Sunday, December 1, 2019

Best Fixed Income Investments for less than 5 years

The difficulty in finding a suitable fixed income product has increased ever since key interest rates were lowered by the Reserve Bank of India. Except for high yield options available only to senior citizens and minor daughters, there are very few products offering nearly 8% return per annum. 
Ideally then, we decided to search and compile a list of various fixed income products offering high interest rate. We have considered the maximum investment term for the product as five years, and excluded products available only to specific age groups. Also, the deposit amount required for investment is less than 2 crores. Here are the options:
Post office and Government Sponsored Schemes
Most government schemes tend to be long term, of more than five years. The returns, too, are fixed and low for investing for such a long period. Among the few short-term options, the returns barely touched 8%. However, these deposits come with a sovereign guarantee, which makes them safe from credit risk. If you want utmost capital safety then the options below are suitable for investing.
The striking feature here is that the five-year deposit interest rates here are higher than offered by quasi-sovereign public sector banks. This makes the options below suitable for investing for a period of five years.
Public Sector Banks
This is the second best option for the ultra-conservative investor. The rates offered by public sector banks rarely ever touch 7%, and are amongst the lowest in the industry. 
Private Banks
Private bank fixed deposit returns have hovered between 7% and 8%, depending on the banks reputation and capital needs. While the top players like HDFC Bank, ICICI Bank offer less than 7.30% interest, the emerging players are offering better rates to attract investors. The newly merged entity IDFC First is offering 8.50% on a 2 year deposit, highest among its peers.
Small Finance Banks (SFBs)
This new category of banks was licensed by RBI a few years back, to cater to the underserved and unserved population. The bank operations will be regulated by the RBI, and also offer deposit insurance of Rs1 lakh, similar to other banks. Compared to fixed deposits at private corporations, SFBs are a better choice, simply due to the better regulations in place for these institutions.
The interest rate offered by SFBs is also higher than corporate deposits. There are 10 SFBs licensed so far by RBI and we have given the highest interest rates offered by each.
Corporate Fixed Deposits
I will not recommend this as , recent DHFL and IIFL problem ruined hard earned money of many retail investors.

Discalimer :
The writing has been inspired by moneylife magazine but i removed corporate fixed deposit here as its very risky.

Sunday, July 1, 2018

Why our Mutual Fund Portfolio needs restructure now ?

Why Mutual Fund portfolio now require restructure …. It is just because of below 3 reasons

  • 1.    Introduction of LTCG
  • 2.    Categorization of Mutual Fund by SEBI
  • 3.    Introduction of TRI (Total Return Index)

Introduction of LTCG :

That means frequent buy and sell of funds will put you in the trap of taxation and on a long run basis your return will reduce. Because each time you redeem you will pay tax and while reinvesting you need to pay upfront expense (applicable in both regular and in direct).
Also we need to stop running behind those funds which are giving best return in recent times by churning your portfolio again and again may become fatal.
So now your responsibility becomes more to choose right fund and stick to it for a lengthy duration.

Categorization of Mutual Fund by SEBI :

After new guideline from SEBI , a large cap should only consist of large cap (no mid and small cap)
Similarly small cap should contain small cap fund (no large and mid cap)
Same with mid cap and multi-cap and hybrid fund.
Now fund manager has been restricted to choose a limited universe of stocks unlike before.
So historical fund return of the funds as of now may not be repeated going forward …
Suppose you bought a fund that earlier was a multi-cap fund. But after the re-categorization, it has become a mid-cap fund. So going forward, about 60% of your money would be invested in mid-caps

Introduction of TRI (Total Return Index):

TRI will consider both price movement and dividend payout going forward which will definitely throw a challenge to fund managers because now due to calculation of dividend the TRI return will be1-2 percent more . This means that the fund will have to work harder to beat the extra 150 basis points per annum. 

So categorization and TRI will make an heavy impact on investor considering for longer investment.
We can now start expecting that the investment industry will start embracing tougher benchmarks to evaluate their product’s performance. Over time, from two asset managers, this number will start spreading to many more asset managers, if not all. With TRI in mind, smarter products with lower costs can take shape in the form of exchange traded funds (ETFs). Many of these funds will find meaningful allocations in our financial journey, especially those whose milestones are many years farther .

This also means that there is a case for investing in index funds for a subset of investors now. Do you realize why this might make sense for you too?
It’s a thought provoking process, Isn’t it!!

I have restructured my mutual fund portfolio, Have you done this exercise, have you????

If you still don’t understand what’s app me or drop me for note at

Thursday, June 14, 2018

Aditya Birla Health Insurance Diamond Plan Review (Best In Current Context)

 There are a lot of talk on health insurance .So I will not add more reason why is it needed. However today I will focus on review of one health insurance product from Aditya Birla , which I believe best among what all available in the market … Aditya Birla entered health insurance just a year back , so many may not aware of this product … But the features are superb while comparing to others …If you buy the insurance for 3 years , 4th year premium is absolutely 0……Wow !!! Apart from that you can enjoy all branded gyms with local gym costs and many more …. Yearly one health check up , two fitness assessment and fitness test are absolutely free…if you are bachelor can enroll now , later you can add your spouse (of course after marriage) and kid  …e.g. If you take insurance for 5 lakh , you will enjoy 15 lakh cashless …and so on …Doesn’t it sound good …
Let’s start
For your quick reference I will right very short and to the point so that you can grasp easily in short time …

Product Feature
Cashless (100 percent payment will be born by Insurance unconditionally)
Room Type
Full Cashless for Private AC room for insurance 5 lakh and above.In the absence of private AC room , upgrade is available with full cashless.There is no cap.
ICU Charges
Full cashless for charges for sum insured 5lakh and above
Pre Hospitalisation Expense
Before admit (30 days) 100 percent expenses born by patient will be reimbursed.There is no cap.
Post Hospitalisation Expense
After discharge till 60 days, 100 percent expenses born by patient will be reimbursed.There is no cap.
Day Care Treatment Available
Yes (586 listed procedures covered)
Example: Catract operation which is done and patient is discarged in 2 hours but 100 percent cashless and there is no cap.
Home Care Treatment
Yes availble (Upto 10% of SI)
Ambulance Cover
• `1,500 - for SI `2 lakhs, `3 lakhs, `4 lakhs
• `2,000 - for SI `5 lakhs - `10 lakhs
 • `2,500 - for SI `15 lakhs - `40 lakhs
 • `3,000 - for SI `50 lakhs - `75 lakhs
 • `5,000 - for SI `1 Crore - `2 Crores
Organ Donor Expense
Yes 100 percent covered.
Example: Supose patient is transplanting kidney from somebody , then expense for both patient and donor will be cash less 100%.There is no cap
Covers treatments given under
Ayurveda, Unani, Siddha,
Yoga & Naturopathy
 and Homeopathy systems.
• `15,000 - for SI `2 lakhs, `3 lakhs, `4 lakhs
 • `20,000 - for SI `5 lakhs - `10 lakhs
 • `30,000 - for SI `15 lakhs - `40 lakhs
 • `40,000 - for SI `50 lakhs - `75 lakhs
 • `50,000 - for SI `1 Crore - `2 Crores
Vaccination Cover
Yes (SI 1 Crore and above policy)
No Claim Bonus
10% of SI per annum, max up to 50% of SI
Reload of Sum Insured
Upto 150% of SI, Max up to `50 Lacs
Even if your Sum Insured
gets exhausted, we will
reload your Sum Insured
amount by another 150%
Health Check-up Program
Second E-Opinion on Available
Yes for 15 listed Critical Illnesses
 Critical Illnesses
Domestic & International
 Emergency Assistance
 (including Air Ambulance)
Suppose you are at village and something happened and local doctor couldnot cure you , you can book flight and come to bangalore etc for treatment which is 100% cashless
The above is available if you are at abroad too
• Earn up to 30% of your premium as HealthReturnsTM.
 • This is earned through a combination of Healthy Heart Score™  and Active DayzTM

     If you do this for consecutive 3 years , 4th year premium is 0.
Addon and optional 1
Unlimited Reload of SI
100% of SI (Unlimited times)
Addon and optional 2
Super NCB
Additional 50% of SI per annum, max upto 100% of SI
Addon and optional 3
Any Room Upgrade
Available with SI `5 lakhs and above

Eligibility and Criteria
·         Individual policy: Minimum entry­ age 5 yrs and there is no maximum age of ent­ry
·         Family floater policy: - We cover up to 6 members (2 Adults + 4 Children) comprising of Self, Spouse and Dependent children (up to 25 yrs) in a single policy
·         Dependent children from 91 days to 5 yrs will be covered only if one adult is covered in the floater policy
·         There is no maximum age of ent­ry.
Waiting Period and Co-Payments
·         30 days waiting period: In the 1st year of the policy cover there is a 30 days waiting period for any treatment, except an accidental injury­.
·         2 year waiting period: For specific illnesses/treatment like Cataract, Hernia, Sinusitis, Joint replacement surge­, Varicose veins etc.
·         Pre-existing disease waiting period: 48 months
·         Mandatory‑ 20% Co-Payment: For age of ent­ry at 61 yrs and above
Looking at the benefits, the premium is very less .You will get many benefits withot paying any add on fee , which are available with other insurance company with additional add on premium
Other Benefits:
If you avail this benefit, how you will available Gym Facility with just 2000 (before GST), That I will tell you in the subsequent blogs

Not Covered:
Maternity Cases (It happens in life once or twice max , the benefit which I am getting this policy is enormous considering only the exclusion for maternity , Isn’t it !!)

Permanent Exclusion:
 • War, act of foreign enemy, uprising, revolution, insurrection,
 milita or usurped acts.
 • Breach of law with Criminal Intent, intentional self inju
 • Abuse or the consequences of the abuse of intoxicants or
 hallucinogenic substances
• Cosmetic, aesthetic and re-shaping treatments & surgeries
 • Hearing aids, spectacles or contact lenses including
 optometric therapy

 • Psychiatric or psychological disorders, mental disorders

For additional information can mail me or add comments or call me (9886220149)

Saturday, August 5, 2017

Good Income Option for Senior Retired Citizens From Government Schemes

It is always difficult to find a good income option for retired persons who do not have any income option and nil risk appetite . There are few below which may help our senior retired people.

1) Senior Citizen Savings Scheme
 Interest rate: 8.1% p.a. paid out quarterly.
Investment Period: 5 Years
Investment Limit: Min- Rs1000, Max-Rs15 lacs
Where to purchase: Post Office, All Nationalized banks and ICICI bank
Eligibility Criteria: 60 years and above; Retirees above 55 can apply within 1 month of VRS/Superannuation.
Pros: Account can be extended for 3 years after its normal term. Investment amount qualifies for deduction under section 80C up to Rs1.5 lacs. Nomination facility is available. Premature withdrawal allowed after 1st year with 1-2% penalty charge. Interest rates locked for the entire term.
Cons: Interest pay-out frequency is quarterly, not monthly. Interest earned is taxable as per income tax bracket. 
Interest rate: 8.3% p.a. yearly, 8.1% p.a. half-yearly, 8.05 p.a. quarterly and 8% p.a. monthly.
Investment Period: 10 years
Investment Limit: Min- 1.44 lacs Max- 7.5 lacs
Where to purchase: Life Insurance Corporation of India (LIC)
Eligibility Criteria: 60 years and above
Pros: Various pay-out frequencies available. Loan offered against scheme. Interest rates are locked for the whole term.If you like to take yearly once interest then you need to deposit 7.22 lakh instead of 7.5lakh.Plan can be bought from LIC
Cons: Investment not eligible for tax deductions. Withdrawal allowed only for medical emergencies.
Investment tenure is long.
3) Bank Fixed Deposits for Senior Citizens
Interest rate: 7%-8% (including the extra returns offered to senior citizens)
Investment Period: 1 year to 10 years
Investment Limit: Up to 1 Crore
Where to purchase: Any private or public sector bank.
Eligibility Criteria: 60 years and above
Pros: Various pay-out frequencies available. Interest rates are locked for the whole term. Loans available against deposits.
Cons: Investment not eligible for tax deductions except for 5-year deposits offering tax deductions to the extent of Rs1.5 lacs under section 80C.  Premature withdrawal will attract penalty charges of 1% to 2%. Tax saving deposits cannot be withdrawn until completion of tenure.

Saturday, July 30, 2016

What is RBI Monetary Policy and How does this impact individual Stock Price and Personal Expense :)

Monetary Policy is generally declared by RBI and related to interest rate … I hope you all have heard this quite a often in news channels and from the speech of Rajan …. By the way what is this ? CPI,CRR,Repo,Rate cut …. OMG!!!! These are not easy and hence market is not my cup of tea J
But in fact these are very simple at least common man understanding point of view … At least we can get an idea how this will impact our monthly family budget and stock market …..
So without wasting time let me start one by one......

Repo Rate:
When banks want to borrow money from RBI , the rate at which RBI lends money to banks is called Repo Rate.
Ex: If Repo rate is high then the then cost of borrowing is high .Then what will happen? Banks will lend money to us in a higher interest rate .Hence house loan , educational loan and other loans will be costlier for us .. Isn’t it !If banks will get loan from RBi at 8% interest rate , then they will give us loan more than that rate , it may be 9,10,11 or 12 though there are some rules but definitely not below 8%.
That’s why Bankers, Market do not want RBI to increase repo rate … Got it J

Reverse Repo Rate :
It is just opposite of repo rate. In this case banks lend money to RBI .In this case banks are happy to give loan to RBI instead of big corporate because the chance of getting default is NIL J
But here also there is a twist. Suppose if Reverse Repo rate is high and banks lend money to RBI heavily , and they don’t lend to corporate and hence liquidity in the system tightens .Consumption dampens if it continue for a long time .Hence high Revese Repo rate is also not good for economy isn’t it !

CRR (Cash Reserve Ratio):
Every bank is mandatorily required to maintain funds with RBI. The amount that they maintain is dependent on the CRR. If CRR increases then more money is removed from the system, which is again not good for the economy.
The RBI meets every quarter to review the rates. This is a key event that the market watches out for. The first to react to rate decisions would be interest rate sensitive stocks across various sectors such as – banks, automobile, housing finance, real estate, metals etc.

Statutory Liquidity Ratio (SLR):
Every bank is required to maintain at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR).  RBI is empowered to increase this ratio up to 40%.  An increase in SLR also restricts the bank’s leverage position to pump more money into the economy.

Now the Big Monster is Inflation .What is inflation?
All things being equal, if the cost of 1 KG of onion has increased from Rs.15 to Rs.20 then this price increase is attributed to inflation. Got it !
Inflation is inevitable but a high inflation is not desirable and creates uneasiness for economy because consumption dampens and saving reduces and hence domestic investment from retail people too . Nobody will tell you domestic retail part but I will as I know the power of common Indian.
There are 2 types of inflation
  1. WPI (Wholesale Price Index)
  2. CPI (Consumer Price Index )

The WPI indicates the movement in prices at the wholesale level. It captures the price increase or decrease when they are sold between organizations as opposed to actual consumers.
The CPI on the other hand captures the effect of the change in prices at a retail level. As a consumer, CPI inflation is what really matters. The calculation of CPI is quite detailed as it involves classifying consumption into various categories and sub categories across urban and rural regions. Each of these categories is made into an index. This means the final CPI index is a composition of several internal indices.
WPI is an easy and convenient method to calculate inflation. However the inflation measured here is at an institutional level and does not necessarily capture the inflation experienced by the consumer.
The computation of CPI is quite rigorous and detailed. It is one of the most critical metrics for studying the economy.  A national statistical agency called the Ministry of Statistics and Programme implementation (MOSPI) publishes the CPI numbers around the 2nd week of every month.

The RBI’s challenge is to strike a balance between inflation and interest rates. Usually a low interest rate tends to increase the inflation and a high interest rate tends to arrest the inflation.

Index of Industrial Production (IIP):
The Index of Industrial Production (IIP)  is a short term indicator of how the industrial sector in the country is progressing. The data is released every month (along with inflation data) by Ministry of Statistics and Programme implementation (MOSPI). As the name suggests, the IIP measures the production in the Indian industrial sectors keeping a fixed reference point. As of today, India uses the reference point of 2004-05. The reference point is also called the base year.
Roughly about 15 different industries submit their production data to the ministry, which collates the data and releases it as an index number. If the IIP is increasing it indicates a vibrant industrial environment (as the production is going up) and hence a positive sign for the economy and markets. A decreasing IIP indicates a sluggish production environment, hence a negative sign for the economy and markets.
To sum up, an upswing in the industrial production is good for the economy and a downswing rings an alarm. As India is getting more industrialized, the relative importance of the Index of Industrial Production is increasing.
A lower IIP number puts pressure on the RBI to lower the interest rates.

Purchasing Manager Index (PMI):
The Purchasing managers index (PMI) is an economic indicator which tries to capture the business activity across the manufacturing and service sectors in the country. This is a survey based indicator where the respondents – usually the purchasing managers indicate their change in business perception with respect to the previous month. A separate survey is conducted for the service and the manufacturing sectors. The data from the survey is consolidated on to a single index. Typical areas covered in the survey include factors such as new orders, output, business expectations and employment amongst others.
The PMI number usually oscillates around 50. A reading above 50 indicates expansion and below 50 indicates a contraction in the economy. And a reading at 50 indicates no change in the economy.

Apart from this Budget and Corporate earnings are 2 different factors influencing country’s economy.

So are you ready for next monetary policy to hear from RBI Governor and make your own predictions J ……..

Friday, July 8, 2016

What does CRISIL , ICRA and CARE ratings mean for bonds and treasury ?

Corporate fixed deposits and bonds are mandatorily required to get rated by a credit rating agency before going for a public issue. Credit rating signifies how risky or safe it is for you to invest in that financial instrument. CRISIL, CARE and ICRA are examples of some well known credit rating agencies. Following are some symbols that CRISIL gives to corporate bonds:-

Sunday, July 3, 2016

Why Tata Metaliks moved from Rs 78 to Rs 409 in just 3 months !!!!!!

  1. It is filing for a fresh scheme of amalgamation of Tata Metaliks Ductile Iron (DI) Pipes (TMDIPL), its wholly-owned subsidiary with it.
  2. Tata Metaliks is one of the largest manufacturers of foundry-grade pig iron in the world. 
  3. Though its consolidated revenues for the March quarter declined by 7%, its profits rose by 71%, to Rs48.62 crore from Rs28.43 crore.
  4. It had a return on capital employed (RoCE) of 37%. 
  5. Tata Steel calls off Tata Metaliks merger - (Tata Steel non merger is a major relief for Tata Mettaliks.Tata Steel is a value destroyer for minority stock holder for more than a decade now)

        However, it is concentrating on high-value ductile iron pipes which are mostly used for water transmission. Some analysts expect that the DI pipes segment will benefit from government thrust on irrigation and healthy water access. 

Disclaimer :
I am holding this stock in my portfolio . Hence i may be biased and i may be wrong like many times before .It is not a investment advice and for educational purpose .