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
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
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.
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
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
| Divide And Rule
Asset classes don't move in tandem-make
the most of this.
| Diversify your portfolio across:
ASSET CLASSES. Don't invest predominantly in just
gold or just equity. Instead, spread your risks across a
basket of products. When equity crashes, your real estate
investment will still look good, and your overall portfolio
TIME GOALS. Some investments should be long-term,
others short-term. One mutual fund could be redeemed when
your child is ready for college, while a pension plan could
mature when you retire. When a plan matures, you can reinvest
it again for a new goal
SEGMENTS. Within an asset class, like equity, ensure
your investment is spread across segments. Buy both large-cap
and mid-cap stocks; buy across sectors without going overboard
on, say, IT stocks. Within MFs, buy into equity and debt,
some tax-savers, some systematic investment plans (SIP),
FUNDS. Don't stick to one fund house-buy schemes
from at least two or three MFs so that you can take advantage
of varying performances. Each fund house could have outperformed
in one area, say, mid-caps or contras. This also exposes
you to different fund management styles-aggressive or passive
Ex-call centre employee Joseph could have made a killing
from the stock market when his Rs 10,000 investment soared
to Rs 2.75 lakh. But his inability to exit the market at
the right time left him with just Rs 75,000
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
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.
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.
| Diversifying Across Currencies
Why diversifying is still not a viable
option for Indians.
| Using global
investments to diversify portfolio risk has so far proven
unviable for Indian investors. The $25,000 (Rs 11.5 lakh)
limit granted by RBI (Reserve Bank of India) to put into overseas
markets has been of no help thus far. As per RBI guidelines,
investors can now only invest in fixed deposits (FDs) in overseas
markets. However, with global interest rates being lower than
those at home, why would an Indian investor choose this option
over domestic FDs today? Only some countries like New Zealand
offer a higher rate of interest, with the official cash rate
in New Zealand being 7.25 per cent vis-à-vis the Indian
reverse repo rate of 5.75 per cent. The higher rate does look
attractive, but the huge currency risk involved has seen investors
baulk at the prospect of parking money overseas.
As of now, you can try to diversify across currencies
by investing in overseas securities through mutual funds.
Two funds (Principal PNB Global Opportunity and Templeton
India Equity) offer investments in overseas markets. However,
despite the recent crash, the opportunities are still in
India and, as experts point out, this particular avenue
does not look attractive for the immediate future.
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
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.
| INTERVIEW: Vidur
Varma, Country Investments Director, Citibank
"Long-term Fundamentals Remain Unchanged"
| What bear strategies do you suggest for
Market volatility is intrinsic to equity and one cannot
predict short-term market moves. Over long periods, research
has proven that equity delivers returns close to corporate
earnings growth. But over shorter periods, this relationship
is weak and equity prices are governed by sentiment, liquidity
and events. Retail investors should, at all times, invest
as per their risk profile and recommended asset allocation.
As markets move through bull and bear phases, investors
should continuously review and rebalance their portfolios.
Should risk-averse investors be moving into systematic
investment plans (SIPs) now?
SIPs offer the benefit of compounding, as investments grow
month-on-month. Plus you get Rupee Cost Averaging (investing
regularly at different levels helps average purchase costs).
In volatile markets, this helps you overcome the need to
time the market and could reduce entry costs. SIPs work
for investors across risk profiles, and across bull and
Are valuations looking more reasonable today? Is this
a time to buy?
There has been a broad selldown in the past few weeks sparked
by investor worries on concerns like the us economy, volatile
commodity markets, rising domestic interest rates, oil prices,
etc. However, the economy's long-term fundamentals remain
unchanged. Citigroup analysts maintain their positive stance
and estimate GDP growth for fiscal 2007 at 7.6 per cent.
Over long periods, research shows that equity delivers returns
that are close to fundamentals-economic and earnings growth,
company valuations, inflation, interest rates, etc.
Recently we saw all asset classes peaking simultaneously.
Now all are crashing. Is this common? Shouldn't asset classes
have negative or lower co-relation?
It is not common to see all asset classes run up simultaneously.
A diversified portfolio is the most suitable way to reduce
risk. Over longer time periods, equities, bonds, gold and
real estate are not highly correlated and hence help in
building a diversified portfolio. Commodities, real estate
and equities tend to have a low correlation, but not a negative
correlation, that is, one asset class falls more or less
than the rest, but they don't usually move in opposite directions.
What is your outlook on debt?
Debt or bonds are an integral part of a portfolio. In
a hardening interest rate environment, investors should
look at funds that match their time horizon and could look
at floating rate and fixed maturity plans to reduce interest
rate risk on their portfolio.
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
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
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
yield funds have had a disappointing run. Should you still factor
them into your portfolio or can you give them a miss?
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
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."
| D For Dividend
Investors show a tendency to turn conservative
when markets crash. It's important to understand first, what
a particular conservative strategy is all about; and second,
that all such strategies need not necessarily pay off. A primer
on dividend yields.
Dividend yield is defined as the dividend per share
divided by the stock's market price at the time of investment
yield funds are equity mutual funds that mainly invest in
stocks with high dividend yields
with high dividend yields are typically those of solid companies
where growth has plateaued and that now divide surplus earnings
growing companies use funds to expand and thus distribute
» In the
US, the leading dividend yield strategy is called the Dogs
of the Dow-adherents pick five of the highest yielding stocks
from the Dow Jones index
funds pick dividend stocks according to certain pre-defined
criteria, for instance, stocks with yields higher than that
of the Sensex
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
| Optimal Use
Using strategy for dividends.
| Buying into dividend
yield stocks could be used to create an automatic 'when to
sell' mechanism for your portfolio. So, for instance, your
portfolio objective could be to invest only in scrips with
dividend yields double that of the Sensex. When the prices
of these stocks start rising, dividend yields will fall. Since
this goes against your portfolio objective, you will automatically
sell. Thus, the entire market timing issue is taken care of,
and your exit policy is in place. Most dividend yield funds
use similar strategies.
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.
|Family dilemma: Home loan on fixed or
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."
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,"
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.
Long And Short
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.
|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
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'.
Some solid bank stocks have fallen in the
general melee. Is it time to forage for good deals?
|Bargaining: But is it the right time?
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)
Can the new media centres truly take over your life and have you
throwing out all your other gadgets?
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.
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
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.
"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
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.
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
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.
With handset prices also crashing, mobile
telephony sweeps across the country.
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
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
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.
Sip It Slowly
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.
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.