Bonus declared in UTI ULIP, UTI Childrens Career plan, UTI Retirement Benefit Pension Plan

UTI Mutual Fund has announced declaration of bonus units under
1. UTI Unit Linked Insurance Plan,
2. UTI Children's Career (Balanced Plan) and
3. UTI Retirement Benefit Pension Fund.

Investors will receive 1 unit for every 10 units held.

The record date is May 30, 2013

Role of RBI, Repo and Reverse Repo rate, Bank rate

RBI acts as a banker to the government participating in open market operations, maintaining price stability and ensure adequate flow of credit to productive sectors.

Open Market operations (OMO)
RBI sells or buys government securities in open market transaction depending upon whether it wants to increase liquidity or reduce it.

Reserve Requirements (CRR and SLR)
CRR or cash reserve ratio refers to a portion of deposits which banks have to keep with the RBI. This serves two purposes. It ensures that a portion of bank deposits is totally risk free and secondly it enables RBI to control liquidity in the system and thereby inflation. To control inflation RBI increases CRR and on other hand if it wants growth then RBI reduces it.

SLR is Statutory Liquidity Ration refers to the amount that all banks requires maintaining in cash, gold or approved securities with RBI. This helps RBI to control liquidity in the market.

Repo Rate
It is the interest rate which RBI charges to banks for collateralized short term loan.

Reverse Repo Rate
Reverse Repo is the rate which RBI pays to banks. When banks have surplus liquidity and there are not enough borrowings from banks by consumers banks park money with RBI and earn some interest called reverse repo rate.

Bank Rate
It is the interest rate at which banks, FIs and other approved entities in the interbank market can get financial accommodation from RBI.

Reference
www.rbi.org.in/home.aspx

what is Debt ? what is Bond ?

Debt Instruments are contracts in which one party lends money to another on pre determined terms with regards 1) Interest rate, 2) periodicity of interest and 3) tenure of debt after which principal is repayed.

Few common examples of Debt Instruments are Fixed Deposit, NSC, PPF, Bond, Debentures etc

'Bond' is the term used for debt instruments issued by government and 'Debentures' is the term used for instruments issued by corporates or private sector.

There are bonds which are listed on stock exchanges after issuance and are traded regularly on marked to market basis. Trading platform for government securities are NDM - 'Negotiated Dealing System' and WDM- 'Wholesale Debt Market' also called NEAT(National Exchange for Automated Trading) on BSE and NSE.



Terms used in Bonds

Principal : Principal is the actual amount lent or invested or Face value of the bond.

Maturity : Maturity is the length of time until principal amount of bond must be repaid.

Coupon : Is the amount of Interest paid per year expressed as a percentage of the face value of the bond. It is mostly paid semi annually (It is called coupon as intially each bond used to have coupons attached to the bonds and holders receive the interest by stripping off the coupons and redeming them)



Different kinds of bonds

Coupon Bond : Debt obligation of semiannual interest payments generally called bearer bond or vanilla bond

Zero Coupon Bond: This bonds do not pay interest but are issued at deep discount to the face value. this are also known as deep discount bonds

Floating Rate Bond : Bond with variable interest rate is called floating rate bond. The adjustments are tied to certain money market instruments and are set every six months.

Callable Bond : Bond that can be redeemed by the issuer prior to its maturity.

Putable Bond : Bond holder can force the issuer to repurchase the bond before maturity.

Convertible Bond : Bond which can be converted to companys equity at predetermined date at the discretion of the bond holder.

Amortizing Bond: A class of debt in which a portion of principal amount is paid along with periodic interest.



DEBT INVESTMENTS THUMB RULE :
Price of Bond is inversely proportional to the interest rate.

Lets look at an example. A 10 year GOI (Government of India) bond offering 7% fixed coupon has been auctioned today with face value of Rs. 100. We assume we bought it on issue and this bond gets listed on exchanges at Rs. 100. Aftere 3 months due to monetary measures taken by RBI the interest rate in market falles by one percentage to 6%.

As the bond is marked to market and traded. it has to be valued every day. so market price post interest rate cut will go up as the bond carries a higher coupon rate then prevailing market interest rate. However if the interest rate would move upward the same bond would be traded at discount price. therefore we follow the first thumb rule of interest rate and current price of a bond move in opposite direction.

Now the question is how much % price of a bond change due to changes in interest rate. in above case 1% rate cut in interest rate will affect all future cash flows to be received from this bond to the remaining tenor. We can then say that all future coupons will be re-invested at a lower interest rate and resulting in fall in YTM on the day of valuation.

Asset Allocation for overall balanced portfolio

Ideally, Retail Investor should invest as per ASSET ALLOCATION.

30% Debt  ( PPF - 30%, Long term MF Debt fund -30%, Tax free
Bonds -10%, Bank FDs -10%, Traditional LIC - 10%, short term liquid fund -10% )

30% Real Estate (1st own home, 2nd Home for Rental Income, 3rd Commercial property & 4th
Land or plot)

30% Equity (Large cap MF -30%, ELSS - 30%, Midcap/Smallcap - 30%,  Direct large cap shares -10%)

10% Alternative investments (Gold ETF -30%, Silver -30%, Daimonds - 30%,Antiques paintings etc-10%)


Above Asset allocation is only for reference and one can change or modify it according to his/her situation.

What is Interest rate on PPF for 2013-2014 ?

Interest rates on PPF (Public provident Fund) and other small savings scheme has been reduced.

PPF Interest rate was 8.8% for year 2012-2013 has now been reduced by 0.1% to 8.7% for year 2013-2014, with effect from 1st April 2013.

Similarly Post office Monthly Income Scheme (MIS) will earn an interest of 8.4% for 5 year maturiy.
The National Savings Certificates (NSC) having maturity of 5years and 10 years will attract 8.5% and 8.8% interest respectively, reduced by 0.10% from previous year.

Top performing Mutual Funds for FY12-13

Following are the Top performing Mutual Funds for the Financial year 2012-2013.

LARGE CAP FUNDS
1. SBI Blue Chip Fund        - 18.1
2. Axis Equity Fund (G)    - 17.3
3. Religare Equity Fund (G) - 16.2
4. Birla SL Frontline Equity  - 15.0
5. Escorts Leading Sectors   - 13.5

SMALL and MIDCAP FUNDS
1. SBI Emerging Busi (G)        - 22.0
2. Taurus Discovery Fund       - 19.8
3. Axis Mid Cap Fund (G)      - 17.6
4. Franklin (I) Smaller Cos      - 17.3
5. Principal Emerging Bluechip - 16.6

DIVERSIFIED EQUITY MUTUAL FUNDS
1. Birla SL India GenNext     -   17.5
2. ICICI Pru Services Indus.  -   17.4
3. Franklin High Growth Cos -   16.0
4. Tata Equity Management  -     15.3
5. Reliance Equity Oppor     -     14.0

ELSS TAX SAVING MUTUAL FUNDS
1. Union KBC Tax Saver     -   16.1
2. HSBC Tax Saver Equity   -   15.4
3. Principal Tax Savings -    14.0
4. Axis Long Term Equity     -   13.8
5. DSP-BRTax Saver Fund   -    13.1

EQUITY ORIENTED BALANCED FUNDS
1. SBI Magnum Balanced Fund -
2. ICICI Pru Eqty-Volatility Adv. -
3. ICICI Pru Balanced Fund (G) -
4. Principal Balanced (G)     -
5. Tata Balanced Fund (G)      -

BENCHMARK RETURNS  for the same period.
Sensex    -10.0
Nifty       -  9.4
BSE 100 -  9.0

source of data moneycontrol.

STT on Mutual Funds reduced in budget 2013-14

Securities transaction tax is reduced. STT on mutual fund and exchange traded fund redemption is reduced to 0.001% from 0.25% earlier. STT on MF/ETF purchase and sale on exchanges is reduced from 0.1% to 0.001%, only on the seller.

STT on futures has come down to 0.017% to 0.01 %
CTT has been introduced on non agro based commodities at the same rate applicable to equity futures of 0.01% to make it par with STT

But there was some good news for travellers. If you are going abroad, you are allowed Duty-free shopping upto Rs 50,000 for a male passenger and Rs 1 lakh for a female passenger.