S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
36,050.44 |538.86 1.52%	63.70 |0.18 0.28%	30,275.00 | 370.00 1.24%	69.60 |0.45 0.65%	5.00% - 6.75%

 

Industry body, the Association of Mutual Funds in India (AMFI) has presented a long list of its desires to the Finance Ministry and looks to the government’s decisive nod for some of its long-standing demands. Favourable policy measures can translate into a long-lasting high growth phase for the industry.

The mutual fund industry is having a dream run for a last few years. Its Assets Under Management (AUM) base has increased from Rs  17.06 lakh crore in December 2016 to Rs 22.60 lakh crore in December 2017—a growth of 32%.

What the industry is hopeful of?

Relief in taxation is one of the prime focus areas.

Hopes that equity-oriented Fund-Of-Funds (FoFs) to be treated as equity schemes

Currently, FoFs are classified as the debt schemes under the tax laws.

Further, the industry seeks to classify equity schemes as those investing at least 50% of their assets in equity and equity-related instruments. At present, the tax laws require any scheme to invest at least 65% of its assets in equity or equity related instruments to be able to qualify as an equity-oriented scheme.

Permission to launch Debt Linked Savings Scheme (DLSS)

The industry is optimistic about launching debt products offering tax-incentives—on the lines of Equity Linked Savings Schemes (ELSS)Equity Linked Savings Schemes (ELSS). The industry believes this product category will help conservative investors avail of tax benefits and earn better returns as compared to other fixed income products that currently qualify under Section 80C deductions.

The industry also expects the government to forgo the Security Transaction Tax (STT) on the equity transactions made by the mutual fund schemes and Exchange Traded Funds (ETFs).

Exclusive exemptions for pension products offered by mutual funds

The mutual fund industry is lobbying the government to offer exclusive tax deductions to pension plans. In the current scenario, insurance companies dominate the pension plan sector in India. According to a report presented by Ernst & Young, premiums collected under pension plans account for nearly 1/4th of the insurance companies’ total collections.

What these companies often do is blend a vanilla savings scheme with an insurance component and sell this as a product. They promote it as being designed to suit the specific requirements of investors.

A retirement plan being one of them.

Now, a typical retirement plan requires an investor to invest throughout his or her working life-span. The accumulated funds in the account are utilised to buy an annuity from the insurance company. The nature of annuity may differ—immediate, deferred, limited period, etc.

The main bone of contention is, while these retirement plans enjoy tax benefits, pension plans don’t.

In fact, the mutual fund industry seems to be convinced that unless pension plans become tax-free, offering retirement plans as a stand-alone product doesn’t make much sense. This is precisely why only a few fund houses currently offer retirement plans.

Mutual funds be notified as the long-term specified asset

Mutual fund industry believes, individuals liquidate financial assets to invest in immovable property, but it’s rarely the other way round. Therefore, to encourage individuals invest in financial assets to receive benefits of capital gain exemptions, the industry expects the government to include mutual funds in the list of specified long term assets that help investors save capital gains tax.

Other important demands are:

For the removal of all restrictions on the Rajiv Gandhi Equity Savings Scheme (RGESS), equal tax treatment to all Foreign Portfolio Investors (FPIs), and for the removal of taxation on intra-fund house transfer from one scheme to another are some other prominent demands of the industry.

Requests have been also been made to lower the holding period from three years to one year in debt schemes to avail the benefits of indexation.

However, industry experts are not unanimous. Some of them opine that the demands of the mutual fund industry are farfetched. The CEO of a big mutual fund house, on the condition of anonymity, told the media, "We guess the government is going to focus on reviving consumption. There may be some tax concessions, etc. to revive growth. It may also focus on rural and agriculture to revive growth. In this scenario, we don't think the government will have mutual fund industry in its radar.” 

This appears to be a prudent view in the present scenario.

It’s important to see how the Finance Ministry evaluates these demands.

Sensex At An All Time High: How To Invest In Best Mutual Funds Now?

Share prices have strayed into new unclaimed territory.

The S&P BSE Sensex continues to make new all-time highs.

Investors are nonchalant as they ride the bull market into uncharted waters.

The momentum in the the stock market keeps it buoyant, even though a certain set of investors have started to become wary.

Yes, the euphoria of the current market is eerily similar to the stock market exuberance a decade ago.

In January 2008, the BSE Sensex had then touched an all-time high of 20,873. In a matter of few weeks, the index was down 5,000 points or 25% to under-15,000. Over the next one year, the market crashed to a multi-year low of 8,160——down nearly 60% from the January peak.

To read more and Personal FN’s views, please click here.

Is Gold Still A Strategic Asset Class For Your Portfolio? Know Here…

Recently, India’s Prime Minister delivered a speech at the World Economic Forum—the highest platform to shape global, regional, and industry agendas. Subtly, he criticised protectionist trade policies adopted by some developed countries and raised concerns about the shrinking globalisation.

He also presented India as a rapidly growing economic power with the potential to drive global economic growth.

Many global and industry leaders might be on the same page with India’s Prime Minister on a variety of economic issues that world faces today.

Global financial crisis punctured the wheel of global growth and in its aftermath, the protectionist policies became prevalent in the developed economies.

Loose monetary policies in the advanced countries created an inflationary pressure in the developing world, and as a result, many small export-oriented economies toppled.

Shrinking globalisation is a real threat to the global economy, indeed. When the advanced countries suddenly change their economic policies, the role of developing countries are challenged. They are left with no option but to re-adjust their policies.

In this transitionary phase, uncertainty rises unprecedentedly and investors feel the heat.

Gold——a strategically important asset——helps them tide over a period of difficulties. As per the World Gold Council data, the precious yellow metal has generated 10% returns on an average every year since 1971——making it one of the steadiest assets.

To read more and Personal FN’s views, please click here.

Are These Top Large Cap Mutual Funds Worth Your Investment in 2018?

The S&P BSE Sensex generated a whopping growth of 32% over the past year!

Had you invested in the top large cap mutual funds in January 2017, you would be sitting on returns in excess of 35%.

In other words, had you put in Rs 1 lakh in any of the top large cap funds, the gains would now be in excess of Rs 35,000!

Sure, this looks all hunky-dory in hindsight.

In reality, no one knows where the stock market is headed and one needs to adopt a prudent approach when investing.

With the share prices of companies soaring to new highs, the valuations too are moving to the grossly overvalued zone. If the positives fail to outweigh the negatives, the market may soon slide lower. At such times, large caps are expected to be better poised to handle market volatility vis-à-vis mid and small caps.

To read more and Personal FN’s views, please click here.

Here’s What You Can Expect From Budget 2018…

On February 01, the Finance Minister will announce his last full-year budget before the Lok Sabha elections. On the back of sagging agricultural growth and rising fiscal deficit, the budget is not expected to be radical this time.

Yet, keeping in mind interests of various stakeholders of the economy, the government will have to do the balancing act.

Right from farmers to industrialists, representations from all sectors have presented their wish-list to the Finance Minister. Now it remains to be seen how many wishes are granted.

Here’s what you can expect from the Finance Minister

Tax relief for the middle class

To allow taxpayers save more, the Budget 2018-19 may increase the tax deduction limit under Section 80C from Rs 1.5 lakh at present to Rs 2 lakh.

Since contributions to the Employees’ Provident Fund (EPF), repayments on home loan, and tuition fees, etc., qualify as deductions under Section 80C, many taxpayers exhaust the overall limit of Rs 1.5 lakh within these categories. In other words, there’s no incentive for them to invest in Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), and other investment avenues eligible for the deduction.

If the government increases the limit by Rs 50,000 indeed, taxpayers in the 30% tax slab would additionally save Rs 15,450. Savings for those in the 10% and 20% tax slabs would be Rs 2,575 and Rs 10,300 respectively.
 
To read more and Personal FN’s views, please click here.

L&T Emerging Businesses Fund: Can Its Performance Sustain?

With the boom in mid and small cap segment, L&T Emerging Businesses Fund has caught the fancy of mutual fund investors. This can be clearly noticed from the multifold rise in its Assets Under Management (AUM).

In the past 1 year, the fund’s corpus has grown almost 10x from just about Rs 380 crore in December 2016 to around Rs 3,587 crore as in December 2017.

L&T Emerging Businesses Fund is a small and mid-cap focused scheme from the stable of L&T Mutual Fund. The fund believes that today’s emerging businesses can become tomorrow’s giants and thus aims to invests in emerging businesses, typically in early stages of development, which have the potential to become future giants and deliver higher alpha.

To read more on this fund, please click here.

Mutual fund houses are now trying to offer more flexibility to the investors, especially in the rising markets. Recently, the HSBC Mutual Fund made an announcement offering investors the facility of the Systematic Transfer Plan (STP) on any day of the month. All open ended funds are eligible to this facility. The investors of the fund house can exercise STT option only on fixed dates—3rd, 10th, 17th, 26th, and 30th of every month.

 

Purchasing Power: Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase.

Quote: "If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards."‒Peter Lynch