e-Nagar

1. I expect that Coal India limited should be listing at around 290/- (18% premium for HNI, 25% for retail). The stock should do well because it is going to be included in Nifty and Sensex… so many mutual funds and portfolio managers would be forced to buy it.

2. After seeing what happened on last thursday, I intend to stay away from Futures and options for a while. Just 30 minutes before the monthly closing of the options/futures, some traders forced the market down by selective high volume trades.

3. I think my fav strategy is back and this time with leverage….
i recommend buy 27th jan Tata Motors DVR futures contract… and short the Tata motors contract for the same period….
Assumption: the spread will reduce over time from 37% now. unfortunately the volume is too low as dvr was added to the fno segment last week only.

4. I did a stupid transaction 3 years ago… Invest in tax saving ELSS. Now that the lock-in period is over, I am liquidating them. I have already liquidated 1/3 of my mutual funds portfolio yesterday.

5. I don’t see myself investing actively till Feb 2011. This is partly because some personal financial commitments have sapped my liquidity and partly because I believe that outlook of the market is completely changes itself every quarter. At present the market has reached its optimal level and would only oscillate (more downwards than upwards)

Suppose instead of investing in the stock market, you put 3,00,000/- in a bank FD which pays you 7.25% interest paid every quarter (i.e. 5437.5/-). After this you go long on 90 day nifty futures. What you will observe is that typically they are available at a premium of 60-70 points above the prevailing spot rate. So net of brokerage 2300-1800/- every quarter. (more if you face an contangio or bearish market). Over the year this would translate into an additional gain of about 7-10k for every 3 Lakhs invested.

All you have to do is buy the nifty futures that expire after 90 days and hold it till the maturity date. On the maturity date you roll over the contract. I.e. pay 60-70 points premium and buy a new contract that matures after another 90 days. If the market goes down, the nifty contract will also lose the same amount hence making it a perfect hedge. Another advantage is the ability to leverage. Irrespective of the margin requirement, I believe that leverage higher than 5:1 in Indian market is risky. Hence by a minimal investment of 60,000/- you can have a market exposure of 300,0000/-

Note: consult your financial adviser before following the strategy blindly.

Last year I had written an article on how a large of insurance industry (atleast the kickbacks) were supported by Money Laundering. enagar.com/2009/04/15/money-laundering-and-insurance-selling/ I had also hypothesed that the high commission of the tune of 30% of first year premium was unsustainable and would collapse soon. If you search in the archives of e-nagar, you would find atleast 5-6 articles describing how ULIP is everything but an insurance plan and the only person who benefits from them is the agent who sells the plan.

Today there are 2 term insurance plans that are available online. They require minimal/zero documentation. Since they eliminate the commission agent, you can get a 30 year term insurance cover of 10 million INR (1 cr.) for less than 10,000/- a year.

These are:

1. i-protect by ICICI Prudential
2. i-term by Religare-Aegon

To set the perspective right, a 5 million INR (50Lakh) term insurance cover for 30 years via an agent would cost me:

1. 15,000/- p.a. from LIC Amulya Jeevan
2. 11,000/- p.a. from ICICI- Pure Protect Elite
3. 11,912/- from Aviva Life Shield Plus.

So a saving of almost 50%.

Note: The above rates are for a 28 years old average Indian male. Please consult your financial advisor before investing.

On top of the 1Lakh limit of 80c, Indian citizens can get an additional tax exemption of 20k if they invest in infrastructure bonds. Usually most public issue of infrastructure bonds provides abysmally low interest rates. However IFCI has come up with a private investment issue (which is open till 31st Aug ’10) http://www.ifciltd.com/Portals/0/IFCI%20Infra%20Bond%20Series%20I_IM_web.pdf

It has 4 different schemes with 5 year lock in and provides 7.85% to 7.95% p.a. interest for 10 years.

Note: Even though IFCI is a PSU, not so long ago it was on the verge of bankruptcy.