Those who timed the Indian markets correctly and cashed in on the Feb. 26 budget must be pleased with their returns – about 3.5% on their mutual fund investments and probably double or triple that rate with some bold trading in the right stocks. For those who missed the chance, don't despair: it's still not too late to enter what could turn be a sustainable bull run into the next quarter. In any case, it's not often that one can time the markets correctly. Seasoned investors will tell you that waiting for that opportune moment to enter or exit the markets often leads to more opportunities lost. For now, it's clear that foreign funds are buying Indian stocks again. Both the Nifty and the Sensex breached their key resistance levels of 5100 and 17,000 in the past week, suggesting that more movements on the upside are likely in the short and medium term. Here's an interesting option for those still hesitating on the sidelines. Buy into a Daily Investment Plan (DIP), a new mutual fund product that's tailor-made for a safe play during volatile times. The concept is quite similar to that of the Systematic Investment Plan (SIP) wherein you make monthly or quarterly investments in a mutual fund so as to minimize the adverse impacts of a volatile market and maximize your chances of riding a bull run. Simply put, with SIPs and DIPs, you average out market volatility and avoid the frustrating need to time the market. The SIP has been around for a while. After the recession shock of 2008 and the sudden upsurge of the Indian markets by mid-2009, it has become clear that SIPs offer a safe and sensible way to protect your investments when the going gets tough and make some appreciable returns when the markets start recovering. The DIP concept, introduced by Bharti AXA Mutual Fund recently, now appears to be the next big thing in safe investing. Already an instant hit with investors, it offers a far greater multiplier effect than the SIP, since you're plowing in your savings daily instead of monthly or quarterly. Encouraged by Bharti's success, L&T launched a similar fund on March 5 and more fund house are expected to follow suit soon. Here's how a DIP works. You make a a one-time investment in a fund from where instalments would be transferred daily into chosen equity schemes. L&T's equity schemes are L&T Opportunities Fund, L&T Growth Fund, L&T Midcap Fund, L&T Multi-Cap Fund, L&T Hedged Equity Fund, L&T Contra Fund and L&T Global Advantage Fund. The minimum amount to be transferred to any of the schemes are Rs. 50/- and in multiples of Re 1/- thereafter. There's also a choice of two DIP investment option: cumulative and dividend. Another positive development is a new rule introduced by the Securities & Exchange Board of India that allows funds to be traded on stock exchanges. Earlier, you could trade in funds only through fund distributors like banks, post office, or some select large brokers like Kotak Securities Ltd. and Sharekhan Ltd. Now, all you need is a dematerialized, or “demat,” account to trade in mutual funds through an offline broker, just as you would execute a stock trade by asking your broker to buy or sell. Whether you are a resident or non-resident Indian (NRI), you will need a Permanent Account Number Card (PAN Card) to open a demat account. In fact, a PAN (a 10-digit alphanumeric code generated by India's Income Tax Department) is essential for anyone wanting to conduct any kind of financial transaction in India – buying a property/house in India, opening bank account, a demat account, renting out a property etc. Buying a mutual fund through a broker will allow your funds (including SIPs and DIPs) to show up in the same demat account as your stocks and bonds. This means that you no longer need to phone or email your broker, log on to different fund web sites or track paperwork to check on the daily status of your funds. In Saudi Arabia, demat accounts can be opened through banks such as SAMBA and SABB which have partner agreements with banks in India offering the online trading facility. Consider these numbers if you're still undecided on buying into mutual funds. The assets of the Indian mutual fund industry increased by 2.65 per cent in February, during the run-up to the budget announcement. The industry's total assets stood at Rs781 trillion (about $171.8 billion) in February, which is an increase of approximately Rs202 billion (about $4.4 billion) from January's figures. Considering that total assets of the industry peaked in November, 2009 at a record Rs8.06 trillion ($1777.1 billion), when the Sensex crossed the 17,800 mark, expectations remain high of more foreign funds returning to the markets. Factor in the brighter prospects in the wake of Finance Minister Pranab Mukherjee's brave budget for economic consolidation and you should expect the markets to keep climbing, though with the occasional dip due to weak global cues. – SG Feedback: [email protected] __
