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Tata Mutual Fund launches Tata Retirement Savings Fund. But will it help the retired?

There is a huge gulf between the oversimplified option of this product from Tata Mutual Fund—and the inertia of savers

Asset management firm Tata Mutual Fund on Tuesday launched an open-ended scheme that aims to provide a financial-planning tool for long-term financial security based on retirement-planning goals.

The strategy of the fund will be mainly a mix of large- and mid-cap firms—the focus will mainly be on big caps.

This retirement-specific mutual fund scheme has an "Auto-Switch" facility. The fund is designed to meet the investment needs of investors in different age brackets. It offers three options to investors—'Progressive Plan', 'Moderate Plan' and 'Conservative Plan'—with varied percentage of equity and debt assets.

The fund is specifically designed keeping in mind the young and middle-aged working generation. With increasing life expectancy, Tata Mutual Fund is assuming a post-retirement life of 30 years after 30 earning years. In the second period of 30 years, the challenge is to maintain the same lifestyle post-retirement.

The "Auto-Switch" feature is supposed to do away with the hassles of adjusting the equity-debt proportion of the portfolio with increasing age. The fund is assuming that the investor depends on his "advisor" for switching assets between equity and debt with increasing age. The facility of "auto-switch" does the necessary asset allocation automatically—as the investor crosses into a different age bracket.

Another feature of the fund is the "Auto-Systematic Withdrawal" facility. This is designed with the objective of providing investors with regular cash flows after they turn 60. The "Auto-Systematic Withdrawal" facility comes with two options of 'Monthly'—1% of market value of investment as on date of completion of 60 years of age or 'Quarterly'—3% of market value of investment as on date of completion of 60 years of age.

Will the scheme work? The whole concept to us is too simplistic to work. Retirement planning is a complex idea and many people simply don't even invest regularly in the right products. There is a huge gulf between the oversimplified option of this product and inertia of savers.

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Share prices on a slow-motion decline: Wednesday Closing Report

If today's low holds, we may see a short-term bounce till 4,820, but the trend is down

The market closed lower for the fourth day in a row on concerns about a collapse of the banking sector in Europe and a fall in domestic financial stocks following the SBI downgrade yesterday. The Nifty managed to skip yesterday's low, however it continued to make a lower high. The index had a restrained fall of 20 points to close at 4,751. If the Nifty is able to sustain above today's low, we may see a short-term bounce till 4,820, but the trend is down.

A firming trend in Asia after the US markets settled positive overnight resulted in the domestic market opening higher this morning. The Nifty opened at 4,791, up 19 points and the Sensex gained 103 points at 15,968. Buying in IT, metals and realty sectors supported the gains. On the other hand, banking stocks continued to underperform for the second day today.

While the indices were in the positive for the entire morning session, the market witnessed volatile trade today. The benchmarks rose to their intra-day highs at around 12.30pm with the Nifty rising to 4,828 and the Sensex going crossing the psychological level of 16,000 to touch 16,045.

However, a sharp sell-off a short while later saw the market being hurtled into the negative terrain and touching their intra-day lows. At the lows, the Nifty fell to 4,741 and the Sensex went down to 15,761. A minor recovery from the lows of the day pushed the market into the green, but sellers became active once again to pull the indices down. The market closed lower for the fourth day with the Nifty falling 21 points to 4,751 and the Sensex settling at 15,792, down 72 points. NSE reported volume of 50.58 crore shares today.

The advance-decline ratio on the NSE was 496:926.

The broader indices underperformed the Sensex today with the BSE Mid-cap index down 0.975 and the BSE Small-cap index falling 0.90%.

The sectoral gainers were BSE Healthcare (up 0.80%), BSE Realty (up 0.55%), BSE Fast Moving Consumer Goods (up 0.52%) and BSE IT (up 0.01%). The top losers were BSE Bankex (down 2.52%), BSE PSU (down 0.67%), BSE Consumer Durables (down 0.62%), BSE Oil & Gas (down 0.58%) and BSE Metal (down 0.4%).

Jaiprakash Associates (up 3.86%), DLF (up 2.63%), Sun Pharma (up 1.70%), Coal India (up 1.55%) and ITC (up 1.46%) were the top performers in the Sensex space. State Bank of India (down 4%) continued to be the top loser for the second day. It was followed by Hindalco Industries (down 3.65%), ICICI Bank (down 2.72%), HDFC Bank (down 2.65%) and Jindal Steel (down 2.55%).

The key gainers on the Nifty were JP Associates (up 4.38%), DLF (up 3.24%), Sun Pharma (up 2.48%), Tata Power (up 2.27%) and Dr Reddy's (up 1.94%). SBI (down 4.22%), Hindalco Ind (down 3.80%), BHEL (down 3.40%), Jindal Steel (down 3.23%) and ICICI Bank (down 2.82%) were at the bottom of the index.

Markets in Asia settled mostly lower as doubts persisted about the efforts of European policymakers to avert a banking crisis. Adding to the European woes, Moody's Investor Services on Tuesday lowered its rating on Italian bonds by three notches.

The Hang Seng settled 3.40% lower, the Nikkei 225 fell by 0.86%, the Straits Times shed 0.09%, the Seoul Composite tanked 2.33% and the Taiwan Weighted declined 0.83%. On the other hand, the Jakarta Composite gained 0.73% and the KLSE Composite climbed 1.05%.

Back home, foreign institutional investors were net sellers of stocks worth Rs971.44 crore on Tuesday whereas domestic institutional investors were net buyers of shares worth Rs555.81 crore.

State-run power equipment major BHEL today said it has bagged a Rs3,800-crore order from Dainik Bhaskar Power for setting up a 1,320MW thermal power plant in Madhya Pradesh. BHEL's scope of work envisages the design, engineering, manufacture, supply, erection, testing and commissioning of supercritical boilers, steam turbines and turbo-generators along with state-of-the-art controls and instrumentation (C&I) and other associated auxiliaries like transformers and a switchyard. The stock closed at Rs311.50, down 3.40% on the NSE.

Leading engineering and construction company Punj Lloyd today said it has bagged an engineering, procurement and construction (EPC) contract to set up Qatar's first plant for manufacture of polysilicon, the raw material used to build solar cells. However, the company did not disclose the value of the contract. Punj Lloyd ended 0.57% higher at Rs52.70 on the NSE.

Wind power company Suzlon Energy today said it has bagged an order from GAIL for supply of wind turbines to the state-run gas distribution major's upcoming project in Karnataka. The order comprises 17 wind turbines of 1.5MW capacity each, to be commissioned in 2012. The stock fell 1.97% to close at Rs34.90 on the NSE.

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