Six sins of Sensex

The nose-diving Sensex and the damp market sentiments may be giving you sleepless nights. We put the spotlight on the biggest market concerns at the moment and outline the way things may play out in future.

Word’s worth

“Oil prices may go up to $170 per barrel as summer driving demand rises. But by the end of this year, we expect the prices to come down.”
— Chakib Khelil, OPEC chief

“Retail investors have got burnt so badly they will be reluctant to take on incremental risk in the short term. I don’t see revival for 2-3 years.”
— Rahul Bhasin, managing partner, Baring Private Equity Partners

“Everything depends on oil prices. If crude prices come down, the market sentiment will be better and equity funds will be in vogue again.”
— Nilesh Shah, CIO, ICICI Prudential

“There is some downside left to the market, but we are entering an attractive buying territory for long-term property investors.”
— Parth Gandhi, MD, Vision Global Investments

Source: The Financial Express, The Economic Times, CNBC-TV18

Telling figures

Some numbers that have immediate or long-term personal finance implications

The fall in the Sensex from its January 2008 high of 21,206 points.This is the steepest six-month fall since it was established in 1979

million dollars was India’s current account deficit in the quarter ended March 2008, according to the RBI. In the same period last year, it recorded a surplus of $2,563 million

crore rupees is the worth of equities off-loaded by FIIs on July 2.They bought equities worth Rs 3,666 crore on the same day

crore rupees is the corpus with the Employees’ Provident Fund Organisation, and Rs 9,000 crore is added every year

The nose-diving Sensex and the damp market sentiments may be giving you sleepless nights. Money Today puts the spotlight on the biggest market concerns at the moment and outlines the way things may play out in future. By giving you the best and worst scenarios in each case, we will try to help you judge which way the wind will blow in the near future and take steps to safeguard your money.

Crude prices:

Rising oil prices is the single biggest worry facing the economy today as it has a domino effect on issues like inflation and interest rates. The broad view in the market is that oil is not going to go below $100 per barrel any time soon. It may, in fact, hit a high of $150 a barrel before showing signs of coming down. However, the good news, or so some experts believe, is that the market has already factored in this possible hike and the RBI’s consequent increase in interest rates. “With most of these negative factors being priced-in at their peak levels, we expect the Sensex to scale back to 15,000 points from September, provided we have a good monsoon and benign second quarter corporate results,” says Bhavesh Shah, vice-president, Asit C Mehta.


With inflation touching double digits and expected to stay that way till the the oil prices come down or a high base effect comes into play in January, the purchasing power of consumers and profitability of companies will be hit. The sales growth will slow down with a certain cut in discretionary spending. Wait till the end of 2008 for the inflationary effect on sales and profits to start wearing off, though a good monsoon could perk up rural demand by year-end.

Interest rates and corporate earnings:

Even if global oil prices remain constant, experts warn of another 100 bps hike in interest rates. The preview of first quarter results have indicated that the growth in corporate earnings has slowed, but this is because of a high base effect. Nobody is expecting a negative growth—which signals recession. The market rally kicked off in 2003 when the earnings growth forecast was at 20% and interest rates were 6%. Though we might not see that attractive a setup any time soon, earnings and interest rates are expected to be back in sync to reignite the cycle for the markets. “The actual test is in the second quarter (July-Sept) when the effect of high borrowing costs and high cost of doing business will play out,” says Amitabh Chakraborty, president (equity), Religare Securities.


A good monsoon and a better kharif production is likely to stablise food prices. Sectors such as FMCG, auto and consumer durables are likely to benefit from the resulting rise in rural spending. Conversely, a bad monsoon could spoil the party for corporates and markets. So far, the rains have been good. But wait till August-end to hear the final word.

Political fall-out:

The uncertainty over the nuclear deal and impending polls are likely to affect the market in the short term. But if the elections are not advanced, the markets won’t suffer from political nervousness. If your investment horizon is till March 2009, you have no option but to live with the ups and downs—perhaps more with the latter. But for those investing for three years and beyond (as most retail investors should), this may just be the best time to buy, and hold all that you might have bought. That’s because low stock price also means high value if the business is fundamentally sound. A look at the movement in price-to-earning ratio (PE) of Nifty proves the point. From an all-time high of 28.29 in January this year, it has fallen to a little over 17—signalling a buying opportunity. Remember: when perceived risk is high, actual risk is often low.

— R Sree Ram

Online fund mart

Indian investors now have a new online fund supermarket, which will make mutual fund (MF) investment easier, not to mention, cheaper. Fidelity International has launched fundsnetwork. co. in in India, the fifth country to boast the platform after the US, the UK, Germany and Taiwan. Currently limited to Fidelity funds, the site will soon offer schemes from various MF houses. And while you have the option to invest online, which means that the entry load is waived off, documentation will still take place offline. A training centre, Fidelity Advisers’ Institute, is also on the cards, offering free e-learning and one-on-one training along with online preparatory tests for those appearing for NSE’s certification exams to get the Amfi Registration Number.

— Shruti Kohli

Digital signs

Adigital signature is an attachment with an e-mail or data exchange which authenticates the identity of the sender. It also ensures that no alterations are made to the data once the document has been digitally signed. Companies and businessmen use digital signatures for electronic communication and transactions. But the common man has no use for it other than e-filing his tax return. Besides, it is a costly affair (see table), so there are few takers. Of the 21.9 lakh income-tax returns filed online last year, only 11% were completely paperless—a majority still filed a physical verification of the return.

Digital signatures will become popular if their usage is expanded and prices brought down. The latter is already happening. Tax-filing portal has tied up with MTNL to offer a three-year package, which includes digital signature as well as tax return filing for just Rs 250 a year. “Digital signatures make e-filing truly and completely online. Our aim is to make it a paperless experience for taxpayers,” says Sudhir Kaushik, director, Taxspanner. However, its usage is limited. If Net-based transactions for buying mutual funds, insurance and the like are allowed using digital signatures, it would make life much easier for investors as well as reduce the paperwork for life insurance companies and mutual funds.

— Babar Zaidi

Issuing authority
Cost of digital signature
 1-year validity2-year validity
MTNLRs 300 for subscribers
Rs 450 for others
Rs 400 for subscribers
Rs 600 for others
Rs 1,245Rs 1,900
IDBRTRs 750Rs 1,500
SafescryptRs 995Rs 1,650
nCode SolutionsRs 1,090Rs 1,650

 What’s Selling Online

Starting an online business is rather easy. The big challenge is to decide what to sell. The Money Today-eBay India Pulse, which tracks the hottestselling items every quarter, could be a handy tool. One glaring change from the last quarter is that stamps are back in vogue while movies are no longer hot. 



 Wealth attack

According to the 12th World Wealth Report from Merrill Lynch and Capgemini, India was the fastest growing HNWI producer in 2007 with a growth rate of 22.7%. The country now boasts 1,23,000 Indians with over Rs 4.3 crore in financial assets. So where does the Richie Rich club park its money in today’s financial market turmoil? Across the world, HNWIs took to safe investment havens of cash/deposits and fixed-income securities in 2007 in a bid to mitigate their risk exposure. This accounted for 44% of the HNWI assets, a rise of almost 10%.

The move was also compounded by the HNWIs cutting down alternative investments in commodities, private equity, hedge funds and the like. Real estate was the biggest loser, with a 10% drop from 2006. Also, in a temporary, tactical move the segment has retrenched to familiar domestic markets while awaiting further developments in the global arena.

— Narayan Krishnamurthy

Cautiously confident


Inflation – 69%
Unemployment – 46%
Interest rate hikes – 44%
Political instability – 29%
Falling property prices – 12%


Personal finances
81% (excellent/good)
Job prospects
86% (excellent/good)

Figures are percentage of respondents

The April 2008 Nielsen Global Consumer Confidence Index, which measures consumer optimism and spending habits in 51 countries, reveals that consumer confidence in India fell by 11 points to 122, the lowest in the last five runs of the survey. Despite the fall, India ranks among the most optimistic countries when it comes to job prospects over the next year. This confidence has loosened the Indian purse—45% of the respondents say this is a good time to shop and travel.

— Rakesh Rai

Child’s Play

Life begins afresh when you become a parent, but with it comes a new set of responsibilities. In the absence of any structured financial product to cater to the needs of a child’s financial future, insurance plans are the best option that let you build a corpus for your young one. SBI Life’s Unit Plus Child is a unit-linked plan that works as a corpus creator in the long run, allowing you to dip into it from the time the child turns 18 till (s)he is 25. Thus it addresses most of the pressing financial needs, including college, higher education and, in some cases, even marriage. Like any other Ulip, this plan too offers the flexibility to choose an annual contribution, which can be for as short a tenure as three years, and get a life cover on the parent’s life. The policy comes with five fund options and allows premium top-ups, which does not impact the sum assured. There are four free fund switches allowed in a year, with a minimum Rs 10,000-switch each time. Most people have a financial plan for themselves, but it is important to secure the financial future of your children too. This is one way to do it.

—Narayan Krishnamurthy

Policy Snapshot

Entry age: Parent: 18 years (minimum), 57 years (maximum) Child: Anytime after birth (min), 15 years (max)
Maturity age: Parent: 65 years (max) Child: 18 years (min), 25 years (max)
Premium Payment: 3/5/7 years or till the child turns 18
Minimum annual premium:
Rs 12,000
Minimum sum assured (Rs):
For policy term 8-10 years: 5 x AP
For policy term 11-25 years:Term/2 x AP

Click to insure

With more than 25 health insurance products, 20 travel plans, 15 home insurance products and 10-plus personal accident plans on offer, the Indian consumer has a hard time picking the right ones. But now Optima Insurance Brokers hopes to help you make an informed choice without being coerced by pushy agents. The website,, provides information on insurance products from all the existing players in five areas—travel, auto, health, home and term life. In addition to the convenience of comparing benefits and prices at the click of a mouse, you have the option to purchase all the products save the term life ones online. “We hope to have a pan-India presence with around 250 locations. Our estimates say that we should have nearly one million customers within five years,” says Rahul Aggarwal, CEO,

Click here to see graphic: Random nuggets of wisdom

Financial wisdom

Do you know why you’ve invested and what you’re invested in? You can check your financial quotient here. More quizzes on our website

1. Investments made in a minor child’s name do not count as income when you file your return

2. The publicised rate of inflation based on the WPI (wholesale price index) is what affects our day-today spendin

3. All debit cards offered by banks come at no cost

4. Interest earned on fixed deposits is not taxable

Rate yourself

Give yourself 1 for every False and 0 for every True
0-1: Better luck next time. Do take the time to read this magazine. There’s plenty of information that could prove useful
2-3: You’ll do. Your grasp of your finances seems pretty good, though, of course, it could be better!
4: Obviously a know-it-all. Just make sure to keep reading and keeping your knowledge up-to-date