Gurunath mudlapur, Managing Director, Atherstone Institute of Research, is a happy man. The equity market has crashed and all around him are people who have lost huge sums of money. Yet, Mudlapur is sitting on a pile of cash. Despite working in the financial markets for 10 years, and being comfortable with the calisthenics of equity, Mudlapur follows a policy that lets him invest only a limited amount in stocks. The rest of his portfolio is split between short-term fixed deposits (FDs), real estate and gold.

If you had diversified your investment portfolio in a similar manner, chances are, you too would have been left fairly unscathed by the recent crash. At best, you will only have so much money in equity that you have earmarked as long-term investments; meaning short-term twists and bends in the Sensex leave your financial plans unaffected.

In the past one month, equity dropped sharply by 17 per cent, gold by 14 per cent and 10-year bonds by 1.3 per cent. Only currency made a 1.12 per cent gain, following the strengthening of the dollar due to the (Fed) rate hike. And real estate prices, although showing some signs of shakiness, can clearly only go up in the long term.

What do these numbers show? Basically this: although this last month has been exceptionally bad for almost all assets uniformly, for the most part, various asset classes have what is described as 'negative co-relation', that is, when one climbs, the other falls and vice versa. This co-relation need not always be negative; sometimes it is just a low co-relation, meaning that one asset class might not fall as steeply as another. Investors have to take advantage of this factor when planning their portfolios, and it is this process that is called portfolio diversification.

In simple words, it's a theory that your great-aunt has been reiterating since she dangled you from her knee-don't keep all your eggs in one basket. And it is not just a question of safety. Diversification also helps beat inflation. Take, for instance, what most Indian investors typically do-they keep almost all their money in FDs or gold. There is no way an FD at today's rates is going to appreciate enough for you to beat inflation a decade or two hence. However, some money in equity will grow much faster and be of significant use over the long term.

"Nearly 67 lakh households in India with an average income above Rs 15,000 do not invest in any assets," says Ranjit Mudholkar, CEO, Financial Planning Standard Board. His explanation: most people are not confident enough of the products available today, and second, investors are shortsighted and don't think of future goals. "There is no classical model for diversification. It is all about a person's goals and needs, and systematically working towards achieving these," he says.

Planning Guide

To get these goals into place and to work towards them basically involves getting a financial plan together. And one of the basic rules of a financial plan should be diversified asset allocation. To start with, you need to know your present financial status, says Hemant Rustagi, CEO, Wiseinvest Advisors. This means getting a fix on how much income you have and how much expenditure.

Then, try and understand your goals and needs, dividing them into short-term and long-term goals, and also between needs and luxuries. Now, you are ready to invest your surplus cash into various assets, based on your risk appetite. Goal setting is especially important because the horizon of the goal and its dimensions will determine the asset class you use to save for it.

Goals and needs differ from person to person and time to time. A young bachelor might want to save up for a car or his marriage while a middle-aged man with a son will be worrying about college fees and getting into his own house. Although both might have roughly the same income and expenditure patterns, the way they save and the assets they choose will differ. However, what will remain the same is that they have to diversify their holdings to protect their assets from the vagaries of the market or inflation.

Goals usually fall into certain basic areas like a child's marriage and higher education, your own travel plans, short-term goals like a car or house, and longer term ones like retirement planning and regular medical expenses. One thumb rule of planning: evaluate the present value and future value of the assets-both in terms of return on investment vis-à-vis inflation figures-such that the returns over a period of time beat inflation and help you achieve your goals.

Asset Classes

Various asset classes have their own peculiarities in terms of returns, safety, and investment terms.

Liquid. These are your cash assets-usually kept in a bank account. Liquidity is need-based, and although cash is a powerful asset, it should be kept minimal. Apart from living expenses, cash should also be kept aside for contingencies.

Equity. Investment in equity should be optimised and not maximised. Over a long period, it is the only asset with the likelihood of delivering maximum benefits to an investor. To get the most from equity, investment goals should be for not less than eight-10 years. On an average, equity has delivered returns of 12-15 per cent a year. If these returns are achieved within a year, book the profits and invest the surplus in a debt product.

Sony Joseph, a Mumbai-based call centre employee, invested Rs 10,000 about two-and-a-half years ago in equity. He made a killing on his investment, raking in profits to the tune of Rs 2.75 lakh, till the May crash saw almost all his profits eroded, leaving him with about Rs 75,000. Ideally, Joseph should have known when to exit and plough his earnings into other avenues. Says Joseph, who has since opened a phone shop: "I did make money in equity, but if I had been smart, I could by now have repaid part of the loan I took to set up my shop."

Debt. This includes FDs, provident fund (pf) and Public Provident Fund (PPF). These were your erstwhile high safety-high return avenues, but all assured return instruments are now sliding. Use them wisely to take advantage of tax savings, and make the most of existing interest rates till they last. Debt and equity usually move in opposite directions, and thus hedge each other.

Gold. This should ideally be bought as bars or coins and should form only about 10 per cent of your portfolio, especially as bullion rates go up. As an asset, gold usually moves alone and has no co-relation to either debt or equity.

Real Estate. It lags slightly behind equity, usually picking up a few years after equity. For the average investor, property is good for self-occupation and tax breaks, since the safety of your principal is high. As an investment too, it scores, since not only is there capital appreciation, there is the chance of rental income too.

Others. Commodities, derivatives and art are other asset classes that are slightly more complex and risky. Ideally, these are best left to experts, unless you have specialised knowledge.

As investment guru Peter Lynch says: "...there's a pretty good argument for diversifying into a wide range of equities, bonds and other asset classes if you think the market is in for tough times."

Atherstone Institute's Mudlapur has little reason to lose his cool. Even as the Sensex crashed and most people lost money, he has surplus cash. Reason: he has diversified into fixed deposits, real estate and gold

They Don't Add Up

Dividend yield funds have had a disappointing run. Should you still factor them into your portfolio or can you give them a miss?

By Mahesh Nayak

Remember the bull run? When it seemed that Midas had touched the market and even dross was quoting at a premium? Well, here's the surprise. Even then, long before the bulls went away, there was a category of investment that was not racing ahead of the benchmarks. This was the dividend yield fund. Even as other categories consistently outperformed the Sensex and their respective benchmark indices, dividend yield funds bucked the market. Worse, despite being defensive investments, their fall in the bear run has equalled the fall of index and diversified funds.

Does that mean dividend yield funds should be totally out of your portfolio? If you are not a completely conservative investor, then yes, you should be looking beyond dividend yield funds. But to find out more, explore this instrument a little closely.

In the past year, dividend yield funds have recorded an average return of 14 per cent, compared to 34 per cent from diversified funds. In fact, the category has underperformed the benchmark indices-during the same period, the Sensex rose 55 per cent while the S&P CNX 500 rose 47 per cent. Being a value-, not growth-oriented investment, this lag would have been forgivable if it had been accompanied by a stoical stand when the bears attacked. Unfortunately, during May, when the market fell from 12,672 points, dividend funds lost 11.6 per cent-almost as much as the 12.4 per cent fall in the riskier diversified funds category.

One explanation for this could be the absence of a unique benchmark for dividend funds. Says Shyam Bhat, Fund Manager, Principal Mutual Fund: "There is no tailor-made benchmark for dividend yield funds. And second, most stocks in the existing indices are growth stocks, therefore resulting in dividend funds underperforming these benchmarks."

Reason To Fall

In a rising market, the task of fund managers handling dividend yield funds is doubly complicated. Apart from yields falling, their investment universe becomes smaller. "The India story is oriented towards growth and in a bull market, players tend to give a high premium to growth stocks rather than value stocks, which is why value funds have underperformed as well as been ignored," explains Bhat.

Another reason for the lacklustre results: commodity and banks stocks (especially the high dividend yielding public sector banks) have not done too well, contributing to the overall low returns.

Positioned chiefly as conservatively managed equity funds, dividend yield funds mainly invest in high dividend yielding stocks, where yields are typically higher than that of the benchmark. By nature, dividend yield stocks are value rather than growth stocks-value stocks enjoy steady, but low earnings growth and have lower P-E (price-earnings) multiples compared to growth stocks with their much higher P-Es. Growth stocks are expensive as the market is willing to pay a premium on the expectation of higher growth, whereas prices of value stocks are lower because the anticipation of growth is correspondingly lower.

In fact, just before the recent bull run, growth stocks were actually considered value stocks since they were available cheap. But with the market climbing swiftly to new heights, the rise in stocks' capital appreciation has been capped and yields too are at lower levels. "From 2003 to the first half of 2005, dividend yield funds were the flavour of the season because, apart from dividend distribution, they also gained from the rising market," points out Mihir Vora, Head (Equity), ABN Amro AMC.

However, that is not the case today, and the schemes have mostly given disappointing returns. Says Hemant Rustagi, CEO, Wiseinvest Advisors: "As a concept, dividend yield funds are good. It is a defensive style of investing and protects your capital during a market fall. But in a growth market like India, with its herd mentality, dividend yield funds have fared poorly."

Wrong Timing

Where does that leave the investor today? Does it still make sense to buy a dividend yield fund? Yes, says Ved Prakash Chaturvedi, Managing Director, Tata Mutual Fund, who says the product is well suited for investors in the present choppy investment scenario. Although they have largely underperformed, their true value is likely to come to the fore when the markets turn volatile. Dividend yield funds, then, might be just the thing for conservative investors, especially first-timers to equity. As Bhat says: "Dividend funds are great for investors who have been investing in bank deposits, fixed income and MIP schemes."

The fact remains, however, that Indian equity today is at the growth stage and the time might not be ripe for dividend funds to take off. "The concept is fairly new to India. With the focus now on growth, it will take time for value funds to mature," says Vora.

When the economy is growing, companies use money to expand and dividend distribution is typically low. Returns from capital appreciation are thus likely to be consistently higher than those from dividends. Says Vora: "Invest in dividend yield funds only for diversification." His advice: existing investors should expose not more than 15-20 per cent of their portfolio to dividend yield funds, just enough to mitigate risk in the present market. As for investors new to equity, they should have maximum exposure in growth funds and only 10-15 per cent in dividend yield funds.

That's sound advice, especially at a time when fund houses tend to go overboard with new launches, each claiming to be a unique solution for the volatile market.

NEWS ROUND-UP

Loanly Questions

Family dilemma: Home loan on fixed or floating rate?

With interest rates again on an upward trek, borrowers of home loans are back to asking the age-old questions: Fixed rate or floating rate? Lower EMIs (equated monthly installments) with longer tenure or higher EMIs with lower tenure?

First, fixed rate loans continue to be the better choice because they are cheaper compared to what was prevailing before 2002. For instance, it is possible to lock into a 15-year loan at around 9-10 per cent. Says Mukund Jachak, Head Sales (Urban Housing), Bank of Baroda: "I foresee interest rates rising in the medium term (next two years) by between 100 and 125 basis points." Then, fixed rate loans are easier to compute and the borrower is always exactly aware of the liability at hand. So, fixed it is.

Onto the next FAQ: Ideally people should avoid very long-term loans. If your income allows it, higher EMIs with lower tenures are better. If you take a 15-year fixed-rate loan of Rs 1 lakh, your total outgo at the end of the term will be Rs 1,52,011 (at 9 per cent). If you opt for a 20-year loan, your total outgo will be Rs 2,15,935-a difference of Rs 63,000. This difference will matter if you have taken a large loan, and especially if you are likely to be nearing the end of your earning period towards the end of the loan tenure.

Tip: ask for the daily reducing method. This means prepayment of a portion of your principal doesn't attract prepayment charges, and from the very next day, interest is charged only on the reduced capital. You can thus reduce your tenure without increasing EMIs. However, there is another point of view that advises you not to be in a hurry to foreclose. Says K. Ramachandran, Territorial Head (Urban Sales), Bank of Baroda: "Since the present value of money is more, if you have spare cash and think you can make it earn at a rate that is two percentage points higher than your housing interest rate, enjoy the spread instead of foreclosing."

-Nitya Varadarajan

Advantage Arbitrage?

At the height of the market's volatility last month, several funds decided to launch arbitrage schemes to reduce the risk of loss caused by price fluctuations in equity.

Arbitrage takes advantage of the price difference between spot and futures prices. So, an arbitrage fund simultaneously buys stocks and sells futures contracts for the same asset, and profits from the price differential. New funds such as SPrEAD from UTI AMC and JM Financial's Arbitrage Advantage belong to this category. However, Tata's Equity Management Fund is different. Here, apart from hedging, the fund can go short or long without having underlying securities. In this, it resembles the recent Reliance Equity Fund (it has the mandate to short sell in the derivatives segment). Says Hemant Rustagi, CEO, Wiseinvest Advisors: "If the fund manager goes wrong on his call, it can completely erode capital. The fund works for people who already have a portfolio and want an exposure in derivatives." The UTI and JM funds are simply ways to attract debt investors into equity. "They are risk-free, and provide an opportunity to investors to receive returns unaffected by the rise or fall of equity markets," says Rustagi.

The four existing arbitrage funds (JM Equity and Derivative, Prudential ICICI Blended, Kotak Cash Plus and Benchmark Derivative) come in the debt category but the new funds from JM and UTI will be in equity. This means that, at any given point, they have to invest up to 65 per cent in equity and equity-related products. This helps investors take advantage of the absence of tax on long-term capital gains (dividends stay tax-free).

The instruments are chiefly aimed at risk-averse investors whose other options are short-term bank deposits or fixed maturity plans, both of which these outperform. Over a one-year period, arbitrage funds have delivered 6.65-7.93 per cent in returns, while in the same period the Sensex gained 43.25 per cent. Clearly, while these should form a portion of a conservative portfolio, it makes little sense to jump into one now just because markets are volatile. It makes more sense to stay invested in diversified equity funds and reap long-term rewards.

-Mahesh Nayak

Long And Short Of Debt

Go short. No, we are not asking you to go short in equity but to consider short-term debt market mutual fund schemes. In an interest rate scenario that's as volatile as equity, not many experts are betting big on long-term debt instruments. So where does that leave you? With short-term debt funds, says R. Swaminathan, Associate Vice-President (National Head-Mutual Fund), IDBI Capital Markets. Short-term schemes (those with a horizon between one month and six months) are an avenue that you should be looking at before any clear interest rate trend emerges for the long term.

"In a tightening liquidity scenario globally as well as in the domestic market, short-term floaters and liquid funds offer an ideal vehicle to park surplus money," says Swaminathan. And in case you want to latch on to existing debt schemes that are performing well, pick the ones with lower duration and higher cash exposure. This advice holds good for fixed deposits in the banking sector as well. Rather than taking on a deposit for the long term (one to three years), lock in your money for a maximum of 180 days; and reinvest the amount when the interest rates move up, as they are widely expected to.

In fact, the worst phase for the debt market seems to be over now and debt as an asset class could bounce back if the crude oil situation stabilises and commodity prices correct sharply in the coming weeks. (See Upside/Downside). And after what happened on Dalal Street in May, the time has certainly come for you to at least start studying the debt market so that you can exploit it for future investments.

-Anand Adhikari

Alternative Promise

Ethanol blending: Will it be a success story in India?

It could be the era of alternative fuels, what with the Petroleum Ministry announcing that it will make ethanol blending mandatory for petroleum retailers from October 2006. Importantly, it will be made mandatory for both the public and private sector players. This will be done in two phases-a 5 per cent blend from October this year and 10 per cent by October next year.

Globally, ethanol blending has been a big success story in countries like Brazil. In the case of India, it has been on the cards for a while and the present decision has perhaps given investors an opportunity to participate in the ethanol story. Karvy Stock Broking's Ambareesh Baliga thinks that a stock like Praj Industries (it makes capital equipment for the alcohol and ethanol industries) could be a good bet although he is more bullish on the sugar stocks (ethanol is a by-product). "The announcement was expected for a while and this is certainly for the better. Sugar stocks are surely a good pick now," he says. Baliga's picks: Bajaj Hindusthan and Balrampur Chini Mills.

In all, there are over 100 ethanol producers in India and they are present in states like Maharashtra, Uttar Pradesh, Tamil Nadu and Karnataka. Sugar stocks were fairly overheated during the peak of the bull run but look like a good buy now, post-correction. Actually make that 'better buys'.

-Krishna Gopalan

Bargain Hunting
Some solid bank stocks have fallen in the general melee. Is it time to forage for good deals?

By Aman Malik

Bargaining: But is it the right time?

Banking stocks have seen an unprecedented fall in the last one month, with some of the best performing stocks falling by anything between 18 per cent and 35 per cent. Why did this happen and how is it likely to affect the larger banking story in India? Should you exit your positions or stock up on such stocks for the long term?

Analysts and market watchers reckon that banking stocks fell primarily because there was uncertainty in the market regarding credit growth. Players were apprehensive that credit offtake would slow down following the Reserve Bank of India's expected but rather mistimed move to hike the reverse repo (the rate at which it sucks out liquidity from the system) and repo (the rate at which it infuses liquidity into the system) rates by 25 basis points on June 8. At least for the short term, this hike is likely to put the stocks of some public sector (PSU) banks under pressure. "PSU banks were especially hard hit by increasing yields on government bonds," says Kanan Shah of Networth Stock Broking. Shah points out that this pressure is likely to haunt PSU bank stocks at least till September.

In 2005-06, the banking sector, riding on robust credit growth (especially non-food credit), registered a growth of 32 per cent. For 2006-07, conservative estimates put the figure at about 25 per cent. Private sector banks such as ICICI Bank which are not affected by yields on government bonds (the bond portfolio of most public sector banks is skewed towards what is called the available-for-sale category, thereby, making the banks vulnerable to interest rate hikes) are expected to register impressive growth as well. And even Wall Street analysts are bullish on a stock like HDFC Bank.

Among private sector banks, ICICI Bank and UTI Bank look good, while in the mid-cap space, Federal Bank and Karnataka Bank are favoured. Among PSU banks, Bank of Baroda, Union Bank of India and Punjab National Bank are fair long-term plays (they are best avoided as short-term ones)

Centre Of Fun

Can the new media centres truly take over your life and have you throwing out all your other gadgets?

By Kapil Bajaj

Go out to buy something as basic as a watch and it'll be surprising if you get home with a dial on your wrist that simply tells you the time. Chances are you'll get something that tells you the phases of the moon, the tides, your blood pressure, tracks dates, plays music and checks your pulse as well. Geeks crow to the world that this is the age of convergence-and that no electronic doodad worth its chip performs one single function any more.

Leading this generation of convergence products is the personal computer (pc) that does it all- CD/DVD player, CD/DVD writer, radio, TV, photo album, photo studio, movie editor, music editor... all this without any heavy investment in hardware and software, and without compromising on the basic functions of the pc.

As with most things computer, it was Microsoft that popularised the process of turning the pc into an entertainment hub. The company's Windows XP Media Center Edition (MCE) is today the most popular operating system among home techies. Essentially, the MCE is an evolved version of the Windows XP operating system. You get all the features of Windows XP so that your pc continues to be your computing and internet tool, plus you can turn it into a TV, radio, or DVD player. Invest a little in some hardware accessories and get a remote control, and you can sit anywhere at home and control all home entertainment with it.

Convenience Plus

The remote control can be used to control almost all applications from burning music, video and data, to making TV recordings and putting musical photo stories on to CD/DVDs. The mouse and keyboard are virtually redundant when you're using the media capabilities of the pc.

"The beauty of a Media Center pc is that it enables you to shift between various entertainment streams on a single screen through a remote control. In that sense, it has enormous convenience value," says P. Krishnakumar, Country Category Manager (Consumer Desktops), HP India, whose range of Pavilion PCs is the largest selling brand of Media Center PCs in India.

Then there's the heavily advertised feature of Media Center-its ability to pause live TV, which means you can use your remote control to pause a TV programme (live or not) for some time and then resume watching it at a later time. No more rushing out for a drink or popcorn during commercial breaks. How exactly this works is in the realm of the nerds, what's important is that it does.

Hardware Or Software?

"Technically, Windows XP MCE is an operating system that's closely tied to a certain hardware configuration. So, it's available with select high-end PCs only," says Manikandan, General Manager (Sales and Marketing-it Division), LG Electronics India.

But does this mean the Media Center is nothing but a souped-up pc that allows you to pause live TV programmes? Some computer dealers swear this is the case. The other problem, says Rajesh, a computer dealer in New Delhi, is that there are complaints about the TV tuner card. "I have hardly sold any Media Center machines.... The tuner card doesn't give you all the channels offered by the cable guy." The way around this problem is to buy a decent card. At any rate, although Microsoft has tied up with hardware suppliers to have MCE preinstalled on PCs, you will in most cases have to buy the TV tuner separately.

You could choose to make your pc a media centre all by yourself -with an upgrade. Get a Pentium dual-core processor (2.8 ghz, 2x1mb l2 cache, 800 mhz FSB), 2x1mb cache, 512mb ram, 160gb hard drive and a DVD-rewritable drive. And, of course, a TV tuner card, and you're in business. However, as Krishnakumar says, a souped-up PC may not work as well as a Media Center pc. "For example, the hp Pavilion range comes with high definition DVD playback, which an ordinary pc does not support. Then, there's the DVD writer and rewriter and an optional and removable Personal Media Drive," he adds.

Tech Specs

The advantage of a Media Center pc is that it also allows you to connect other entertainment devices (home theatre, stereo, TV, etc.) to your pc. George Paul, Executive Vice President (Marketing), HCL Infosystems, explains how this allows you to turn your television in another room into a Media Center: set up a wireless network at home through Media Center Extender or Xbox 360, which comes with everything you need for making a wireless connection using a Microsoft-recommended dual band wireless. HP Pavilion m7382in model, for example, is available with a Wireless LAN (802.11 b/g). "Wireless technology can also help households with more than one pc to share a single internet connection, plus data and resources like printer and scanner without running cables," says Krishnakumar.

There's more in store: you could connect your mobile phone to your Media Center. Says Rishi Srivastava, Director (Windows Client Business Group), Microsoft: "This means downloading pre-recorded movies or matches and watching them while on the move." And then Microsoft has launched a free electronic programming service, which tells you what's playing on which channel, so you can view and record shows at your convenience.

Can the Media Center turn into a digital entertainment hub and supplant your other AV products? Says Girish V. Rao, Vice President (Sales and Marketing), LG Electronics India: "PCs come low on the list of durables that most Indian households buy but a Media Center certainly points to the future."

The future looks bright, according to Microsoft's Srivastava: "In the last eight months, 80,000 Media Center PCs have been sold in the Indian market. That's a good beginning." Given that the geeks are convinced the future is in convergence and networking, it looks as though Media Center PCs are here to stay. But if you are old-fashioned, don't throw away your other entertainment devices yet-we are not yet convinced that convergence has come up to speed.

Talk Gets Cheaper
With handset prices also crashing, mobile telephony sweeps across the country.

The mobile telephone subscriber base in India crossed the 100 million mark last month. From 55 million in May 2005 to 101 million in May 2006, connections have grown 84 per cent, forcing handset vendors to put more thought into low-cost phones aimed at first-time buyers.

And while the prices of handsets have fallen, features have increased. The cheapest phones continue to come from Motorola, with a model available for Rs 1,549 (through a bundled deal with Hutch). And, of 17 models in its portfolio, Motorola has six for less than Rs 4,000, of which four have colour screens.

LG, which does not make black and white phones, has two models below Rs 4,000, and plans to double this by year-end. LG's B2050, priced at Rs 2,990, apart from having a colour screen, is GPRS and Java enabled and comes with a free headset.

Says H.S. Bhatia, Product Group Head (GSM), LG: "Prices are down because of lower taxes and duties, cheaper technology, and increasing scale of production." Samsung's N710 costs Rs 2,675, weighs a mere 76 g and has features like rich backlight, long talktime.

In fact, Samsung has five models below or around Rs 4,000. Market leader Nokia's cheapest model, 1100 (now, also made in the company's plant near Chennai), is available for about Rs 3,000, and the company has six models below or about the Rs 4,000 mark, three of those being phones with colour screens.

According to Lloyd Mathias, Director (Marketing-India, Mobile Devices), Motorola, with the spread of mobile telephony, the number of entry-level consumers is increasing. Not that these consumers are any less sophisticated. "Customers at the bottom end are becoming more demanding now." Sony Ericsson, for instance, now has three low-cost instruments. Prices are likely to fall further. Catch us complaining.

-Shaleen Agrawal

Sip It Slowly

Considering that almost everybody is advising that investors change over to systematic investment plans (SIPs) to tide over the volatility in the market, it comes as something of a surprise that fund houses have chosen to increase entry loads on SIPs for equity schemes with effect from June 1. At least three leading fund houses-HDFC Mutual Fund, Prudential ICICI and Franklin Templeton-have increased loads to 2.25 per cent from the earlier nominal 1 per cent. Or perhaps they have done it precisely because investors are now shifting to SIPs. At any rate, SIPs continue to make most sense for the average Joes. As Dhirendra Kumar, CEO, Value Research, says: "The only way to stay focussed on your financial goals is to choose a good fund and invest regularly." Staggering your investment over the year helps you average costs, eliminates the need to time the market, and helps navigate violent market shifts.

-Shalini S. Dagar

Trend-spotting

Is the i-monster coming back? The pass-through effect of high crude prices on the domestic market as well as surplus liquidity has pushed inflation up from 4 per cent (in early 2006) to close to 5 per cent. The Reserve Bank of India's target for 2006-07 is 5-5.5 per cent but some more oil-action may see this breached. The saving grace: "Oil is not fully captured in domestic inflation figures," says Rajesh Mokashi, Executive Director, Care Ratings. It might not yet be a worry, with the economy growing robustly (8 per cent), but a sub-standard monsoon (it started well this year, then faltered) could put paid to that. Then, global crude and commodity prices are soaring. It is only a matter of time before the impact of that is felt in India.

-Anand Adhikari