S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
28,240.00 | 357.54 1.28%	67.38 |0.70 1.03%	29,125 | 90.00 0.31%	56.50 | 1.74 3.20%	5.25% - 7.0%

The revival of the private sector capex cycle in India hasn’t been as vigorous as the Government. Consequently, the credit offtake and job creation have taken a hit. Private players still seem wary, perhaps risk-averse to announce aggressive expansion plans. This is because consumption / demand appears anemic – more so after the so-called surgical strike on black money (or demonetisation).. Therefore, many industries haven’t been operating at their optimal capacities. The unorganised sector especially, post- demonetisation, has borne the worst brunt.

In such times, with the aim of kick-starting the process of economic growth, the Government has planned to scale up its expenditure on infrastructure building. The Union Budget 2017-18 provided greater support to industries such as transportation, road construction, ship-building and oil and gas among others.

Here are some of the highlights on these fronts…

• Budgetary support to infrastructure in FY 2017-18 will go up by 13.5% to reach Rs 3.96 lakh crore. The allocations to roadways and railways has increased by around 12.0% and 22.0% respectively.


• Airports in select tier-2 cities will get an upliftment plan which will be implemented through Public Private Partnership (PPP) route.


• The Government has not only provided higher budgetary allocations to Metro Rail projects but has also expressed its intent to launch a new metro rail policy soon and enact the Metro Rail Act.


• Besides, the Government intends to build two more strategic oil reserve facilities each in Odisha and Rajasthan. It’s also been pondering on merging Public Sector Undertakings (PSUs) operating in the oil and gas sector. The combined entity is expected to provide an edge to India in the global competition with a clear focus on improving competitiveness.


• Renewable energy has also received special attention.


• A relief on taxation front is provided to banks. This might help some troubled banks which are under pressure due to the rising number of Non-Performing Assets (NPAs).


• Some tax-related provisions for the real estate developers have been relaxed which will help them clear the inventory that has been stifling their balance sheets.


• ‘Infrastructure’ status has been granted to ‘Affordable Housing’ which would provide a stimulus to the housing sector.  


 

So, the Union Budget 2017-18 has clearly opened investment opportunities in the infrastructure space.

Theme infrastructure is likely to remain in the limelight even in future. But a fact also remains that most companies in ‘infrastructure space’ are going through difficulties in either repaying debt or running businesses profitably. And a point to note is, many civil construction projects have a long gestation period translating into higher outgoings in initial years, and limiting the earnings growth. For any reason, if the completion gets delayed, the working capital requirements keep mounting for such companies.

Non-Performing Assets are bogging down banks and infrastructure finance companies. As per the Financial Stability Report released in June 2016, infrastructure contributes to 32.8% of total stressed assets of banks. Metals on the other hand had a share of 13.6%. 

Can infrastructure-focused mutual funds reward you?

If the universe from which mutual funds pick the stocks is going through troubles of all kinds, it is very unlikely that they will reward you. There might be a few well-managed companies which might be profitable and their prospects could also be bright. But to take exposure to them; why do you need a thematic fund?

Any well-performing opportunities fund with a proven track record would also sense such opportunities and invest in these companies.

PersonalFN believes, under no circumstances, you should invest in the sector and thematic funds. They expose you to a high risk, and their return potential doesn’t warrant the risk they take. A portfolio of select well diversified equity mutual funds is what all you need to create long-term wealth.

To build a mutual portfolio of the best mutual funds in 2017, try our Investment Guide.

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Mobile Wallets Are Likely To Become More Dependable Now

The Government has been seeking to implement its hectic agenda for promoting digital economy. The Government has been working hard towards achieving a target of ‘Rs 2,500 crore digital transaction’ before the Financial Year (FY) 2016-17 ends.

So far, it has managed to create awareness among masses.  The Bharat Interface for Money (BHIM) App was downloaded by more than 10 million cell phone users within first 10 days of its launch, and as many as 2 million transactions were performed using it.

Besides, some private mobile wallets have already become hugely popular after demonetisation. It’s no exaggeration that even a roadside chaiwala (tea stalls) and vegetable vendors accept payments through digital wallets.

However, there is still a large section of the population that refrains from using app-based payment solutions believing them to be vulnerable to frauds and misappropriation of money.

If the on-going high-level discussions in the Ministry of electronics and Information Technology, gets concluded productively; soon it may become mandatory for mobile wallet companies to take an insurance cover for money they handle.

Briefing the media about this development, one of the ministry officials said, "The discussions have been quite fruitful. We would be able to bring in the new rules soon. It is extremely important that users know and understand that their money is safe and even if there are technical glitches, they get their money back,"

In the budgetary speech, the Finance Minister clarified that the Government will set up a Computer Emergency Response Team for Financial Sector (CERT-Fin). Furthermore, the Government has been working on making cyber laws tougher.

So, if all in place one day, we all may opt for cashless means happily and peacefully supporting the Government’s endevour to go digital.

How The Union Budget 2017-18 Impacted Your Personal Finance 

The Union Budget 2017-18 which was brought forward by four weeks, was the most hoped-for event. 

After demonetisation left many high and dry, expectations of a respite stemmed, as citizens looked forward to acche din. 

Finance Minister, Mr Arun Jaitley highlighted how governance made a transformative move in the last two-and-half years, since Modi-led-NDA Government was elected to power. He said, “We have moved…

• from a discretionary administration to a policy and system based administration; 


• from favouritism  to transparency and objectivity in decision making; 


• from blanket and loose entitlements to targeted delivery; and 


• from informal economy to formal economy.”


 

Even the success in controlling inflation, endeavour to clock better economic growth (amid global uncertainties), waging a war against black money, commitment to fiscal consolidation, tectonic reforms (Goods & Service Tax Constitution Amendment Bill, Insolvency and Bankruptcy Code, amendment to  RBI Act for inflation targeting, enactment of the Aadhar Bill for disbursement of financial subsidies and other benefits); were tactfully highlighted. A pro-poor tone too, was adopted ahead of state elections.

But has the Union Budget 2017-18, lived-up to the expectations of the aam aadmi (or the common man) and brought a smile? Did Mr Jaitely manage to become the darling of the middle-class?

To read more about this story and Personal FN’s views over it, please click here.

 

The Impact Of The Union Budget 2017-18 On Your Long Term Capital Gains

 

It has never been a secret that the property deals are often murky. Voluminous transactions happen in black, and thus real estate as an asset class has often been looked upon as a preferred safe haven to park and multiply black money. 

The same holds true for gold. 

While announcing demonetisation, the Government had stated that the note ban (or note bandi) in itself won’t be enough to curb black money and corruption. It must be supported by other initiatives as well. 

And vide the proposal to tweak provisions for Long Term Capital Gain (LTCG) for immoveable property; it seems the Government has identified practical issues. 

Taking into consideration that capital gains are vital to ascertain effective returns on investments. While Long Term Capital Gains on equity shares and equity oriented mutual funds are exempt, for other assets viz. real estate, gold, bonds and debt oriented mutual funds; it is taxable.

Suppose, your absolute returns on real estate and equity mutual funds are 60% respectively, and your holding period in each case is 5 years; as per the existing tax rules, the returns on the  former would be subject to Long Term Capital Gain Tax, while for the latter will be fully exempt. Therefore, the returns post-tax in case of real estate would be lower than for equity mutual funds. This is because Long Term Capital Gain with indexation benefit attracts a 20% tax. As you may be aware, the indexation benefits help you adjust the cost of acquisition for inflation.

To read more about this story and Personal FN’s views over it, please click here.

 

 

 

 

SEBI has been pushing mutual funds hard to merge alike schemes. PersonalFN has written multiple articles on how mutual funds try to make hay while the sun shines by launching New Fund Offers (NFOs) when there’s an exuberance in the market.

As a result of this practice, the product portfolio of many mutual funds has become too vast and confusing for the investors as there is too much duplicacy of schemes.

The Union Budget 2017-18 has cleared one important hurdle in the scheme merger. The Government has clarified that, when two schemes are being merged (from the same fund house or even from different fund houses), investors won’t have to pay any capital gain tax.

It remains to be seen how fast mutual fund houses act now.

 

 

 

 

Capital Expenditure (CAPEX): Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm. This type of outlay is also made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building, to purchasing a piece of equipment, or building a brand new factory.

 

Quote: "The income tax created more criminals than any other single act of government "- Barry Goldwater