Finergo Episode 28 15june09

04 KALEIDOSCOPE

ERGO Monday, June 15, 2009

At a glance Reliance Infrastructure Fund Fund philosophy: To give investors long-term capital appreciation by investing mainly in equities and related instruments. The investments will be only in equities related to the infrastructure and related companies. Opening date: May 25, 2009 Closing date: June 23, 2009 Offer price: Rs. 10 per unit Finergo’s take: Infrastructure will be an industry that will show consistent growth at least for the next 10 years.

Quiz 1. What does ELSS stand for: A) Employee Linked Savings Scheme B) Equity Linked Small Stocks C) Equity Linked Savings Scheme D) Enterprise Level Securities and stocks 2. CAP in Large Cap or Mid-Cap stands for? A) Capital B) Capitalisation C) Capacity D) Capability Send your answers to [email protected] or SMS your answers to 92813 98889. For example, if you choose A as the answer to question 1 and B as the answer to question 2 type it as 1A2B and send it. Winner will be chosen by lucky draw from all correct answers.

Answers for last week’s quiz: 20% Palanimanickam

News you can use No to consolidation Employees of all State Bank associates have shown negative sentiments towards the proposed consolidation (Read lead article) of the public sector banks. They are of the opinion that doing so would lead to a distraction in the core focus of the banks from the common man to global competition. The employees association has called for a strike on July 3.

New mortality table for life insurance The IRDA will soon be releasing the new table for calculating mortality rates. The table is based on latest data relating to mortality and is also based on the data provided by different insurance companies relating to their claims. With this customers could look forward to lower premium rates.

HDFC coming up with NCD The board of Housing Development Finance Corporation (HDFC) has approved plans to raise capital of Rs. 4,000 crore through non convertible debentures and warrants that could be converted to shares at a later date. Although the NCDs will be available only to Qualified Institutional Investors, from a personal finance point of view it is a significant move considering it is one of the largest NCD offering and also an indicator of market sentiments.

Consolidation of banks will assure more government support as well as higher safety

Banking on the power on oneness What is it for you and me if PSBs were to consolidate? DIVYA DARSHINI [email protected]

F

inance Minister Pranab Mukherjee has emphasised the need to consolidate Public Sector Banks (PSBs). He stated that this merger of PSBs is very essential for the country as well for the survival and growth of banks themselves. For, it not only aids in the reduction of risks due to financial stability but also helps in improving the state of competitiveness of Indian banks globally. Recently, the Finance Minister met with the Chief Executives of the PSBs and suggested that they look through all the possible ways to further reduce their lending rates. According to him, this will assist in the

growth of these banks as well as boost the economy as a whole. Although the PLR (Prime Lending Rate) of banks have come down by 1.75 to 2.25 per cent during the past six months there is still scope for further reduction. This will give impetus to economic growth too. The FM also pointed out that the Government, as a majority shareholder, will play a very supportive role in the merger. So, what does this mean for you and me? Although on a macro level consolidation can help the country, there are a few positive take-homes for us as individual investors as well: 1. Consolidation of banks may enable better returns on investments and the lending rates could go down, making it cheaper and easier for us

to avail of loans. 2. Government support will be more than before for there is less diversification in policies and procedures. 3. This would benefit the capital markets tremendously and thus the values of our stock investments and mutual fund NAVs could see a positive growth. 4. Indian public sector banks could become more competitive in comparison to global banks, thus enabling them to offer cost-effective yet world-class financial products. 5. Common investors can be more assured when investing in these entities as there is more government support as well as higher safety. This is very critical, especially after what happened to the large US banks. ■