Open 24th February 2012 to 27th February 2012
Fixed Maturity Plans (FMP)-key points :
· FMPs invest their corpus in debt instruments such as Commercial Papers, Certificate of Deposits, Debentures etc., which enable them to earn higher returns at times than bank FD rates .
· FMPs effectively eliminate interest rate risk by investing in instruments whose maturity coincides with the maturity of the FMP, However, an investor is exposed to credit risks depending on the portfolio of an FMP.
· Tax Efficient- Dividend distribution tax of 12.5% (plus applicable surcharge and cess) for individual/HUF /NRI investors investing in FMPs as compared to flat 30%(plus surcharge) TDS in case of NRO FDs.
· Investors willing to take a little risk for that extra return ,should invest in FMPs. Investors who are satisfied with a lower but assured return should invest in bank FDs.
The main aspects of FMP are as under :-
· 1. They are tax efficient (most important feature for HNIs since Fixed Deposit returns are subjected to 30.900% tax)
· 2. FMPs are passively managed funds; the turnover is low resulting in lower costs of transaction. This in turn enhances the returns for the investor.
· 3. The prime reason lies in investors seeking a safer alternative to equity funds, with decent returns and tax efficiency
· The SBI DEBT FUND SERIES – (FMPs) are close-ended 100% Debt Fund. The investment objective of the Fund is to provide regular income, liquidity and returns to the investors through investments in a portfolio comprising of debt instruments such as Government Securities, PSU & Corporate Bonds and Money Market Instruments maturing on or before the maturity of the scheme. The investments in this Fund would not carry any Interest rate risk as the Fund would seek to invest only in such instruments whose residual maturity matches with the maturity of the Fund.
Thursday, February 23, 2012
Wednesday, February 15, 2012
NFO Launch : Kotak FMP Series 75 - (370 Days)
The New Fund Offer of the scheme opens on February 16, 2012 (Thursday) and closes on February 21, 2012 (Tuesday)
MINIMUM INVESTMENT during NFO:
Rs. 5,000/- and in multiples of Rs 10 for purchase and switch-ins.
OPTIONS : Growth and Dividend Payout.
INVESTMENT OBJECTIVE:
The investment objective of the Scheme is to generate returns through investments in debt and money market instruments with a view to significantly reduce the interest rate risk. The Scheme will invest in debt and money market securities, maturing on or before maturity of the scheme.
LISTING:
The units of the scheme will be listed on BSE on allotment. The units of the scheme may also be listed on the other stock exchanges.
BENCHMARK : CRISIL Short Term Bond Index.
LIQUIDITY:
Units of this scheme will be listed on Bombay Stock Exchange. Investors may sell their units in the stock exchange(s) on which these units are listed on all the trading days of the stock exchange. The units cannot be redeemed with KMMF until the maturity of the scheme.
MATURITY : 370 Days after the date of allotment of units.
MINIMUM INVESTMENT during NFO:
Rs. 5,000/- and in multiples of Rs 10 for purchase and switch-ins.
OPTIONS : Growth and Dividend Payout.
INVESTMENT OBJECTIVE:
The investment objective of the Scheme is to generate returns through investments in debt and money market instruments with a view to significantly reduce the interest rate risk. The Scheme will invest in debt and money market securities, maturing on or before maturity of the scheme.
LISTING:
The units of the scheme will be listed on BSE on allotment. The units of the scheme may also be listed on the other stock exchanges.
BENCHMARK : CRISIL Short Term Bond Index.
LIQUIDITY:
Units of this scheme will be listed on Bombay Stock Exchange. Investors may sell their units in the stock exchange(s) on which these units are listed on all the trading days of the stock exchange. The units cannot be redeemed with KMMF until the maturity of the scheme.
MATURITY : 370 Days after the date of allotment of units.
Monday, February 13, 2012
IRDA’s focus on needs-based life insurance sales
IRDA’s focus on needs-based life insurance sales—Will it really work or increase confusion?
The Insurance Regulatory and Development Authority (IRDA) recently announced guidelines on development and implementation of prospect product matrix by life insurance companies, which will help in needs-based sales. Will this help?
Sale of life insurance policies based on customer needs would surely help. There is a lower chance of buying a wrong policy and painful policy surrenders. IRDA’s step in this direction is welcome, but combining needs analysis and proposal in one form will be cumbersome to both customers and intermediaries. After all, the proposal form is needed only when the customer has agreed to buy a specific product while the needs analysis form will be used to determine the customer’s requirement which will be used to recommend one or more insurance products.
According to Vijay Sinha, senior vice president and head, marketing, Tata AIG Life Insurance, “IRDA’s initiative is most welcome as all mature insurance markets like the UK already have needs-based sales. The needs analysis and proposal form should be separate as its importance comes at different stages in the sales process. The fact-finding stage of the sales process should involve a needs analysis form. After understanding the customer’s requirements, the intermediary can come up with solutions and recommend product. When the customer approves the product, the proposal form will be used. It will confuse the customer if the needs analysis and proposal form are combined.”
IRDA exposure draft specifies that an insurer or a distributor must make “reasonable efforts” to obtain a consumer’s suitability information prior to making a recommendation. It means that customer suitability information is optional which will entail most of the customers bypassing the questions or intermediaries making half-hearted attempts to get answers. Suitability information means information that is reasonably appropriate to determine the suitability of a recommendation. E.g. age, annual Income, financial resources used for funding the purchase of the life insurance product, intended use of the life insurance product, financial objectives with time horizon, existing assets including investment and life insurance holdings, liquidity needs, liquid net worth, tax status, risk tolerance and so on.
Many insurance companies are not happy to adopt a standard proposal-cum-needs analysis form. While they agree on the need to have some mandatory questions to seek customer information, they feel that there should be flexibility in structuring the remaining questions. Insurance companies want to apply their own ingenuity in having questions framed in a sales-oriented manner; the fact finding will naturally lead to sales. They feel that IRDA approach should be flexible rather than prescriptive.
Online life insurance buying is popular with term life insurance as well as ULIPs. The exposure draft is silent about online life insurance. Will the ‘prospect product matrix’ be applicable to online life insurance sales, too? If not, what prevents an aged person from buying long-term online ULIP that is clearly not suitable for his/her needs?
An insurance intermediary is not a financial planner in most cases and hence a customer may be queasy about sharing financial information, especially giving income proof, expected inheritance, details of liabilities, expenditure and so on (as per the proposed form).
According to a senior official in one insurance company, “The customer should have the flexibility to refuse sharing of financial information in the needs analysis form. The prospective customer should state in writing that he wishes to buy the product without sharing his financial information. If it is made mandatory, it will turn-off some customers or the intermediary may end up filling something just to meet the requirement, both the things being undesirable.”
The Insurance Regulatory and Development Authority (IRDA) recently announced guidelines on development and implementation of prospect product matrix by life insurance companies, which will help in needs-based sales. Will this help?
Sale of life insurance policies based on customer needs would surely help. There is a lower chance of buying a wrong policy and painful policy surrenders. IRDA’s step in this direction is welcome, but combining needs analysis and proposal in one form will be cumbersome to both customers and intermediaries. After all, the proposal form is needed only when the customer has agreed to buy a specific product while the needs analysis form will be used to determine the customer’s requirement which will be used to recommend one or more insurance products.
According to Vijay Sinha, senior vice president and head, marketing, Tata AIG Life Insurance, “IRDA’s initiative is most welcome as all mature insurance markets like the UK already have needs-based sales. The needs analysis and proposal form should be separate as its importance comes at different stages in the sales process. The fact-finding stage of the sales process should involve a needs analysis form. After understanding the customer’s requirements, the intermediary can come up with solutions and recommend product. When the customer approves the product, the proposal form will be used. It will confuse the customer if the needs analysis and proposal form are combined.”
IRDA exposure draft specifies that an insurer or a distributor must make “reasonable efforts” to obtain a consumer’s suitability information prior to making a recommendation. It means that customer suitability information is optional which will entail most of the customers bypassing the questions or intermediaries making half-hearted attempts to get answers. Suitability information means information that is reasonably appropriate to determine the suitability of a recommendation. E.g. age, annual Income, financial resources used for funding the purchase of the life insurance product, intended use of the life insurance product, financial objectives with time horizon, existing assets including investment and life insurance holdings, liquidity needs, liquid net worth, tax status, risk tolerance and so on.
Many insurance companies are not happy to adopt a standard proposal-cum-needs analysis form. While they agree on the need to have some mandatory questions to seek customer information, they feel that there should be flexibility in structuring the remaining questions. Insurance companies want to apply their own ingenuity in having questions framed in a sales-oriented manner; the fact finding will naturally lead to sales. They feel that IRDA approach should be flexible rather than prescriptive.
Online life insurance buying is popular with term life insurance as well as ULIPs. The exposure draft is silent about online life insurance. Will the ‘prospect product matrix’ be applicable to online life insurance sales, too? If not, what prevents an aged person from buying long-term online ULIP that is clearly not suitable for his/her needs?
An insurance intermediary is not a financial planner in most cases and hence a customer may be queasy about sharing financial information, especially giving income proof, expected inheritance, details of liabilities, expenditure and so on (as per the proposed form).
According to a senior official in one insurance company, “The customer should have the flexibility to refuse sharing of financial information in the needs analysis form. The prospective customer should state in writing that he wishes to buy the product without sharing his financial information. If it is made mandatory, it will turn-off some customers or the intermediary may end up filling something just to meet the requirement, both the things being undesirable.”
Saturday, February 11, 2012
IT Sector Update
Cognizant’s guidance for 1QCY12 and NASSCOM’s (National Association of Software and Services Companies) forecast for software and services export growth for FY13 are weak.
Cognizant’s guidance for 1QCY12 suggests that the company expects a mere 2.2% qoq growth for 1Q.
NASSCOM’s initial forecast for FY13, estimates 11 -14% yoy software and services export growth for the industry.
Its implications are negative to the IT coverage universe, as it seems that the industry-wise demand visibility is still poor.
It looks better to use the current rally to exit from the stocks.
Target prices on IT stocks and assumptions on the sector remain unchanged. On a relative basis, Infosys looks better because of their conservative guidance and cheaper valuation.
Cognizant’s guidance for 1QCY12 suggests that the company expects a mere 2.2% qoq growth for 1Q.
NASSCOM’s initial forecast for FY13, estimates 11 -14% yoy software and services export growth for the industry.
Its implications are negative to the IT coverage universe, as it seems that the industry-wise demand visibility is still poor.
It looks better to use the current rally to exit from the stocks.
Target prices on IT stocks and assumptions on the sector remain unchanged. On a relative basis, Infosys looks better because of their conservative guidance and cheaper valuation.
Wednesday, February 8, 2012
It is a positive year for mutual fund industry
With a less-than-promising 2011 behind, mutual fund houses can look forward to a better 2012, says a report from credit-rating agency ICRA.
The report on the mutual fund industry says that with the equity markets on an upswing in 2012, interest among investors may come back. “The funds can also benefit from gradual improvement in confidence due to policy actions aimed to mitigate concerns emerging out of the Euro Zone debt crisis.
“Expected easing of monetary policy in other emerging markets is also expected to add to the positive sentiments,” said the report. The BSE Sensex has so far, this calendar year, risen 13.6 per cent. Calendar 2011 witnessed a 24 per cent fall. .
Wealth management firms may now focus on mutual fund to retain their customer base in the wake of the increase in minimum investment amount for PMS.
At a January 28 board meeting, capital market regulator SEBI hiked the minimum investment amount for PMS funds from Rs 5 lakh to Rs 25 lakh. . Analysts say that this may help the mutual fund industry which had lost a number of its high-end investors to the PMS business post the entry-load ban. This was because distributors could charge a high entry fee for PMS products but not for mutual fund products.
Debt funds could also see continued interest in the short-term, which will result in better risk-adjusted returns. The tight Government fiscals could, however, limit the upside over the short-term. Also, FMPs may see sustained interest among investors, as the “recent ruling of reducing the marked to market window from 90 days to 60 days and that all securities in the liquid schemes be valued could ensure that investors with a longer term investment horizon stand to benefit,” said the report.
GOLD ETFS MAY NOT
Investors of gold ETFs may have less to look forward to as there is less likelihood of 2012 being a repeat of 2011 in terms of the returns provided.
“We could also see a realignment of investor interest due to the increasing feeling of comfort which could be generated by lower inflation numbers. Anticipation of positive policy action especially on the monetary front could increase the attractiveness of other asset classes.
“Another possible reason for a slight cooling down is the fact that upside gained from gold could increasingly be looked at as collateral to cover for downsides in other asset classes,” said the report.
Gold ETFs were among the best performing category of calendar year 2011 due to steady rise in gold prices.
The report on the mutual fund industry says that with the equity markets on an upswing in 2012, interest among investors may come back. “The funds can also benefit from gradual improvement in confidence due to policy actions aimed to mitigate concerns emerging out of the Euro Zone debt crisis.
“Expected easing of monetary policy in other emerging markets is also expected to add to the positive sentiments,” said the report. The BSE Sensex has so far, this calendar year, risen 13.6 per cent. Calendar 2011 witnessed a 24 per cent fall. .
Wealth management firms may now focus on mutual fund to retain their customer base in the wake of the increase in minimum investment amount for PMS.
At a January 28 board meeting, capital market regulator SEBI hiked the minimum investment amount for PMS funds from Rs 5 lakh to Rs 25 lakh. . Analysts say that this may help the mutual fund industry which had lost a number of its high-end investors to the PMS business post the entry-load ban. This was because distributors could charge a high entry fee for PMS products but not for mutual fund products.
Debt funds could also see continued interest in the short-term, which will result in better risk-adjusted returns. The tight Government fiscals could, however, limit the upside over the short-term. Also, FMPs may see sustained interest among investors, as the “recent ruling of reducing the marked to market window from 90 days to 60 days and that all securities in the liquid schemes be valued could ensure that investors with a longer term investment horizon stand to benefit,” said the report.
GOLD ETFS MAY NOT
Investors of gold ETFs may have less to look forward to as there is less likelihood of 2012 being a repeat of 2011 in terms of the returns provided.
“We could also see a realignment of investor interest due to the increasing feeling of comfort which could be generated by lower inflation numbers. Anticipation of positive policy action especially on the monetary front could increase the attractiveness of other asset classes.
“Another possible reason for a slight cooling down is the fact that upside gained from gold could increasingly be looked at as collateral to cover for downsides in other asset classes,” said the report.
Gold ETFs were among the best performing category of calendar year 2011 due to steady rise in gold prices.
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