Personal Finance this week: Dealing with stock market slump; RBI policy impact on EMIs


The week gone by was marked by two major event – a huge sell-off in the stock market and the RBI bi-monthly review of the credit policy. Several lakh crore of investor wealth was wiped out in the stock market collapse, partly attributable to the imposition of long-term capital gains (LTCG) tax on equities and equity-oriented mutual funds and partly to the global stock market selloff.

The sudden and sharp fall in the indices caused a degree of panic among investors who did not expect a correction of that magnitude.

How should you react in such situations? Should you participate in the selloff or hold on to your investments? Should you investment some more money into stocks since stock prices have fallen?

Most personal finance experts would suggest not to have a knee-jerk reaction to such sudden market movements. In the long run, stock markets give good returns if you ride out the temporary trend. In our article we walk you through the steps an investor should take in these periods of downturn.

In fact, there should be no cause for worry if you have a long-term financial plan and work towards it. Your strategies should be directed towards meeting your financial goals which are planned for a longer time horizon. Also, you should have a good asset allocation to mitigate risk. Read our article to know some strategies while investing in equities.

Budget 2018 imposed LTCG if your gains in equities and equity-oriented funds was more than Rs 1 lakh in a fiscal year on selling. Along with this Finance Minister, Arun Jaitley has specified that any dividend paid out by equity mutual fund has also been subjected to 10% Dividend Distribution Tax. In our story we tell you whether the two new taxes require you to review and restructure your portfolio.

Whatever be the situation, you should review portfolio periodically to rebalance it to meet your risk profile. Find out the five things you must keep in mind while reviewing your portfolio in our story.

Finance Minister Jaitley, however, spared Unit-Linked Insurance Plans (ULIPs) from LTCG. Does this give ULIPs an edge over equity-oriented mutual funds? ULIPs also have low-cost structure along with benefits of EEE (Exempt-Exempt-Exempt) tax structure. In our article we tell you whether you should opt for ULIPs instead of mutual funds after the Budget.

On the commodity side, there is a feeling that the stock market slump could revive interest in gold as a safe haven investment. Experts tracking the yellow metal say that major indicators are in favour of a rally in gold prices and that there could be a major up-move in coming days. Read here to know where gold could be headed due to bear run in equities and inflation worries in US.

The RBI, in its credit policy, has said that it would soon come out with guidelines to harmonise the Marginal Cost of funds Lending Rate (MCLR) with the Base Rate methodology for determining lending rates with effect from April 1, 2018.

How would borrowers be impacted by this? Leading experts on the subject feel that the decision to harmonise the two systems would hugely beneficial for borrowers under the Base Rate system. In our article we tell you about the possible impact of the RBI’s decision on your EMIs.moneycontrol