 | | Dec 26, 2009 | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex | 17,360.61
| 466.4  | 2.76% | | Re/US$ | 46.66% | 0.2 | 0.49% | | Gold Rs/10g | 16,760.00
| 340.0  | 1.99% | | Crude ($/barrel) | 74.55 | 0.9 | 1.26% | | FD Rates (1-Yr) | 5.00%-6.50% | Weekly change as on Dec 24, 2009 
Impact 
Salaried individuals enjoying the
following perquisites will see their tax outflows mounting.
- Chauffer-driven car
- Rent-free accommodation
- Services of sweeper, a gardener, a watchman or a
personal attendant
- Free or concessional education
- Free or concessional journeys
- Interest-free loans
- Gift vouchers
- Credit cards
- Hotel stay exceeding 15 days
- Paid-for holidays
- Employee Stock Option Plans (ESOPs
This is because the Central Board of Direct Taxes
(CBDT) has notified new rules for valuation of perquisites. These new rules have
come into effect retrospectively, from April 1, 2009 after the Fringe Benefit
Tax (FBT) was abolished and perquisites became taxable in the hands of the
employee. So now it is an old wine in a new bottle!!
Thus employees’ will have to fork out
tax on the value of the perquisites enjoyed by them. The value of the
perquisites enjoyed by the salaried individual will now be added to his total
income and will be taxed at the applicable tax rate.
We believe that such a move by the
CBDT would:
- Move some individuals to a higher tax bracket
- Witness employees taking lighter pay cheques
home
- Enable companies to restructure their
employees’ compensation packages
Impact
Investors have experienced the ‘see
saw’ ride of the stock markets as displayed by their return on investments.
The chart below depicts that during
the bear phase (i.e. from Jan 08, 2008 to March 09, 2009) of the Indian equity
markets, the mid cap index experienced a greater fall vis-à-vis the large cap
index. Similarly during the bull phase (i.e. from March 09, 2009 to December 18,
2009) the mid cap index out-performed the large cap index.
(Source: Crisil Fund Analyser) Volatility will always be an integral part of the
equity markets, but in order to reduce the impact, we recommend investors to
diversify their equity investments and invest in both large cap as well as mid
cap funds, in accordance with their risk appetite. Impact  The online mutual fund trading platform of the exchanges’ definitely provides an easy route for investors to trade in mutual funds, but when we consider the fees (both direct and indirect), which are payable to the depositories and Registrars & Transfer Agents (RTAs), it certainly is an expensive proposition to transact in mutual funds using the online trading platforms of the exchanges’. This is especially true for investors who do not have a trading account, demat account and those who frequently churn their portfolios.
The table below shows the charges which a mutual fund investor will pay under the two broad options (i.e. approaching your mutual fund advisor or mutual fund house directly and the exchanges’ online mutual fund trading platform), for routing mutual fund trades.
| Charges | Mutual Fund
Advisor or Mutual Fund House Directly | Online MF Trading
Platform | | Indirect Costs | | (Rs) | (Rs) | | Trading account opening | NA | 350 | | Demat account opening | NA | 400 | | Annual maintenance charges for demat
a/c. | NA | 150 – 400 | | RTA service charge* | 6 – 8 | 16 - 18 |
| Direct
Costs | | Brokerage (%) | NA | 0.25 –
0.50 | *Paid by the fund house, which is
ultimately charged as fund expenses (charged to investors). These are charged
per account. The above table distinctively indicates that the account opening charges itself are quite high (Rs 750). Similarly if an investor is a frequent portfolio churner, then apart from the exit load, the broking charges which he defrays would also pinch his pocket.
We reckon the ease and convenience which the online mutual fund trading platform provides, but conversely it will also pinch the investors’ pocket. In an interview with the Financial Express, Investment Guru, Mr. Marc Faber, expressed his views on FII inflows and monetary policy.
On the FII inflow he said that “unlike 2008, now there is more genuine money coming into Indian markets, for the simple reason that the emerging economy makes up for 50% of world’s GDP”. He believes that someone with an international portfolio would definitely think of putting 10% - 20% in emerging economies. He is also of the view that, money coming in from overseas is stable money.
On the interest rates front he said that “even if interest rates go up, I wouldn’t consider that to be disastrous for the stock markets”. However he also expressed that markets have doubled, and therefore to have a correction of 20% - 30% is nothing unusual. - Association of Mutual Funds in India (AMFI)
will delay its online mutual fund trading platform since it faces tough
competition from the online mutual fund trading platform of BSE &
NSE.
- India’s foreign exchange reserves fell by $1.63
billion to $285.74 billion for the week ended December 11, 2009. This was
mainly due to the revaluation of no-dollar assets in the
reserves.
- Mobile Number Portability (MNP) which was
earlier scheduled to be implemented from January 1, 2010 is now delayed till
April 2010.
- The Bombay Stock Exchange (BSE) would allow
brokers empanelled with Asset Management Companies (AMCs) to place orders
through mobile phones in its online mutual fund trading platform in the next
15 days.
- Investors can now invest in the New Pension
Scheme (NPS) even through a post office as the Pension Fund Regulatory and
Development Authority (PFRDA) has allowed Indian Post to distribute both tier I
and tier II accounts of the NPS.
- Citibank which is country’s largest foreign
lender announced the launch of ‘CitiHome One’, which seeks to combine
features of conventional home loan and credit line. The customers of this
product will be able to convert 30% of their total home loan amount into a
credit line and the remaining 70% of the mortgage will be treated as a
conventional home loan.
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| IN THIS ISSUE  Think you know someone that will enjoy this email? Why not send it to a friend? Monetary Policy: The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves). (Source: www.investopedia.com) QUOTE OF THE WEEK Quote: "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years". - Warren Buffett ATTENTION WOMEN!
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