S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
19,958.47 | 462.7 2.37%	59.68 |0.5 0.75%	26,640.00 | 370.0 1.41%	107.93 | 2.2 2.09%	7.00% - 8.75%

Although equity markets recovered from their 2008 lows, many investors lost money in the interim. On the contrary real estate markets had quickly recovered and attracted lot of money in the post crisis times. But now, with sustained lull in Indian economy even real estate sales have come under pressure. Luxury home sales in some key property markets such as Mumbai, Gurgaon and Bengaluru have substantially dropped in last few months. In Gurgaon, demand for homes above Rs 3 crore has dived 40% while in Mumbai, homes costing Rs 5 crore and above have witnessed a steep 35% fall in demand. Sales of premium homes costing Rs 2.5 crore and above dropped by around 20% in I.T. hub Bengaluru.

PersonalFN believes such fall in the premium segment highlights that even higher income groups are facing the adverse effects of economic slowdown. However, we might not see any meaningful drop in real estate prices any time soon. Indians are ardent believers of real assets such as real estate and gold. As soon as economy recovers, demand may revive. Having said this, PersonalFN is also of the view that price trend in residential property market would also depend on interest rate movement in the economy. At present, rupee weakness and vulnerability of India’s external sector limits the scope of aggressive rate cuts by RBI. PersonalFN believes rather than chasing real estate without being cautious to property prices may be a bad idea. Following a personalised financial plan always provides you a roadmap to your financial security and also helps you keep away from speculation.

 

Gold imports curbed; will it prop sinking rupee?

 

Tumbling Rupee has been giving sleepless nights to Indians. It hits on profit margins of importers and also makes imported goods costlier for consumers. At country level, Weakness in the rupee puts tremendous pressure on nation’s current account. In Indian context, the Current Account Deficit (CAD) peaked at 6.7% of GDP during the 3rd quarter of Financial Year (FY) 2012-13. Such a high CAD makes it difficult to bridge the gap for a country like India which has limited export competence. It’s a vicious circle. Excessive imports make currency weaker and weaker currency increases the import bill even further.

Have we fixed it?

Huge gold imports are often blamed for spoiling India’s current account position. To rein in imports, government took various steps at all levels, right from raising import duty to restricting sale of gold. All these concerted efforts seem to be paying off now. India began FY 13-14 with very high imports of gold which stood at 142.5 tonnes in April and 162 tonnes in May. Gold imports have fallen massive 80% in June. Last year, India had imported 50 tonnes of gold. However, as per official estimates, just 31.5 tonnes of gold has been shipped to India June this year. Also, current account deficit for 4th quarter of FY 13 came in at 3.6%. This has improved the market sentiment. Furthermore, assurance of Federal Reserves (U.S.) to continue with lose monetary stance has made dollar weaker and thus has provide some prop to sinking rupee.

Why should we be still cautious…

India keeps getting back to square one thanks to its ineffective policies and structural deficiencies. Have a look at chart given below.
 

Crude Oil Imports: India’s Real Pain?
    
(#: While calculating average for 2013-14, prices between April 01, 2013 and July 09, 2013 are considered)
(Sources: Ministry of Petroleum & Natural Gas, U.S. Energy Information Administration and PersonalFN Research)

Crude oil imports of India are steadily on rise. From FY 2007-08 India’s oil imports have risen in excess of 100%. Moreover, average Brent crude oil prices have also inched up year after year. Lose monetary policies in developed economies and especially in the U.S. are keeping crude oil prices at elevated level as speculative money flows into crude oil. Therefore, although lesser gold imports may lessen some pressure on import bill; crude oil imports may continue to make a dent. On the other hand, Indian exporters are having a tough time due to recessionary pressure in Europe and elsewhere. Much talked U.S. Immigration Reform Bill may affect prospects of some of India’s major exporters. In short, problem of CAD is deeper than it appears on its face.

PersonalFN is of the view that, although rupee may strengthen with continuation of lose monetary policy in U.S., but easy money may inflate crude oil prices erasing the impact of stronger rupee. Well, RBI would keep a close eye to such external developments before taking a call on direction of interest rates. It is advisable to stick to asset allocation and review your financial plan. Speculation may prove to be extremely hazardous.
 

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Can REITs revive the paining real estate sector?

The real estate sector over the years has attracted many, to approach it as asset class and an effective wealth creating investment avenue. But sky-rocketed property prices in some segments and regions have kept many investors away (although they vie to invest in property). Thus as result, the real estate sector too is witnessing a slump in sale while the country is undergoing an economic slowdown.

But now in the Government’s effort to attract investments and make capital markets more vibrant; here’s some good news for those of you wanting to invest in the real estate sector. The Finance Ministry is considering introduction of Real Estate Investment Trusts (REITs).

So, what are REITs?
Well, they would be offered by real estate companies who will pool capital from investors to purchase and manage real estate assets and / or mortgage loans and are traded on major stock exchanges like normal stocks. To read more about this news and the view of PersonalFN over it, please click here.

 

Is it right to shift your portfolio from equity to debt at this juncture?

 

It may take years to build trust but minutes to ruin it and that too very easily. This goes true in case of individual investors in India. In early days of development of Indian equity markets, retail investors were apprehensive about investing in equities for a number of reasons. Apart from their inclination to invest in physical assets such as gold and real estate, scams and malpractices are among others factors which kept many retail investors away from equity markets. However things changed in post ‘dotcom bubble’ era. Tighter regulations use of much more transparent trading platform and sustained bull market of 2002-07 helped change the mindset of retail investors.

Today, 5 years later, markets are hovering at around levels seen in 2007. So effectively, those who entered the market in 2007-08 have virtually made no returns. At the time of investment, they were perhaps assured by their agents and distributors that over long term (say 3 to 5 years) they would get extremely attractive returns from their investments in equities. In spite of keeping patience for 5 years, they have not made returns. This has put investors off.
And, as a result, delivery based transactions recently hit a 9 year low. The average monthly delivery based transactions has more than halved and has sank to 75 lac in May 2013 against 1.64 crore recorded in 2007-08. To read more about this news and the view of PersonalFN over it, please click here.

 

Assets under Management (AUM) of Gold Exchange Traded Funds (ETFs) dropped 9.2% in June. As per data released by Association of Mutual Funds in India (AMFI), gold ETFs had Rs 9,610 crore under management as on June 30, 2013. Although gold prices fell by 4.5% (in rupee terms) in June; AUM of gold ETFs has fallen at a higher rate. This indicates that more and more investors are exiting gold ETFs. The AUM of gold ETFs has fallen about 20% since January 2013. Higher volatility in gold prices on back of ambiguity about end of quantitative easing in the U.S. seems to have affected Indian Investors.

PersonalFN is of the view that exiting any asset class, including gold, shouldn’t be based only on price movement. Gold should be considered as portfolio diversifier and while investing, ETFs should be a preferred route. Portfolio rebalancing saves you from skewing your portfolio towards a particular asset class.

 

 

Lien: It is the legal right of a creditor to sell the collateral property of a debtor who fails to meet the obligations of a loan contract. A lien exists, for example, when an individual takes out an automobile loan. The lien holder is the bank that grants the loan, and the lien is released when the loan is paid in full. Another type of lien is a mechanic's lien, which can be attached to real property if the property owner fails to pay a contractor for services rendered. If the debtor never pays, the property can be auctioned off to pay the lien holder.

 

Quote : "Don’t stretch yourself too much with a mortgage. Buy within your means.. it’s not worth the sleepless nights"   - Sarah Beeny