian asset management firm as it
prepares to start a third fund.
Shinsei, which announced plans to merge with Aozora to form Japan’s sixth-largest bank
last month, started the Indian asset management company in February. The Tokyo-based
company owns 75 per cent of Shinsei Asset Management.
Masamoto Yashiro, chief executive officer of Shinsei Bank, and Chief Financial Officer
Rahul Gupta visited Mumbai last week to assure investors including Rakesh
Jhunjhunwala, who holds a 15 per cent stake in the unit, that their Indian operations will
continue as planned.
“We are committed to the asset management company,” Gupta said in a phone interview.
“Whatever action we take, the firm is ensured continuity.”
Shinsei Asset would launch its third Indian fund, which would invest in bonds, in less
than two months as talks with Aozora continued, Gupta said. The Indian asset
management company will break even in three years, he said.
“We want to start small, build a track record and then grow it,” Mumbai-based Sanjay
Sachdev, country manager for Shinsei, said by telephone. “They are open-ended funds, so
we’re going to keep collecting money.”
India’s 38 mutual fund managers had a combined Rs 6.9 lakh crore ($144 billion) in
assets as of July 31, according to data from the Association of Mutual Funds in India.
Shinsei managed Rs 203 crore, it said. The firm launched a money market fund in July
that raised $75 million, Sachdev said.
http://www.business-standard.com/india/news/shinsei-to-continue-indian-fund-
operations/366673/
==========================
PVT. EQUITY & HEDGE FUNDS -Top-
==========================
-----
=======================
PENSION FUNDS / PF / EPF -Top-
=======================
POOR RESPONSE TO PENSION SCHEME TILL JULY 31

PTI
Mumbai: Lack of tax incentives and inadequate awareness about the New Pension
System (NPS) has resulted in only 1,109 subscribers filing their applications as on July
31.
The Pension Fund Regulatory Development Authority (PFRDA) rolled out the NPS for
all citizens from May 1. Till July 31, only 1,109 forms were collected by the 22 points of
presence (POPs) appointed by the interim pension fund regulator.
“Initially, when NPS for the private sector was launched, we expected it to grow at a slow
pace but it grew at a much lesser pace then expected,” ICICI Prudential Pension Fund
Management Director-on-Board, Mr Tarun Chugh, told PTI here.
ICICI Prudential Pension Fund Management, which has 49 branches authorised by the
PFRDA to act as points of presence, collected 218 forms, the highest among all 22 POPs.
He further said the lack of tax-breaks for NPS is one of the major reasons for it not
picking up. “At the time of retirement one can withdraw 33 per cent of the contribution
and the rest 67 per cent is used for annuity, which is taxed. There should not b e any tax
at the time of withdrawal,” Mr Chugh said.
Taxation on annuity at the time of withdrawal under NPS is not in line with provident
fund, he said.
==========================
GOVT. SECURITIES & BONDS -Top-
==========================
BONDS RISE ON NEW SHORT-TERM INSTRUMENT

Mumbai: Bond prices rose on Tuesday after the Government introduced cash
management bills, a new short-term instrument.
The markets reacted positively to the government announcement. The yields of the
shorter-term papers will be under pressure but more interest will be shown in longer-term
papers, said a dealer with a private bank. Total traded volumes on the order matching
system were higher at Rs 6,850 crore (Rs 5,435 crore).
The 6.90 per cent-10 year-2019 paper opened at Rs 98.80 (7.06 per cent YTM) and rose
to close at Rs 99.07 (7.03 per cent YTM), against the previous close of Rs 98.61 (7.09 per
cent YTM). The most highly traded-6.07 per cent-5 year-2014 paper opened at Rs 96.85
(6.85 per cent YTM) and closed at Rs 97.12 (6.78 per cent YTM).
CALL RATE ENDS AT 3.25-3.30%

Mumbai: The inter-bank call rate ended at 3.25-3.30 per cent, against the previous close
of 3.20-3.30 per cent. Under the Liquidity Adjustment Facility (LAF) conducted by the
Reserve Bank of India, there were no bids in the one-day repo auction. In the reverse repo
auction, there were 51 bids for Rs 1,12,075 crore. In the CBLO auction, there were 617
trades for Rs 75,721.15 crore in the range of 2.04-3.15 per cent.
================
INTERNATIONAL -Top-
================
BOJ KEEPS INTEREST RATE UNCHANGED

AP
Japan’s central bank kept its key interest rate unchanged at 0.1 per cent on Tuesday, and
maintained a cautious view on the strength of recovery in the world’s second-largest
economy.
The Bank of Japan’s policy board voted unanimously to keep the overnight call rate
unchanged at the end of a two-day meeting.
==========
ECONOMY -Top-
==========
RUPEE FALLS BY 14 P AGAINST DOLLAR

Mumbai: The rupee fell marginally by 14 paise against the dollar on Tuesday, in a range-
bound market. The domestic currency opened at 48 and strengthened to touch an intra-
day high of 47.81. It weakened to close at 47.96/97, as against the previous close of
47.82. The rupee opened with a negative gap on expectations that there would be capital
outflows from the country, said a dealer with a private bank. The dollar’s rally against
other international currencies also exerted pressure. The rupee traded in a range between
47.88 and 48.05 during the day. It lost most of its gains in the last hour of trade after the
domestic equities market fell sharply, added the dealer. In the forward premia market, the
six month ended higher at 2.88 per cent (2.78 per cent) and the one-year was at 2.56 per
cent (2.48 per cent).
SENSEX SNAPS LOSING STREAK

PTI
Mumbai: Snapping a three-day falling streak, the Bombay Stock Exchange benchmark
Sensex on Tuesday gained nearly 65 points as investors indulged in buying at lower
levels in blue-chip stocks led by auto.
The Sensex, which had lost nearly 6 per cent in the last three days, rebounded to close
higher by 64.82 points at 15,074.59, after oscillating between 15,218.65 and 14,864.23
during the day.
Similarly, the 50-share National Stock Exchange index rose by 33.70 points to 4,471.35.
The Nifty shot up to touch the day's high of 4,510.80 and a low of 4,398.90. The recovery
was mostly due to a rise in stocks of auto, realty and metals.
The auto sector index, which rose by 3.07 per cent to 2,537.48, was the biggest gainer on
aggressive buying by funds on the basis of reports that the automobile industry posted
healthy growth in July.
The industry data revealed domestic passenger car sales in July went up to 1,15,067 units
from 87,901 units in the same month last year.
WEAK MONSOON TO IMPACT GROWTH, INFLATION, SAYS CRISIL

Mumbai: Weak monsoon between July and August has emerged as a major
macroeconomic risk for both growth and inflation.
In its latest report ‘Deficient Rainfall Impact Parameter’ (DRIP), Crisil said the 64 per
cent shortfall in rain during July 30-August 5 raised the cumulative deficiency in this
monsoon season to 25 per cent.
“Our analysis shows that July and August rainfall is the most critical determinant of
agricultural production,” the report said and added that after a dismal June there was
some improvement in July, but the cheer brought was short lived as towards the end of
July and the first week of August many parts of the country witnessed deficient to scanty
rainfall.
DRIP scores based till August 5 show that Uttar Pradesh, Madhya Pradesh, Maharashtra,
Andhra Pradesh, Bihar and West Bengal have been hit the most by poor rainfall.
These six States account for 47 per cent of total kharif foodgrain production and 46 per
cent of total kharif rice output.
Punjab and Haryana too have suffered from rainfall deficiency but has irrigation buffer.
The crop loss may not be significant but cost of irrigation may go up and will definitely
result in increased input subsidy. “Food inflation which is already pressurised will face
further pressure due to poor rainfall. Sufficient rice stocks will keep a lid on rice prices.”
Inflationary pressure
The prices of pulses and coarse cereals, which are rain-fed crops and for which no buffer
stock exists, will continue to remain under pressure,” it said.
Mr Dharmakirti Joshi, Principal Economist, Crisil, said “Most of the six States which had
poor rainfall not only have high incidence of rural poverty but also high dependence on
agriculture. This translates into higher burden on the exchequer to provide relief to these
States”.
Rice will remain the most adversely impacted crop due to high water requirement. The
poor rainfall will lead to a sharp reduction in the area under rice cultivation. Other
vulnerable crops are coarse cereals and pulses.
Area under some of the coarse cereals and pulses has expanded this year due to attractive
prices as well substitution of rice.
“The increased area under these crops will lead to higher production critically depending
on the performance of monsoons in the coming weeks. The signs so far are not
encouraging,” the report said.
Last Financial closing……
Sensex 15,074.59
US$ spot Rs.47.98
US$ Y.96.5324
US$ 6 months Rs.48.74
Yen Rs.49.70
Euro spot Rs.67.98
LIBOR 6 months %
Call %
GOI sec. 10 years ----
=====================
1 million = 10 lakh
10 million = 100 lakh or 1 crore
1 billion = 100 crore
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by Chris Matthai,
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Often, our members ask us how much they should invest in one of our particular
recommendations.
Regardless of an individual's net worth, risk tolerance, or time horizon, The Oxford Club has a
position-sizing formula we use to determine how much to invest in a particular stock or single
investment: 4% of your equity portfolio. If you want to be conservative, invest less. If you want
to be aggressive, invest more. But not too much more.
Combined with our 25% stop-loss strategy, our position-sizing formula means that you should
never lose more than 1% of your total portfolio on one investment. For example, if you have
$100,000 to invest, the maximum we suggest putting into one investment is $4,000. And with our
25% trailing stop, the most you could ever lose in that play would be $1,000.
Pillar IV: Cut Investment Expenses, And Leave the IRS in the Cold
Unless you run or sit on the board of the companies you invest in, there's nothing you can do to
affect your stocks' performance once you own them. But there is a way to guarantee that your
stock-portfolio value will be worth more five, 10 and 20 years from now. Cut your expenses... and
stiff-arm the tax man.
Let's start with expenses. Our recent Oxford Investment Portfolio contained a textbook case for
doing an end run around Wall Street's outlandish fees. A purchase in our Oxford All-Star Portfolio
provides a perfect example. Simply knowing which fund to buy helped us save a heap of
unnecessary expenses...
Just Say No... To High Fees

Instead of buying the nation's largest bond fund, the Pimco Total Return Fund, we recommended
the Managers Fremont Bond Fund (MBDFX). Members still got the nation's top-performing
bond fund manager, Bill Gross, but avoided the high fees and expenses associated with Pimco
Total Return. Fremont is a no-load fund.
In fact, there is nothing in our Oxford Portfolio that has a front-end load, back-end load, 12b-1
fees or surrender penalties. Furthermore, you can act on any of our recommendations through a
no-load fund company or a deep discount broker that charges you no more than $8 a trade.
The second way is to tax-manage your investments. That means handling your portfolio in such a
way that there is simply nothing there for the IRS to take. We go more in depth on this point in
our report available to Oxford Club members: How To Live a Millionaire's Dream Retirement.
In short, we cut portfolio expenses and taxes to the bone. Lower investment costs, and lower tax
costs are the one sure-fire way to increase your net returns.
The other sure-fire way to increase your returns is: selecting outstanding investments.
Here are 2 that will help you build a solid retirement nest egg.
Recommendation #1: A Precious Metals Fund Ready to Soar

Not only are precious metals a good way to guard against economic weakness - gold has a near-
perfect negative correlation to the dollar - but, at the moment, the times are ripe for a nice bull
run in this commodity.
Is History Repeating Itself? The last time metals went on a serious ride like we're beginning to
experience now was during the inflationary '70s. And many of the conditions of the '70s are
currently alive and well. In fact, the similarities are striking.
Here are a few:
1. War: In the beginning of the 1970s, the U.S. was caught up in the Vietnam War, which
depleted our treasury. Today, the U.S. is engaged in the "endless war" against terrorism.
Right now, America has troops in more than 100 countries.
2. National Debt: In the 1970s, there was a "guns and butter" approach by the federal
government. Today, there is a similar mindset. But now it is much worse, since the United
States is the biggest debtor country in the world, owing at least $3 trillion to other
governments, and $1 trillion to China alone.
3. Interest Rates: The world was flooded with U.S. dollars in the 1970s. And today, the
story remains the same. The governments of the world accepted dollars but wanted to
redeem them into gold. This eventually brought about the closing of the gold window.
Today, the governments are diversifying out of the U.S. dollar and into currencies like the
euro, Swiss franc, and Japanese yen, which are increasing in value against the weakening
U.S. dollar.
Right now, factors suggest gold will only soar higher. Historically, gold has served as a hedge
against inflation as well as deflation. And gold also provides a way to profit from a falling dollar to
hedge against market disruptions caused by global crises. Furthermore, increased worldwide
demand, especially from China and India, are moving prices.
So, what's the best way to play it?
This ETF Is Golden

Although we are certainly advocates of holding individual stocks, when we see a big positive trend
unfolding for a specific industry, it's a good strategy to "play the field." That's why we're
recommending purchase of Market Vectors-Gold Miners (AMEX: GDX), an exchange-traded
fund.
The Market Vectors-Gold Miners ETF is linked to the AMEX Gold Miners Index and owns all of the
world's leading gold and silver mining companies. That means you can capture the performance of
the entire sector with a single, well-diversified investment.
The Market Vectors-Gold Miners ETF (GDX) came out in 2004, and is comprised of 45 publicly
traded mining stocks of various weight and size. For investors who are not up to the task of
individual stock picking, but want to take part in the amazing run in gold stocks, GDX certainly
provides good market exposure to the red-hot gold mining sector.
This ETF is truly a wise way to play gold. It eliminates the vagaries associated with selecting
individual stocks, including mines shutting down and price volatility. And the performance has
been impressive...
The annual expense ratio is one half of one percent. The shares can be margined or sold short -
and there are options available for traders who prefer to play gold more aggressively. If you have
less than 5% of your liquid assets in gold shares, Market Vectors Gold Miners ETF fits the bill.
Though we fully expect the price of gold to rise into the thousands, the recent peaks and
corrections in the gold market show this won't be strictly a vertical climb. Brace for ups and
downs... but when all is said and done, you'll be all the richer for it.
Action to Take: Buy Market Vectors-Gold Miners (AMEX: GDX) at market. As with our other
gold shares, we're using a 35% trailing stop here due to the higher beta of this sector.
Recommendation #2: A Recession-Proof Growth Stock

For The Long Haul
Rather than trying to outguess the market, instead focus on large, non-cyclical, dividend paying
companies. These companies tend to do well when the economy is in a upswing... or a downturn.
A perfect example is Abbott Laboratories.
Abbott Laboratories (NYSE: ABT) last year, posted a 36% increase in profits on a 14% increase
in revenue. In the first quarter of 2009 earnings were up 53% and despite a slight downturn in
second quarter earnings, Abbott confirmed its double-digit earnings-per-share growth outlook for
2009.
This isn't just because the company operates in a recession-resistant industry. So do its
competitors, yet several of these competitors look vulnerable, predicting a weak year due to poor
business conditions, unfavorable currency rates and competition in generics.
Abbott is trumping its rivals with strong sales in two of its key product areas, pharmaceuticals and
coronary stents. It also has the advantage of a much more diversified business, from medical
devices to laboratory tests to baby formulas.
In the year ahead, Abbott expects to expand its cholesterol business with its recently approved
cholesterol drug Trilipix. (Trilipix raises "good" HDL cholesterol while reducing triglycerides and
"bad" LDL cholesterol.) Abbott is also working with British drugmaker AstraZeneca to develop a
drug that combines Trilipix with AstraZeneca's blockbuster cholesterol drug Crestor.
Abbott will launch a new version of its drug-coated Xience V stent in Europe before the end of the
year, too. This will be another big moneymaker. The new stent is easier for physicians to implant.
How does Abbott manage to run circles around the competition? Too many Big Pharma companies
rely on just a handful of bestselling drugs. Revenue and earnings growth are vulnerable to patent
expirations.
Abbott doesn't have this problem. Its diverse business model, limited patent exposure and
increasing growth in its stent and nutritional business will steer the company through the tough
year ahead and drive sales for many years to come.
So don't let the challenging business environment and poor tone of the market drive you to the
sidelines. Companies like this one will have a very profitable year. Take advantage of the unusual
sell-off that happened in the health care sector in the fourth quarter of 2008 and first quarter
2009. This created a bargain opportunity in Abbott that you should take advantage of. (And did
we mention that Abbott just paid its 342nd consecutive dividend!)
Editor's Note: The Oxford Club has delivered market-beating gains every year for a reason: We
adhere to our Nobel Prize-winning investment formula and our Four Pillars of Wealth to ensure our
returns beat the markets. Fact is, our winning formula has allowed members to more than double
the returns of the markets. And the prestigious Hulbert Financial Digest recently rated The Oxford
Club's 10-year portfolio performance as having the 5th best track record in the industry.
And you'll find all of our theories and strategies put to good use in our custom-built portfolios.
Each portfolio has a different emphasis because we realize different people have different financial
goals, distinct tolerances for risk and different timelines for accomplishing their goals. However,
they all combine to form one of the most balanced, low-risk, high-return set of portfolios you'll
find anywhere.
Good Investing,
The Investment U Research Team
To get a steady stream of companies with above average revenue growth and accelerating
earnings,consider joining The Oxford Club, our premium service. Investment Director Alexander
Green recently produced an 87% gain in six weeks, 153% in three weeks, 350% in 85 days and
223% in 35 days. Just go here to get access to all of Alex's growth-stock recommendations.
© 1999 - Present - Investment U | 105 West Monument Street | Baltimore, MD, 21201 | Phone: 800-992-0205
Sir,
1. Your lecture was very educative and we appreciate your knowledge and research on
the subject.
2. Firstly,I will request u to mail me the presentation on this id as well on

malhotra.samresh@gmail.com.
3. Secondly, sir i want to take a home loan as I have purchased a house for approx Rs 31
lacs.You mentioned about BoB.Is it the best option?Are there any ohter options.
4. Thirdly sir i wish to invest in SIP.I would seek your recommendations in this regard.I
am already having ICICI power growth SIP with Rs 1000 pm.
5. LAstly,my DSOP is near 10 lacs @Rs11000 pm.I had planned to reduce it

considerably as my EMI for the home loan starts.Also, I had planned to take out the
yearly interest on the DSOP towards payment of my EMI thereby keeping my DSOP
amount intact.What woul do you recommend in this case.How to balance DSOP and the
Home loan EMI.My BAsic is 27000/-
6. I hope i m not troubling you with so many queries at one go.
Thanking you,
Maj Saurabh Sethi

About Astrologer
G.D. Vashist, comes from a family of scholars and mystic seers of
Northern India. He is trained in Vedantic and other systems of philosophy
and he is Redbook specialist (Lal Kitab) .
His discourses combine authenticity with simplicity of contemporary

idiom suited to the modern mind. Over the years he has had occasion to
delve deep into Tantrik esotericism and various systems of Astrology. His interest in
these sciences has opened new dimensions in his understanding of the human
psyche and has compelled him to think along lines which will ultimately bring about
systhesis of discoveries of modern Science and ancient area of human wisdom. His i
from all over the world under the umbrella of vedic wisdom and to provide
information to the spiritually parched souls of the modern world.
Please come forward and meet G.D. Vashist to connect with your future. His valued
Astrological advise is available exclusively on http://www.astroscience.in
Pt. GD Vashist ji
General Remedies Redbook
Tips regarding health of small children
1. To keep small children in good health and save them from bad effects of
every kind, hang a pendant of silver with pearl or moon stone, in the neck
of the child.
2. f the child is suffering from hiccups, make the child lick honey in 2, 2
drops. It will help in hiccup curing.
3. If a child is suffering from marasmus apply paste of multani mitti on the

whole body of the child. After three hours give him a hot bath. Continue t
fro 11 days. It will help the child.
4. f the child is not sleeping at night, put a small clothe packet of dry goat-
dung below his head. He will sleep well.
5. If a small child suffers from Jaundice, put a whole raddish alonmg with
leaves near his head. If the leaves turn yellow at night, replace the
raddish with a fresh one. Continue this process for four days.
6. Drop 400 gms. Gram dal in flowing water.
7. If your child does not drink milk, or vomits after drinking, on a Saturday or
Sunday fill a earthern small pot with milk, take it seven times around the
head of the child, make a black dog drink it. This will make the child drink
milk properly.
8. If your child startles up at night, while sleeping, or begins to weep; put a

small iron sword / knife or a teeth of a pig or a lion; bound in black
thread, in the neck of the child. It will help the child overcome this
problem for five years.
9. If a child is frightened while sleeping, take a piece of alum, pronounce

“Shree Ram Bhakt Hanuman ki Jai” and put is below the head of he child.
This helps in preventing of the startling of the child.
10. If a child urinates in the bed, while sleeping, take a rose incense stick,
inflame it, collect its ash on a bhoj patra, mix it with ganga water and
make a paste, paste it around navel and on the stomach of the child. Do it
on every alternate day for a week.
Or
Apply a paste of saffron around the navel.
If a child suffers from the bad effects of an evil eye, take a piece of alum,
move it around the child from head to feet, seven times and burn it in the
fire.
Or
Take some salt, move it from head to foot of the child seven times, and
make it flow in the gush of water under the wash basin.
11. Go to Hanuman Temple on Tuesday and Saturday, salute the idol of

Hanuman respectfully, take some vermillion off the shoulder of right hand
of Hanuman and apply it on the child’s forehead. It will prevent the bad
effect on an evil eye.
General Remedies
सनतान का सुख Tips to Increase your trade
रोग समबनधी जानकारी Tips for Early Marriage of Daughter
अपना मकान कब बनेगा Tips to get rid of long lasting disease
िववाह Tips to get Transfer
विजरत दान (गहानुसार) Tips to obtain wealth, victory and success
याता हेतु उपाय Tips to obtain Savings & Prosperity
राहु हेतु उपाय Tips to get rid of obesity
केतु Tips for Easy teething of infants
मंगल Tips to bring temperature down of a patient
बुध Tips to get rid of disease Jaundice
बृहसपित Tips to increase eyesight
शुक Tips to decrease Headache
शिन
Tips to cure the painful eyes
सूयर
Tips to cure ear pain
चनद
Tips regarding health of small children
लमबी बीमारी से छुटकारा पाने के िलए उपाय
Tips to get rid of drinking
(िपतृऋण)
वयापार वृिद अथवा नया वयवसाय शुर करने हेतु उपाय Tips to cure the diseases of the Liver
नौकरी पापत करने एंव तबदीली हेतु उपाय Tips to improve memory and appetite
शराब छुडाने के उपाय Tips to get a sound sleep
धन बचत और ऋण वसूल करने हेतु उपाय Tips to get rid of planet calamity and keep peace
परीका मे उतीणर होने हेतु उपाय & Prosperity
Tips to get success in examination.
Tips to recover loan
Tips to get service or to get transfer
Tips to cure trembling of hands & feet and back
pain
Tips to cure constipation.
Tips to cure TB
Tips to get rid of stone
Tips to get rid of Asthma
Tips to get those early married, who do not get
engaged at all.
Tips to get rid of worms in the abdomen
General Remedies Redbook
Tips to get rid of obesity
1. Wearing lead ring on the big finger of your right hand helps in decreasing your fat,
the person appears to be normal.
Tips to bring temperature down of a

patient
• By binding the outer skin of the snake (live or dead) or a bhanvra on the head
of the patient, helps in bringing down the temperature normally.
• Binding the tail of a lizard on the head or hand on Tuesday, or on Sunday, the
tail of a giorgit on head or hand helps in bringing down the temperature.
Tips to obtain Savings & Prosperity
1. To increase your savings, keep a square piece of silver in honey in a steel utensil, in your house; it
increases savings and wealth.
Tips to obtain wealth, victory and success
1. Take horn of a jackal and keep it in the vermillion. If the horn is real the quantity of vermillion will
keep on decreasing. Keep in mind the vermillion remains, it does not totally vanish; so continue
putting vermillion in it. Till that time, you continue putting vermillion, there will not be shortage of
wealth.
2. The following tips provide you success in your court cases and monetary benefit.
a. Cat’s Nal obtained on Saturday should be kept in the cash box. It increases your wealth.
b. If you keep a one eyed coconut in your house, the goddess Lakshmi is always kind to you.
c. If you get an old white flower – Aak plant, begin to dig it at the root. After digging for about
7-8 feet you will find a seven-par-knot, on which there will be a figure of the god Ganesh.
Bring it home, get it bathed, worship it in sixteen kind and then establish a throne, It always
increases wealth and happiness
d. ON Sunday, when there is Pushya Nakshtra, take the nail of right feet of a black crow and
keep it in your purse, cash box or treasury. It increases your wealth.
e. Form the figure of the god Ganesh, on the root of white aak, with a knife and worship it. It
increases your wealth, happiness and profit and brings prosperity.
Tips to get rid of long lasting disease
Here under are given some tips to come over the obstacles that come in the way of
settling the marriage of daughter.
The person who has been suffering from a disease for a long time; or one gets
involved in another disease, as soon as he gets free from one; if one does not get
relief from disease inspite of efforts, can be free from disease by adopting these
tips:-
1. To get rid of long lasting disease, one should prepare a chapatti (roti) of besan
(gram floor) or makka (corn floor) paste it with sarson (mustard)oil, should take the
roti around the patients head seven times. Make a black dog eat this roti. This makes
gradual improvement in the patient.
Tips to get Transfer
If someone wants to get himself transferred to a place of this own choice, one should adopt the following
way:-
◊-⇓1. One should take bath in cold water on Friday night Saturday morning and thereafter should keep
continuing praying and worshipping. ON sunrise he should offer the Sun God 21 or seven red chilies. NO
water is to be offered. If the Sun God is kind, the desired transfer will happen in 21 days.
Tips to obtain wealth, victory and success
1. Take horn of a jackal and keep it in the vermillion. If the horn is real the quantity of vermillion will keep
on decreasing. Keep in mind the vermillion remains, it does not totally vanish; so continue putting
vermillion in it. Till that time, you continue putting vermillion, there will not be shortage of wealth.
2. The following tips provide you success in your court cases and monetary benefit.
a. Cat’s Nal obtained on Saturday should be kept in the cash box. It increases your wealth.
b. If you keep a one eyed coconut in your house, the goddess Lakshmi is always kind to you.
c. If you get an old white flower – Aak plant, begin to dig it at the root. After digging for about 7-8 feet you
will find a seven-par-knot, on which there will be a figure of the god Ganesh. Bring it home, get it bathed,
worship it in sixteen kind and then establish a throne, It always increases wealth and happiness
d. ON Sunday, when there is Pushya Nakshtra, take the nail of right feet of a black crow and keep it in your
purse, cash box or treasury. It increases your wealth.
e. Form the figure of the god Ganesh, on the root of white aak, with a knife and worship it. It increases your
wealth, happiness and profit and brings prosperity.
Tips to get rid of drinking
1. If a man drinks too much, his wife should play on a spinning wheel, this
will help in reducing the drinking.
2. When a man is badly habituated of drinking his wife should take off her
bichuaa, wash it in fresh water, take some wine out of the bottle and put
these bichuaa in that wine. On the thirteenth or fifteenth put that wine in
the bottle again. By repeating this process for five Tuesdays or Saturdays
helps in removing the habit of drinking.
3. Take seven leaves of Palash, apply mustard oil 2-4 drops on each, crush
them in your hand and throw out of the house. Continue this process for
11 days. It will help in getting rid of drinking.
Q How can the Index Scheme performance be adjudged?

A There are many Index Schemes available in the market and investment in these
passive form of investment where the Fund Managers replicate the index. Investors s
cost and the tracking error of these schemes before investments. Tracking error can be
• Money not fully deployed. The Fund may keep aside some cash to me
pressure.
• Index Funds buy shares at any point in time throughout the day, but when
only the closing prices, which is the weighted average of last half an hour pric
Investors should look at long term performance of the scheme and expense ratio of the
Q Should the Scheme with lower NAV be preferred over a scheme with higher NAV , if both the schemes fall under the sam
A Investors generally tend to prefer a scheme with a lower NAV than a scheme with higher NAV. Sometimes, they believe that inve
when units are available at Rs 10 would be a better option than to choose a scheme with the same investment philosophy and c
higher NAV. Investors should know that, its not the lower or higher NAV of the scheme, but the performance track record of th
schemes, quality of services offered by the fund House matter during selection of scheme from amongst the ava
Suppose scheme A is available at a NAV of Rs.20 and another scheme B at Rs.50. Both schemes are diversified equity orie
Investor has put Rs. 10000 in each of the two schemes. He would get 500 units (10000/20) in scheme A and 200 units (10000/50
Assuming that the markets go up by 10 per cent and both the schemes perform equally well and it is reflected in their NAVs. NA
would go up to Rs. 22 and that of scheme B to Rs. 55. Thus, the market value of investments would be Rs. 11000 (500* 22) in s
would be the same amount of Rs. 11000 in scheme B (200 * 55). The investor would get the same return of 10% on his investm
the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an in
to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered a
existing scheme is available for Rs. 35, should not be a factor for decision making by the investor. Similar is the case with in
oriented schemes. How efficiently the schemes are managed should be an important criterion and not higher or lower NAVs.
Q How can an investor know where his money collected in a scheme has been invested?
A The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly basis that are published in the new
Houses also publish ‘Fact Sheets’ every month where it gives details of the portfolios in different schemes, % of NAV inves
securities and also the sector allocation guide. For the exposure in debt, it gives details of the instruments where the money has
tenor of the debt papers, rating profile and percentage allocation in rated & also the unrated papers.
Q What is the advice to investors who have discontinued their SIPs?

A Investors need to understand that with the downturn in markets, the NAVs of mutual fund units are also down and thus the cost o
units becomes less than before. This helps investors even out vagaries in the market and that is what SIPs are all about. A
allocated more units when markets are down and from that level, when the markets go up, value of the investment also goe
planned and disciplined way of investments to meet your goals at various points in time. Start planning early through SIPs to get
advantage.
Q Choice between growth option, dividend option and dividend re-investment option makes any difference on the tax liabil
earnings from mutual fund units.
A Yes, this choice makes a lot of difference. The difference arises because dividends attract dividend distribution tax, whereas
Funds units attract capital gains tax both of which have different rates.
Taxation
In the hands of the funds - Income earned by all SEBI registered Mutual Funds is exempt from tax under Sec 10 (23D) of
In the hands of investors
As per Income Tax all funds are classified as
• Equity Oriented (>=65% in Indian Equities)
• Debt Oriented (<65% in Indian Equities)
Fund Type Tax Rate (in the hands of)

Income Type
MF Investors
Equity NIL NIL

Dividend
Debt Pays DDT NIL
Equity NIL 15%*

STCG
Debt NIL Added to income*
Equity NIL NIL

LTCG Debt NIL 10% flat or 20% with
indexation*
* for NRI Investors, this is deducted at source by the MF. The tax rate is 20% in case of LTCG for Debt schemes and 30% in ca
Debt schemes.
Dividend distribution Tax (DDT)
Individuals & HUFs – 12.5% + Surcharge & Education Cess = Effective Rate o
Other Investors – 20% + Surcharge & Education Cess = Effective Rate
For liquid funds DDT rate is 25% + Surcharge & Education Cess = Effective Rate of 28.325% irrespective of the categ
Securities Transaction Tax – Levied at the time of sale/redemption of Equity Oriented Funds only
MF units are not under Wealth Tax
FOFs are treated as debt schemes even though they may be investing in equ
Source: The above is based on Taxation Laws applicable to equity mutual funds and other than equity mutual fund schemes.
August '09, Vol 17 An e-Newsletter for investors of ICICI Prudential Mutual Fund
COVER STORY
Factors to look at before selecting a Mutual Fund

Over the past few years, Indian investors
increasingly have turned to mutual funds to save
for retirement and other financial goals. Mutual
funds can offer the advantages of diversification
and professional management. But, as with
other investment choices, investing in mutual
funds involves risk. Moreover, fees and taxes
also reduce a fund's returns. It is important to
understand both the upsides and the downsides
of mutual fund investing and how to choose
products from amongst available options that
match your goals, investment horizon and
tolerance for risk.
This cover story explains what factors to

consider before investing, so that an investor
takes an informed decision before investing.
The factors are as under:-
Stated Investment Objective: It is important that the scheme’s philosophy matches with the
investment objective of the investor. For instance, if the investor is a conservative investor, then
the fund manager’s investment approach should be conservative or vice versa. If an investor
prefers to invest in growth stocks, he can consider investing in equity growth funds. An investor
can also look at the fund manager’s track record, date of inception of the fund and the asset
size.
Positioning of Fund: Each scheme is characterized by its style box, which indicate style of
investment (Growth, value or blended) and market capitalization (Large, Mid or Small Cap) in
an Equity fund. In a debt based fund, it is maturity of papers (long term, medium term and short
term) and volatility of the debt Portfolio constituted by these papers to the change in interest
rates, classified as low, medium and high. Based on the risk return profile of the investor and
investment horizon, he can select the product that would suit him.
Performance Record of the Fund: After identifying a fund, an investor can compare the same
with its peers or relevant benchmark. Each Fund is benchmarked against an index which best
suits the investment philosophy of the fund. For example if the fund chosen by an investor has
given a return of 15%, he can find out how much benchmark has given in the same period.
Also he can compare this fund’s performance with other similar funds in its category. Say, if the
fund invests only in mid caps, its appropriate benchmark will be BSE Mid Caps and peers
would be the funds that also invest only in mid caps and NOT those, which invest, in large caps
or small caps.
Emphasize on Long Term Performance: Analyze the performance of fund over a longer
period of time i.e. how much return the fund gave in the last 6 months, last 1 year, last 3 years,
last 5 years or since inception and simply do not go by its performance in the last 1 month or
the last 3 months. These data are publicly available. The Fund houses publish fact sheet every
month which can also be downloaded from the website. A consistent return is a MUST before
investing in the fund. It is not advisable to invest in a fund that just gave a very high return in
the last few months but have no history of good performance or a fund.
Portfolio Allocation: An investor should look at the portfolio of the funds to know the
percentage allocation to different sectors and its weightage in NAV in case of equity based
funds. From this, he would know whether the Fund is overweight or underweight in different
sectors and this will help him understand the performance of the fund in different market
conditions. By looking at the debt Fund Portfolio, an investor would know the instruments
where the money is being invested, tenor of the papers, credit worthiness of the borrowers
based on the rating assigned and also the weightages of these papers in the portfolio. This
when seen in the light of positioning of fund in the style box, gives an indication of the riskiness
of the fund. He can select the fund accordingly.
Performance Indicators: Each fund, based on percentage allocation to debt and equity
component, will have its performance indicators of both the asset classes. This when compared
with similar funds of peer group will give an understanding of relative performance and risk
return of different funds. P/E Multiple, Price to Book Value, Portfolio Turnover, Dividend Yield,
Sharpe Ratio, Beta, Standard Deviation, R-Squared, Average Maturity, Modified Duration,
YTM, and Expense Ratios are some of these measures.
Tax Implication of Funds: Equity and debt funds are taxed differently. Based on the tax
bracket an investor is in and also his investment horizon, he can benefit by investing wisely,
fully knowing the tax implications.
Fees and Expenses
As with any business, running a mutual fund scheme involves costs — Investment advisory
fees, marketing and distribution expenses, custodian Fee, auditor’s fee, registrar & transfer
agent Fee, statutory advertisements, etc. It is important to look at these numbers as it impacts
the returns received by investors.
To summarize, while selecting equity funds one should analyze the followings:
• Classify the available equity schemes into growth, value, concentrated, thematic,
diversified etc.
• Either Select main stream growth or value fund providing broad diversification.
• Evaluate past returns of available funds
• Review salient feature of a scheme
• Fund size, Fund age, Portfolio Manager’s experience, Cost of investing, Portfolio
characteristics (cash position, portfolio concentration, Market Capitalization), Portfolio
Turnover, Portfolio Statistics like ExMarks, Beta, Gross Dividend yield.
While Selecting Debt Funds
• Investor must know the objectives, investment horizon etc

• Determine the right selection criteria
• Fund Age, Fund Size, Relative yields, Relative Costs, Portfolio Characteristics,
Average Maturity, Tax implication, Past Returns and Expense performance
There are a wide range of good performing funds available and based on the investment
horizon and risk-return profile of the investors, they can select from amongst large cap, flexi-
cap, thematic funds to capitalize on the growth opportunities available. Past economic cycles
have proved that when interest rates bottom out, equity as an asset class picks up. Therefore
portfolio allocation to equity through systematic investment plan in good performing diversified
equity funds for a long term investment horizon of at least 3 years, systematic transfer plans
from debt to equity, disciplined approach of investments by investing early and regularly to
benefit from the power of compounding and also regular booking of profits and systematically
transferring gains to debt (STP from Equity to debt) should be the ways to build portfolio in
Equity. Conservative investors too can start building equity gradually in the portfolio by
investing in blended products, specially the MIPs that have consistency in terms of dividend
paying record. In MIPs, large chunk of portfolio (approx 85%) in debt and 15% in equity, short-
term debt plans & dynamically managed debt funds, which invest across maturities and
volatilities and gradually look to transfer the monies in good performing equity funds are also
the options available to investor. In this way investors can participate in both debt and equity
allocation.
Investors need to be realistically optimistic, have investment horizon of at least 3-5 years to
benefit from the power of compounding, make use of every dip in market as an investment
opportunity to build equity portfolio, skip fear and sentiment based motive of investment, focus
on consistent past performance of the funds and benefit from the diversification through mutual
Funds investing.
Market Capitalization
We often hear companies or different mutual funds positioning being categorized as small c
large cap. But what do these terms really mean? The "cap" part means ‘Capitalization’, whic
by which one can have an idea of the size of the company. Though there is no standard defin
for classification of capitalization, yet, it is important for investors to understand these terms, t
of the
Calculating Market
It is the market value of a company's outstanding shares. This figure is found by multiplying
the total number of shares outstanding. For example, if Company X shares were trading at
and had 10,000,00 shares outstanding, then the market capitalization would be (120 * 10,00
000,
Market Capitalization = MPS (Market Price Per Share) * No. of shares outstanding (available on *Free Float Basis where only thos
are actively traded in the market are taken into consideration). * Source: NSE turned Free Float on June 26th, 09 as appeared in
It’s Importance to know that higher market price of a stock does not mean that the company is large sized. It is not reflective
actual
Suppose that, as of August 1, 2009 stock prices of Company X & Y were Rs 95 and Rs 55 respectively. Although Company’s X
higher; it has about 10 lac shares outstanding, while Company Y has 1 crore shares outstanding. As a result of this difference, w
Company Y’s market cap is actually larger( 55 crores) than Company X( 9.5 crores). If we compared the two companies by solely
stock prices, we would not be comparing their true values, which are affected by the number of outstanding shares each
The classification of companies into different caps also allows investors to understand growth prospects and also risk
Different Types of
While there isn't one set framework for defining the different market caps, here are the widely published standards for each
*Large Cap Stocks: If the market capitalization of a company is high, we call such a company as a large company. There is not
which a stock can be categorized as large capitalized. It is a relative concept. Most of the mutual fund scheme defines a large cap
company whose market capitalization is more than the market capitalization of the highest valued stock on the mid-cap index o
stock of a large cap index. These stocks are highly
**Mid- Cap Stocks: These can be understood as medium sized companies. Mutual Funds normally define them as having a valu
highest valued company and lowest valued company of a mid ca
***Small Cap Stocks: These are relatively smaller companies. Mutual Funds generally define them as having a market capitaliza
the least valued company of a mid-cap
Source (*, **, ***): - Mutual Funds by HABSG Consulting, Co-branded by ICICI Prudential AMC Ltd., based on curriculum of AMFI
Module
Please note, these definitions are not standard. This keeps on changing depending on how the market is performing and what a
various indices. Understanding the market cap is important not only in direct investments in stocks but also as mutual fund Inves
fund schemes, fund houses show positioning of equity fund or equity exposure in blended funds (funds which have both d
component) based on the style of investment (whether value or growth or blended) and market capitalization( whether Large Cap /
Cap stocks). This gives an understanding to the investor whether the fund is totally large cap oriented or mid cap /small cap or fle
across capitalization. This can be seen in the fact sheets published by the fund
For example: In the style box, a fund X is shown investing predominantly in large and mid cap space. Size indicates Market Capita
large, mid and small cap segment. Style shows Value, Blend and
Source of above style box: www.icicipruamc.com, Funds Section, The Prudent Fact Sheet
Dividend Distribution Tax (DDT):

An investor is not required to pay any tax on the amount received as dividend. However, a mutual fund is required to pay tax w
dividends to the investors. This is known as dividend distribution tax. Not all funds are liable to pay dividend distribution tax. Fo
provisions in this regard:
• A mutual fund having more than 65 % of its assets invested in Indian Equity and Equity related instruments are not
dividend distribution tax. This means, for equity mutual funds, dividends are not taxed at all in any way.
• All other mutual funds are liable to pay dividend distribution tax. The dividend distribution tax is paid by mutual fund o
money.
Setting-off LTC Gains

By Research Desk | Aug 21, 2009
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Can I set-off long-term capital gains (LTCG) from investments in an FMP (375 days
maturity) against short-term capital loss (STCL) and long-term capital loss (LTCL)
from selling equities in the current year?
- Anand Kumar V
Where the capital gains are tax-free, capital loss will also be treated as nil for taxation. Hence,
LTCG from FMP cannot be set-off against LTCL from selling of equities. But it can be set-off
against STCL from selling of equities. Further, it is possible to carry forward the capital losses for
eight assessment years immediately succeeding the assessment year in which the loss was first
computed.
Entry Loads
By the time you read this article, entry loads charged by mutual funds will be
history. From August 1, fund sales distributors will be paid directly by investors
rather than being paid by funds out of the entry load. We'll be talking about the
impact of this change as things become clearer, but for the time being, there are
some very interesting things that have happened during the past few weeks -- the
period between the Securities and Exchange Board of India’s (SEBI)
announcement that entry load was being abolished and the day that it actually
got abolished.
As soon as it became clear that entry load was on the way out, fund companies
got down in earnest to collect as much investments as was possible before the
deadline. Clearly, distributors won't sell without some kind of upfront fee from
funds and if they can't be paid out of entry load then they'll have to be paid out of
the fund companies' own slice of the pie and that'll mean lower profits for
everyone around.
This race for gathering assets took two forms -- new fund offers (NFOs) and
dividends. While the NFO story is clear to everyone, many investors need to
understand a little more about dividends and why mutual fund dividends are
meaningless from an investment returns point of view.
July saw a bonanza of dividends in equity funds. As many as 35 equity funds
announced dividends. Apparently, announcing a dividend works effectively as a
sales-boosting gimmick. The only reason why this should be so is that investors
do not understand the nature of mutual fund dividends and confuse them with
corporate dividends. A mutual fund dividend is nothing but a redemption in
disguise. For the dividend-paying plan, funds simply sell off part of the assets and
pay out of the proceeds.
Here's an example of the maths. Let's say you own a thousand units in a fund
with an NAV of Rs 20. Your investment is worth Rs 20,000. The fund announces
a dividend of 20 per cent. That's 20 per cent of face value, which is Rs 10, or a
dividend amount per unit of Rs 2. For your thousand units, you'll get a dividend
of Rs 2,000. However, this amount will come straight from the value of your
investment. On the record date, the NAV of the fund will drop by Rs 2 to Rs 18.
This means that along with receiving Rs 2,000 as dividend, your investment will
be worth Rs 2,000 less. Getting mutual fund dividend is a zero-sum game.
Dividends have no impact on the return you are getting from your investment.
What that means is that those who are investing in funds on getting attracted by
dividends are just going to lose the 2.25 per cent that funds will charge as entry
load and have some of their money rotated back to them.
In equity mutual funds, dividends can play a role in tax planning since equity
dividend income is tax free. If you invest in a fund and immediately get part of
the investment back as dividend then you'll have a loss on your capital. However,
one has to hold an investment for at least three months to qualify for a tax set-off
with that loss.
The most important things is the basic non-dividend nature of mutual funds'
dividend and that's something that investors must understand.
Funds Look For Loopholes
By Dhirendra Kumar | Aug 4, 2009
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As every mutual fund investor in the country must know (or should know) by
now, entry loads on mutual funds have been abolished from August 1. Now, the
entirety of the sum you invest will actually get invested in your name. Entry loads
were used by funds to help remunerate the fund distributor who serviced you.
Now, you will have to separately pay the distributor for his services an amount
that you can mutually fix with him as fair payment for his services.
Apart from entry loads, there are some accompanying changes in the rules that
investors must understand. The most important is the vastly enhanced incidence
of exit load in equity funds. Earlier, exit loads in funds were generally around one
per cent for amounts withdrawn within one year and zero afterwards. Above a
certain amount, which used to range from Rs 2 to 5 crore, the loads were lower.
Now all, or some, of these parameters have been tightened by all fund companies.
The period has been enhanced to 2 or 3 years, the amount limit has been lowered
and in some cases, the percentages have also been enhanced to 2 per cent,
specially for periods under a year. Generally, investors can count on zero exit
loads only for investment periods longer than three years. These are early days
and it’s possible that exit loads may evolve. Exit loads are going to acquire more
importance now and one can expect some standardisation across the industry.
Exit loads are supposed to deter investors from pulling out their money quickly.
Under the new regulations, up to one per cent of the exit load can be used by the
funds for their own expenses. The way things are shaping up, it looks like fund
companies will be paying distributors one per cent up front commission even
though there’s no entry load. If the investor exits the fund within a year, then the
commission gets compensated from the exit load. In any case, investors now need
to be aware of the exit load factor.
Besides exit load, there’s another part of the new regulations that investors need
to pay attention to. One of the goals of the Securities and Exchange Board of
India’s (SEBI) new regulations was to eliminate or reduce ‘churn’. Churn was the
practice of distributors of repeatedly getting the investor to switch money
between funds because each switch earns commission. This commission could be
as high as three or even four per cent. Now, with entry loads gone, this
commission will be down to perhaps one per cent, but not zero. That means that
the motive for churning is not gone. In fact, from the point of view of an
unscrupulous distribution organisation, a commission of one per cent instead of
three simply means that they have to churn three times as much to earn the same
revenues.
Fortunately, SEBI has also given investors a tool to protect themselves against
this. Distributors are now obliged to reveal to investors what commissions fund
companies pay them. They are even obliged to reveal what commissions
competing fund companies would have paid them. In the run-up to August 1, this
aspect of the new regulation has received the least attention. However, if
investors are to benefit fully, then this transparency could prove to be the most
important.
Talking about Sundaram SELECT FOCUS AND SELECT MID CAP now, though
downgraded (investors should not get upset if a fund becomes 4-star or from 5-
star because there may be many factors which could be driving it). These two
funds remain very well managed and attractive funds with credible history.
Unless they become 3-star funds and they remain that way for over six months,
then is the time to take a redemption call.
I want to invest Rs 6,000 per month in an SIP. How can this investment be
distributed and in which funds should I invest? Separately, if there is an exit
load for three years in any equity fund, would I be able to get long-term
capital gains if I sell off the units in one year?
As far as your first question is concerned, a first-time investor should invest in one or
two balanced funds and invest in it on a regular basis. Balanced funds are treated like
equity funds only. Secondly, exit loads and long-term capital gains are not related. Load
structures depend on a fund’s terms and conditions. Some time ago, most fund
companies had revived their exit load structures in a way that if you redeem your money
within at least three years, then an exit load would be applied. But there are rapid
changes being made. Now, most of the companies have more or less decided on a
somewhat common exit load structure, which is that if you exit before one year then one
per cent exit load would be charged, otherwise there would be nothing charged. A one-
year investment in equity funds gives you the long-term capital gains advantage. There
would be a number of changes in this especially after the announcement of the Direct
Tax Code scheduled to be implemented from 2011.
How can I invest in an equity fund?
For mutual fund investments, you can go to the nearest bank. Apart from that, there are
around 90,000 mutual fund advisors in the country. One can get information on them
after logging on to http://www.amfiindia.com. Thereafter, type your pin code in the
relevant place. Once that is done, the list of all the mutual fund advisors in your area
would get revealed. Choose from that list.
Choice Simplifier
By Research Desk | Sep 7, 2009
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Take 1: Ever wondered what happened to those days when ‘Nirma’ washing powder was
a household name, when markets were flooded by that brand and housewives swore by
it? Those days are gone forever, with a plethora of choices open before the consumer.
Take 2: Lets cite another example and try to bring this a bit closer to home. Who doesn’t
want his money to grow? Everyone wants to invest their hard earned income and get
maximum benefits even at the rate of say, 6-7 per cent per annum. Given the risky nature
of current times, mutual funds are perhaps best-placed to realise returns on that dream.
Take 3: What does a person do if he discovers that there are more than 4,000 such
funds floating in the market and he has to wade through the confusion and choose the
ones that suit him?
Quite naturally, he’s at a loss to take the proper decision.
With such confusion prevailing over the mutual fund investor, one wrong step can lead
to disastrous consequences. Finding the right pick that gives a relative guarantee of
likelihood of money to grow. That is where Value Research Fund Selector at
www.valuereseachonline.com comes into the picture. We help you to do exactly that, at
absolutely no cost at all.
The Fund Selector tool is one of the many aids that is available to mutual fund investors
through which you can easily short-list funds based on the criteria important to you.
Select the ‘Fund Type’, the ‘Category’, pick the ‘Initial Investment’ feature you intend to
make, define the ‘fund returns’ across periods, set their ‘risk type’ and shortlist them
according to their Value Research Ratings.
The more definite the query, the more precise gets the search result. For example, a
query on “all equity funds”, with a return period of “2 years” on funds performing “above
30 per cent” without any specifications on the degree of risk returns 151 funds. But
revise the same query by including only 5- and 4-star rated funds, and you’ll get only 81
funds. Specify the risk appetite as ‘average’ and all you have before you is 12 funds. The
process has been simplified exponentially to enable investors to cut out the irrelevancy
and choose funds that are tailored to fit their investment profile. For a complete user-
friendly experience, there is no need to even register on the website to access the tool.
So what are you waiting for. Just go ahead and make the right choice. After all that is
what you want and we intend to deliver.
Swing To SIPs
By Research Desk | Sep 14, 2009
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Everyone wants their money to grow faster and to ensure that, they invest. A major
option open is through mutual funds (MFs).
However, investing in MFs does present one problem — that of keeping track of
payments made to various AMCs, especially through the method of Systematic
Investment Plans (SIPs) as well as to find out the returns generated. The propensity of
the retail investor to opt for micro SIPs, which involve payments of as little as Rs 50 or
Rs 100, has added to their troubles.
If an investor diversifies his holdings across even five funds to derive optimum benefits
from a diversified portfolio, he/she will still have to devote some time to get a grip on all
the payments made as well as returns generated by funds they have invested in.
In general most investors have upwards of five monthly SIPs across different schemes. A
pre-requisite, to use the tool, to finding out the figures involves the knowledge of the net
asset value (NAV) on the day of investment of every fund invested in by the investor.
While none of this requires rocket science, yet the presence of digitally enhanced tools,
can make the task simpler, more accurate and even less taxing on the nerves.
Welcome to the world of the SIP calculator at Value Research:
http://valueresearchonline.com/learning/CalcSIPReturn.asp.
The tool allows you to keep tabs on accumulated units over the time period concerned
where the SIP is being serviced regularly. It provides all the information that you need
involving the cost of acquiring of units, as well as assessing the gains or losses that were
generated on the basis of current market value.
The only problem that you may face is that no monthly returns figures will be available
and that too because most MF houses have done away with a monthly statement of the
SIP. Instead, you will be apprised of your accumulated holdings once a quarter.
Working through the SIP calculator you do not need to even know the number of units
held. All you needs is the date of your SIP outflow and the fund that you are investing in.
That's it! The result that the tool generates will give you both an annualized return figure
and an absolute return figure.
Not only that, while you are rebalancing your portfolio or reshuffling your SIPs this tool
can help you assess what to drop.
So, what are you waiting for? Surf's up on SIPs! Where are you?
Check the taxes

Taxation STCG LTCG DDT
Tax-
Equity / Balanced Funds 15% Tax-free
free
Medium Term Debt / MIP as per tax 10% (20% with
14.16%
Funds slab indexation)
Equities from balanced funds

Balanced funds typically maintain about 70 per cent of their assets in equities. The
following table shows how the investments can be allocated to balanced funds and debt
funds to get the required asset allocation.
Asset Allocation
Required Debt (as % of total Balanced Fund Debt Fund
portfolio) (%) (%)
80 29 71
70 43 57
60 57 43
50 71 29
40 86 14
However, do not have all the debt exposure through balanced funds. Having some
portion in pure debt funds is helpful in rebalancing. Also, if your targeted allocation to
equities is less than 40 per cent, we suggest that you also include pure equity funds.
Go the systematic way
When investing in equities, the best way to do it is to invest systematically. When
investing in the balanced fund, first invest in a debt fund, and then gradually shift to the
balanced funds.
SETTING THINGS RIGHT
Your fund selection has not been bad. But for reasons discussed above, you may consider
replacing some of your equity funds with the balanced funds.
AGGRESSION IS GOOD, BUT…
If you have already accumulated for your goals, you may go ahead with your subsequent
investments into the aggressive funds that you own. We believe that you would still want
the returns from this investment to be stable. Hence, a single fund or sector should not
account for much of the portfolio. Thematic funds are good only as a small percentage of
your portfolio.
DSPBR World Gold Fund is a different fund that you can take a look at, but be mindful of
the additional risk of currency exchange rates that you would be assuming through them.
Suggested Portfolio
Category Choices
Canara Robeco Balanced, DSPBR Balanced, HDFC
2 / 3 Balanced Funds
Prudence
1 / 2 Debt Fund(s) Reliance Short-term, UTI Short Term Income Fund
Diversified Equity Funds (if ICICI Prudential Dynamic, Reliance Regular Savings
required) Equity
Aggressive Equity Funds (if Reliance Growth, Sundaram BNP Paribas Select Mid
required) cap
Tax-planning Funds Fidelity Tax Advantage, Magnum Taxgain
The 6-point plan
1. Avoid bulk investing. When investing in funds, stick to an SIP. In

this way, your investments will be less prone to extreme market
movements.
2. Avoid thematic funds and NFOs. Stick to proven diversified equity
funds.
3. Come up with an asset allocation. Since your goals are far off and
you have ample earning years in hand, go with 80 per cent of the
portfolio into equities.
4. Do not put any more of your savings into fixed deposits. Focus on
increasing your equity allocation. Later on, if you need to increase your
debt allocation to keep it at 20 per cent, consider a debt fund.
5. Once a year, rebalance your portfolio to ensure that the equity:debt
allocation for that year is maintained. As your goals approach, the money
allocated to equity should gradually start moving into debt.
6. If you want to invest directly in the stock market, go ahead. But
ensure that you have the time, inclination and patience to research
companies and understand industry trends on your own.
How to reach your goals

You would require a monthly income of Rs 50,000 after 25 years.
At an inflation rate of 6.50 per cent per annum, Rs 50,000 will be equivalent to Rs 2.41
lakh.
Keeping that in mind, you need to accumulate a corpus of Rs 4.27 crore over 25 years.
Start investing Rs 35,200 per month. Every year, increase this by 5 per cent. And on an
assumption that your savings will earn 10 per cent per annum, all your goals will be met.
Restructuring the portfolio

Your ideal portfolio What Can Stay What you can consider
HDFC Top 200
3 large cap diversified equity Magnum Contra
-
funds DSPBR Top 100
Equity
Reliance Growth
2 aggressive funds ICICI Pru -
Infrastructure
Sundaram BNP Paribas Tax
Saver
2 tax-planning funds -
HDFC Tax Saver
Magnum Taxgain
Kotak Flexi Debt
1 debt fund -
Canara Robeco Income
Kotak MF has proposed the following load changes under the Kotak 30, Kotak
Opportunities, Kotak Midcap, Kotak Contra, Kotak Lifestyle, Kotak Balance, Kotak
Equity FOF, Kotak Select Focus Fund, w.e.f. August 1, 2009:
Revised Load Structure:

Entry Load: NIL
Exit Load: 1% for investment less than Rs.5 crores, if redeemed within 2 years and 1% for
investment equals to or greater than Rs.5 crore if redeemed within 182 Days
IDFC Small and Midcap Equity Fund shall get converted into open
ended equity scheme. This change would take place with effect from September 11, 2009.
The investments in the fund were locked-in till June 2009. The fund has seen some
outflows after that.
History Lesson: September Is Best Month for Gold
We’re heading into September next week, so it’s a good time to revisit the
historic seasonality of gold and gold stocks.
Over the past four decades, September has been the best time for gold in
terms of its month-over-month price appreciation. You can see this on the
chart below – in a typical year, the price of gold in September rises 2.5
percent above its August price.
The gold price has risen in 16 of the 20 Septembers since 1989, by far the
best success ratio of any month of the year.
Source: U.S. Global research
What accounts for this predictable trend?
September kicks off several of the planet’s most potent gold-demand drivers:
 The post-monsoon wedding season in India and Diwali, one of the

country’s most important festivals;
 Restocking by jewelry makers in advance of the Christmas shopping
season in the United States;
 The holy month of Ramadan in the Muslim world, whose end in late
September is marked by a period of celebration and gift-giving;
 And in China, the week-long National Day celebration starting
October 1 and the run-up to the Chinese New Year in early 2010.
This could be a challenging September in India, the world’s largest gold

consumer. The economic slowdown and gold prices near record highs drove
jewelry demand down 31 percent in the second quarter compared to the
same period in 2008.
On the other hand, the World Gold Council says India’s bank deposits saw
22 percent year-over-year growth in the second quarter of 2009, so cash is
available to be spent if the rupee price for gold weakens even slightly. The
WGC also expects the wedding and Diwali season to “underpin a seasonal
improvement over the remainder of 2009.”
China, the world’s #2 gold market, actually saw a year-over-year gold

demand increase of 6 percent in the latest quarter, with buyers favoring 24-
carat gold jewelry for its quality and as a store of value. The WGC says that
trend toward the purer form of gold should continue, though the third quarter
is usually the low season for this segment of the market.
While September is a good month for gold, it is historically a great month for
gold stocks as measured by the NYSE Arca Gold Miners Index (ticker GDM),
as seen in the chart above. The GDM index comprises a broader collection
of gold miners – including more smaller-cap companies – than either the
NYSE Arca Gold Bugs Index (HUI) or the Philadelphia Stock Exchange Gold
and Silver Index (XAU).
After the typically soft months of June and July, the gold miners start to
bounce back with a 2 percent bump in August before shooting up another 8
percent in September. Since 1993, when it was created, the GDM has been
up 11 times in September and down just five times.
In September 1998, the GDM had by far its best-ever month (up 54.3
percent) when the bullion was bouncing off a two-decade low price of less
than $275 per ounce. A decade later in September 2008, however, amid the
severe credit squeeze triggered by the global financial crisis, the GDM fell
10.2 percent.
The strong correlation between the gold price and the value of gold-mining
stocks explains much of the average September jump for gold stocks. But
the relationship is not lock-step – gold stocks (particularly for companies that
do not hedge their production) have historically offered leverage to the gold
price. In up markets, earnings growth has tended to exceed the increase in
gold price. Of course, the leverage also works in the opposite direction –
gold stocks also tend to decline more when the price of bullion is falling.
One of the most consistent correlations for gold is its inverse relationship
with the U.S. dollar – when gold is up, the dollar tends to be down, and vice
versa. Looking at weekly data going back 20 years, this relationship occurs
nearly 70 percent of the time.
The seasonality chart above shows that September is only second to

December in terms of dollar weakness, the average result for the U.S. Trade
Weighted Dollar Index (DXY) being a 0.66 percent decline from August.
Looking at the 39 Septembers going back to 1970, the dollar has seen
negative performance 26 times, more than any other month of the year.
The Federal Reserve’s massive stimulus spending and the expectation that
the current low-interest-rate environment will continue for many more months
are additional headwinds for the dollar, and thus tend to be positive for gold.
In our June commentary “Why the Time Could Be Right for Gold Stocks,” we
pointed out that gold stocks tend to outperform the overall stock market
when the federal government is engaged in deficit spending. This year’s
federal deficit is expected to be a record $1.6 trillion, and the White House
projected this week that the deficit will grow another $9 trillion between 2010
and 2019. These huge deficits will fan inflation fears and keep downward
pressure on the dollar.
Based on the long-term record, this may represent a good time for investors
who want to establish or add to a gold or gold-stock position in advance of
seasonal demand growth. The guidance provided by historical patterns may
improve the chances for investment success, but of course, there are no
guarantees that this September will follow the well-established trend.
by Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors, Inc.
*****
Frank Holmes is CEO and chief investment officer at U.S. Global Investors,
a boutique investment advisor specializing in natural resources and global
emerging markets. The company manages the U.S. Global World Precious
Minerals Fund (UNWPX) and the Gold and Precious Metals Fund (USERX).
Read more from Frank Holmes and the USGI investment team in the blog
“Frank Talk.”
Please consider carefully the fund’s investment objectives, risks, charges

and expenses. For this and other important information, obtain a fund
prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-
800-873-8637). Read it carefully before investing. Distributed by U.S. Global
Brokerage, Inc.
Gold funds may be susceptible to adverse economic, political or regulatory

developments due to concentrating in a single theme. The price of gold is
subject to substantial price fluctuations over short periods of time and may
be affected by unpredicted international monetary and political policies. We
suggest investing no more than 5% to 10% of your portfolio in gold or gold
stocks.
All opinions expressed and data provided are subject to change without
notice. Some of these opinions may not be appropriate to every investor.
The NYSE Arca Gold Miners Index is a modified market capitalization
weighted index comprised of publicly traded companies involved primarily in
the mining for gold and silver. The index benchmark value was 500.0 at the
close of trading on December 20, 2002. The NYSE Arca Gold Bugs Index
(HUI) is a modified equal-dollar weighted index of companies involved in
major gold mining. The Philadelphia Stock Exchange Gold and Silver Index
(XAU) is a capitalization-weighted index that includes the leading companies
involved in the mining of gold and silver. The U.S. Trade Weighted Dollar
Index (DXY) provides a general indication of the international value of the
U.S. dollar.
Latest Commentaries by
James Turk
Brien Lundin
Eric & David Coffin
Lawrence Roulston
Howard Ruff
The Aden Sisters

Frank Holmes
Roger Wiegand
Retirement Retreat
By Research Desk | Jul 23, 2009
• EMAIL
• FEEDBACK
• DELICIOUS
• DIGG
• REDDIT
I started investing in mutual funds five years ago. Over time, I made
several changes in my portfolio, guided solely by neighbourhood advisors.
However, except for a 25 per cent gain made in the first two years, I was
going nowhere. How can I go about setting things right? I am 60 and
retired, my risk appetite is low-medium and I need an income of
approximately Rs 40,000 per month to retain my current lifestyle. My
children are well settled. I and my wife have adequate insurance.
I have Rs 9 lakh in my savings account, received recently from the government as
compensation for acquired property. Of this, Rs 7 lakh is subject to long-term capital
gains, which I would like to invest.
Mutual Fund Portfolio
Percentag
Top 10 Funds
e
Reliance Regular Savings
13.76
Equity
Reliance Diversified Power
10.49
Sec.
Reliance Vision 9.29
Reliance Growth 7.97
HDFC MIP Long-term 7.8
HSBC MIP Savings 6.92
DSPBR T.I.G.E.R. 4.93
HDFC Arbitrage 4.62
HDFC Prudence 4.5
Kotak Opportunities 3.99
-Ashok Rao
Foresightedly preparing for retirement is crucial to enable you to live a comfortable life,
where every need can be adequately serviced and all emergencies can be positively dealt
with.
Any hitches happening in your efforts to ensure the same can be frustrating to say the
least. And as such, we can understand your disappointment at not being able to get
decent returns from your mutual fund (MF) portfolio. If you look at the Retirement
Portfolio Principles, you would realize you have gone against many of those guidelines.
The most obvious ones are having invested in too many funds and keeping a higher
allocation to aggressive or thematic funds.
To bring your portfolio in line with your requirements, here is what we think you should
do:
ACTION POINTS
Clear the clutter
Over 50 per cent of your current MF portfolio is in thematic and aggressive funds. The
performance of these funds is driven by movements in their underlying themes and
market-cap ranges (small- and mid-cap stocks), making your portfolio risky.
We recommend that you opt for a balanced fund. It invests a minimum of 65 per cent of
its assets in equities, and the rest in fixed income securities. Due to its debt component,
it will not give you the high returns that a pure equity fund would, but, having such a
fund as a core holding will considerably decrease the riskiness of the portfolio, together
with bringing some semblance of stability.
Divide your MF investments among three or four balanced funds. You may find these
ones suitable for your needs: HDFC Prudence, Canara Robeco Balance, DSPBR Balanced
and Magnum Balanced.
Rebalance Recurrently
The portfolio must get rebalanced regularly every year so that the ratio between debt and
equity investments always remains at 80:20. This entails shifting of funds from one to
the other. In your case, keep 30 per cent of your corpus in balanced funds (since
balanced funds also have a debt component of their own) and 70 per cent in debt.
FD Vs SCSS
Senior Citizens Savings Scheme (SCSS) is a Post Office savings scheme having a maturity
of five years with an interest of nine per cent payable quarterly. When your banks’ fixed
deposits (FD) mature, check whether the interest being given there is less than in SCSS.
If so, you can consider shifting the FD proceeds to the latter. But be mindfull, one cannot
invest more than Rs 15 lakh in SCSS.
Contingency cash
Keep about Rs 5 lakh in flexi-fixed deposits and keep about Rs 50,000 in your savings
account to meet any emergencies that may crop up.
Medical insurance
Get a health cover for both you and your wife as sudden medical expenses can make a
serious dent in your retirement plans.
Escalating Expenses
Due to inflation, expenses will increase, but interest income from debt investments will
not. Therefore, to compensate, you can withdraw parts of your investment in the
balanced funds as and when required, to meet monthly expense needs. For your benefit
we have calcuated how you could have kept ahead of inflation in Dodging Inflation, had
you retired 10 years before.
TAX PLANNING
Income Tax
Money received from FDs and Post Office MIS are added to the investor’s income and
taxed as per the applicable income tax slab. Hence, while calculating tax, if any part of
your income is taxable then you might consider investing up to Rs 1 lakh from balanced
fund in either SCSS or a tax-saving fund. But keep in mind that your current life
insurance and medical insurance premiums also qualify for tax exemption.
LTCG on Property
Long-term capital gains from property are taxed at the rate of 20 per cent. Hence, for Rs
7 lakh gain from the property you willhave to pay Rs 1.40 lakh as tax. Since you are not
interested in investing the proceeds to purchase other property, you can invest the gains
in notified capitals gain bonds to get a tax exemption.
Both National Highways Authority of India (NHAI) and Rural Electrification Corpora-
tion (REC) have this kind of bonds for a maturity of 3 years and they pay 6.25 per cent
and 5.75 per cent respectively. But here again, the interest income from these bonds are
taxable as per your tax slab.
On the other hand, you might consider paying the tax and then investing the remaining
in equity funds. Considering a conservative return of 10 per cent from equity funds at the
end of three years, you would end up with Rs 7.45 lakh compared to Rs 8.42 lakh from
capital gains bonds (assuming interest is invested in FDs at 8%).
Though this might not seem very attractive, if you stay put with your investment in
equity funds, then the returns from this avenue can be far higher and tax-efficient than
capital gains bonds.
Dodging inflation
Investment with balanced fund
Balance Funds
Yea Income Withdraw Amt.
r Req. al Remaining
0 4.8 0.6 13.9
1 4.99 0.79 14.44
2 5.19 0.99 11.63
3 5.4 1.2 10.24
4 5.62 1.42 11.16
5 5.84 1.64 15.09
6 6.07 1.87 18.06
7 6.32 2.12 22.7
8 6.57 2.37 28.73
9 6.83 2.63 30.25
10 7.11 2.91 27.16
(in Rs lakh)
• Required Income - Rs 4.8 lakh per year

• Income from fixed return instruments - Rs 4.2 lakh per year (Rs 35,000 p.m.)
• Investment in Balanced funds - Rs 14.5 lakh
• Making up Shortfall - Considering an inflation rate of four per cent, the required income
per year would increase to Rs 4.99 lakh after the first year itself. Hence, any shortfall in
income should be met by withdrawing from balanced funds.

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Headlines…..

RBI / MoF / Govt. Policies

Regulatory Bodies / IRDA / SEBI

Private / Public Sector Banks

Foreign Banks / FIIs

Rating & Research

Credit & Pre-paid Cards

Life & General Insurance

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The News in detail…

RBI PANEL WANTS TECH UPGRADE TO CHECK FAKE NOTES

THORAT PANEL LAYS OUT PLANS TO COUNTER FAKE NOTE MENACE

POST-2011, BANK BOOKS TO CARRY REAL NUMBERS

GOVT: LATEST DEBT INSTRUMENT NOT TO FUND FISCAL DEFICIT

CENTRAL BANKS LOOKING TO ENDING MONETARY EXPANSION: Y. V.

Exit: Status quo ante?

CREDIT CARD BALANCES' GROWTH DECLINES TO ALL-TIME LOW

According to Srinivasan, Standard Chartered Bank is the largest issuer of premium

GOVT MAY GIVE RS 10,000 CR FOR DEBT WAIVER SCHEME

"The Finance Ministry is considering to release Rs 10,000 crore to lending institutions in

ARMS HELP SBI ENTER NEW AREAS SANS GOVT EQUITY

SEBI SUSPENDS 578 BROKERS’ REGISTRATION

PUBLIC SECTOR BANKS PIP PRIVATE PEERS IN GROWTH IN STAFF

SUUTI WON'T PARTICIPATE IN AXIS BANK PREF ISSUE

According to a source, there is an issue of lock-in period if the undertaking participates in

AXIS BANK ADDS 31 LAKH SHARES IN OPEN INTEREST

SBI and Reliance Capital shed open position.

LVB SEES GAINS FROM RE-PRICING HIGH COST DEPOSITS

Five-fold rise in net

ATMS WITH IN-BUILT NOTE DETECTORS SOON

Note sorting machines

To tackle eventualities such as thefts/ robberies of treasure at bank branches/ during

Elaborating on the action to be taken by citizens who come in possession of counterfeit

M&M, SYNDICATE BANK TIE-UP

PNB TO CUT HOME LOAN RATE TO 8.5% THIS WEEK

The bank is expected to announce this “festive offer” this week.

STANCHART TO HIRE 850 FOR PRIORITY BANKING

ALLAHABAD BANK BONDS RATING

CREDIT CARD SLUMP TELLS SLOWDOWN TALE

MAGFIL MAY RAISE RS 3,250 CR

We were looking at foraying into Singapore and UK by 2010-11, said Nandakumar.

PTC FIN MAY RAISE RS 1.5K CR THROUGH IPO BY FY11-END

New Delhi: PTC Financial Services, a subsidiary of Power Trading Corporation, is

TATA CAPITAL TO LAUNCH PRIVATE EQUITY FUND

POSTAL COVER FUNDS SET FOR STOCK-MARKET DELIVERY

SUUTI WON'T PARTICIPATE IN AXIS BANK PREF ISSUE

According to a source, there is an issue of lock-in period if the undertaking participates in

LIFE INSURERS MAY SOON INVEST IN INFRA SPVS

Chennai: Newgen Software has announced the successful implementation of document

CITIZENS INSURE ROAD FOR QUALITY

This initiative by residents of Vidyanagar under the Hubli-Dharwad municipal

INSURERS GEAR UP TO MEET FLU CLAIMS

“Also, we will provide cashless treatment to the customer as prescribed by a qualified

EXISTING HEALTH POLICIES TO COVER SWINE FLU HOSPITALIZATION

Few claims so far

The claims in this segment will go up as the number of instances of hospitalisation

HEALTH INSURERS: SUPER SMART OR BORN LOSERS?

POOR RESPONSE TO PENSION SCHEME TILL JULY 31

MF SALES, NEW FUND LAUNCHES REBOUND

MFS CUT DISTRIBUTORS’ FEE

Incentives on big-ticket investments may be informally negotiated.