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MAY 20, 2007
 Cover Story
 BT Special
 Back of the Book

Web Censors
Internet censorship is on the rise worldwide. As many as two dozen countries are blocking content using a variety of techniques. Distressingly, the most censor-heavy countries such as China, Iran, Saudi Arabia, Myanmar and Uzbekistan seem to be passing on their technologically sophisticated techniques to other countries of the world. Some examples of censorship: China's blocking of Wikipedia and Pakistan's ban on Google's blogging service.

Temping Trend
Of late, temporary staffing has become a trend in India Inc. In industries such as retail and logistics, temporary hiring has become a business strategy as it enables them to quickly ramp up teams. It is becoming increasingly important for the survival of Indian firms, given the growth rates and talent shortage. Although the salary gap between temporary and permanent jobs is narrowing, temporary staff in India earn lower salaries than permanent ones, which is contrary to the global trend.
More Net Specials

Business Today,  May 6, 2007

A Going Global the Easy Way
International funds are gunning for your wallet promising the allure of foreign assets. Should you invest in them?

All along only foreigners could play movers and shakers in emerging markets-buy stocks and exit at will for better opportunities. If the Emerging Portfolio Fund Research shows that there were inflows of $23 billion (Rs 96,600 crore) into emerging markets between January and March 2006 and likewise an outflow of investments of $1.67 billion (7,014 crore) from the same markets in the January-March quarter of 2007, an Indian could only shake his head in helplessness for not participating in this game.

No longer though. The emerging markets have still not lost their shine and today an Indian can invest comfortably into them from the confines of his home. Not that he was totally deprived earlier. It was just that opportunities were lesser in the past.

The Overseas Push

The business of overseas investing started in 2004, but it's only recently that this asset diversification strategy is getting the push from different quarters, both regulatory and product sources like asset management companies. In the latest credit policy, the Reserve Bank of India (RBI) handed out a further fillip to the mutual fund industry by increasing the overseas investment limit from $3 billion to $4 billion to encourage more fund houses to introduce international funds. RBI even increased the individual limits of investing abroad from $50,000 to $100,000, although it does not cover investing in rupee mutual funds, but only direct buying of equities or overseas assets by an individual.

The EMI Card Game
A Stitch In Time
News Round-up

When you examine an international fund, it's actually not much different from a normal mutual fund. A normal fund is rupee denominated as it accepts investments in the form of rupees and the regular net asset values are also calculated in Indian rupees. But international funds go one step ahead. They repatriate the same rupees overseas, which are then invested in, say, one single overseas fund or in a basket of international funds or fund managers may directly purchase overseas stocks. Likewise, investments by you in international funds are made in rupees and redeemed in rupees. Yet, you get a bona fide global diversification.

One reason you can consider a global mutual fund is because it provides a hedging mechanism of a different kind-a currency hedge. If the Indian environment gets uncertain, the Indian rupee tends to weaken and, therefore, if you are invested in overseas assets, you get to hedge your rupee risk. "Diversification improves the investor's overall portfolio risk return characteristics. It is not a case of global investing versus investing in India, but a tool to reduce risk, besides taking exposure to the global economy,'' says Rajat Jain, Chief Investment Officer, Principal PNB Asset Management. What's more, investors can expect opportunities to grab global assets as funds like Kotak Mutual Fund have already joined hands with us-based T. Rowe Price to launch a fund that would invest in Global Emerging Markets Funds.

INTERVIEW: Ashu Suyash/Country Head/Fidelity Asset Management
"A Fund Manager will Factor in Currency Risks before Evaluating a Stock"
What is the potential of international funds?

We expect investor interest in international funds to increase over the next few years. However, the 'home country' bias tends to remain. Even in a developed market like the us, only about 10 per cent of investor money is invested outside of the us. India accounts for only half a per cent of the world's market capitalisation and this presents investors with many opportunities to bring global diversification to their portfolios.

You have custom benchmarked to BSE 200 and MSCI. To what extent do you think you can outperform both?

The Fidelity International Opportunities Fund will have a custom benchmark created using the bse-200 to the extent of 65 per cent of the portfolio and MSCI Asia-Pacific, excluding Japan, for the balance 35 per cent. This is to ensure that performance is tracked as the portfolio is cast. Currently, none of the available indices reflects the 65:35 mix of the Fidelity International Opportunities Fund. Our endeavour is to beat 66 per cent of competition on a consistent basis. And if we do that, then the math shows that year-on-year you would be a top quartile performer. Moreover, our fund managers are evaluated on the out-performance they show vis-à-vis the benchmark, in addition to beating two-thirds of competition.

To what extent do currency risks wipe out returns?

Currency delivers only a small component of a fund's performance and you wouldn't build a portfolio on a currency neutral basis. In the case of Fidelity International Opportunities Fund, the fund manager will invest knowing that he has to provide returns in Indian rupees. He will therefore factor in the currency risks-as he would oil prices or interest rates-when evaluating a stock.

How would you rate China, Vietnam, Thailand, Korea as emerging markets-and Brazil and Russia?

Our investment approach is that of bottom-up stock picking and, therefore, we do not make calls on countries.

Overhead costs of international funds are high. In this case, are they more expensive than a pure-play Indian fund?

For organisations like ours with decades of experience, we provide economies of scale to newer markets where we sell or create international funds. Therefore, we are able to make these available at TERs (total expense ratio) comparable to pure play Indian equity funds.

The Way to Global Wealth

But before you launch into global assets, there's a reason why you should check a few facts before deciding the asset. Says Keshav Kumar, Corporate Advisory Group, Chennai-based Religare Finvest: "Diversification is essential to reduce risk. But diversification within India in multiple stocks may dilute absolute returns, as they could be of the same sector-without any major difference.'' But you could look at diversification in different countries with different economic cycles. "Various countries and markets respond differently to risks when compared to our Indian markets, which could provide tremendous opportunities to invest,'' he says.

As of now, though, the Indian economy is on a strong wicket and its currency is rising against the dollar, so it's not advisable to go aggressive overseas. What's more, the Indian stock market and assets are by themselves in a bull trajectory of their own. Says Sandip Raichura, Vice President (Business Development), Chola DBS: "If the emphasis is on returns alone, a pure Indian fund is a good bet."

Before you go shopping, do the legwork. Does the offer document specify that the investments would be only in emerging market equities (or also stocks and bonds) or does it reserve the option of also looking at developed markets? The latter option could provide more stabilised returns.

Does the fund have a constrained portfolio with market-specific and sector-specific weights-like limiting exposure to 14 per cent in any emerging market? This may provide lesser returns, but could protect your capital. While past performances are not guarantees for the future, how do peer funds overseas of the same company compare, relative to the benchmarked index? This may call for patient research.

Passive funds, which generally follow index stocks and manage to return reasonable (not spectacular results), are less expensive. Tactical asset management, where the portfolios are actively churned, have higher expenses thus eating into your returns. And lastly, you may want to check out the tax implications. If you are invested 100 per cent in global equities, then for the purposes of income tax, your investment is treated as a debt fund, and taxed accordingly. On the other hand, if you have a mixed component of domestic and foreign equity, of which domestic comprises more than 65 per cent of the portfolio, then for taxation purposes, your investment will be treated as equity investment with the tax breaks that go with them-that is, you can enjoy the benefits of long-term capital gains.

The EMI Card Game
There are credit cards that allow you to make repayments in equated monthly installments. But should you?

Buy now, pay later-that's the basic premise that drives a credit card business. But now that concept has got an extension- buy today, pay later and that too in installments. Snappily called an EMI (equated monthly installment) card, these cards allow a customer to pay off the principal as EMIs, much like any other monthly installment product.

There's hardly any difference between a credit card and an EMI card. It works the same way like a credit card. You can buy the same goods from the same merchant establishments that accept a normal credit card. But unlike a normal credit, an EMI card makes your repayment less tasking for you-and at a lower rate.

Here's how an EMI card works. "In an EMI card, the customer has the option of paying the fixed amount every month subject to the purchase limit he has. All transactions on the EMI credit card would be automatically converted into EMI payments," says Sachin Khandelwal, General Manager (Cards), ICICI Bank. On the other hand, a normal credit card allows you to rollover your outstanding balance by paying just 5 per cent of the outstanding amount.

The Card Variants

There are two variants of the EMI card in the market. ICICI Bank's EMI card allows customers to repay in monthly installments of either Rs 1,000 or Rs 2,000 or Rs 4,000 per month depending on the purchase limit pre-approved by the bank. In short, the EMI is preset and cannot be changed. Multiple purchases on the card do not jack up the EMI amount, but instead increase the tenure proportionately. "Basically, an EMI card is a form of credit card itself, but an EMI card customer pays a fixed amount called EMI amount due (EAD) and there is no grace period, interest gets levied like the cash withdrawal on a credit card," adds Khandelwal.

The Card Basket
The various EMI cards on offer.
Standard Chartered's EMI Card
» All transactions over Rs 2,000 will be converted into 24 equated monthly installments
» Transactions below Rs 2,000 will be treated as normal credit card spends
» One can do multiple EMI card transactions subject to available credit limit
» The EMI will be billed under a unique card number, and payments need to be made to this number
» Interest is calculated at 2 per cent per month
» No processing fee, no down payment or paperwork required

ICICI Bank's EMI Card
» Transactions will be automatically converted into EMIs of Rs 1,000, Rs 2,000 or Rs 4,000 based on a pre-approved limit
» Mutliple purchases will not increase the EMI amount, the tenure will increase
» One can increase the EMI amount and reduce the tenure of the repayments
» There's a processing charge of Rs 149 per transaction of any ticket size
» Pre-payments are charged (Rs 199) for every pre-payment done
» Rate of interests vary depending on the purchase-0 per cent, 1.49 per cent and 1.99 per cent per month

When to Use
» If you are planning to use the normal rollover facility in your credit card
» If the vendor is not offering financing, but is accepting only credit card payments
» If you are getting an attractive 0 per cent financing deal

And When Not
» Don't use it to buy 'big ticket' items when there's alternative financing available with vendors
» Financing at various vendors usually costs 16-20 per cent per annum
» Interest rates here are slightly higher from 19.82-26.82 per annum compounded monthly
» If the paperwork is not a chore, do compare the EMI per Rs 1,000 before you strike deal
The EMI Way
» A buyer has the option of paying a fixed amount every month
» There's the convenience of buying products by using it just like credit card
» The purchases can be repaid in equal monthly installments
» Most banks charge a transaction or processing fee, which varies between Rs 150-300
» Some banks charge a pre-payment penalty, if you pay off your dues early
» Banks may also charge an annual fee depending on the cards

The ICICI EMI card comes with specific purchase limits depending on what the bank allots you. The higher the purchase limit, the higher will be your installment. In an EMI card, the interest variants are 0 per cent, 1.49 per cent and 1.99 per cent per month on reducing monthly balance depending on the purchase limits.

On the other side of the competitive divide, Standard Chartered's EMI card converts all purchases of over Rs 2,000 into 24 equated installments. Depending on the size of your ticket, the installments vary, but your tenure will remain a constant 24 months. "We issue our EMI card with an interest rate of 2 per cent per month. This may change depending upon the overall credit behaviour and other offers valid from time to time. It can go as low as 1.49 per cent per month," says Viraj Tyagi, Head (Credit Cards), Standard Chartered Bank.

Basic Usage Guide

So, as a customer what do you stand to gain by using an EMI card? For starters, interest rates are lower than those of a normal credit card. An EMI card also allows one the luxury of planning his budget better by paying out fixed monthly installments, as the outgo from your end is fixed irrespective of the purchases made.

Having said that, how does one plan the use of his EMI card? Like Khandelwal says: "A customer has to consider the overall monthly outflow he can afford, how his outflow should change with a change in the outstanding amount. In addition, he can plan his purchases in advance and stagger his repayments, take a quick decision on what all new products he wants to buy, compare what other better rates or processing charges he can get on a credit card or any other loan before deciding to buy an EMI card."

Customers should also check the fine print for processing charges, joining or annual fees. These charges can vary according to the banks or schemes offered. ICICI Bank, for example, charges a transaction fee of Rs 149 per transaction (Utility Bill Payment Services or UBPS transactions are excluded). In case of cash withdrawals, a fee of Rs 299 or 2.99 per cent, whichever is higher, is charged.

On the other hand, using an EMI card for 'big ticket' items might not really be a good idea, if the vendor is providing you financing. As against an interest rate that can go from 19-27 per cent on an annual basis, some vendors could provide goods at rates far lower, say, between 15 and 18 per cent. If that's the case, then you might still not need to swipe your EMI card.

A Stitch In Time
Routine check-ups ensure you are up to date on your health and help save a bundle in future health costs.

It's a sign of the times-excessive stress and strain, extended working hours, irregular eating habits, late night weekend parties and inadequate rest. Coupled with high pollution levels, no wonder they cause various health problems. Yet most people pay little attention to their health until perhaps too late. But surely a little money spent on a regular health check-up early enough can save you lots of trouble and money later in life.

There's no second chance if something goes wrong with health. Doctors say that with the exception of some factors determined by genetics, an individual's general state of health is essentially determined by one's lifestyle-diet, exercise that the body gets and the respect that an individual has for his or her body. All of these determine our present and future health. So, given the stressful life one leads in today's time, how can one remain healthy? "People who want to remain healthy and active better start taking care of themselves by bringing about a basic lifestyle modification," says Dr Sandip Rane, an Interventional Cardiologist and the Director and Promoter of the Asian Heart Institute and Research Centre (AHIRC) in Mumbai.

Regular Check-ups

People tend to ignore their health until they are compelled to confront a medical complication. To cope with a rising risk of the medical disorders, health monitors are crucial these days. Doctors say that the awareness is very minimal among individuals to go in for regular health check-ups. One tends to get serious with such matters only when forced. Doctors recommend that prevention should begin much earlier. Rane says that a basic health check-up is a must for every one over the age of 30. A basic check-up should be done every two years after 30, he recommends. After 40, go in for yearly check-ups.

Routine health checks-ups are conducted across all hospitals in India. A basic check-up is light on the wallet and can help in diagnosing a problem much earlier, thus ensuring a quicker recovery. Some essential check-ups include heart, and blood sugar and cancer detection. There are plenty of health check-up packages suiting various needs and requirements, but essentially, some of the mandatory basic health check-ups are a must-do every year or so (see A Healthy Checklist). BT has looked at some of the common health packages available at four major hospitals in India, namely PD Hinduja Hopsital, AHIRC, Wockhardt Hospitals and Apollo Hospitals. The packages are designed to give an individual a complete check-up and, within their limitations, detect any latent health problems. But even the most routine check-ups can be done at your locality hospitals. However, consult specialists to know which check-up suits you the best.

The Essential Guide to Healthy Living

» Exercise regularly, it improves overall body tone
» Yoga and meditation help reduce stress and improve flexibility
» Increase fibre intake and cut down on animal fat, fried food and salt
» Adopt relaxing hobbies
» Sleep at least eight hours a day
» After 40, get your eyes, teeth and bones examined once a year

A Healthy Checklist
Here are some must-do health check-ups.
Cardiac risk evaluation
Helps detect heart ailments, if any
Lipid profile: Detects high cholesterol levels

Diabetic evaluation
Determines sugar levels in the blood

Complete liver and kidney profile
Liver profile is a group of blood tests that tell how well your liver is working. Kidney profile test allows the physician to make a determination of how effectively the kidneys are functioning

Complete blood count with ESR
CBC helps health professional evaluate symptoms such as weakness, fatigue, or bruising and diagnose conditions such as anaemia, infection, and many other disorders

Routine urine examination
Helps in the diagnosis of many disorders

Stool routine examination
Helps detect blood in the stools

Complete physical examination and consultation with a physician
Reputed hospitals like Apollo Hospitals, and Wockhardt Hospitals offer various health check-up schemes to suit individual needs. There are master health check-ups, executive and cardiac-recommended specifically for persons with cardiac symptoms-besides comprehensive health and diabetic check-ups. More details of the medical check-ups are available on the respective hospitals' websites along with costs

Costs of a basic health check-up
PD Hinduja Hospital, Mumbai: Rs 1,200
Asian Heart Institute and Research Centre (AHIRC), Mumbai: Rs 2,750 Wockhardt Hospitals, Mumbai: Rs 950

Change Your Style

"Lifestyle modification is all about having a holistic approach towards life that includes positive mental attitude, a good diet and plenty of physical activity for a healthy digestive system. All this go a long way in ensuring a healthy body," Rane explains. "Yoga and meditation also go a long way in minimising and controlling stress," he adds. Further, doctors say that to handle stress, an individual must organise his or her day well so tense situations are minimised. Lower blood pressure with deep-breathing exercises, take out some time to be alone and do things one really enjoys.

Sports and exercises are proven friends of health. Moderate physical activity at least three times a week is relaxing to the body and soul for old and young alike. Rane's advice is to do regular exercise. "Preferably three times a week for at least half an hour to an hour one must work out by either walking or jogging and swimming. If one can manage to do both, all the better," he adds. Besides burning calories, regular exercise helps one feel happier and be in good shape.

The most crucial aspect to remain healthy, as all doctors say, is to eat a balanced diet. "One must eat food which is high in fibre like vegetables, fruits and beans. Fatty foods like deep fried stuff, butter, ghee, red meat, and also food high in salt content should be limited or best avoided," says Rane. Some lifestyle diseases such as diabetes are caused due to poor eating habits. An individual should take regular care of his or her bones, joints, teeth and eyes. Experts say that once a person reaches the age of 45, he or she should see an orthopaedist at least once a year for a bone density test.

Similarly, many eye problems can be effectively treated in the initial stages. Normally, an individual's eyesight starts deteriorating between 40-45 years and long-sightedness sets in. For healthy eyes, doctors recommend cleaning of eyes twice daily with clean water, visiting an eye specialist at least once a year in the case of a normal vision, or twice in case a person is suffering from diabetes. A balanced diet comprising proteins and carbohydrates, milk and milk products, pulses, soyabeans, green vegetables, fruits, eggs, meat products, rice, wheat and maize are not only good for healthy eyes, but a healthier you as well.


Untangle the FDs
The new norms affect fixed maturity plans, but will help improve the debt segment.

“Returns on bulk FDs are more attractive than normal fixed deposits, thus attracting larger players, particularly FMPs”
Hemant Rustagi
CEO/ Wisinvest

Fund managers of fixed maturity plans now have a dilemma on their hands. Recently, the Securities and Exchange Board of India (SEBI) ruled that mutual funds cannot invest more than 15 per cent of their net assets in short-term deposits of up to 91 days. The regulator cracked down on the industry for misusing the stopgap arrangement of investing in fixed deposits by making it a regular practice of deploying most of the cash in FDs and restricting the growth in debt market as they weren't investing in traded instruments. As bulk fixed deposits were getting attractive with banks offering higher rates, most fund managers were taking the easy way out.

For one, the move will add further depth to the debt market. "This is a welcome move by SEBI, which will help in developing the debt market," says Sandeep Bagla, Senior Fund Manager, Fixed Income, Principal PNB AMC. "Despite higher yields of tradable instruments such as bonds, debentures, etc., managers used to park their funds in fixed deposits of banks because of higher trading costs which resulted in lower yields than FDs". But not only that, bulk deposits fetched higher interest rates from banks. Says Hemant Rustagi, CEO, Wisinvest: "Returns on bulk FDs are more attractive than normal fixed deposits, thus attracting larger players, particularly FMPs." Hemant reckons that bulk investors made about 100-150 basis points extra returns than normal FDs.

The Impact of FDs
» FMPs to henceforth invest only up to 15 per cent in bank fixed deposits
» The new norms could affect existing funds with a high FD component
» Fixed deposit is a passive stopgap strategy used by fund managers pending deployment
» The move will increase the depth in the debt market
» New FMPs could still yield decent indicative yields as FMP management becomes active

Many funds parked a large portion of their money in fixed deposits. For most fund houses it was passive fund management till the time they found other better return opportunities. But SEBI has allowed a conditional 20 per cent investment in fixed deposits if the fund managers take prior approval of the trustees.

But for now, the rule comes into effect immediately for any new investment as well as for existing schemes. For FMPs that have already parked funds in short-term deposits, SEBI has given three months to these funds to re-balance their portfolios. This could affect the indicative yields of some FMPs. Banks could reduce the effective rate to FMPs, resulting in lower yields for the FMP investor. The impact will be higher for those FMPs that had a higher component of fixed deposits to the total portfolio.

On the other hand, the debt segment, which is less traded these days, is expected to see better activity. "With volumes expected to increase in tradable instrument, the supply of instruments can see improvement in yields," says Bagla. On the whole, though, FMPs are still better instruments because of their tax efficiency. With SEBI whittling down FD investments, fund managers will be pushed to find higher yielding investments in the debt market, thus the next crop of FMPs could still fetch decent returns. Keep a watch on indicative yields, though.

Go Floating?
As the interest rates rise, floating rate deposits and funds could just be what you need.

“If the investor favours debt over equity, a floating rate mutual fund is an attractive option”
Uttam Agarwal
Vice President (Mutual Funds)/ Bajaj Capital

You've heard of floating rate home loans, but here comes the floating rate fixed deposits. Banks have begun to offer floating rate fixed deposits to investors where the interest payment increases as the rates in the economy increase. Among the first to launch a floating rate scheme is the Punjab National Bank. Over the last seven months, interest rates on bank deposits have increased from around 7 per cent to around 10 per cent-the last time banks offered such exciting rates was nearly a decade ago.

Of late, investors were scrambling to break old fixed deposits at lower yields and redeploying them in fresh ones at higher rates of interest, as rates at the short-term are higher and many banks are offering excellent short-term returns. But you need not go through the hassle of breaking your fixed deposit every time the rate increases-instead take a look at the floating rate fixed deposit.

When interest rates dip, both floating rate deposits and funds will lose money for the investor as yields take a beating. The rates on such deposits will periodically get adjusted according to the rates in the economy so floating rate deposits work best in a rising interest rate scenario, and is hardly the place to get stuck in when the rates start to slide. As of now, there are no signs of interest rates cooling off, but as inflation starts to tame, the rates are expected to taper off.

For a Change, Just Float
» Floating rate fixed deposits yield higher when the interest rates are rising
» Interest rates are reset periodically every three to six months
» Floaters save time in redeploying funds every time the rates go up
» If the interest rate falls, floaters' yield tumbles so go for them only during rate increases
» Floating rate funds are more tax efficient than bank floating rate FDs
» Switch to fixed rates immediately if the interest rates have peaked out

Floating Smart

Another similar product that's just appropriate for investment now is the floating rate mutual fund. Floating rate funds invest in bonds and securities that are floating in nature and returns are benchmarked against a particular index such as MIBOR. The coupon rates could be reset every three to six months. Says Uttam Agarwal, a certified financial planner and Vice President (Mutual Funds), Bajaj Capital: "If the investor favours debt over equity, a floating rate mutual fund is an attractive option. In the last one year, these averaged 7 per cent, though in the last one week return has been 9 per cent."

If a person opts for a term of less than one year for a floating rate mutual fund, the dividend option works fine-where a dividend tax of 12.5 per cent is charged (there is also a surcharge). If the tenure is longer, the growth option is attractive.

Comparing post-tax returns, for instance, if the bank deposit offers an interest rate of 10 per cent, a deposit of Rs 100 grows to Rs 110. If you adjust this for the highest tax-bracked, net returns are just Rs 7.

On the other hand, in a floating rate mutual fund growth option above a year, the tax would be either 10 per cent of the actual gain or 20 per cent after indexing to inflation. If you pay just 10 per cent tax, the outgo works out to Rs 1, thus fetching you a net return of Rs 9. Whereas if you opted for the 20 per cent long-term capital gains tax, and adjusting for the inflation, the asset price can get inflated by 6 per cent (the current inflation) to about Rs 106. Reducing the gain (Rs 110) from the inflation-adjusted price (Rs 106), the net gain works out to just Rs 4. The 20 per cent tax on this is merely 80 paise. Hence, the post-tax return works out to Rs 9.20. Which is why, a floating rate fixed deposit may not offer the bang for the buck, while a floating rate mutual fund could work smarter for you.

Cheaper? Not Yet
There's news for small home loan borrowers, rates might taper off.

Smaller home loan borrowers could get to see lower rates. But don't lick your chops yet. As is understood from banking sources, banks have yet to take a view on whether the interest rates for this category of home loans will get the benefit of the risk weight reduction offered by RBI in its credit policy.

The Reserve Bank of India, in its latest credit policy, cut the risk weight on home loans up to Rs 20 lakh from 75 per cent to 50 per cent. The central bank feels that smaller home loans are less risky and signals that banks could be a little more aggressive in lending to this segment. This also ensures that the mass market has access to cheaper funds.

But as of now, it seems, bankers are in no hurry to pass on this reduction in costs to borrowers. Besides, the benefits will be marginal. Says Sangeet Shukla, gm (Personal Banking), State Bank of India: "The benefit would be very small. It would be about 25-30 basis points. What this decision of RBI does is for banks to look at home loans more positively."

But others feel that there could be re-alignment of the rates sooner than later. Adds Mukun Hari Jhachak, Head (retail), Bank of Baroda, Chennai: "This will ensure that housing interest rates fall by 25 to 50 basis points.'' Let's hope it's sooner.

Honey, MFs Shrunk the SIP
The new micro-SIP initiative will boost small investor participation.

In the world of mutual fund investing, it's usually the bigger investors who are favoured over the smaller ones. Which is why when it's a question of what's the least one should invest, it's no question that some of the smaller rural investors aren't able to match up with the urban investors. But a new concept is going to change the contours of investing for the small investor-micro sip.

Small, But Sweet
» The minimum investment limit for a SIP is down to as low as Rs 50
» More rural and small investors can now participate in mutual funds
» SIP products as a category have been getting quite popular with the investing class
» The entry loads are expected to remain as with existing SIPs

For as little as Rs 50 a month, small investors can now invest in mutual funds. Prudential ICICI Mutual Fund announced a micro sip (systematic investment plan) scheme that's going to benefit a lot of small and rural investors. On starting of micro sip, Pankaj Razdan, Managing Director & CEO, Prudential ICICI AMC, said, "It's a social purpose with a business opportunity." The fund is launched with the idea of targeting lower strata of the population that really requires money for development. "The index has jumped from 2,000 to 14,000. However, those who really want money have not benefited from the market boom. Therefore, we wanted to target these people and make a difference in their life," says Razdan.

Earlier, Reliance Mutual Fund also announced a similar micro-investment initiative that had Rs 100 as the minimum investment amount. Other mutual fund houses are also said to be considering similar products, which will also expand the mutual fund investor universe.

An sip is like a monthly investment scheme or a recurring deposit with a bank where you invest a small amount every month. Of late, mf investments through the sip route have been quite popular with more investors participating through this route. Market watchers reckon that sips now contribute close to around 7-8 per cent of new fund inflows in equity products. But it deterred rural investors, as the minimum investment was at Rs 500. The new sip will work much in the same way, with a similar 2.25-2.5 per cent entry load structure. Thanks to this initiative, small investors will be laughing all the way to the mutual funds.