Paper Assets | wealthymatters

Buy The Product Not The Shares

September 6, 2013 Leave a comment

wealthymatters Invest in their apartments, and you will get rich. But invest in their shares and you will be poorer. Unlike in other sectors, values of shares of listed real estate companies do not reflect the growing value of their products. Sample this: Investments made in shares of real estate companies like Delhi-based Unitech and DLF, Mumbai-based Indiabulls Real Estate or Bangalore-based Purvankara in 2008 would have crashed to half or to a fifth of their value by now whereas in the same period, returns from investments made in homes built by the same companies would have risen anywhere between 50% and 150% or more. If one had bought an apartment in any Gurgaon-based apartment building of DLF — India’s biggest builder — in 2008, the investment would have, by now, appreciated 60-175%. Had the same money been used to purchase DLF’s shares the same year, that investment would have eroded to just 20%. Investors of Unitech, Indiabulls and other real estate firms would have a similar story to tell. Read more of this post

Filed under Alternative Assets, Paper Assets, Tool Kit Tagged with buy real estate, commodity business, cyclical business, DLF, Gold, Indiabulls Real Estate, Inflation, invest in property, invest in real estate, over leveraged, postaday, Purvankara, real estate company shares, real estate returns, shares you should never buy, trading appartments, Unitech

The Co-relation Between Rupee,Bonds And Shares

September 5, 2013 Leave a comment

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On a point-to-point basis up to August 22, the rupee (RBI reference rate) had fallen by 17.5%, the 10-year yield had gone up by around 90 bps and the Sensex had declined 9.5%. In terms of the linkage between the two, statistical analysis shows that the coefficient of correlation between the rupee and Sensex at absolute levels was -0.58 which is quite high with an inverse sign, indicating that the market does not like a declining rupee. At the incremental level, i.e. daily changes in both of them, the coefficient was -0.37. In case of the rupee and the 10-year bond, it was as high as 0.70 at the absolute level and -0.07 at the incremental level. This shows that high rupee rates go hand-in hand with high bond yields. However, the exact changes in levels are not correlated. Last, higher bond yields are negatively correlated with sensex at 0.29 (for absolute levels) and 0.35 (for changes).

While such correlations do have somewhere an inbuilt assumption of causation, the causality tests do not support such a relation between any of these variables. This makes sense as bond yields are driven mainly by liquidity conditions and regulatory conditions. The Sensex reacts also to political actions and global developments. Therefore, while there is a tendency to move in a pre-determined direction — the stock market does not quite like a weak rupee or high interest rates and a weak rupee should go along with higher interest rates.

Filed under Paper Assets, Tool Kit Tagged with portfolio adjustments, portfolio trimming, postaday

SENSEX Guesstimates

September 4, 2013 Leave a comment

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For what it is worth,Morgan Stanley after a bit of crystal ball gazing,estimates the SENSEX levels between 15700-23800,in the next 2 years.

My personal opinion is to batten down the hatches and take a defensive position for a while.Move your money to the stocks of the companies with the strong pricing power,if you insist on not exiting the market,else cash out your money and wait for clarity.

Why take risks you don’t need to especially if there’s not much to be gained from running extraordinary risks?More about this :Here

Filed under Paper Assets Tagged with Morgan Stanley estimate of SENSEX levels, postaday

Caution 20/80 Home Loan Schemes

September 4, 2013 3 Comments

Real estate companies have been offering schemes called 20:80 and 25:75 where the builder agrees to pay interest on the borrower’s loan for a specific period. The buyer pays 20% upfront and the bank disburses the entire loan to the builder through the individual. The builder finances the construction of the project with the money, and agrees to pay interest on behalf of the borrower to the bank.

Banks such as ICICI Bank ,HDFC Bank and Axis Bank have been lending under these schemes in the hope of increasing the pace of home loan disbursement. Read more of this post

Filed under Alternative Assets, Paper Assets, Tool Kit Tagged with 20/80 home loan, Axis bank Home Loan, credit bureau, credit rating, creditworthiness, default, delayed payments, HDFC Bank Home Loan, home loan, home loan disbursal, ICICI Bank Home loan, liability, postaday, problems, teaser product

Health Insurance Policies For Students

September 3, 2013 3 Comments

wealthymatters Universities abroad mostly make it mandatory for students to have medical coverage. Some universities insist on certain specific requirements such as a minimum medical sum insured, maternity expenses,coverage of mental and nervous disorders, drug and alcohol abuse and inter-collegiate sports injuries.Studying your course fee structure closely would be a good idea. It will help you ascertain whether the cost of health insurance is included in the fees. Next, you need to figure out whether your university allows you to replace this built-in cover with a health policy, that is, student cover from an Indian insurer of your choice.If the answer is yes,you’re in luck.

A student can buy student health insurance cover in India with one-third the premium he/she would have to pay for a similar cover in a foreign country. Additionally, Indian travel cover ensures that students are covered round-the-clock for all in-patient and outpatient treatments when they are abroad. This is unlike many universities who only cover students within the premises. The cover offered by some universities restricts students to a specific list of hospitals. Read more of this post