Tuesday, December 22, 2009

Something About Insurance ...

Now a days, we are often annoyed by calls from various  insurance companies to buy this or that plans….
But How many of us  know what insurance really means? Not many going by the various plans that have been sold over the years. While different individuals plan their finances differently based on their needs and incomes, it is also true that all individuals need to have a term plan in their financial portfolio. Also other insurance plans can co-exist in your portfolio.

Any ways it can be defined in simple language as a protection against financial loss arising on the happening of an eventuality. For instance, In life insurance parlance, the event happens to be the death of an individual.

Basically there are 2 types of plans; endowment plans and term plans. All other plans are actually variations derived from these two.

In an endowment plan, the premium paid covers a savings element that is invested in different investment instruments to generate returns in the long-term.

A term plan, is a pure risk cover plan, only administration expenses and mortality charges are covered in the premium. There is no savings element in the premium being charged to the insured; as a result the insured does not receive anything should he survive the entire term.

Thus , the question now arise for which plan we should go for??? See the answer to this depends upon individual to individual..but in a broader way, for a lay man , Term insurance is advocated…The reasons are very clear.

• A term plan offers the insured a higher sum assured at a very low cost. And this is the fundamental principle of insurance. But in India, history suggests that insurance has always been sold, it has rarely been bought. Blame the unscrupulous insurance agents for this. To really understand this statement, one has to take a look at the agent’s commission structure of various plans.

• Premium paid on term plans is lower compared to the premiums on other plans

• Another reason for term plans being a more prudent option than other plans is its suitability to all individuals irrespective of their age, sex, earning capacity and lifestyle, and risk-taking ability. This plan is a necessity for all concerned as it offers maximum (cover) at minimum (premium).

• Ideally, a term plan should be taken for the maximum possible tenure available from the insurance company.

Lets have a peek on other side too,

People tend to ask, “What do I get back after paying my premium?” A reply that their family is protected against the financial loss due to an unlikely event of their sudden demise does not suffice.

That’s why penetration of term insurance plans are very very low in our country. Data reveals that only 26 per cent are insured in India. That too the average sum assured per policy is just over Rs 90,000. This is never going to be sufficient..
As observed , premium to sum assured ratio is high in India, because we rarely have term insurance policies. Invariably every policy holder expects a maturity value. This leave the insurers with no choice but to promote emdowment plans.

But as everybody says, endowment plans gives back a maturity benefit which is not the case with term assurance plans. That does not matter if you are really a smart investor..Isnt It...?

Friday, December 18, 2009

Food Alert...

Food prices rose almost 20% from last week 19.05%. Where as manufacturing price rose 4% over a week, showing sign of building economic recovery. The WPI (Wholesale Price index) inflation rose to 4.78% in November 2009 from, 1.34% in October 2009.
Food prices are jumping because of shortages after crops were hit by the weakest monsoon rains in 37 years & then flooding in parts of the country.
This lead market expectations the central bank would tighten policy as early as Jan 2010.
RBI (Reserve Bank of India) Governor D Subbarao has said that monetary policy was not the right tool to fix supply problems such as food shortages, but has also noted the risk that if soaring food prices were factored into expectations for other prices it would create inflation pressures through the economy. The central bank holds its next policy meeting in late January, but it can adjust monetory policy at any time.

This influences us to get attention of food product industry & the stocks covering this.

Thursday, December 17, 2009

Markets will open at 9 am.

Very competitive move by NSE (National stock exchange), reacting quickly to BSE's (Bombay Stock Exchange) earlier changing time 9.45 to from 9.55, claiming this will improve market liquidity.
Thank God, SEBI guideline says, markets can't start before 9 am.
This move sparkled many angry reactions across the Dalal street, affecting more than 1 million people in country directly or indirectly.
The move was advocated to match the timing with Singapore stock exchange where, SGX Nifty futures trade, but this problem will still persist, as their market opens well ahead of us. 2 and half hours time gap.
The operational aspects behind this may brake this speeding event, as banks do not open so early, to arrange the margin funding for brokers.
Dalal Street is of course upset on the same move...
Ohh.. the news came just now, from my friend's office.. They have announced, office will start business at 8.00 am from tomorrow, as they need to generate morning reports.... How can a person staying in suburbs like Borivali, Mulund or far.. can come at 8.00am office?  He would have to wake up at 5... No time for Gym, Yoga, personal life (View from Dalal street participant's ) )....
Hope at least this will move Sensex to 25000..

Wednesday, December 16, 2009

Have investments SIP by SIP.....

Moral of the Fable: "Slow but steady wins the race".

Well, SIP is the same. A winning formula.

As every one is aware, SIP is a method of investing a fixed sum of money regularly in a Mutual Fund Scheme. It is quite similar to regular saving scheme in a bank account like a recurring deposit. The only difference is that there are good chances of getting a better return than a bank deposit when investing in stocks.

Every Financial Analyst (FA) will be after you to start a SIP, wondering why such emphasis on SIP,  Lets have a look on some benefits of it...
1) SIP offers you tax benefits which could come in handy if have to pay income tax.

2) Regular Investment makes you disciplined in your savings and also leads to wealth accumulation.

3) SIP comes with a locking period, so even if you wish to spend you cannot as the funds are locked and cannot be taken out.

4) Not need for large investment: In SIP, invest as low as 100, 500 or 1000 rupees. There is no need to worry if you do not earn a lot of money as you can still be a market investor with as low as 500 a month and even that would come up to be quite a good sum after a few years.

5) Experts work for you: In SIP, you invest in mutual funds where your investments are managed by market experts and professionals who have good knowledge in this field, so you have a chance to do much better than that of investing yourself alone.

6) Law of Averages: In SIP, you will be purchasing units at all phases of the market, high or low, depending on that you get the units share and so you don't need to worry about market going up or down. You just have to wait for the right time to take out your money after the scheme is over and no more deposits are being done. Thus your investments get averaged out at the end and the loss is very limited which is not the case when you invest all at once.

Friday, December 11, 2009

R-Infra fetched Rs 1K -cr contract from Gujarat govt

Anil Dhirubhai Ambani Group flagship company Reliance Infrastructure Ltd (R-Infra) has won a Rs 1,000-crore (Rs 10-billion) road project from the Gujarat government, within a week after winning the Rs 1,725-crore (Rs 17.25 billion) Pune-Satara Road project from the National Highway Authority of India .

R-Infra quoted Rs 42-crore (Rs 420-million) premium over the bids of rival companies such as GVK Power and Infrastructure Limited, GMR Infrastructure , B Sennaih and C&C, JMC Srei and Sadhbhav, sources told Business Standard.

The project is to execute a 71 kilometre four-six lane corridor connecting the ports of Mundra and Kandla in Gujarat. The project has to be completed by December 2012 on a design, build, finance, operate and transfer (toll) basis with a concession period of 25 years.

The bidding process for this project started in February and 20 bidders were qualified in the initial screening stage. The shortlisted six companies submitted their final bids on December 3. The bids were opened on Monday, said sources. An R-Infra spokesperson declined to comment.The company plans to increase its investments in road projects to over Rs 20,000 crore (Rs 200 billion) by 2012. R-Infra is also looking for opportunities in ultra mega road projects across India, Lalit Jalan, chief executive of R-Infra, had told Business Standard in a recent interview.
A few days ago, R-Infra had won the Rs 1,750-crore (Rs 17.5-billion) Pune-Satara six laning project with a length of 140 kilometers, a corridor connecting Mumbai and Pune to southern parts of India, including Bangalore and Chennai.R-Infra is now executing nine road projects with a total outlay of Rs 7,500 crore (Rs 75 billion) totaling more than 700 kilometers. Two months ago, the company had operationalised its two toll road projects worth Rs 760 crore (Rs 7.6 billion) in Tamil Nadu.

The rest of the road projects are at various stages of development. All road projects of the company are executed by Reliance Infraventures, a 100 per cent subsidiary of R-Infra.