Strategy for investing in debt or debt related instruments

For this part of the portfolio, you need to have a personal yardstick which you may aim to better with your investment in a debt or debt oriented fund. This may, for example, be the returns that you have been getting from some of the traditional investment options like deposits, bonds and small savings schemes. To achieve this in the year 2010, the key would be to manage credit and duration risk.

Going ahead, inflation as well as the subsequent movement in the interest rates are going to be the most influential factors for this part of the portfolio both in terms of selection of instruments as well as their performances. While, one may debate about how quickly interest rates will start moving up, there is no doubt that interest rates will increase from here.
Hence, you may be better off either focusing on short term bonds funds for another couple of quarters or invest in floating rate funds. Thereafter, debt funds and FMPs will have a role to play in investing long term funds. For those who do not mind some exposure to equity in order to get better returns than pure debt and debt oriented funds, MIPs will continue to be a good option for at least 1-2 years time horizon.

Strategy for investing in Gold

Notwithstanding the recent volatility in the gold prices, it continues to remain one of the attractive options. Considering that it would take some more time for the global economies to recover fully from the setbacks of 2008, an alternative asset like gold will remain an attractive investment option. However, as the gold prices are likely to be volatile going forward, one would be better off buying periodically rather than investing a lump sum. Remember, ultimate role that gold plays in a portfolio is that of hedging against the inflation. Therefore, restrict your exposure to gold to around 10 to15% of the portfolio.

Though Indians have always fancied owning gold for various cultural and emotional reasons, it has not been actively considered while working out the asset allocation. It’s time to do so. Today mutual funds offer investors a couple of choices that can eliminate many risks that one has to face while holding physical gold.

Firstly, there are Gold Exchange Traded funds (GETFs). An exchange traded fund with gold as its underlying asset is called Gold ETF. There are many advantages of investing in GETFs. For example, gold storage and other costs are shared with other investors. GETFs allow investment in gold in small denominations thereby allowing retail investors to participate. In the secondary market, the minimum lot is one unit.

Another option is to invest through fund of funds launched by domestic mutual funds to invest in gold mining companies through an international fund. Investing in a scheme like this provides investors access to fund manager’s expertise and active fund management, which is not available in GETFs. Also investing in gold mining companies offer investors the upside opportunity through organic/M&A growth as well as leverage the increasing price of gold. In other words, investors benefit as the profitability of gold mining companies increases with a rise in gold prices.
Ideally, a combination of both i.e. GETF and Gold equity fund would be the right way to invest.

NAVs end higher as markets gain

Equity diversified NAVs ended last day of the year 2009 on a positive note and their advance:decline ratio stood at 209:13. The markets closed the session at a new 19-month high. The Nifty shut shop above the psychological 5,200 mark for the first time since May 02, 2008.

Oil & gas, power, capital goods, and select auto, banking & technology stocks helped the indices to remain on the higher side. However, selling in the last couple of hours in pharma & realty stocks along with Reliance Communications, JSPL, ICICI Bank, PNB, HUL, Idea & Reliance Infrastructure limited the gains to some extent.

The 30-share BSE Sensex closed at 17,464.81, up 120.99 points or 0.7% and the 50-share NSE Nifty rose 0.61% or 31.60 points, to settle at 5,201.05, after seeing an intraday high of 17,530.94 and 5,221.85, respectively.

Ambani gas case: HC rules in RNRL's favour

In what is seen as a victory for Reliance Natural Resources (RNRL) in the tussle with Reliance Industries over the KG basin D6 gas, the Bombay High Court on Monday upheld the maintainability of RNRL’s plea and asked RIL to supply gas to the latter to the tune of 28 mmscmd for 17 years at a price of USD 2.34 per mmbtu.

The RIL-RNRL case is related to a conflict over the terms of supply of natural gas from RIL’s Krishna Godavari Basin to Anil Ambani’s Dadri Power plant in Uttar Pradesh. Mukesh Ambani-promoted RIL wanted to sell the gas at USD 4.2 per mmbtu.

The court has asked the two parties to enter into an agreement within a month along the stipulated ruling. The HC also said the parties can approach Kokilaben Ambani — the mother of the estranged industrialists Anil and Mukesh Ambani — to reach an arrangement or approach a company court. The interim order would continue till all remedies for the argument are exhausted, the court said.

An elated Mukul Rohatgi, counsel for RNRL, said, “It has resulted in a complete victory for RNRL. The company will get 28 mmscmd of assured gas supply plus 12 mmscmd if NTPC does not avail of the amount given to it — so it may be 40 mmscmd. RIL had entered into a one-sided agreement and pushed it down the throat of RNRL, and it was contrary to the Memorandum of Understanding [signed during the Reliance demerger]. The court came to a conclusion that the MoU was valid and that the agreement as prepared by RIL was invalid.”

DJ Kakadia, another RNRL counsel, said the court had given RNRL the option to also file for damages.

RIL can now approach the Supreme Court challenging the verdict.

Coin Shortage leads to chocolate sales

The sale of fifty paise chocolates in the city has picked up manifold not because of people's sudden love for it, but to tide over acute shortage of 50 paise coins. The chocolates are given in some government and private buses, canteens, hotels, drug stores and parking places in place of coins and sholesale dealers.Some scrap dealers attribute this shortage to mas purchase of coins by blade manufactures in Mumbai for making high quality razor blades. The dealers said they were paying two rupees for one rupee coin and one rupee for a 50 paise coin. The companies in turn would pay more margin to the scrap dealers.Though the business was at a peak till a month ago, there's a shortage of coins at present, they had a deal with employees who were managing the vehicle parking areas and some bus conductors to supply coins. But they too were facing proglems in procuring the coins now.The branded chocolates are selling bottles of chocolate instead of one bottle. Even in hospital canteens, where a cup of coffee or tea costs Rs. 3.50, chocolates were given for 50 paise balance. Conductor or a parking site employee whould earn about Rs. 15.00 if he is able to use a bottle of chocolates for the purpose of giving the change. In some city buses chocolates are given without authorisation. The corporation officials had approached some co-operative banks and temples to provide 50 paise coins. The scaracity of 50 paise coins are artificial. Chocolates are being thrust on the people. It is a ploy of the chocolate dealers to sell their product.I think that there should be an immediate action on this