Dear Policy Holders,
 
Please refer to my last two posts about fund switching. I have been advising for staying in equity investment through Growth Fund and other such funds to the maximum extent of your risk appetite. The reason was precisely this that the markets were unduly under pressure and were poised for a rebound any time whenever any trigger appeared on the scene. This would not have left any chance to get in to equities in good time as the moves were expected to be fast. This has precisely happened when just after the RBI's move to reduce the CRR by 50bps was welcomed by the markets. This allowed release of Rs 32000 crores to seep into banking system without any cost to banks.

Now since the interest rates have still not been brought down and are expected to be dealt with in the next RBI exercise, the markets are now losing ground. The markets were also helped by international events and global market performance. We are however at a critical juncture due to the forthcoming budget and the political equation change on account of the assembly elections five states. In light of this I would suggest that the equity exposure should be now 65pc for the aggressive and young, 50pc for the moderates and only 40pc for the conservative. The conservatives are advised to keep reducing their exposure by 10pc with every 5pc rise (Nifty is now just above 5400) from here.

With best wishes,

 Krishnakumar Khandelwal

Fund switching advice for ULIPs on Diwali 2011

Dear Policyholders,

I am addressing you after a long gap. In fact the economic scenario has remained fluid and no rational assessment was possible due to concerns having roots overseas. Only the basic strength of Indian economy and more particularly the bigger Indian corporates gives me courage to tell you once more that equity investment is a better option and hence you should be more inclined to keep your funds in equities in accordance with your age and risk profile. This means that the younger of you may remain in equity pocket as younger people have longer period for letting the investment fructify.

It may seem to you that right when the interest rate is going up I have been telling you what I told above. I need to explain to you the situation and the main points guiding me have been the following :

A) the RBI has been busy raising the Repo and Rverse Repo rate due mainly to address the inflationary situation. They have done it lastly today itself by 25 bps and the Repo and Reverse Repo stand at 8.5pc and 7.5pc while the CRR has been kept unchanged at 6 pc. In my vew the rate increases in medium term do not adversely affect the corporates. The possibility of readjustment right after the moderation of inflation leaves scope of good appreciation in equity prices. You may well appreciate that while rates have been going up the collective performance of corporates has still shown positive growth over the past quarters since the rate hikes have been taking place.

B) the market is flat since Oct 2007 ie it stays at the same level now as was the level in Oct 2007. But, the important point is that the sales have nearly doubled , the profits have also nearly doubled while the Price to Book Value ratio has come down under 2.9 from above 4 in Oct 2007. Typically the net-worth of companies acts as support for Indian corporates as the this counters inflation in a beautiful way. This should be understood against the back-drop of Indian economy's still nascent state which has an enormous room for growth given the demographic advantage and the ever increasing proportion of population actively participating in recountable economic activity. This ensures robust GDP growth for some more time to come besides making capital as more precious asset than bullion etc.

C) it has been observed that the Indian equities go up in geometric progression after a long period of lull (extending beyond four-five years). This is partly due to lack of depth and partly due to design by some market participants. In view of this those who miss the bus don't have any safe chance of boarding it later. So safety lies in remaining invested in equities at the moment and being prepared to see some temporary dilution of values which may happen due to some developments in world markets or some precipitate govt action. Being ready to forego the interest earning is another aspect but it gets neutralized due to the nominal returns on equities being the same as the bank interest (it means that since the PE ratio at present is under twelve the nominal return on investment remains at over eight percent).

D) there is little chance of your being in absolutely wrong sort of equities as the fund managers of HDFC Life have shown capacity to choose only the right scrips.

Every thing said above has to be understood fully by you and I would be ready to explain the points that you may have to further discuss. The responsibility of your decision lies with you only and my advice may be taken as just a broad guidance.

I wish you all a very happy Diwali, and wish that collectively we will be able to take India in to an era that is corruption free.

Krishnakumar Khandelwal

Positive Growth by HDFC Life

Dear Policyholders,

HDFC Life is the only company which has had positive growth during last year. Even LIC hasn't been able to show positive growth last year.

The year was bad for all as  many changes were brought about by IRDA in line with policy of keeping interest of policyholders supreme and compelling companies to reduce costs and charges. Since HDFC Life has always been alive to this, it could negotiate a period of turmoil for the industry at large in absolute comfort.

You should now be satisfied and proud to be with HDFC Life. As for returns on various funds for ULIP Holders , the lead is maintained by HDFC Life. You may check fund performance by visiting www.hdfclife.com .

The total fund under management of HDFC Life have crossed the mile-stone of Rs 25000 crs.

Please contact me with your specific requirement of insurance coverage, funds investment and tax planning , I promise to give you entire satisfaction on all scores, HDFC Life provides me plateform to do it.

Thanking you,

Krishna Kumar Khandelwal