This is one interesting fact.. salaried Indians are the 10th most taxed people on the planet.. whats more is that we are 40 places ahead of USA.. which somehow i always believed was a very heavily taxed country. I wonder how badly were the people tax before the Narsima Rao Reforms which lowered the tax rates to half.
Suppose instead of investing in the stock market, you put 3,00,000/- in a bank FD which pays you 7.25% interest paid every quarter (i.e. 5437.5/-). After this you go long on 90 day nifty futures. What you will observe is that typically they are available at a premium of 60-70 points above the prevailing spot rate. So net of brokerage 2300-1800/- every quarter. (more if you face an contangio or bearish market). Over the year this would translate into an additional gain of about 7-10k for every 3 Lakhs invested.
All you have to do is buy the nifty futures that expire after 90 days and hold it till the maturity date. On the maturity date you roll over the contract. I.e. pay 60-70 points premium and buy a new contract that matures after another 90 days. If the market goes down, the nifty contract will also lose the same amount hence making it a perfect hedge. Another advantage is the ability to leverage. Irrespective of the margin requirement, I believe that leverage higher than 5:1 in Indian market is risky. Hence by a minimal investment of 60,000/- you can have a market exposure of 300,0000/-
Note: consult your financial adviser before following the strategy blindly.
When tempted to fight fire with fire, remember: the fire department uses water.
One thing that always baffles me that: Most banks charge about 15-27% on personal loans while they pay a minuscule 7-7.5%
These days, I am exploring the merits of creating a platform through which a person (esp. Indian citizens) can seek loan from their friends and family. This way the borrower can have access to cheaper credit, while the lender could either earn higher interest rate or get the satisfaction of helping a friend in need. (And being a friend indeed)
The features that I was seeking were:
1. Ability to connect to various social networking sites: Facebook, twitter, linkedin
2. Ability for an individual to bar certain individuals to know that they are in need of money.
3. Viral Marketing: A person can endorse his friend and spread the news of his requirement amongst his friend circle.
4. provision of anonymous lending (you can help your friend without him knowing that the money is from you)
5. Since charging interest might be awkward amongst friends, there would be a provision to donate interest to charity.
The first version of the website will be basically a forum where individuals can post their needs. They can subsequently contact each other and negotiate the terms and conditions of the loan. There would be no charge for such a service.
In the second version, we intend to add a few fee based services:
1. The borrowers would have a chance to get their documents verified, and deposit with us for safekeeping till the loan is not fully paid back. We are working with NSDL to incorporate hypothecation of shares and securities.
2. Lenders could use our bank accounts for transfer and collection of funds.
3. There would be a provision for an auction to determine the min. interest charged.
However I would really need your feedback (on ankur@enagar.com) about what features should/should not be there and how I can promote and popularize this initiative
Update: 11 Dec 2013: I have launched the beta version of the P2P crowd-funding website
A very long post… but the end is worth it.
