The year gone by 2011 will be remembered as one of the most unfortunate year for India. Scandals, corruption, political drama, rising interest rates, falling rupee, rising oil prices and what not. What more one can think of things which have gone wrong in this calendar year. With all these negative news, stock market got a tight slap along with Sharad Pawar…   Sensex down close to 25% on calendar year basis… a big blow to investors. We can do a lot of analysis and post mortem on why stock market went down and what better we could have done but it is all history. Not to say that we have not learnt from 2011 or what better should we do in future. But the point is that what lies ahead...   What is that an investor should do now? There are various questions which come in investors mind and it is entirely reasonable as well. In this article we will try and answer few of the queries which do come in investors mind.   Is India shining over?             Well India shinning or the great Indian Growth story was driven by mainly its demography. India is the youngest population in the world and accounts for over 25% of the world young population. With over 123 crore population, a population which aspires to live a better life, is the largest workforce in the world and this demography benefits will continue for at least 2 more decades to come. Now this benefit has not changed, we have not stopped consuming goods and services. Look around and you will see developments happening all around. Yes due to bad governance and due to some problems across the globe, the speed of growth has come down. A good policy action on the part of RBI and Government is needed to again come to 5th gear of our growth. The Government is definitely a major cause of concern. As often said, “India is not growing because of Government but in spite of government.”   Somehow, we feel that government has gone in sleep mode where just no action is taking place. Reforms and policy action are needed not only on FDI matter but across all areas like power, education, agriculture, infrastructure etc. In one of the recent interview, Mr. Deepak Parikh of HDFC said that it is high time that government must get its act together.   Should I stop investing in equities or withdraw my money from equities?         Look at the above graph. Investors generally feel confident about any asset class when it is at its highest risk point and most disappointed when it is much rewarding. In fact, today the perception of risk is highest but the actual risk is lowest. Also as good times don’t last forever, so as bad times. Noting is permanent. Indian economy has been through much worst economic condition than what is being witnessed today. All we need is to have patience. Already the signs of improvement have started emerging. RBI in its December 16, 2011 policy review clearly stated that they will now work on improving the conditions of the economy rather than just looking at inflation. Dollar is at its high and FII and other investors abroad have started finding Indian share market much cheaper. When will good time come when I will make money?                         Million dollar question! We wish we would have got an exact answer to this. Yes it is for sure that good times will come but they may not come in a hurry. It may take some time unless government does something miraculous. Mind you, both Government and RBI is under pressure to make the bad things repair. Interest rates have peaked out and if nothing wrong further happens to international prices of oil, it is visible that interest will start coming down and that will be a big booster to economy. 2012 may well be a year where repair work will take place and those set of investors who will show patience are bound to be rewarded when other next bull market starts. This year may not be a year of supernormal profits but also may not be as bad as 2011.         Conclusion:     Keep your long term vision intact, SIPs continue and have patience. SIPs work best when we invest large portion of money in bearish markets.   We would like conclude by saying – “Buy when others are fearful and sell when others are greedy – Warren Buffet”

One day I was talking to one of relative that you should have a mediclaim policy. He got frustrated and said that paying premium for mediclaim is just waste and insurance company do not pay claim when it is needed. He said that he earlier had a policy for which he paid the premium for 5 years and when he got hospitalized, the insurance company did not pay the full amount.  When I got the details of claim, I found two reasons for lesser payments. One that the room rent paid by my relative during hospitalization exceeded the limit provided in the policy also called “sub-limits”and second point why he was given lesser payment is because there was a condition of “co pay” which he had opted at the time of taking the policy which reduced his premium. But actually he never realized that just by saving few hundred rupees on premium, he would be losing thousands at the time of claim. In this article, we will highlights on few points which are important to see before taking a mediclaim policy. 1.   Room Rent Eligibility:Many Insurance companies keep a cap on the rent amount which can be charged against the policy. It is generally 1% to 2% of the sum assured. For example, if your policy is of Rs. 1 lac, your room rent cannot exceed Rs. 1000 per day. Now if you have opted for a super-deluxe room which cost Rs. 3000 per day, you will only be reimbursed for Rs. 1000 per day. The condition of room charges in many policies could be such that they allow room only on twin sharing basis. And let us assume that the insured stays in a room with single capacity, in this case, he will be paid only half the amount. Similar to room charges, there are capping on the cost of ICU also in many policies. One must either know such terms and condition before taking such policy or should avoid such policy which keeps ay limit on room charges.   2.   Diseases not covered:In most of the policies, there are certain diseases which are not covered during first year or two years of the policy period. These are diseases which are assumed to exist with the insured at the time of taking policy. Though the list of such disease cannot be written here but few of the common disease are piles, hernia, osteoarthritis etc. After the initial period is over, the same diseases can be covered for. 3.   Pre-existing diseases:Now there are diseases which are already there at the time of taking insurance for the first time. They are classified as pre-existing diseases. Remember that health insurance policy covers risk but if one is already diagnosed by certain diseases at the time taking policy, it cannot be classified as risk. Though, it is not that such disease will never be covered for. There are policies which cover the pre-existing diseases after continuing the policy for 3-4 years.One should always look forward for such policies. But despite having pre-existing coverage clause, an insurance company can give in writing to the policy holder that certain diseases cannot be covered at all during the entire life of policy. For example, if one is already suffering from stones and opts for fresh medical policy, company may put a condition that such disease shall not be covered at all.   4.   Renewal Barriers: There could be condition in the policy that they will not be automatic renewal after the insured touches the specific age. For example, policy may state that the renewal will be subject to medical check up and underwriting guidelines once the insured touches the age of 75. Such policies should be avoided in totality. The real need for medical help is needed at the higher age and if one is continuing the policy, the insurance company should not deny renewals. 5. No Claim Bonus:This is a very grey area and one should be extremely cautious here. In every insurance policy, there are certain benefits given to the policy holder for a claim-less year. The company can give such benefits in two ways. A.      The amount of sum assured is increased without increasing the policy premium.The rate of increased sum assured is generally 5-10 % in a year and subject to maximum 50% of the initial sum assured. B.      The other way of giving such benefit is to reduce the premium by 5-10% and keeping the original sum assured as it is. Again it is also subject to 50% deduction in premium only.         The grey area is that the increase in benefit is 5-10% per year but in case you take a claim in any particular year, the entire benefits are withdrawn. Logically speaking, if benefit is given on incremental step by step basis, so as it should be withdrawn step by step approach.  The sudden drop in NCB from high point to ZERO discourages users to take benefit of policy in small claims. So look for policy where there is step up approach in increment in NCB and similar step down approach in case of claim.     

Just a day before diwali, RBI Governor Mr. Subbarao deregulated the interest rate on Savings Bank. Very recently, the interest rates on Savings Bank were raised from 3.5% to 4%.Now as per the new deregulation policy, each bank will decide what will be the rate of interest which they would give on savings bank account. Now each bank can decide what interest should be given on savings bank account but will have to offer similar interest rate to accounts with less than 1 lac balance but they can choose to offer different rate of interest on any amount over 1 lac.   For example, bank can decide to pay 3% on amount less than 1 lac but may offer 5% to any amount above 1 lace to 2 lac, 5.5% to any amount more than 2 lac to 5 laces and above 5 lace, it may choose to pay 6% interest rates. But a bank cannot decide to pay 2% to less than 50000 deposit and 3% to above 50000. Upto 1 lac, they have to offer uniform rate.