Wednesday, December 24, 2008

Where to Invest for Retirement Planning?

What is the best retirement plan where we can invest? Alas, this simple question does not have a one line answer!

Moreover, if we really want to plan for our retirement >20 years from now, it's a good idea to spend an hour or so rather than come to a hasty decision. In fact when you are planning for retirement, you are also, in a single stroke, managing your personal finance. Because retirement investments takes into account your financial goals, income, spending and savings. So it is a good idea to spend some quality time on this.

So, let's start with figuring out your retirement funds, how much every month will you need after factoring inflation and how long will the funds keep going.
(you may like to spend time with this retirement planner, these sheets and calculators)

After you have an idea about your retirement needs, you also figure out how much to invest. And depending on what your income is, you make the decision for savings too. So, in a way, your retirement planning is a complete management of your money too!

Now it's time to weigh the various options available. The common investments options are:
  1. Pension products from Insurance companies,
  2. Mutual Funds and
  3. Post Office investments.
  4. PPF.
Before we proceed, it's important to consider three out of four parameters of investing. i.e. 1) Growth, 2) Security and 3) Expenses (leaving out liquidity, which has to come much later!)

The pension products from the Insurance companies have a high cost structure as they pay a decent amount to their Agents. The Insurance companies have to follow guidelines from IRDA to invest your money which is generally in safe investments (Other than ULIPS where investor bear the investment risk). This affects the returns and the average return can be pegged at around 6% as of now.

ULIP Pension products can give higher returns though the investor bears that risk. But the cost structure of ULIP pension funds is higher than Mutual Funds.

Mutual Funds offer better returns and again they are subject to market risks. But over a long time frame, the returns are really good.

Post Office monthly accounts offer interest @ 8% per annum, payable monthly.

Now, coming back to the question about the best retirement plan, the answer would be a combination of the following products:

Mutual Funds, Public Provident Fund, fixed deposit (FD) and fixed maturity plan (FMP), etc to build the retirement fund while you are young and can take risks.

As the fund grows, the investments can be deployed in avenues like FDs, senior citizens scheme, Post Office Monthly Income Scheme, MF investments with a systematic withdrawal option, FMPs in the dividend distribution mode and monthly income plans, etc to get periodic returns.

Essentially it's like bat like Sehwag first and then let Sachin take you to the winning post!

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Sunday, December 21, 2008

What's Wrong With Mistakes, Learn from Them!

From about 2003 till early 2008, there was a feeling of invincibility for all investors. No matter what the investors did, they made lots of money. No mistake seemed to matter. Whether it was a the wrong fund, a heavy sector concentration, or a disfigured asset allocation, it all worked out.

But times have changed now. Errors in financial judgement can carry a heavy cost today. While what was done in the past cannot be undone fully, some of the ill-effects of financial mistakes can be corrected.

So it's time to ask yourself the following questions?
  • Is my Fund selection aligned to my financial goals?
  • Am I properly diversified?
  • Do I have an asset allocation strategy in place?

Very basic questions. But once you have figured out the questions, the solution is on the way.

Every problem has a solution has been heard so many times. How about the following:

Solutions are fun, but to get one, you need a problem. So what's wrong with problems?

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Sunday, December 14, 2008

Overview of Cement Industry in India

Wrote an article on the Overview of Cement Industry in India for my website. Click here for the full article.

The cement industry is the most visible beneficiary of the housing and construction boom in the country. The importance of the housing sector in cement demand can be gauged from the fact that it consumes almost 70%-80% of the country’s cement.
I will be attempting the overviews for all industries. Stay tuned. Thanks

India's first online weekly on Personal Finance

Monday, December 8, 2008

Interesting Blog Posts on India's Finance

Not getting enough breathing space at my day job to blog. So I'm just pointing you to a few interesting blog posts:

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Saturday, November 29, 2008

Personal Finance Softwares in India

The last post was on Personal Finance Softwares. These are very good efforts but I wonder if the people are ready to use these softwares.

Is it the classic case of a market for shoes where no one wears one?! Help with the following poll will be greatly appreciated. As a small gesture of thanks, I'll guide you to download the free one that I have built myself.

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Friday, November 28, 2008

Personal Finance Tracker Software for Indian Users

Measurement is the first step of Management. So we need to measure/track our Income & Expenses and Investments to manage it in a better way.

Trawling on the net, I did find some interesting softwares that helps in managing your money.

MyIris Plus provide a powerful desktop application & RupeeX have an awesome web based Money powertool. I intend to take a test drive for both of them and review them here.

In the meantime, I built this personal finance tracker on Zoho Creator which is for newbie users like me.

The idea is simple and they are:
# Manage & Track your assets and portfolio in a simpler way
# Filter & View your Portfolio on the Investment Categories and periodicity
# Create alerts and reminders
# Links to your choicest Financial Calculators
# Create your favorite bookmarks on personal finance which you may want to revert back again and again.

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Saturday, November 22, 2008

Spending Two When You Have One is No More Sexy

Things are changing. And changing fast. I never thought that we Indians would ape the Americans and start spending more than what we earn. But emails have started trickling in about how some guys have got into a vicious debt trap. I really hope this article in Express is an isolated story: Meltdown impact: 'It was over in five minutes

Excerpts: Jadhav has crossed the overdraft limit on his two credit cards and has run himself into a Rs-70,000 credit card debt. As he describes, “I am quite a spendthrift”. If he does not land a job in the next one month, Jadhav cannot pay his credit card dues and the card company will “come knocking to my door.”

Jadhav’s credit card debt has not found favour with his father whom he describes as his opposite because he abhors loans. “If my father has ten rupees in his pocket, he might consider spending one rupee. But I will spend two rupees if I have one rupee in my pocket,” he describes. Jadhav concedes he will have to change his squandering habits for the sake of his wife and son. His wife might soon start job scouting too.

It has only been a week since he has lost his job and Jadhav says he can manage for the next couple of weeks on his last pay cheque. If he does not find himself work within a month, Jadhav says he will go to his dad and say “zindabad” to his bank. He says how he expects his father to respond: “He will call me shameless!”
Looks like the time has come for workshops on Personal Finance, focused towards young and new heads hoping to make better financial decisions and avoiding financial mistakes in the future
Photo credit: Debt20's photostream

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Friday, November 21, 2008

Personal Finance Bulletin: Get Started!

I have blogged about why we avoid personal finance generally

I believe ignoring personal finance worsens the situation. And the only way to get the maximum out of your personal finance is to look it into its eye and grapple with it.

The purpose of this e-Bulletin is to get you started. What do we have here in this e-book?

1. Monday is Money day!
2. Basics of Financial Planning
3. Investing Basics: Which financial products to choose from and why?
4. Seven deadly sins of Investing.
5. Asset Allocation.

Free Personal Finance EBook

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Thursday, November 13, 2008

Using Technology to Reach Unbanked Rural Customers

Financial Information Network & Operations Ltd(FINO). is an Application Service Provider (ASP). Using cutting edge technologies like Smart cards, Biometrics and a basket of support services,FINO enables Financial Institutions on projects for Financial Inclusion

For example, FINO supports sector initiatives such as General Credit cards (GCC) and Kisan credit cards (KCC) aimed at enabling the rural and remotest un-banked parts of the country to enjoy the benefits of formal financial products and services.

FINO announced its partnership with ACCESS Development Services, which helps tier two and tier three MFIs towards capacity building and adopting MIS management information systems to improve efficiency of their day-to-day operations.

This looks to be a welcome partnership which will enable the distribution channels of MFIs with state of the art technology
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Wednesday, November 12, 2008

Eko: Financial Azaadi for the Unbanked Indian Population

From CGAP's Focus Notes 47:

    • But in the same way that access to clean water is more than being able to buy a bottle of water, access to finance is more than being able to get the occasional loan.
    • Access to finance really involves being connected to a national payments system, much like the national electricity network.
    • Once I have a transactional account in a “payment grid,” I can receive and repay loans, save up and withdraw from a savings account, and use the proceeds to pay for what I need.
    • This transactional account is my gateway to a range of financial services, it gives me a financial history, and it is the basis from which I can manage my financial life.

Eko's objective is to connect the vast untapped & unbanked Indian population to the Financial Services industry with the ubiquitous mobile phone.
Really impressed with their work, I shot off an email to Abhishek Sinha, CEO requesting his thoughts on Eko, future plans and using ICT for making financial education available to one & all.

Thankyou, Abhishek for your prompt response and it's reproduced below the fold:

About Eko: I used to run a mobile value added services company before doing Eko. We did some mobile commerce projects in my previous company and what came across blatantly was the fact that there was no mobile commerce for people who used cash and did not have bank accounts or credit cards. This germinated the idea behind Eko though it has evolved to a great extent.

Future Plans: Today, Eko has evolved and will continually evolve into a very low cost infrastructure for financial services. We are working towards extremely low cost of transactions and servicing while making the model rapidly scalable. Any financial product should be able to ride over it and reach the unreached. In a very similar thought process, we are looking for a scalable model for financial literacy / awareness.

About ICT: As far as ICT is concerned, I am in total agreement with you. Even in Eko we try and look at ICT for most of our problems as apart from the solution it ensure efficiency and low cost. We have adopted mobile as a channel as we see a mobile phone as a low energy consuming, always on IT device which should be used to connect to the customer. Mobile has breached geographic boundaries as well as customer segments.

While using mobile, we leverage a lot existing behavior associated with mobile. This video should explain this more.

Thankyou, Abhishek and all the very best.

India's first online weekly on Personal Finance

Monday, November 10, 2008 - India's first Interactive, Realtime Online Loan Market

Personal Finance space is slowly but surely getting the attention it deserves. I have chronicled some of the efforts in this space and you can also see all the posts under the personal finance websites category

Another hot start up in the personal finance space is BankBazaar. They provide an interactive online platform that helps the user procure loans. The entire loan seeking process takes place online and can be completed in 15 minutes flat, while the process of comparing interest rates across banks can be possible within 2 minutes.

They offer instant interest rate quotes that matches the applicant's credit profile. Even before he shares his contact information, he would know the loan amount, tenure and interest rates he is eligible for and all this in just 2 minutes before he begins his loan application process, which is also completely online, with no phone calls needed. BankBazaar claims that this kind of personalized interest rate comparison is the first of its kind in the world.

I am waiting for them for rolling out all the remaining financial products which include insurance, credit cards, all other loan products including LAP, business and education loans.

I also had the opportunity to ask Adhil Shetty, CEO, a few questions on the opportunities and the challenges of working in this space.

Adhil Shetty, Founder & CEO,, prior to relocating to India, lived in New York City and managed Deloitte Touche Tomahatsu's US East alliances with the world's leading Information Management Company. Earlier in his career, Adhil worked with Cisco Systems as an engineer in Bangalore and San Jose. Adhil has a Masters degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelors degree in Engineering from the College of Engineering Guindy, Anna University.

Q1. What do you think is the size of the market?

Adhil: In 2007-08, retail lending in India was over 140K crores, and general insurance premium collected was over 90K crores. A significant portion of this retail loan and insurance distribution can be channeled online- Bankers in India believe that a fourth of total disbursements can be channeled online over the next 24 months leveraging web 2.0 technologies. Given the trend that one is increasingly booking flight tickets online, paying electricity bills online and even finding their respective life partners online, I am convinced that the benefits of instantly competing real time loan offers online will find acceptance among the Indian audience.

Q2. What are the challenges in the Indian online scene?

Adhil: Building awareness of our innovative and differentiated product amongst Consumers is a key challenge. We offer a far superior customer experience from the low-value loan aggregation platforms that are in vogue today. Here is how loan aggregation platforms work: they merely generate leads for banks i.e. they sell users' contact information to bank agents. These agents then call the customer and try to market their product. So customers still need to provide their detailed information to each of these agents individually to receive customized quotes, they still need to bargain with each of these banks and they still have trouble comparing the complex offers they are being given. The model adds significantly higher value to the consumer as it offers an end-to-end solution i.e. the consumer gets to do everything online, right from getting customized rate quotes, comparing the offers and applying online directly to the bank.

Q3.What are your marketing strategies?

Adhil: is using online marketing strategies to build awareness of the site among the online population. We also believe in the power of word-of-mouth recommendations. Once the customers experience our offering, we are confident that they will find it attractive, especially as we make it easy for them by saving time and money.

Thank you, Adhil and all the best! I'll be awaiting the roll out for insurance, credit cards, all other loan products including LAP, business and education loans.

India's first online weekly on Personal Finance

Saturday, November 8, 2008

SNAPPY FINGERS: A Search Engine With a Difference

Following is a guest post by Praval who is a freelance writer/blogger and works for Uswaretech, a Web Development Consulting shop as a Web Evangelist.

SnappyFingers is a Bangalore; India based startup and claims to be a search engine for Question and Answers. The interface is pretty clean and leaves a mark when it comes to user friendliness and usability. Though, still in its beta form, the search engine has built a considerable database of 3 million questions in their search index (as per the information given by Chirayu Patel, the founder of the website). To be really honest, I really liked the idea of presenting the search query in a question-answer format especially when you want to explore the possibilities of web for some research work.

HOW DOES SnappyFingers WORK?

SnappyFingers uses a very simple mechanism. It crawls and indexes FAQs across the internet irrespective of the topic. Generally, FAQs provides more detailed answers to queries, so Q&A search helps in finding answers faster. They are also not crawling already established Q&A sites like, Yahoo answers, forums etc. That explains me why I failed searching for the keyword ‘snappyfinger’ on SnappyFingers itself as there is no FAQ provided for it.

SnappyFingers definitely lacks a tutorial and a support section which should explain how one can use it more efficiently and what this unique search engine is capable of.
The biggest challenge which SnappyFingers faces is of ranking the FAQs and proving the authentication of the source of knowledge. For example, I tried searching for ‘GOOGLE’ but didn’t get the exact result instead I got info on Google Apps and bunch of other useless results. They have to work more towards improvising their search algorithm to produce more exact results.

Also the user has the limitation of searching exact keywords and basic questions. There is a whole lot of difference between what you will get as a result on Google and what you will get on SnappyFingers. For example, I can not expect to get an answer for some specific computer error but Google can find it for me.


I tried searching for ‘NASDAQ’ on Google and Wikipedia. As expected, Google gave me a result which contains links for NASDAQ’s website and other stock prices index. Wikipedia gave me a result which has information about NASDAQ’s history, business, market share, etc but I was quite amazed by the result of SnappyFingers. I got all the useful information about how NASDAQ works? What is NASDAQ? What is the NASDAQ market center? These results were by far better then those of Google and Wikipedia.

In spite of all these shortcomings, I really liked the idea behind it. There is still a huge scope in search engine sphere particularly dominated by big players like Google and Yahoo. Contemporary users’ want quick and problem oriented results and SnappyFingers surely provides it. I also hope that the developers will rectify all the problems in their final release.

India's first online weekly on Personal Finance

Thursday, November 6, 2008

Entrepreneur Journeys by Sramana Mitra

I was happy to get extracts of the book written by Sramana Mitra and the permission to publish it on my blog. Sramana Mitra is a Strategy Consultant in the Silicon Valley and has a knack of lucidly explaining the jargons on her blog.

Lighting the Way to India

An excerpt from Entrepreneur Journeys (Volume One) by Sramana Mitra, now available from below the fold.

While greed is infectious, it hasn't touched Harish Hande. Unlike many entrepreneurs, Hande didn't dream of great wealth, luxury or power as he built SELCO India, a rural solar energy company. At a time when his fellow Indian Institute of Technology engineering alumni were drifting aimlessly into the domestic IT industry, Hande stayed focused on his major: energy engineering. After earning a PhD from the University of Massachusetts, Lowell, Hande headed back home in 1993 to provide reliable, clean energy to un-electrified areas in rural India.

"We believe that in anybody's daily life, reliable energy, like solar electricity or solar lighting, can lead to a better quality of life," Hande says.

SELCO, short for Solar Electric Light Co., sells small-scale, modular solar photovoltaic systems to households and businesses in villages in the southern Indian states of Karnataka, Kerala and Andhra Pradesh.

He started small, buying one solar-lighting system with $300 he had left over in scholarship money. Then, to find workers for large scale installations, he went to village TV stores in Karnataka. Hande described what he was doing, and asked if anyone was interested. They were, since many of them relied on candles and kerosene lamps after sundown. This gave him confidence that he could build a team, and that there was a substantial market for what he wanted to do.

Since most rural Indians are poor and can't afford to pay for SELCO's systems out of pocket, Hande needed to obtain bank financing. In late 1996 he was able to convince Malaprabha Grameen Bank in Karnataka to finance 100 solar-lighting systems. "Probably because they were getting fed up with me more than anything else," Hande jokes.

He then leveraged the bank's backing to get other banks to finance more solar-lighting systems. "That was our biggest code to crack, since our entire model is based on banks providing the financing," Hande says.

In addition to providing a source of safe, clean lighting to rural people, SELCO also helps them generate much-needed income. With light after dark, they can keep shops open later and stay up at home working on crafts. Some of his customers told Hande they can now make two to three baskets a night, selling them for 30 rupees each.

This gave Hande the idea to create a business plan for a tribal community in Karnataka, with four-year bank loans under which they would pay for their solar-lighting systems with the proceeds of basket sales.

So far, SELCO has installed close to 100,000 solar-lighting systems, and in the process, it has brought light to people who were considered too poor to be part of the capitalist system.

I use the term "light" both literally and metaphorically, since Hande's thinking went far beyond solar lighting installations. What he did was innovate at a much deeper level by connecting energy services to income generation.

Sadly, Hande says few of his fellow Indian Institute of Technology energy engineering alumni are working in alternative energy. "When I went back to IIT last year, all 26 seats in energy engineering went to [work in] software," he says. "There is an extreme shortage of energy engineers."

I recently wrote an open letter to IIT students asking them to look beyond software – to do something electrifying, following Hande's example.

Tuesday, November 4, 2008

RBI Press Release: An Informative Review

The Reserve Bank of India indicated that in the context of the uncertain and unsettled global situation and its indirect impact on our domestic economy and our financial markets, it would closely and continuously monitor the situation and respond swiftly and effectively to developments.

It was also indicated in the Mid-Term Review that the current challenge for the conduct of monetary policy is to strike an optimal balance between preserving financial stability, maintaining price stability and sustaining the growth momentum. Inflation, in terms of the wholesale price index (WPI), has been softening steadily since August 9, 2008 and has declined to 10.68 per cent for the week ended October 18, 2008. Globally, pressures from commodity prices, including crude, appear to be abating. The moderation in key global commodity prices, if sustained, would further reduce inflationary pressures. On the growth front, it is important to ensure that credit requirements for productive purposes are adequately met so as to support the growth momentum of the economy. Domestic financial markets have been functioning normally. Prudent regulatory surveillance and effective supervision have ensured that our financial sector has been and continues to be robust. However, the global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability,

The Reserve Bank has reviewed the current and evolving macroeconomic situation and liquidity conditions in the global and domestic financial markets. Based on this review, it has taken measures that you can read here

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Sunday, November 2, 2008

How Technology Enables Health Insurance Scheme for the Poor

Gurcharan Das writes about Health Insurance scheme for India's poor.

Technology should be customized for mass Indian use and Vijay Anand's point about Indians trying to do US businesses here in India makes a lot of sense. Gurcharan Das explains how the magical smart card will make the National Health Insurance Scheme successful while others have failed. Extracts from the article below:

Nearly 65% of India’s poor get into debt and 1% fall below the poverty line each year because of illness, according to National Sample Survey Organisation (NSSO) 2004. The answer, of course, is health insurance, but only 6% of India’s workers have it. Free public hospitals are not an option as two out of five doctors are absent, and there is a 50% chance of receiving the wrong treatment, according Jishnu Das and Jeffrey Hammer’s study. This tragic state of affairs is, however, set to change dramatically with Rashtriya Swasthya Bima Yojana (RSBY), a visionary national health insurance scheme, which provides Rs 30,000 ‘in patient’ health benefits at a premium of Rs 600, which the government pays if you are poor.

A brainchild of an IAS officer, Anil Swarup, this scheme will succeed when others have failed because of choice, competition and a magical ‘smart card’. A patient can choose from almost 1,000 private or government hospitals. States can choose from 18 public or private insurance companies. Insurers have the incentive to recruit the poor as they earn premiums by doing so. Hospitals will not turn away the poor because they don’t want to lose the Rs 30,000 in potential revenue. The poor have a choice to exit a bad hospital, something that only the rich can do today. Competition between hospitals will improve the quality of healthcare and new hospitals will come up because there is now money in catering to the poor.

India's first online weekly on Personal Finance

Tuesday, October 28, 2008

Making New Beginnings On This Diwali

While Deepavali is popularly known as the "festival of lights" and "triumph of good over evil", a more appropriate significance is "the new year of luck and wealth". At least for me!

Especially since there are a lot of ideas that needs to be implemented in the coming year. For example, we have started building/designing modules for personal finance education. We are also building a Personal Finance Discussion Forum & a Financial Products Database

Personal Finance education is a relatively untouched area. And let me give you some dope why it's a bad idea to ignore it. Personal Finance looks at how an individual’s money and future is managed.It involves analyzing their current financial position, predicting short-term and long-term needs, and recommending a financial strategy. This may involve advice on retirement planning or pensions, wealth creation through stocks and mutual funds, children’s education, home loans, life insurance, and other investment.

So, don't you think it's a good idea to start building those modules for personal finance.

Wikis provide the tools for online collaboration and so we set up a wiki on this Diwali day to help us collaborate on this project.

We welcome your feedback, articles and suggestions to build the modules on personal finance. If you want to contribute by writing articles on a relevant subject, you are more than welcome.

Happy Diwali!

India's first online weekly on Personal Finance

Saturday, October 25, 2008

Pictualize's Take on the Credit Crisis

The team at “Pictualize” comprises of Aakanksha Gaur, Anirudh Maitra & Vineesh Kumar who feel strongly about conveying through pictures. Take a look at their fabulous presentation on credit crisis.

Credit Crisis Pictualized
View SlideShare presentation or Upload your own. (tags: presentation comic)

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Wednesday, October 22, 2008

Personal Finance Forum on PhpBB

On Sunday, I installed PhpBB Forum software on a subdomain of my personal finance website.

Though I am pretty satisfied with the theme/layouts, the success of the forum depends on users.

I don't really know if this forum will be actively used. I'm hoping it is.

Do take out some time and register. And then, share, discuss and ask personal finance questions & issues. Thanks

India's first online weekly on Personal Finance

Sunday, October 19, 2008

Time to Buy & Go to Sleep for 4-5 years

Rajiv Mundra has a keen eye for the markets and he has the following post on his Google Group. Post below the fold.

Time is coming to start buying now into the markets.

Anywhere from 2600 to 2000 can be bottom for our markets.

I am optimistic for 2600 holding the line, but if doesnot, thats ok too.. downside from there will be very limited with high upsides possible.

Reward vs risk will be in big favour 2600 onwards.

At 2600 Invest 15% Diversified mutual funds and 15% in midcap funds.

Wait for 1 month and if lower levels come say 2300 or 1900. Invest all rest amount.

If 2600 is not broken in NSE even after 1month, keep deploying 20-30% more in mutual funds every month.

Do not forget to be invested in midcaps. They will severely out-perform broad indices in 2-3 years.

This is a once in life buying opportunity. Same as 2003 lows. Buy while things are still cheap.

Equity markets bottoms out about 6 months before the real economy does.

Nifty Levels
My expectation 2600. (30% invest zone when hit for first time then buy more every month)

Slightly bad 2300 (50-60% invest zone when hit for first time, then buy rest every month)

Very bad 1900 (100% invest zone when hit for first time, no waiting to buy slowly, but at once)

Worst of Worst^100 Bad 1400-1500. (sell your house, car and clothes and mortgage yourself and buy stocks)

Some positives.
recall previous email sent 10-20 days back, saying it stocks are best bet till rupee is so weak.



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Friday, October 17, 2008

Financial Crisis

Latest Updates

Important Updates

CRISIL Analysis of Quality of FMP Portfolio

Fixed maturity plans (FMPs) constitute a quarter of the assets under management AUM) in the mutual fund industry. FMPs have also been the biggest contributor to the mutual fund industry’s growth so far in 2008. Recently there has been heightened apprehension about the quality of the FMPs’ investments and reports of investors seeking premature redemptions even by paying substantial exit loads. Against this background, CRISIL has carried out a quick analysis of the credit quality of FMP portfolios, even though it has outstanding credit quality ratings on less than 5 per cent of the 400 odd FMPs outstanding.

Says Roopa Kudva, Managing Director & Chief Executive Officer, CRISIL, “Portfolio data that is available with CRISIL for FMPs’ investments represents only 30 per cent of total AUM (50 per cent of the number of schemes) for this product. Here our analysis reveals that a high 85 per cent of these portfolios are invested in the highest safety AAA and P1+ rated instruments and government securities, which is indicative of strong credit quality. A full disclosure of investment portfolios of FMPs could, therefore enhance investor confidence in FMPs.”

CRISIL’s analysis further reveals that there are a number of FMPs whose portfolios are only invested in securities rated AAA and P1+. However, it is important to note that the sample size of this CRISIL study covered only 30 per cent of the AUM of all FMPs (50 per cent of the total number of schemes) because of the limited disclosure followed by a number of AMCs for this category of funds. While open ended funds in India typically follow a system of full portfolio disclosure on a monthly basis, this is not the case with FMPs. Says Krishnan Sitaraman, Head, CRISIL FundServices, “If the disclosure levels in FMPs were similar to those of open ended funds, investors would be fully aware of the credit ratings of the underlying investments. In this scenario, potentially redemptions could have been lower if the strong credit quality as seen above was maintained across FMPs. Monthly disclosure of portfolios in fact sheets could significantly increase transparency”

If the credit quality of FMPs’ investments is strong, then investors have much to gain by holding these investments to maturity. In this situation, it is actually premature redemptions which could lead to sub-optimal returns.
Fixed Maturity Plans (FMPs) have significantly gained in popularity in India as interest rates in India increased, and equity market returns diminished. With FMPs offering tax-adjusted returns that are higher than bank fixed deposits (FDs) of comparable maturity, AUMs under FMPs nearly quadrupled from levels two years ago. AUMs in FMPs at end September 2008 were about Rs.1.40 trillion1 (or
about US$ 28 billion). In 2008 thus far, over 800 schemes, aimed at both, the retail and institutional segments have mopped up Rs. 440 billion (or about US$10 billion) of investments.
Full portfolio disclosures with credit ratings of each investment or the credit quality rating of the FMP as a whole would help investors understand clearly which FMP portfolios have a higher risk profile. A higher risk profile could emanate either from taking exposure to instruments lower down in the ratings spectrum or through excessive exposures to sensitive sectors like real estate.

India's first online weekly on Personal Finance

Tuesday, October 14, 2008

Everything About ULIPs?

AboutUlips is ICICI Prudential Life's attempt to educate the online public about Unit Linked Insurance Plans (ULIPs).
I would have loved to see a comparison chart of ULIPs across all insurers showing the various allocation/ administration charges. I couldn't find anything of that sort there.
ULIPs really pinch on their costs. And the cost details aren't found anywhere!

Saturday, October 11, 2008

Get Real or Go Home

Sequoia Capital's presentation to its portfolio companies about how to try to survive an economic downturn. It's survival of the quickest or else you enter a death spiral, they say. Check it out!

Hat tip: Webyantra

India's first online weekly on Personal Finance

Financial Crisis v/s Any Other Crisis

A crisis is a crisis. Be it financial, that is raging furiously these days, or a personal crisis.

All crisis originates with some excess/wrong doings/ mistakes on the part of an individual or a company. The financial crisis has its origins in the sub prime lendings in the US and it is engulfing all and sundry. Likewise, a personal crisis too is an offshoot of some mistakes. Like Pravin Mahajan killing his own brother and pulling the entire Mahajan family into a crisis. Or the Ayushi murder case.

Everybody loves distress stories And then the media goes overboard since it knows that and it feeds on the raging fire.

Here are my thoughts on what to do in these troubled times:

  • Take it on your chin: Understand the reason and the direction from which the blow is coming and accept that blow. Instead of ducking issues or avoiding them. It will give you a perspective on how it is going to affect you and you can take some corrective actions. Like you could have gone for more allocation for liquid/gold funds. Or go for a SOS: Short only Strategy.
  • Put some wax in your ears: Media goes overboard with distress stories and your blood pressure shoots up too. All those stories in the name of analysis/insights do not solve the problem. Remember, there is a difference between discussing a problem and solving a problem. In times like this, it's a boon to be able to withdraw!
  • It's a catharsis: All crisis are lessons. Failures can be very good feedback if you are willing to look at it that way. It also gives you a perspective on past mistakes and the way out.
  • What goes down, comes up: I love the "Sine curve". Sometimes it goes up and then goes down, only to go up again. It's a continuous loop.

I am an eternal optimist. Are you one?

More Updates

India's first online weekly on Personal Finance

Thursday, October 9, 2008

10 Principles for Teaching Children about Money

Here are ten principles for teaching children about money written by R Padmanabhan (I found them posted on a Google Group):

  1. *Talk about money.* Every time money is involved, parents have a chance to teach their children the values and analysis behind their actions. Money is one of the important topics through which we communicate our wisdom and values to our children. Every purchase, investment, or donation can be a time to teach your children something about your values.
  2. *Talk openly about money.* Parent makes a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.
  3. *Talk factually about money.* Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children. Instead of helping children, they can cripple children from growing to make sound financial decisions.
  4. *Require chores; pay for optional work.* Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work they can choose to do or not to do.
  5. *Provide children an allowance they can make real choices with.* Talk about money is important, but children need real-world lab experience to understand the consequences of their decisions. Consider giving them an allowance large enough so that they can purchase some of their own needs. Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values.
  6.  *Help children prioritize purchases* Ask them if this purchase is better than other purchases they are considering making.
  7. *Help children comparison shop.* Help them consider issues such as cost, quality, and convenience. 
  8. *Require children wait before making large purchases* Adults should wait at least a month whenever they are making a large purchase. Children shouldn't be expected to wait that long. Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week's allowance). There is always tomorrow and over half the time they won't remember what attracted them to it in the first place. Developing this habit will help make them resistant to impulse buying.
  9. *Don't use money as a punishment. * Your priority should be helping to give your values to your children, not buy their outward behavior.
  10. *Don't loan your children money.* If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them.

The principles are "If they want it, they have to save for it. If you want them to have it, you will buy it for them." Loaning your children money for items they want teaches them they aren't responsible and they don't have to prioritize.

Wednesday, October 8, 2008

Rs. 2.3 trillion of shareholder value lost in Indian Stock Markets in September

CRISIL reports:

The Indian equity market continued to slide in September 2008 with the S&P CNX NIFTY, registering its second sharpest fall since January 2008, declining around 10 per cent. It is estimated that Rs 2.3 trillion of shareholders' wealth eroded in the background of the situation in the US financial markets. On the contrary, the fall in the US markets was lower with the S&P 500 and Dow Jones both declining by around 9 per cent and 6 per cent respectively, while emerging markets lost around 18 per cent during the month.

Pessimism in the financial markets following the filing for bankruptcy by Lehman Brothers, Merrill Lynch's sell-off, the bail out of AIG and perceived uncertainty around the US bail-out package added to investor fears. Investor sentiment was also affected on news of the possibility of Fortis filing for bankruptcy, indicating problems in the European financial markets as well.

The BSE Realty Index and the BSE Metal Index were the most severely affected during the month dropping by 32 per cent and 25 per cent respectively. Concerns over slowing demand in the real estate market due to a liquidity crunch and increased cost of funding weighed in on investor sentiment in the realty sector.

Expectations of lower demand for commodities given the weaker global economic growth affected metal sector stocks." The FMCG and Oil and Gas sector indices, however, outperformed the overall market, declining 1.6 per cent and 7.6 per cent, respectively.

Moreover, although inflation numbers were in line with CRISIL estimates, the reported 7.1 per cent growth in Index of Industrial Production (IIP) for July 2008 bettered expectations. However, this failed to provide any positive trigger for the market. For the first two weeks of September 2008, the headline inflation appeared to have stabilised at around 12.10 per cent as against 12.49 per cent in August 2008.

While a 15 per cent decline in average crude oil prices during month provided some reprieve, the impact was partially negated by the 7 per cent decline in the value of the rupee against the dollar.

Going forward, rising crude oil and food prices are expected to keep an upward pressure on inflation. Further, global liquidity pressures affected FII investments in the country, adding to the weakness of Indian markets - during the month, net sales by FIIs were to the tune of Rs 82 billion.

India's first online weekly on Personal Finance

Tuesday, October 7, 2008

Self Styled Editor, Publisher, Broadcaster & Database Administrator!

Technology gives us amazing tools. And being a non techie, I get pretty excited about being able to do things which I wouldn't have imagined that I would ever do. Everything that I am doing now, was unthinkable just two years back (for me, ofcourse!).

So now I am 
I should stop since I just might be annoying you with my child-like excitement of playing with techie toys. 

But not before I tell you that I am playing with 
I am pretty excited about being able to embed it in my website done on Joomla CMS!

So after being an Editor, Publisher, Broadcaster, I am on way to become an Online Database Administrator!!

Sunday, October 5, 2008

Ranjan's Blog is changing yet again

This is another one of those countless revamps for this blog. It's two years since I started with a blogspot url that read "" and then put it under mu custom domain "". The domain still shows a site under construction and my numerous mails to rediff for help has fallen on deaf ears :(

Over the two years, the title of the blog has seen countless variations. From the "Blog on Personal Finance & Business" to lines like "Get Rich or Die Trying", "You don't need to be a genius to manage your personal finances", "Take responsibility for your Personal Finance", etc.

Now it's a simple "Ranjan Varma's Blog". For Personal Finance, please visit India's first online weekly on Personal Finance, a website I have built which totally focuses on the subject.

I have refrained from talking about my other musings on this blog. From now on I'll take that liberty.

It's Navratra and I have been on a fruit fast for last 5 days. It's really a detox exercise that I've been doing for the last 5 years. Here's wishing everyone a very happy Navratras.

Wednesday, September 24, 2008

Making the decision on what I want to do on this Blog

From Godin's blog
Do you know what the difficult part is? It's not the art. Not the talent or the skill. It's the deciding. Making the decision to be an artist instead.
It really rings true for me. I have been blinded with making a name for myself & making money from this blog. Only now I know that all that is not important.

What's important is that I articulate what I know about personal finance in the best manner. Nothing else matters.

Monday, September 22, 2008

Financial Crisis Blog Posts of Value

The financial crisis is big news. And the media generally goes on the overdrive on them. Here are some sane voices that I enjoyed reading. I'm sure you'll enjoy too.
  1. Surviving the Financial Crisis: Even though you may not be part of the Financial industry, the crisis affects all. Zoho guys relive their experience of the DotCom bubble and share their experience
  2. How the financial crisis affect you and me: Lekhni wears many hats. Here she says, "It's not about the investment bankers, it's about you. Their loss, directly or indirectly, affects you.
  3. The regulation of Derivatives: Tyler Cowen has a primer on derivatives which is very insightful.
Updates for this post

Tuesday, September 16, 2008

2nd Anniversary: Apologies & Roadmap ahead for this Blog

I apologize to my readers. For distracting them with advertisements (that I don't beleive in!) and for occasionally writing some crap "personal" posts.

I hide behind the argument that it's my blog and I can write anything & everything. But on the verge of completing two years of blogging, I am realizing that this web space is no longer "personal". In fact, there is a sense of responsibility towards readers to whom I can add some value on the "personal finance" front. 

So, essentially, there is a move from "personal" to personal finance for this blog!

I also thank readers & friends who have encouraged me along this two year journey.

The Roadmap: Having apologized for the distractions by way of ads, you can be sure that the ads are going off today. It shouldn't return and I promise that I'll ask you first before taking a call on the ads.

Also, I will refrain from personal posts that don't add value to the readers that I want to write for in this blog. For personal rants, I have a Twitter handle which you can follow.

I have talked about my manifesto before.  I want to focus my energies in building the modules on personal finance

I have already started practicing them by speaking to a group of employees from my Organization. And the response has been amazing.

I would love to see how we can make financial education available to the masses by using ICT. (Information & Communication Technologies)

According to RBI data, as a percentage of financial savings, mutual funds constituted 7.7% of the financial savings of the household sector while insurance accounted for 17.5% and provident funds and pensions funds made up for 8.2% of the total financial savings during 2007-08. The predominant share fo savings was still parked in banks (55%).

This goes to show how much ground providers of financial products have to cover. Also this distribution is a bit skewed because of lack of financial literacy.

Thank you readers and wish me Godspeed!

Monday, September 15, 2008

Currency Futures: New Financial Product in India

The Finance Minister dedicated to the financial services community, a new product - Currency Futures on 29th August, 2008. It has been set up be the National Stock Exchange (NSE).

Bombay Stock Exchange Limited (BSE) has also received in-principle approval from Securities and Exchange Board of India (SEBI) for setting up of an Exchange Traded Currency Derivatives Segment (CDS). The recommendations for Currency Futures has been laid down in the Report of the RBI-SEBI Standing Technical Committee on Exchange Traded Currency Futures, released by RBI & SEBI on May 29, 2008.

The worldwide average daily turnover in Exchange Traded Currency Derivatives has grown at a CAGR of approximately 23.2% as compared to the CAGR of 10.3% in the OTC Currency Derivatives market (the domestic OTC volume in Currency Derivatives is approximately US $34 billion per day.

The Exchange Traded Currency Futures (ETCF) contracts facilitates easy access, increased transparency, much needed efficient price discovery; enable better counterparty credit risk management, wider participation, trading of a standardised product and reduced transaction costs.

Currently, institutions like Banks, Insurance Companies, Corporates, SEBI Registered Brokers, Mutual Funds, participants in bullion markets and Individuals etc. are among those eligible for trading.

Saturday, September 13, 2008

Magic of Compounding

If we could appreciate the “Magic of Compounding” we would understand the benefits of starting early and discipline!

Let us explain the power of compounding with the famous story of the Persian emperor who was so enchanted with a new ‘chess’ game that he wanted to fulfill any wish the inventor of the game had. This inventor, a mathematician, decided to ask for one seed of grain on the first square of the chessboard doubling the amounts on each of the following squares. The emperor, at first happy about such modesty, was soon to discover that the total yield of his entire empire would not be sufficient to fulfill the ‘modest’ wish. The amount needed on the 64th square of the chessboard equals 440 times the yield of grain of the entire planet. Just try converting into money in any currency and you will realize the importance of compounding.

Starting with Rs 1000 and by investing Rs 1000 every month compounded at 10% amounts works out to Rs 78171 after 5 years. In 10 years it more than doubles to Rs 202457. The figures at the end of 15, 20, 25, 30 40, 50 years are Rs 402621, 724986, 1244159, 2080292, 5595607, 1,47,13,428!!

Imagine Rs 100 is invested and it grows at 10% every year. Column 2 is what it will grow to if it was held for the number of years in column 1. So if your great grand father invested Rs 100, 150 years ago, you would have inherited Rs 16 crore.

Are you aware of the Magic of Compounding?

If we could appreciate the “Magic of Compounding” we would understand the benefits of starting early and discipline!

Let us explain the power of compounding with the famous story of the Persian emperor who was so enchanted with a new ‘chess’ game that he wanted to fulfill any wish the inventor of the game had. This inventor, a mathematician, decided to ask for one seed of grain on the first square of the chessboard doubling the amounts on each of the following squares. The emperor, at first happy about such modesty, was soon to discover that the total yield of his entire empire would not be sufficient to fulfill the ‘modest’ wish. The amount needed on the 64th square of the chessboard equals 440 times the yield of grain of the entire planet. Just try converting into money in any currency and you will realize the importance of compounding.

Starting with Rs 1000 and by investing Rs 1000 every month compounded at 10% amounts works out to Rs 78171 after 5 years. In 10 years it more than doubles to Rs 202457. The figures at the end of 15, 20, 25, 30 40, 50 years are Rs 402621, 724986, 1244159, 2080292, 5595607, 1,47,13,428!!

Imagine Rs 100 is invested and it grows at 10% every year. Column 2 is what it will grow to if it was held for the number of years in column 1. So if your great grand father invested Rs 100, 150 years ago, you would have inherited Rs 16 crore.

Friday, September 12, 2008

Personal Finance E-Book

Have you checked out my e-book on personal finance. It's called Monday is Moneyday.

Download link

Thursday, September 11, 2008

Needs & Wants: What's the Difference?

Personal Finance is all about spending less than what you earn and maximizing your savings by investing prudently.

When it comes to spending, we have a continuous struggle between what we need and what we want. There is a very thin line separating them. We so badly want to have a smoke that we call it a need!

To take a food example, all we need is दाल रोटी चावल & सब्जी /भाजी । But we want our Chocolates, Pizzas, Noodles, Non veg dishes and consider them our needs.

Have you noticed labourers, daily wagers who survive by fulfilling the needs and still having better health? All our lifestyle diseases are due to what we want!!

My takeaway from this post: Needs simplify. Wants complicates.

Question to self: Do I need link love for this post? Or do I want one?

What is your question?

Wednesday, September 10, 2008

Equity funds out-perform bellwether indices in August: CRISIL

CRISIL reports that Diversified Equity funds, on an average, out-performed the S&P CNX Nifty and Sensex in the month of August led by the out-performance of midcap stocks vis-à-vis large caps. As most diversified equity funds have a fair exposure to midcap stocks, this has helped them boost their returns in August.

In addition, the out-performance is a result of auto, banking, IT and FMCG stocks doing well in the month. 237 schemes out of 335 schemes in the equity fund category, outperformed the S&P CNX Nifty in August. Top performers in the category belonged to ELSS schemes as well as general equity schemes. Franklin India Taxshield 99, Fidelity India Special Situations Fund and Lotus India Midcap Fund were the top three gainers.

All CRISIL indices posted positive returns in August. Equity based indices lead the charts when analyzed forthe month as a whole. The hybrid CRISIL Fund~bX (which tracks balanced funds) surged the most during the month by 2.83 per cent, benefiting from the good showing of both equities and debt. This was a classic case of benefits being derived from diversification into debt and equity as for some periods in the month positive movements on the debt side cushioned negative movements on the equity side, thus causing balanced funds to out-perform equity funds on an average for the month taken as a whole. The CRISIL Fund~eX (which tracks equity funds) closely followed it with 2.49 per cent returns while the CRISIL MIPEX, (benchmark for monthly income plans) which has a lower equity component, posted a return of 0.79 per cent. Among pure debt indices, CRISIL Fund~ Gilt Index (benchmark for Gilt Funds) rose over 1 per cent while CRISIL Fund~dX (which tracks Long-Term Bond Funds) ended up 0.75 per cent. The CRISIL STBEX (benchmark for Short-Term Bond Funds) rose 0.68 per cent and CRISIL~LX (which tracks liquid funds) gave a monthly return of 0.71 per cent

Auto and Banking Sector stocks provide a kicker in the equity funds category

“Among the key outperforming sectors were interest rate sensitive sectors such as auto and banking which topped the returns chart on hopes of softening interest rates as inflation showed signs of easing.” Availability of stocks at good valuations given the hammering these sectors have taken in the past also contributed to the uptick. Adds Mr. Sitaraman, “Easing of inflation worries also helped the FMCG stocks do well while the depreciating rupee helped ITstocks outperform during the month.”

JM Auto Sector Fund was the top performer in the equity category with 9 per cent return. Lotus India Banking Fund followed it with 7 per cent returns over the past month. Franklin Infotech Fund gained over 6 per cent while UTI-Software Fund returned 5 per cent during the month.

Reliance Industries Ltd. continued to be the most popular stock among fund managers of diversified equity schemes over a 3-month time frame followed by Bharti Televentures Ltd and Larsen & Toubro Ltd. Among industries, the banking sector continued to be the most sought after industry for yet another month followed by Computers - Software, Electrical Equipment and Pharmaceuticals..

Indian mutual fund industry’s average assets under management (AUM) rose by nearly 3 per cent in August, to Rs.5.45 trillion from Rs. 5.31 trillion in July 2008 (including fund of funds). The rise in average AUM can be attributed to the resurgent equity market as well as new fund offerings in Fixed Maturity Plans (FMPs). 25 out of 34 fund houses witnessed rise in their average AUM. Reliance Mutual Fund continued to dominate the asset charts with an average asset base of Rs 886 bn, up by almost 5 per cent from the previous month. HDFC Mutual Fund moved up by one notch to occupy the second spot. Its average assets under management rose by 6 per cent to Rs 539 bn.

India's first online weekly on personal finance

Tuesday, September 9, 2008

Clear & Smart Steps to Raise Your Financial Intelligence Levels

Steve Pavlina writes on "How to raise your financial vibration" where he lists out clear and smart goals to adopt to raise your financial intelligence levels.

There was one part which I really relate to and touched me is:

If you double your income, it means you’re contributing twice as much value
to others. The money you earn is an IOU from society. If you have a million
dollars in the bank, it means you’ve given at least a million dollars more value
than you received — that’s very generous. If you’re in debt, it means you’re
taking more than you’re giving. The more value you contribute, the more society
owes you in return. If you allow your income to stagnate, it means you’re
holding back on the contribution side. That’s lazy and selfish. Focus on
expanding your contribution, and you’ll find that society gives you a lot more

Read the full post

Monday, September 8, 2008

Blow by Blow Account of Freddie Mac Fannie Mae being Taken Over

In one of the most sweeping government interventions in financial markets in U.S. history, the Government is likely to take over Freddie Mac and Fannie Mae.

The downfall of Fannie and Freddie stems from a series of miscalculations and deferred decisions, both by their executives and government officials, according to company insiders, regulators, auditors and outside analysts. The companies expanded rapidly in recent years, initially playing down the risks posed by a housing bubble. Then, as the housing slump expanded nationwide, they resisted raising enough new capital that might have provided a financial cushion to weather the storm. Lawmakers, paralyzed by partisan infighting, delayed strengthening regulatory oversight of the politically powerful companies.

Read the blow by blow account of the story
Also check what it means (By Deepak Shenoy)

Saturday, September 6, 2008

Why can't we handle Personal Finance properly?

Most of us avoid taking financial decisions or generally do a sloppy job with our personal finances. I was wondering why and I could figure out three reasons. 

One, there is an information asymmetry in this industry. That means that the seller of financial products knows more than the buyer and he uses it to his advantage and not the buyers advantage. The lack of transparency puts off people.

Two, the sellers use a lot of jargons and number crunching which makes people uncomfortable. Probably that’s another reason why people avoid personal finance.

The third reason that comes to my mind is of a psychological nature. In Mahabharata, the great Indian epic, there’s a story of a Yaksha who challenges Yudishthira to answer his questions.

What is the most surprising thing in the world was one of the questions. Yudishthira answers that the most amazing thing is that even though every day one sees countless living beings that are old and dying but no one can imagine him/herself as old or taking that last journey!

That’s why people have a natural tendency to avoid financial planning. Do you have any other ideas? Let me know, please.

Friday, September 5, 2008

Currency Futures Trading is Live

Excerpts from the speech of Finance Minister inaugurating the trading of Currency Futures on NSE, India.
It's a proud day today and I stand before you to dedicate to the financial services community, a new product - Currency Futures. May I begin by warmly thanking the Reserve Bank of India and Securities Exchange Board of India for jointly developing this product and I congratulate the National Stock Exchange for having the distinction of being the first exchange to commence its trade. I wish all success to NSE and I am hopeful that the other two exchanges which have received in-principle approval and other exchanges will soon offer this product.

I see before me on the screen the first trades that is being put through. I am not a trader and I can't qualify ever to become a trader, but if it makes any sense and I am sure it does to a large number of you. Someone is buying at 43.8250 and someone is selling at 43.8400, hope one of them at least makes a profit.

In today's globalised and integrated business environment, many entities are impacted by currency risk either directly or indirectly. Exchange traded currency futures market provides an excellent opportunities to hedge currency risk for different kinds of participants.

The electronic nation wide trading facility, with the backbone of efficient clearing mechanism and efficient risk management system, will benefit universal participants including corporates, banks and individual investors.

As Shri. Ravi Narain mentioned, currency futures contract will be allowed, to begin with, only for USD / Rupee. and for participations by Indian residents. The regulations would with experience gained in the functioning market, consider how and when it can further open up for trading in other currencies as well as for permitting participation by foreign institutional investors and non-resident Indians. I see this as an important step towards going forward on financial innovation in the country. History shows that financial innovation has been a critical and persistent part of the economic landscape over the past few centuries.

Financial markets have continued to produce a multitude of new products including many new forms of derivatives, alternative risk transfer products, exchange traded funds and variants of equity. We in India have adopted all these slowly, some of these products but with considerable success. However, I may note that many years after these ideas were mooted we had to wait. For example, stock index futures took 5 years to be offered to investors after it was first conceived; exchange traded funds for Gold took 4 years to become a reality; interest rate derivatives though launched in 2003 have not taken off. These experiences highlight the risky environment that financial innovation faces in this country. This should change.

Galileo I believe said doubt is the father of invention; if I may add, doubting Thomases are impediments to progress.

We need to continue to innovate and improve in the design of financial products, its customer service as well as all India delivery. I hope this will be kept in mind when regulators review the next steps on the exchange traded futures markets. I urge them to move rapidly and with an open mind that are necessary in such situations. After having launched currency Futures we need to revitalize the exchange traded interest rate derivatives market. We need to offer exchange traded credit derivatives and we need to strengthen the corporate bond market.

These three products are high on the priority list of government and I ask the co-operation and support of RBI and SEBI and others to move forward rapidly. These 3 markets are important (Bond, Currency and Derivatives), it is important that these markets develop rapidly in-order to attract domestic and foreign participation have vibrant trading in spot and derivatives, have healthy speculation and arbitrage to ensure liquidity.

As Shri. Bhave cautioned, some of these products are indeed complex. But the complexity of the products should not deter us from making a beginning. Everybody has a responsibility to explain the complexity of the products to the customers, so that the customers can chose the products that he or she desires. We need to draw the right lessons from developments around the world. We need to innovate, while the same time we need to ensure that the complexities are understood, the risks are mitigated and there is reward for those who are willing to take the risk.

India's first online weekly on personal finance