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| May 29, 2015 |
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| Weekly Facts |
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Close |
Change |
%Change |
| S&P BSE Sensex* |
27,828.44 |
-129.06 |
-0.46% |
| Re/US $ |
63.81 |
-0.21 |
-0.33% |
| Gold Rs/10g |
27,150.00 |
-330.00 |
-1.20% |
| Crude ($/barrel) |
61.10 |
-2.56 |
-4.02% |
| F.D. Rates (1-Yr) |
7.00% - 8.50% |
Weekly changes as on May 28, 2015
*BSE Sensex as on May 29, 2015
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Impact 
As you may be aware and even experienced, the cost healthcare is rising every passing day. In such a case not opting for a health insurance plan can result in big blow on savings. Paying for huge expenses at one go can be herculean task when you are hospitalized. Hence, having a health insurance policy is vital for everyone.
In India, the penetration of health insurance in rural and semi-urban areas is quite negligible for various reasons. However, now a proposal to allow savings-cum-health insurance products which the Insurance Regulatory and Development Authority (IRDA) is considering, may soon be a game changer.
How will a savings-cum-health insurance plan work?
The proposed savings-cum-health insurance plan will offer interest to policyholders, but cannot be operated like a bank account. The premium to be paid will be divided into three parts - First, for risk charge for health insurance;
Second, for expenses; and
Third, the savings component
Hence the product is structured in a way where the policyholder can place money to save for future medical expenses. The health insurance component shall have a guaranteed renewability for life, but the risk charges could vary with the insurer having the right to review the risk premium rates annually.
Are there any tax benefit?
Yes. The premium paid under this proposed health insurance plan would be eligible for a deduction under Section 80D of the Income Tax Act, 1961, much like any other health insurance policy.
Interesting facts...
Such savings-cum-health insurance plans are quite popular in developed countries. But since social welfare schemes are well established and healthcare is subsidised, not many indulge in these products.
PersonalFN is of the view that in India if the proposal is implemented well, it can aid better growth of health insurance. The proposed savings-cum-health insurance plan differs from the existing health insurance plan, which has no savings component attached to it.
Having health insurance can be of great support during financial difficulties and there is no plausible reason why one should not opt for health insurance. A good health insurance plan with an optimal cover is necessary, because medical expenses related to you or your family members can sabotage your financial planning.
Do you think the proposed savings-cum-health insurance plan, would encourage people to buy them? Share your views here.
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Impact
Many of you may have encountered problems tendering change money while travelling in metros, buses and taxis. But soon paying for commute could be less cumbersome with 'mobility cards'.
The Reserve Bank of India (RBI) has issued draft guidelines on mobility cards that will allow you to travel without cash in metros, buses and taxis. Mobility cards will be a new addition to Prepaid Payment Instruments (PPIs) that will be issued by mass transit operators.
The details...
The mobility card can be loaded and reloaded with a maximum value of Rs 2,000. The said card would have a minimum validity of six months from the issue date and no cash-out or refund will be permitted. The issuer will decide upon the level of KYC (Know Your Customer), if any. According to the draft guidelines, the card can be used at other merchants provided the activity is limited to transit.
All other extant guidelines for escrow arrangement, customer grievance redressal mechanism, agent / merchant due diligence, reporting and MIS requirements, etc. would be applicable, the draft guidelines say.
PersonalFN is of the view that, PPIs would help achieve India's vision of a cashless society for handling transactions. Transit is one area where a lot of small value cash payments take place, especially in mass transit. The mobility card will help reduce embezzlement and corruption involved in handling cash with an automated fare collection in transit system. Overall, this will be a good initiative.
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Impact
The global cues have produced a slippery ground for the Indian equity market. The movement of the S&P BSE Sensex has been range bound on a year-to-date basis. Disappointing corporate earnings for the last couple of quarters have weighed in on the market, while the electorates yet continue to exude confidence on Mod-led-NDA Government. The forecast of sub-normal monsoon by the Indian Meteorological Department (IMD) this year is also weighing on the market, with an implication of possibility that Reserve Bank of India (RBI) may not cut rates in its 2nd bi-monthly monetary policy statement for 2015-16.
Equity market trending downwards
Data as on May 26, 2015
(Source: ACE MF, PersonalFN Research)
However, at present all eyes are on the economic situation in Greece and the Federal Reserve in the U.S.
To read more about this news and PersonalFN's views over it, please click here.
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Impact
There is a buzz in the market that the Reserve Bank of India (RBI) in its 2nd bi-monthly monetary statement for 2015-16 (schedule on June 2, 2015) would reduce policy rates, now that inflation has mellowed down. There are many out there advising investors to park their hard money in long term debt funds now. So, should you buy in to that advice?
Well, in the past one year, medium-to-long term gilt funds and income funds have delivered luring returns, with some even clocking double-digits. But of late, over the last quarter, they seem to be losing steam. This is because bond yields after falling for more than 18 months, have remained flat in the past three months.
In the last few days there is some pressure evident on yields and there are several factors responsible for this...
To know more on our views on this, please click here.
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- As a best practice guideline, the Association of Mutual Funds in India (AMFI) in a circular asked mutual fund houses to check the practice of bonus stripping.
It was observed that investors mainly use the bonus option for tax arbitrage. They buy into the bonus option, book a loss on it and then set it off against capital gains from other sources. It is vital to note here that when a mutual fund issues bonus units, the Net Asset Value (NAV) falls in accordance to the bonus ratio declared. The reduction in NAV leads to a capital loss, opening a window for tax arbitrage.
Hence, AMFI has asked mutual fund houses to refrain from launching bonus plans and early disclosure of bonus pay-outs that tempt investors.
PersonalFN is of the view that if mutual fund houses pull out bonus options, it would close the tax arbitrage window available at present, leaving mainly two options - growth and dividend - for mutual fund investors. Nevertheless, it remains to be seen how many fund houses actually follow this guideline.
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Tax Arbitrage: "The practice of profiting from differences between the way transactions are treated for tax purposes. The complexity of tax codes often allows for many incentives which drive individuals to restructure their transactions in the most advantageous way in order to pay the least amount of tax. Some forms of tax arbitrage are legal while others are illegal."
(Source: Investopedia)
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Quote : "A wise man should have money in his head, but not in his heart. " - Jonathan Swift
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