  | | January 31, 2014 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 20,513.85 | -619.71 | -2.93% | | Re/US$ | 62.58 | -0.65 | -1.05% | | Gold Rs/10g | 30,090.00 | 265 | 0.89% | | Crude ($/barrel) | 108.44 | -1.09 | -1.00% | | FD Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on January 30, 2014
*BSE Sensex as on January 31, 2014 | |
Impact 
Apart from earning interest, one of your objectives for keeping money with banks might be safety of your money. But before you open a savings bank account with any bank or opt for loans, do you check the history the bank?
A bank can preserve your capital only if it acts prudently with money that you kept with it as a deposit. While it sanctions advances and offers other monetary services to its customers, bank is expected to act diligently. However, banking frauds are on rise these days. Although, number of cases reported have reduced every year since 2009-10; amount involved has gone up substantially. As per the RBI findings, almost 65% of the frauds are technology related. You would be surprised to know that new private sector banks and foreign banks (who are believed to have most advanced technologies) have a bigger share in such frauds. Technology related frauds involve small amounts but the frequency of occurrence is high. On the other hand, advance related frauds have been frequent with some public sector banks, which contribute the highest share (83%) as far as total value of frauds is concerned. Some well-known banks such as Indian Overseas Bank, State Bank of India, Canara Bank, United Bank of India, UCO bank and Central bank to name a few have seen rise in frauds. Public sector banks have a cumulative loss of about Rs 23,000 crore on account of frauds. But this is not to say that only these banks have been facing the issue of frauds; there are other banks too.
PersonalFN is of the view that, the amount involved in frauds may not be alarming as compared to volume and value of banking transactions. Having said this, it is still important for you as a customer to thoroughly assess the fundamentals of a bank before banking with it. The quality of corporate governance should also be assessed. Unlike wealth management, which only focuses on generating high returns on your investments, financial planning helps you deal with each aspect of your personal finance prudently.
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Impact
New concepts flood the markets regularly but many of them lose steam as the time lapses. However, bitcoin, a virtual currency, seems to be in for a long haul. It has gained huge popularity despite having been turned down by central banks of many nations. Worldwide, bitcoin has earned bad reputation. Bitcoin has been used as a medium of trade in illegal activities. There have been cases of bitcoin exchanges having vanished overnight. Millions have been lost in bitcoin. On this backdrop, RBI had cautioned people of India against ill-effects of using bitcoin. This might have been a matter of concern for those who are trying to hard-sell the concept of bitcoin in India. Proponents of Bitcoin are launching a legal battle against RBI.
Recently, Mr Venugopal Badravada, a life member of Bitcoin Foundation Inc., USA, has demanded a legal framework within 30 days. The notice sent by him to the central bank also accuses the bank for causing doubts in minds of entrepreneurs who want to do genuine business. Earlier, along with issuing warning against bitcoin, RBI had made it clear that it wouldn't regulate the virtual currency.
PersonalFN is of the view that, since success of bitcoin depends on number of people using it; proponents of it would try to highlight the novelty it claims to bring with it. Although, unlike any Ponzi scheme it doesn't guarantee high returns, there have been huge speculations that have caused volatility in the value of bitcoin. While RBI fights a legal battle with Bitcoin supporters, you should access whether you need a currency which is not backed by any sovereign guarantee.
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The Most Awaited Tax Planning Guide 2014 - Released!
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Impact
You might be tempted to time the market while investing in stocks. If you apply the same tactics even in case of mutual fund investments then probably that would be inappropriate. When you invest in mutual funds, a team of experts is managing your money. PersonalFN is of the view that you should rely on your fund manager for taking a directional call on the market. At present when markets are very close to their all-time high, you might be thinking about selling your mutual funds and taking profits on the table. Probably, you are worried that markets may again go down and you would lose exit opportunities. Very few have made money in last 5-6 years. However, having a perception that markets will continue to move down as soon as they are near their highs is flawed. There are several factors that move the market and concentrating only on the index level ignoring the fundamentals may prove to be wrong later.
Is your fund manager bearish too?
Mutual funds have been the net sellers this month. In the first 22 days of the New Year only during 3 trading sessions the mutual funds have turned net buyers. From the beginning of the month mutual funds have approximately sold equities worth Rs 1,500 crore. It is noteworthy that markets are absolutely flat for past few weeks. They appear to be undecided for now.
Mutual Fund Activity
Data as on January 22, 2014
(Source: ACE MF, PersonalFN Research)
Why mutual funds might be selling?
There could be a number of reasons why a mutual fund can offload equity. However at this juncture it appears that there could be one of the below mentioned factors or a combination of all might have prompted fund managers to sell equities.
To read more about this news and the view of PersonalFN over it, please click here.
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Impact 
As On taking the charge in September 2013, the new RBI governor had said that "at a time when financial markets are volatile, and there is some domestic political uncertainty because of impending elections, the Reserve Bank of India should be a beacon of stability as to its objectives. That is not to say we will never surprise markets with actions. A central bank should never say "Never"! But the public should have a clear framework as to where we are going, and understand how our policy actions fit into that framework". This might give you a feeling that RBI may rarely surprise with its policy actions. But if you see the market consensus, thrice it was opposite of what RBI actually did in its policy, out of last four policy announcements. RBI has a contrary view that even if it cuts policy rates banks may not cut lending rates. So under such a scenario you might be worried about what will happen to your home loan EMIs and fixed deposits when any policy decision is taken.
What may change now?
It has been observed that, banks do not hike rates on deposits immediately when repo rates are hiked and vice-a-versa, Lending rate too don't react to policy rate actions immediately. For example, With 3 hikes in last 3-4 months, it was anticipated that, bankers may pass on the rate hikes to customers by hiking deposit rates and also the lending rates. But very few banks have responded with upward revisions in interest rates. Since the credit demand has been low, banks fear that they may lose business if they hike lending rates. Therefore it is now safe to assume that banks may not take any action till their margins are not affected to unaccepted level.
To read more about this news and the view of PersonalFN over it, please click here.
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- You must have read somewhere, "retail investors don't make money in markets." This happens so because they exit markets in panic and enter on optimism. Although this behaviour is exactly opposite of what successful investors might advocate; retail investors refuse to change it. While, equity oriented mutual funds have incessantly witnessed redemption pressure in 2013, business garnered through New Fund Offers (NFOs) in 2013 was highest in last 3 years.
Mutual fund houses launched a number of NFOs towards the end of last year and have garnered close to Rs 2,400 crore. Investors had shunned equities and equity oriented mutual funds when markets were falling over rupee concerns in 2013. But now that rupee has partially recovered and market sentiment has improved substantially, retail investors are again investing in NFOs.
PersonalFN is of the view that, although investing in NFO at face value Rs 10 per unit might give you a feeling that they are selling cheaper to the already existing funds which quote at higher NAV. However, it is noteworthy that, this is a myth. Investors should try to follow their asset allocation and invest accordingly.
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Block Chain: "Bitcoin requires that all transactions, without exception, be included in a shared public transaction log known as a "block chain". This mechanism ensures that the party spending the bitcoins really owns them, and also prevents double-counting and other fraud."
(Source: Investopedia)
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Quote : "All intelligent investing is value investing — acquiring more that you are paying for. You must value the business in order to value the stock." - Charlie Munger
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