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The National Stock Exchange (NSE) will launch interest rate futures on the 91-day treasury bills from July 4. So, what is this interest rate futures is all about? Interest rate futures (IRF) is a standardised interest rate derivative contract traded on a stock exchange to buy or sell an interest bearing instrument at a specified future date, at a price determined at the time of the contract. Why are they issued? These Money market instruments are issued to finance the short term requirements of the Government of India and they are issued at a discount to face value (Rs 100). The return is the difference between the par value and issue price There are different types of T-bills based on the maturity period like 91 days, 182 days and 364 days. Such instruments are very helpful for banks and mutual funds to hedge their exposure. How are they quoted? Quote Price = 100 minus futures discount yield. E.g. For a futures discount yield of 7% p.a, the quote price would be 100 – 7 = Rs 93.00.

In continuation of earlier article about the basics of Exchange Traded Funds (ETFs) and pros and cons of investing in ETFs , let us look at the list of ETFs available in India. With regard to Equity ETFs, there are a few Index funds, couple of banking sector funds and an international index like Hangseng Bees. Similarly in the Commodity ETFs,there are a quite a number of Gold ETFs, which has attracted a large number of investors, of late. Interestingly there aren't any Silver ETFs and one can expect such an ETF soon. The following is the list of ETFs available in India and traded in National Stock Exchange of India . The list shows the Fund house, name of the scheme and the NSE symbol. Equity ETFs: Benchmark Mutual Fund: Banking Index Benchmark Exchange Traded Scheme - Bankbees . Hang Seng Benchmark Exchange Traded Scheme Hangsangbees. Infrastructure Benchmark Exchange Traded Scheme -Infrabees. Nifty Benchmark Exchange Traded Scheme- Niftybees. Nifty Junior Benchmark Exchange Trad

In this second part of the series about Exchange Traded Funds (ETFs), we look at the advantages and disadvantages of ETFs. As we have seen earlier in Part 1  , ETFs trade like shares while providing the diversification of managed funds. Though they are similar to mutual funds, they differ in their diversification like index, commodities and different sectors. Their performance closely tracks the investment returns of the shares making up the index or the commodity they are invested into. Benefits of investing in ETFs: 1. ETFs are passively managed, have low distribution costs and minimal administrative charges. Hence most ETFs have lower expense ratios than conventional Mutual Funds. 2. Not dependent on the fund manager, the ETF just tracks the index. 3. Like an index fund, they are very transparent. 4.Convenient to buy and sell as it can be bought/sold on the stock exchange at any time of the day when the market is open. 5.One can short sell an ETF or buy even purchase one unit, which

Currently, Inflation is the buzz word and let us take a look how inflation affects stocks markets and stock prices. To put it in simple words, Inflation is - your money loses purchasing power and as a result you buy less with the money you have than before. When the inflation rates start to rise, investors get very nervous anticipating the potentially negative consequences. Many industries wait for the response of the Central Bankers or the Reserve Bank of India (RBI)  for their measures combating inflation. One of the measures is to increase interest rates, which the RBI is currently doing in its monetary policy. However, the rising prices and the higher interest rates don't lead to positive effects on the investment portfolios of investors. When the interest rates are increased it becomes more expensive for the companies to borrow money and their borrowing costs is increased, and expansion plans are slowed down. Since the revenues and earnings of companies tend to rise at the sa

An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks,commodities and bonds. Most ETFs track an index, such as the S&P 500 or NIFTY. They first came into existence in the USA in 1993. It took several years for them to attract public interest. Over the last few years more than $120 billion is invested in about 230 ETFs. About 60% of trading volumes on the American Stock Exchange are from ETFs. The most popular ETFs are QQQs (Cubes) based on the Nasdaq-100 Index, SPDRs (Spiders) based on the S&P 500 Index, iSHARES based on MSCI Indices and TRAHK (Tracks) based on the Hang Seng Index. In India , Nifty Bees is the first index fund which tracks the S&P CNX Nifty. Let us take a look at  different types of ETFs. Index ETFs : Most ETFs are index funds that hold securities and attempt to replicate the performance of a stock market index. An index fund seeks to track the performance of an index by holding

When it comes to investing in stock markets, an investor is exposed to two kinds of risks - systematic risk and unsystematic risk. Systematic risk is due to macroeconomic movements and it affects the whole market, while unsystematic risks are company specific risks. When we buy a stock of a single company we are exposed to both systematic risks (market risk) and unsystematic risks( company risk. But when we buy a diversified mutual fund or a portfolio we are exposed only to systematic risks and there is no unsystematic risks due to proper diversification by the mutual funds. Let us take a look at some of the major advantages of mutual fund over stocks : A mutual fund gives diversification : If you have only 1,000 to 5,000 to invest, the money will not buy many shares of a single stock, and it will certainly not buy many different stocks. By putting your money in only two or three stocks, you are exposed to the possibility that one of them will plummet in price, wiping out much of your