Real estate in pune : Emotion vs Practical

Implications of buying versus renting a flat

Assume there is a 2 BHK Flat for sale at Kharadi (in Pune – for that matter you can assume your locality). Considering the cost of the flat between 60L to 80L. Assuming 70 L as a total cost of the flat. After US housing loan fall, no bank will give you more than 85% of total cost amount which doesn’t even include local taxes from certain banks. Assuming you have taken a loan for 20 years. Here is the calculation.

Base payment 15 % = 10.5L (this will rip you off with all your previous savings)
Loan amount = 59.5 L
EMI per month Rs.59,000 per month

Maintenance charges approx 24K Rs per year = 2000 Rs per month
Average property Tax per month = 1000-1500 Rs per month

– Tax benefit is discount on the Interest amount = 50K per year = 4K per month

That also for first few years as most of the EMI goes in interest.

– 1 Lac in base amount is any way settled for PF, 80CC and LIC contribution

– Total EMI comes to approx Rs 65,000 per month for next 20 years.

(Society maintenance, water taxes and corporation tax will increase with inflation).

After paying this much money per month.


You have to say no to your family for shopping (even after a CTC of 12 Lacs)No holiday trips, no gifts to parents, skip friend’s marriage, no new Car for initial few years and lot of cost cutting measures. If you get fired from the company, you are doomed. or what If recession hits. Days are not far for such crisis to hit the market. China market and Greece are examples of it.

Hence, total cost of ownership for 20 years = 65,000 X 20 X 12 months + 10.5 L = 1, 66, 50,000 (approx 1.67 crore)

What have you got:

“Home for 20 years”, and after 20 years you will have a 20 years old flat in 20 years old society (dirty and filthy )

– After 20 years if the cost of your 2 BHK home is say 2 Cr by market value ( I doubt because it will be very old flat in the middle of crowded city). You make nothing out of it.

– Secondly, even if it values so. I doubt how many buyers will be interested in a property ageing 20 years for 2 crores.

– We are predicting 20yrs hence. Wasting / suffering our today for future. That too a long term future, we have never seen.

-With the rising suicide rate world-wide, who knows something unfortunate happens at our floor and you will end up selling it at a lower price.

-With the heavy infrastructure development in Pune and Pune dependency on few lakes for water, I am certain of water shortage in coming years.

– Lastly, for Indian’s at least buying a house is a emotional decision. What I mean is, even if the house is worth 5 crores tomorrow. House owner will never ever think of selling to book a profit of it to enjoy his life. It’s worst that we just boast of investments and businesses but are emotional at heart. Even our share market BSE, NSE run on emotional atyachaar.

Let’s talk about rented flat

If you take the same flat on rent or say next door flat, at present rent for 2 BHK is Rs 14,000 all other things including.

– Assuming rent increase at 10% (very unlikely it will be less). Year on year you will pay rent approximately 1.44L, 1.58 L, or 1.74 L , at 20th year you will be paying 1.44 X 1.1^(20-1)= 8.8L

Total rent you will pay = 1.44((1-(1.1)^20)/(1-(1.1)) = 82L


1. You can change home any time, even for small reason like neighbor’s wife is hitting on you (I will not leave in that case tongue emoticon )
2. Better job in Bangalore or US or Mumbai (I just love it… am dreaming of getting a job in Silicon Valley or Wanna to sit in a office near Powai lake :))
3. Better Job in Yerewada (do you want to manage the traffic in case you buy the flat in Kharadi, already BRTS has increased a lot of trouble on Pune roads).
4. Growing family need a 3 BHK. (Think of future need also) or villa.
5. As your rent grows so will you HRA so more tax benefit? – Apparently rent receipts have more benefit in taxes than a Housing loan.
6. A new cosmopolitan area is coming up in the city which is better than where you stay now ( I would love to stay in Vimannagar than in Dhanori tongue emoticon )
7. If you move out of the city, finding a tenant is a problem. A tenant who may convert your dream home into filthy home(sounds scary right?)

So what should I do?

Now if you are smart enough you will put some money in equity or SIP Because you are paying only 14, 000 rent and not 60,000 EMI.
Assuming you put 25000 Rs in investment for 20 years at an annual return of 15 % or 1.2% a month (buy plot in tier 2 cities, Mutual fund, SIP, Bank FD, PPF) you can reduce the investment amount as your rent increase. Still by our personal calculations, You can make anything between 3-5 Cr after 20 years depending on your Smartness.

Then you can purchase the above flat as second home for your kids and spent some money on cleaning it up smile emoticon

Moreover, after 20 years you will be sure enough where you want to settle down and hence making an investment after 20 years sounds more wiser than investing now in flat. This is the time to enjoy your life to the fullest, doing mistake, learning from it, going on an adventurous trip, checking out bucket list and list goes on and these all will be possible only if you’re not under a heavy loans. I agree that your salary will also increase which you may use a counter to this article but by the time it will increase enough that you can do anything, you would have reached an age of 40 and you won’t feel like enjoying anymore at 40 (exceptions exist)

Decision is yours and life you get once So, Make a wise decision.
Compiled & Issued in public interest.

Understanding the Bank rate,repo rate, cash reserve ratio

1) Bank Rate

It is the rate at which the RBI is ready to buy or rediscount bills of exchange or other commercial papers. This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes.
Any upward revision in the bank rate is an indication that banks should also increase deposit rates as well as their respective base rate / Benchmark Prime Lending Rate.

Thus any revision in the bank rate indicates that it is likely that interest rates on your deposits will move according, so will the EMIs on floating rate loans.

Do note: The bank rate Remember is not the same thing as deposit rates offered by banks for fixed and recurring deposits.

Current Bank rate is reduced from 8.25% to 7.75 %

2) Liquidity Adjustment Facility, or LAF

LAF helps banks adjust their daily liquidity mismatches by pledging government securities over and above the SLR requirement. Repo and reverse repo rates form a part of the LAF.

Repo Rate

Repo rate is the rate at which the RBI lends money to commercial banks against securities. The higher this rate, higher the cost of capital. In an inflationary scenario, this will act as a disincentive for banks to borrow from the central bank and will reduce the money supply in the economy and consequently arrest inflation.

Current Repo is reduced from 7.25% to 6.75%

Reverse Repo Rate

Reverse Repo is the rate at which banks deposit their excess money with the RBI for short periods of time. The lower the rate, the less the incentive for banks to deposit increment cash with the central bank. This raises the liquidity in the banking system. It also encourages banks to lend at lower rates.


Current Reverse Repo Rate is reduced from 6.25% to 5.75%

3) Cash Reserve Ratio, or CRR

CRR is the percentage of a bank’s net demand and time liabilities (deposits) that banks must maintain as cash balance with the RBI.
A high percentage means banks have less to lend, a low CRR does the opposite. This in turn impacts liquidity in the economy. RBI can use the CRR to tighten or ease liquidity by increasing or decreasing it as the situation demands.
Current CRR is unchanged to 4%

4) Statutory Liquidity Ratio, or SLR

This is the percentage of net demand and time liabilities (deposits) that banks must maintain in safe and liquid assets approved by the RBI, such as government securities, cash and gold. Changes in SLR often influence the availability of resources in the banking system for lending to the private sector.

Current SLR: 21.5%

5) Marginal Standing Facility, or MSF

This is a facility under which banks can borrow additional amount of overnight money from the RBI.

Banks can avail funds from the RBI against their excess SLR holdings. Additionally, they can also avail funds on overnight basis below the stipulated SLR, but up to a limit of their respective Net Demand and Time Liabilities (NDTL) outstanding.

This provides a safety valve against unanticipated liquidity shocks to the banking system.

Current MSF is reduced from 8.25% to 7.75 %

Do I Need Critical Insurance Plan?

Usually people subscribe health insurance policy & assume that they are covered for all type of illnesses. But many of them are not fully aware that there is a list of critical illness (a whole list or some of it depending upon insurance companies) are not a part of health insurance policies. Those are covered under Critical illness insurance plan only. List of dieses covered under critical illness insurance such as heart attack, paralysis, stroke, kidney failure, multiple sclerosis ,cancer, aorta graft surgery, heart value surgery & so on, is sufficient self explanatory to understand its importance.

Besides this list there are some other major differences in health insurance plan & critical illness insurance plans such as minimum period of hospitalization ,police wise cash less or reimbursement of exact medical expenses, where as critical illness policy works complete differently. It pays lump sum amount to the insurer once critical illness contracted.

Obviously there are some conditions in this insurance policy as well. A concept of general waiting period remains same in this plan as it remains in all other insurance policies. However its period differs from policy to policy. But in addition to this clause there is additional condition of minimum survival period clause. which means the policy holder should survive minimum number of days from the detection of the disease which varies between 25 to 30 days from policy to policy.


Insurance companies pay the insured sum after the completion of stated survival period to the insurer. In a sense it also works as income supplement as that sum can be utilized for any purpose in addition to treatment. Also it does not required too many proofs. Policy stands terminated once the assured sum paid.

Every policy is different than other policies as some may or may not have survival clause as an exception (like in ICICI Lombard) or some policy may cover pre existing diseases after specified cooling off period. So how to chose a right policy is important question for many people.

In fact each & every clause is important in the policy but still we have to focus on some important points where one need to pay more attention such as maximum number of critical illness covered, survival clause, ,claim settlement ratio, policy renewable benefits, cost comparison.

Besides the above mentioned points more importantly insurer should focus more on hereditary & family history. Insurer with family history should seek higher amount of protection from those specific diseases. Insurere’s age is also important factor in deciding the insurance amount.

Though many people purchase critical illness policy but they are not enough aware of the word “critical” means a life threatening condition. It carries a different meaning in different dieses such as Renal failure means both kidneys should stop functioning & not the one because a person can well survive with one kidney. Same about the deafness by both ears of the policy holders & not the one ear. In case of cancer claim of 1st stage cancer is not admissible. Cancer with 2nd stage is defined as critical condition.

Apart from this some other illnesses are also not with in the scope of insurance such as critical illness arousing out of intentional self injury i.e suicide or its attempt ; HIV ; genetic disorder; drugs abuse ; alcohol; etc.

It has been observed that people are not adequately increasing the cover amount in proportionate of the inflection in general & also increasing prices of health care cost which are rising on an average 12 to 15 % per annum. Because of new technology, costly latest medicines, are also increasing the treatment cost for which timely updation of cover amount in its proportion is equivalently important.

Insurer may consider the option of rider with his life or health insurance policy. As far as terms & conditions of rider & standalone policies remains same in both. However only difference remains of increasing insurance amount at the time of policy renewal in future. In the rider critical illness policy’s insurance sum remains equal with the base policy that is main policy on which the rider is taken. Where as in stand alone policy insurer can increase the sum at the time of future renewal & due to this facility its premiums are little costly than rider.

A word of cautious about the disclosure clause .In any insurance policy, insurer is suppose to disclose all the material facts about the pre ailments at the time of policy enrollment. It is not only a responsibility but also in the interest of insurer to declare all the material facts of his pre enrollment illnesses. If in case during any claim settlement if insurance company finds suppression of material facts (happened accidentally or intentionally is immaterial), insurer may not only repudiate the critical illness benefit but also a base policy on which the rider is taken.

Three finance lessons for your child

Money skills are not taught in schools. However, they are essential for one’s growth. It is better to start educating kids at younger age.

Depending on their age kids make choices with money – whether to hang out on weekends at the local ice cream parlour, whether to go with brands or look at value. Before they take on their own financial responsibilities the skills of handling money ought to be provided to kids.

Unfortunately money skills are not part of formal school education. Many of us would have picked up some of our own financial lessons the hard way…through mistakes and corrections. That qualifies us to be a personal finance coach that the younger generation can look up to. Here is a guide to imparting essentials money to kids.

Make learning easy

From a young age children can be taught that money has purchasing power and that it needs to be earned. According to a study by a UK based advisory service, by the age of 7 years kids develop several basic concepts about money that will later broadly relate to personal finance. Some of these include the understanding that they need to pay for goods with an equivalent amount of money, the concept of earning and income.

So depending on their age and capacity you can introduce various aspects of finances. Opening a bank account for teenage kids can go a long way in helping them gain confidence and experience with handling money transactions. Many banks offer student account for school and college students. Teens can be taught how to use a debit card, and the “grown up” activities of write a cheque or DD.

Games are a nice way to engage the smaller kids. You would find many board games on money management such as Monopoly, Cashflow etc. and plenty of them are available online too.

Saving money in a piggybank

Three finance lessons for your child

i. Saving comes before spending

Kids may not have paychecks to save from but if they do have some kind of income they can be encouraged to save. Let them begin with whatever amount they can, even if it’s Rs 20 a week. The habit once formed is likely to stay with them, as some day they take on their own financial responsibilities.

You could incentivize them to drive home the virtue of saving by adding a rupee for every X amount of money they save. Another effective way is to make fun deals. Say they wish to have a camera for the next birthday. Agree to buy one for them after they have accumulated a small portion of the amount required for it. Your child would also better appreciate its value since she has earned it, in a sense.

ii. Avoiding the debt trap

One of the foundational keys to financial wellbeing is to learn to live within one’s means. You can talk to them about how debt could hurt one’s financial life and even ruin it, if in excess. Older kids can be educated on how credit card debt, personal loans can become a vicious trap.

Inculcating the savings habit discussed in the point above would go a long way in making them used to creating a corpus from which they use in the future and avoid debts.

iii. Inflation and investing

Although compared to our western counterparts many of us Indians are savers by tradition, only a minority seems to appreciate the importance of long term investing in growth assets, and even fewer people actually practice it. For many adults saving in a bank account is equivalent to investing! Teenage children can be introduced to the concept of inflation, how money loses value over time and the need for accumulated savings to outgrow inflation to help in meeting future goals.

Set a good example to follow

After all is said, one must carefully adhere to the good financial principles they’d like their child to follow. Your kids are likely to resemble you in their financial behaviour and orientation because like they say, children learn more by observing than by hearing.

By the time your child is ready to fly out of your nest he/she will have built solid foundations for his/her personal finance life.

Data Source: Bloomberg and Quantum AMC


RBI may cut interest rates before next policy review

The Indian markets are likely to cheer the US Federal Reserve’s decision to hold rates at zero for more time. The benchmark Sensex could open gap up however the gains could be capped as the stock markets had largely priced in for a status quo by the US central bank.

fed new

Equity markets had assigned just 32 per cent probability for the first interest rate increase rise since 2006 by the Federal Reserve. And could have seen a drop had the Fed hiked interest rates, which could have sparked capital outflows from emerging markets like India into the developed markets

Market players believe that the Fed will wait until December to raise rates. Interest rates in the US have been near-zero since the 2008 global financial crisis. The low rates or easy money has seen riskier markets rally over the last few years

Selection Criteria of health care insurance

In the field of insurance there are number of similar terms often perplex investors. Even health insurance segment itself is subdivided by many specific concept s such as mediclaim , health insurance, critical illness insurance with its own features dealing into specified areas many time lead to confusion.

In spite of its complexities that is a must thing for every citizen with alarming level of increasing in health related problems & whooping levels of increasing health care cost in India. According to the survey conducted by international insurance consulting firm Towers & Wadson in the year 2011-12 alone health care cost in India increased by 13.25%.

Health insurance is often misunderstood with mediclaim policies which covers hospitalization & treatment towards accident & pre specified illnesses only, where as health care is more broad concept includes comprehensive health cover against illness excluding critical illness. However some policies cover some (certainly not all) critical illnesses in health insurances. It is more comprehensive in nature as it covers pre & posts hospitalization expenses, compensation of loss of income, ambulance charges etc.


Critical analysis of the policy document is must in the field of insurance & following points will help the investor in selecting the right policy.
If the insurer & family members are healthy, young with no chronic ailments, no hospitalization history then choices are available for comparison with multiple options & decide about the insurance cover, stand alone insurance or family floater .Where as if the insurer is in his 40 & above or with medical history of any family member then certainly options about the insurance small amount of cover is limited & especially opting family floater remains difficult ( & even not recommended).

Cap on hospital room rent. Many health insurance policies having a clause of room rent cap that means insurer is eligible to claim expenses only up to the room rent costing below this cap. This clause is most important & needs to understand in detail. The concept of room cap is not restricted only up to hospital room rent but is applicable to all the hospital expenses & treatment such as ICU, operation, doctors charges. Policy holder with this clause get the claim settlement or reimbursement as per his policy in proportionate of his room rent only. So it is always advisable to opt the policy with private room rent eligibility or policy with no room rent cap than the policy with room rent cap.

Policies also have a clause of Sub limit cap that is a limit on particular expenses such as ambulance charges (2 to 3 % of the assured sum),limits of specified surgeries as 50 to 60% needs to check carefully.

Insurance companies or TPA’s with high claim settlement ratio, minimum settlement period, along with the in house claim settlement process or through TPA in insurer’s city is more preferable.

Insurance companies having strong hospital network with cashless facilities is always better than reimbursement facility where insurer needs to pay first if he opt the hospital out side the network. This problem comes especially when the companies hospital network is weak or good hospitals with good doctors are not in the network, or network hospital far away from the insurer’s home. This problem is more visible in tire 2 & tire 3 cities.
Some companies or some policies do not cover the pre-existing ailments & remain permanently excluded. So insurer needs to check it very clearly. For the same true & factual disclosure of pre existing dieses by the insurer is equally important. In complex cases insurer should communicate in writing with the company & maintain that communication for future references. Some companies put a waiting period clause & after the completion of that period its claim becomes admissible.

Some Companies have a age limit of policy renewal i.e. insurer can renew his policy only up to his age 70 to 75 years, where as some companies have a life time renewal facility & better to go with such companies because what is a use of such policy or company not extending the insurance cover when it is required most.

For planned surgeries & hospitalization process some companies are providing free consultation, it is in the interest of insurer as it also works as a second opinion & helps in its claim settlement.

After care full analysis of the above points then the issue comes of premium & its affordability. It is also a matter of our willingness to pay out of our pocket for better services.

All eyes on the Fed

The eyes of the world will be on the Federal Reserve this week and the question of whether US policy makers will finally begin raising interest rates.

US interest rates have been near-zero from late-2008, and now markets are expecting that the Federal Reserve will effect its first rate hike in the upcoming meeting on September 17.

Long-term investors should note that historically, though gold prices have dropped in the run-up to a Fed rate hike, they have strengthened after the first or second rate hike — behaviour that shows that traders usually buy on rumours and sell on news.

An unexpected drop in the jobless rate to 5.1% and an upward revision in second quarter growth to 3.7% support calls for a hike as the labour market tightens and utilisation is at its best level since the global financial crisis.some believe the US economy is healthy and ready for monetary tightening.

But, there are two arguments for the central bank to defer its rate hikes too. One, after the Chinese market crash, there has been chaos in financial markets across the globe.

The Reuters CRB Commodity index has recently dropped to levels last seen in 2003 with the prices of oil and base metals plummeting. Equity indices are down about 7-15 per cent year-to-date and many central banks are resorting to monetary easing.


With deflationary risks higher now with a slowing China and downside risks to oil prices, a rate hike now may invite more problems for the Fed. In the recent survey by University of Michigan, the consumer sentiment reading fell to 85.7 down from 91.9 in August.

Over a dozen of them, including China, Thailand, South Korea, Australia, Russia, Poland and India, have cut rates so far this year.

Reserve Bank of India (RBI) Governor Raghuram Rajan had said on many occasions that India is better prepared for a US tightening.

“The market has already factored in a 25 basis points rise by the Fed. Some other uncertainties have also already got priced in. The Fed’s guidance would be key for further moves.

Two, inflation — a key factor in rate actions — in the US is still low. In July, it was reported at 0.2 per cent — well below the Fed’s 2 per cent target rate.

The currency market believes the rupee might not see much volatility even if the Fed begins raising the rates. “The rupee will move in line with other currencies. The rupee is still overvalued in Real Effective Exchange Rate terms. Barring further negative news from China or continued negative emerging market sentiments, impact of Fed’s action on the rupee might be limited beyond the initial knee-jerk reaction,” said Badri Nivas, head, local market treasury, Citi India.

Cabinet approves Gold Monetisation, Bond Schemes

Government in its effort to keep the gold demand in check has announced couple of schemes

i.e.1). Sovereign Gold Bonds & 2). Gold Monetisation scheme

Here are the highlights:

RBI to issue gold bonds on behalf of the government

The government will declare interest on the bonds from time to time

Maximum limit of 500 gm per person per year in gold bonds

People can buy gold bonds instead of physical gold via gold bond scheme

Gold bond could be for minimum of 5 to 7 years

Gold bonds will pay interest and its price will also be linked to gold

Gold bonds will be done by banks, NBFCs and other authorized entities

Cabinet has also approved gold monetisation scheme

Anyone who has gold as idle asset can deposit them

Deposited gold to earn interest

India imports about 1000 tonnes of gold and these schemes will help to reduce imports

Gold Monetisation Scheme.

Historically investment in gold is always popular because of its easy to buy & sell, easy liquidibility, status symbol, easy to transfer from one generation to another with out any legal process i.e. gift deed or any thing & more importantly easy way to convert black money through its investment in gold.

There is an estimate of country’s house hold stock of gold is approximately 20,000 tones worth Rs:-60 lacks cores, 2 ½ times more than US Fed’s gold reserves of 8000 tones.

Successive govts through different schemes have tried to bring that stock in circulation. This govt too has tried to address the issue through new scheme i.e. Gold Monetisation Scheme with more practical terms & conditions.

Working of the Scheme.

A person shall take a gold in any physical form i.e. coin, jewelry, bar to the specified agency or banks. Bank or agency will check the purity of the gold, open a depository’s metal account there end & the same quantity of gold will be transferred to this account while gold deposit certificate would be issued to the depositors. Interest on this account will start from the date of deposition similar with the bank’s fixed deposits. Depositors will have to comply with the KYC norms.

As the metal account is created by depositor’s gold as a principal, interest too will be paid in gold like 102 or 103 grams for 100 grams of principal.

This will replace both existing schemes i.e. gold metal loan account & another one offered through SBI remained unpopular because of there impractical conditions such as minimum quantity requirement of 500 grams @ 1% interest rate.

While in this scheme the minimum quantity requirement is 30 grams with maximum limit if 500 grams per annum per entity for minimum period of an investment 1 year.

Depositor’s shall have an option to take a gold or cash on completion of there investment period but its choice has to be made in the beginning at the time of opening account i.e. gold deposition.

Interest rate for this scheme would be bit at higher side i.e. @ 3 %.

However from depositors point of view melting of jewelry is inevitable part of this scheme is an emotional issue for many people.


Sovereign Gold Bond

Being a largest buyers at the international gold market Indians gold obsession is well known. It is a second largest import item after oil with approximately 800 to 1000 tones per annum.

As per govt research approx. 350 tones of gold is purchased in the form of coins & bars. Through sovereign gold bonds govt wants to tap these investors investing purely for the investment purpose & as per cabinet note the govt is planning to raise Rs:-15000 cores through these bonds.

These bonds will be issued in 2,5,10 grams of gold for the minimum period of 5 to 7 years. However it will remain tradable with the option of redemption in the stock exchange & investor will get the market value of gold at the time of redemption. But for investors it always better to remain invested for long term i.e. 5 to 7 years which will protect them from the medium term volatility in gold prices.

It is an effort to create an alternate financial asset & an option for purchasing gold in physical form. It is also a better option to gold exchange traded funds. The gold ETF after receiving an investment from the people purchases a gold from the market after deducting expenses up to permissible limits & stacked the purchased gold in bank lockers while in these gold bond actual purchases & deduction of expenses shall not require.

Short term investment may carry a risk of market volatility & price fluctuation compare to long term investment & is a good option like parents wanting to buy jewelry for there daughters.

These bonds will attract the capital gain tax same as it happens in case of sale of actual gold.

Profitability of investment in gold bonds is purely based on the presumption of scarcity, popularity, demand & supply of this precious metal but also carries a risk of price correction because of its inter-linking with many international issues, policies & polities as well.

Why DII are Buying when FII are selling ?

Chinese equity markets are smashed, European and U.S. markets are distressed, and those in the Japan and elsewhere in Asia are rocked. It is very obvious, equity markets in India can’t run up in isolation. That decoupling hasn’t happened yet. In such a scenario U.S. Dollar is being considered very safe and has been attracting investors. This is why investors are encashing profits in equities and preferring to stay in USD for a moment; at least unless picture becomes clears.

Speaking about India, last week of August was a devastating one. Overvalued Indian market fell like a house of cards as contagion of Chinese gloom spread everywhere; after Asia’s largest economy pegged its currency down. While FIIs exited India; mutual funds came to the rescue. Only time will prove, who’s dumb and who’s smart.

FIIs might be exiting India for reasons given below

• China has been facing serious structural problems. As slowdown fears in China appear to be more serious and well-accepted now, FIIs are believed to have become risk-averse all of a sudden and thus have been withdrawing from all major emerging markets.

• What looked certain till now, as far as action of Federal Reserve (Fed) on policy rates in the U.S. is concerned, has started looking uncertain after China devalued its currency.

FII VS DII Activity for the month of August and september



• With 7 odd percent of GDP growth, India still remains one of the most rapidly growing economies. However, despite of showing noticeable improvements, Indian economy is well-short of meeting expectations of global investors.

• It seems lacklustre performance of corporate Inc., quarter after quarter, has finally made FIIs believe that India may take a long to recover in true sense. Valuations appear extremely expensive.

• Logjams in Parliament are obstructing the passage of some key bills which gives a feeling that there is no consensus within India on the reform agenda

In simple words, FIIs had invested heavily in India on expectations that it will be a rewarding investment destination. However, they appear to be worried about prospects of Indian markets now under fast changing environment.

Let’s now see how mutual funds are reacting to the changing situation

Taking a contra view, mutual funds aggressively invested in equity markets in August. Net investments by mutual funds amounted to over Rs 10,500 crore in August while the total in first 8 months of 2015 was about 47,000 crore.

What makes mutual funds bullish on India when FIIs are selling in India and global brokerage houses are reducing targets of leading Indian Indices?

Here are the factors…

• Mutual funds have been witnessing huge inflows from the retail segment which is why they still remain net buyers

• Taking advantage of downbeat sentiment, fund houses might have done some value buying

• Although, by and large, mutual fund houses held low cash in their portfolios under diversified schemes, there is a possibility that, money they collected through New Fund Offers (NFOs) launched recently, may have found ways in the market

• Retail investors look upon recent market fall as an opportunity rather than a threat and may have invested aggressively.

Source PFN

Amtek auto MF Holdings

Amtek Auto’s debt is estimated to be around Rs 17,661 crore. The stock has plunged 88% from its peak in a year ( i.e. Rs. 251/- High and Rs. 25/- low ) and Amtek has warned about its failing financial health.

More than 80 investors, including Axis Bank, Karur Vysya, Syndicate, Corporation Bank and some pension funds, stare at a knock of at least Rs 800 crore in their books in the September quarter as beleaguered Amtek Auto may fail to reschedule its payments.

Amtek auto MF Holdings ended July 2015


Amtek Auto on Friday i.e. 14 th Aug. reported a net loss of Rs 157.76 crore for the third quarter ended June 30. The company had posted a net profit of Rs 86.08 crore in the same period of the previous fiscal.

The woes of Amtek Auto have been gradually piling up with its credit rating downgraded in September 2014 to AA, from AA+ by rating company CARE. The rating was further downgraded to C in August, from A +.

In May, Amtek Auto agreed to buy Germany’s Rege Holding GmbH. It was at least its 19th acquisition. The group manages some 63 production facilities in several countries with a focus on casting and forging business mainly for the automobile makers.