December has been a month when foreign investors pull out money to adjust their profit and loss account for their yearly closures. This obviously brings Sensex down.
Also December is the month when most of us have to start declaring our actual tax savings under 80C. So I see a good opportunity to cash in falling markets to meet this declaration burden. Gear up if you have lost the best opportunity to invest during august-September and want to join the Indian Sensex bandwagon now.
The instrument that I’m suggesting here is ELSS (Equity linked savings scheme) scheme of mutual funds. Though there are many investment products that are eligible for tax deductions under 80C, ELSS gives you the opportunity to earn maximum return and has the shortest lock-in period of 3 years amongst all such investment options. However, it comes with an inherit risk of investing in equity markets.
There are several ELSS funds available. Following two are recommended:
1. SBI magnum Tax Gain Scheme
2. HDFC Tax-Saver
These schemes come with different flavors like dividend, growth, dividend reinvestments. I would recommend growth scheme as it takes care of our long term wealth building plan.
Now the main point: How to utilize the December factors if you have missed to log on through Systematic investment plan?
Markets will remain hugely volatile in the month of December fluctuating between 17500 (most pessimistic) – 20500 (most optimistic). I recommend you to follow the steps below:
1. Set aside the sum you want to invest in ELSS
2. Divide it in 3 chunks
3. Invest first chunk when market closes below 19000
4. Invest second when market goes down and closes below 18400.
5. Now wait for the third chunk to be invested around last week of December at whatever level the market is.
You will have to be really swift and track the market closing on a day-to-day basis. This strategy might give you little more return than putting whole of your money at once. Also it would need you to online trading account. If you don’t have it then get in touch with someone of these banks and invest your whole sum at around 18.5K level at once.
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Regular Stock ideas: Buy DLF at around 850-875, Reliance at current level and on dips
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4 comments:
nice topic Kumar saab...
the ELSS and the stage wise investments are good points, and i really like the 'make money, lose some, but learn' funda... so true in any market...
Only one point rankles... "the foreign investors pull out money in December" is a media myth...
actual data suggests otherwise:
FII investments in Equity in Dec ($ mn)
2006: - 797
2005: 2046
2004: 1472
2003: 1355
2002: 88
2001: 52
Source: SEBI: http://www.sebi.gov.in/Index.jsp?contentDisp=FIITrends
so, markets need not necessarily go down in December... am yet to chk December trends in mkts... will add to this comments when i get tht...
Agreed SRK with the point on it being more of a media hype.
In fact, In the month of Dec so far [14th], FIIs have been net +ve investors. However, the quantum appears to have slowed down from last two months.
Markets will remain positively volatile as it appears.
Nov 2007, there was a flow out of 1.5 Bn$ by FII's after an impressive 5Bn$ inflow in Oct 2007. With current turmoil in world financial env. there are chances of dull december which is evident from current month inflow.
On other thoughts... Yester years data and their extrapolation do not necessarily apply in indian markets as the context has changed a lot over the years..
So markets may no necessarily go down but will provide avenues for investments definitely caused by volatility...
i agree on the volatility part dost...
as i said, nice post...
December might witness falls, and FIIs might withdraw this time, wht wid US recessions and more subprime writeoffs...
but those need not be necessarily bcoz FIIs book profits... or withdraw every time in Dec...
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