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| September 08, 2017 |
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Impact 
Affirming its commitment to the digital India campaign, the Government is all set to start a new digital payment initiative. It is likely to set up more convenient ways for taxpayers to pay off their tax dues using digital means such as Unified Payment Interface (UPI), digital wallets, and internet banking. The Central Board of Direct Taxes (CBDT) is preparing to launch a new app and a website “My Pay”. Besides offering digital payment avenues, the said platforms will address all tax-related issues. The communication between the tax departments and taxpayers will be conducted through these facilities.
This initiative is in line with the recommendations made by the Ratan Watal Committee on digital payments. The committee submitted its report to the Finance Ministry in December 2016 stating that India must bring down its cash-to-GDP ratio from 12% to 6% over the span of 3 years. Taking the recommendations of the committee seriously, the Government has been working towards making India a less-cash economy.
Moreover, to facilitate faster payment of customs duties at airports, the Government has asked CBDT to appraise the possibility of allowing electronic payment of taxes. At present, duties only over Rs 1 lakh can be paid electronically. The Government intends to lower this limit significantly. Progressively, it has already launched a pilot project with the help of SBI to test the viability of this option,. The country’s largest bank has installed Point of Sale (PoS) machines at the Jaipur airport for the collection of duties electronically. If this project meets the expectations, the Government may extend this facility to 11 more airports across India. Furthermore, the Government has directed nodal departments and ministries to make inter-departmental and inter-ministerial transactions digitally, whenever the transaction amount exceeds Rs 5,000.
If long queues deterred you from visiting a bank for the payment of taxes, the digital payments can offer you a remedy. They are convenient and effective. That being said, remember to transact carefully on any digital interface. Otherwise, you will end up revealing too much of information about yourself to fraudsters.
How can you safeguard yourself?
Always download apps from the authentic developers and mind the permissions an app seeks from you. Paying your tax dues on time and filing your returns before the due date will help you not only avoid the last minute rush, but would save you from many potential hassles.
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Impact
After introducing stricter rules for financial service providers and safety measures for individual investors, the Securities and Exchange Board of India (SEBI) is firing on all cylinders, by simplifying the selection process of financial products .
It is likely to introduce a new set of rules directing mutual fund houses to classify their offerings as per the asset categories. On the condition of anonymity, a few people with inside knowledge of this development told the media that the SEBI wants mutual fund houses to classify their products broadly in three categories—equity, debt, and hybrid. In addition, there will be more subcategories.
Offering more information about the pace of development, one of the officials said, "Fund houses will have to be true to the product label," said a member of the mutual fund advisory panel." SEBI will issue a circular with the list of classifications asking fund companies to comply with the requirement within six months", he added further.
Currently, 42 mutual fund houses collectively manage Rs 19.5 lakh crore. The schemes offered across all categories add up to nearly 2,000—a huge number. From time to time, SEBI has insisted that mutual fund houses merge schemes with similar attributes.
So far, the mutual fund industry hasn’t taken SEBI’s guidance seriously With informal letters being returned undelivered, SEBI is preparing to tighten the lasso around mutual funds houses. It seems the capital market regulator is likely to permit mutual fund houses to offer only one scheme in each category. In other words, if a mutual fund has two or more schemes in any subcategory, it will be forced to merge existing schemes.
As per the media reports, the SEBI-appointed committee has identified over 30 subcategories for the scheme classification. Within equity category, there may be 8-10 subcategories, another 16 in debt, and around 4 subcategories may be allowed under the hybrid asset class.
Shall SEBI reconsider this reclassification?
Ideally, it should. If you assume every fund house will try to expand its product portfolio to the best possible extent, the mutual fund industry will still have at least 1,260 (30 x 42) schemes on offer.
Moreover, merging close-ended schemes won’t be easy. Hence, despite doing the hectic exercise of forming new rules, merging schemes, and getting mutual fund houses to toe the line; the SEBI might fail to attain its objective to simplify the selection process for individual investors. Having good intent isn’t enough to bring about positive changes.
As far as the difficulty in scheme selection goes, you can be rest assured about it even today. Let the scheme count be 2,000 or 1,260 or 4,000; PersonalFN’s unbiased mutual fund research services will always hand-pick the right schemes for your portfolio. You may opt for Fund Select and Debt Select reports to gain insights from these detailed reports.
To reduce your efforts further, opt for ready-made portfolio services. This way you follow the allocation pattern of the suggested model portfolio, buy suggested schemes in the same proportion as in the model portfolio, and hold these until PersonalFN generates a clear ‘sell’ signal. You are welcome to try out Fund Select Plus and Strategic Portfolio for 2025.
To receive an overwhelming response to such emotional campaigns, the Government and the opposition has to show greater commitment towards these objectives.
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Impact
The Securities Exchange Board of India (SEBI) is trying its best to make capital markets here in India a much safer place for individual investors. Apparently, the capital market regulator is looking to overhaul the existing framework.
Recently, it released a discussion paper on growth and development of the equity derivatives market in India.
It made an important observation— “Derivatives products by nature are complex instruments. The valuation of derivatives such as options depends on many variables and option writers are exposed to significant risk if that do not have corresponding position. Therefore it is important that investors have a good understanding of derivatives and the ability to absorb the risk of their position. Indian market does not have the concept of product suitability framework. Investors may not have adequate understanding and financial capability to withstand risk posed by complex derivative instruments.”
Other important observations mentioned in the discussion paper are as follows:
- The ratio of notional turnover in equity derivatives to equity cash segment shot up 10 times over the last 12 financial years
- As far as the composition of the various trading segment is concerned, options which account for 83.61%, dominate the total trading turnover in derivatives
- Nearly 14% of individual investors who contribute about 2.5% of the total turnover of the equity derivatives segment don’t trade in the cash segment. Individual investors who have greater than Rs 1 Crore exposure in cash market contribute over 50% trading in the derivative segment in the category
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Mr. Sharma (name changed) a client with us at PFN for personal financial advisory services, shared the conversation he recently had with his bank’s relationship manager at the local branch.
“I was at the bank the other day, waiting for my turn to deposit some cash. In the meantime, a gentleman walked up to me and asked –
Sir, are you looking to invest some money for appealing returns?
Given my curiosity and being an avid investor, I replied – Yes.
Do you invest in equity? he asked. Once again, I replied in the affirmative.
Great! Then I have the best investment plan for you, he said.
I was pretty inquisitive to know what the offer was…
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Investors often chase star-studded mutual funds. There may be no doubt that these star performers may have done exceptionally well in the past. Unfortunately, some star performers often fail to keep up their consistent performance of the past.
If you have spent over a decade analysing mutual funds as PersonalFN has, it is common to see certain mutual fund schemes rise and fall. A fund may do unusually well over a certain period, and often it is hard to pinpoint whether this was a factor of luck or skill. If it is the former, that is, being in the right place at the right time without actually preparing for it, the fund may do remarkably well. However, it may lack the potential to deal with market complexities in the long run.
This is why it is necessary to analyse funds on both quantitative and qualitative parameters. While the quantitative factors delve in to the fund’s past performance, the qualitative aspects rate the fund manager’s experience, investment systems and processes, among other things. Many rating agencies overlook or under weigh the qualitative aspects. Thus, substandard funds tend to appear at the top of the list.
To read more and Personal FN’s views, please click here. |
As you know, the RBI launched the Rs 200 note a few days ago. But, before you get your hopes up, the wait is a little longer before new currency notes are stacked in ATMs. Reason? The RBI hasn’t issued any directive to ATM manufacturing companies for the recalibration of machines that will enable the dispensing of the new Rs 200 currency notes. It is estimated that the entire recalibration process may take about 3 months. And more importantly, even banks haven’t been supplied the new notes as yet. Perhaps until then, the curiosity factor might subside.
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Option Premium : An option premium is the income received by an investor who sells or "writes" an option contract to another party. An option premium may also refer to the current price of any specific option contract that has yet to expire. For stock options, the premium is quoted as a dollar amount per share, and most contracts represent the commitment of 100 shares.
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Quote: "In the short run, the market is a voting machine, but in the long run it is a weighing machine”- Benjamin Graham
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