Why mutual fund investors should understand passive investing…

If you are a mutual fund investor you are sure to have seen advertisements of mutual fund advertising their performance. These are typically referred to as active funds. These active funds have managers who indulge in stock selection and try to outperform the Nifty or the Sensex. For example over the last 1 year if the Nifty has earned 14% and the fund manager has earned 19%, then the fund manager is said to have outperformed the index. Passive investing, on the other hand, is just investing in the index. How do you do it? You can do it by simply buying an index fund.

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RBI Credit Policy – Investors get more than they bargained for…

If there was one way to describe the RBI policy announced on 29th September 2015, it was a policy that exceeded expectations by a margin. Markets were expecting a 25 bps rate cut and preparing for a zero bps rate cut with a hawkish tone. What the markets actually got was a pleasant surprise! The RBI cut rates by a full 50 basis points and did not rule out further rate cuts, thus keeping the tone as dovish as possible. Also there were some more items for the markets to rejoice.

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Volkswagen Story

How one global company destroyed itself…

When Volkswagen CEO resigned and admitted that they had long manipulated emission norms in the US, it came as little surprise. For years the US authorities were investigating why Volkswagen’s emission tests on road were far worse than those done in the lab. It now transpires that VW had actually fudged its software to lie about actual emissions of its diesel cars..

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Rating Agencies

The focus is back on them after 7 long years…

The recent fiasco that happened with Amtek Auto has once again put the spotlight on the reactive approach of rating agencies. Add Bhushan Steel and Jaypee Infra and you have 3 companies that enjoyed fairly privileged ratings shortly before these companies came to the verge of default.

Back in 2008, this became a global issue as investment banks with AAA ratings suddenly found themselves on the verge of bankruptcy. Why did the rating agencies not flag off such concerns well in advance? Obviously, such concerns could not have arisen overnight and must have built up over time.

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What will weigh on the RBI Governor’s mind ahead of a rate cut?

It almost appears like a fait accompli. The US Fed has maintained status quo on rates in September and hence the door is open for Dr. Rajan to cut rates in his September 29 review of monetary policy. Actually, it may not be as simple as that. A rate cut will not be as simple as it appears to be. From a practical standpoint, the RBI governor will be weighed down by a plethora of variables before he decides on a rate cut on September 29. These variables will impact not only the rate cut decision but also the extent of rate cut that the RBI will undertake in the forthcoming policy meet.

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