Impact 
The capital market regulator - Securities and Exchange Board of India (SEBI) is mulling ways to encourage mutual fund houses to launch pension plans. However, for launching a pension plan or providing pension option under a particular mutual fund scheme, according to SEBI, the mutual fund scheme must have a track record of at least five years. Moreover, investors would not be permitted to withdraw in between, and such an option will be available only in a growth plan and not a dividend plan, since the pension corpus is meant to accumulate.
Mr U.K. Sinha, Chairman of SEBI has been asking mutual fund houses for over a year to launch their pension schemes, but no fund house has come forward. The disinterest shown by the mutual fund houses to launch pension plans crops up from the fear of whether the same tax benefits will be available to pension plans of mutual funds which are presently available to other pension products.
Commenting on this Mr U. K. Sinha said, "Nothing prevents an asset manager to seek an approval for a mutual fund (MF) scheme that has pension as a theme. We are in touch with tax authorities for tax benefits and we have been given to understand that whenever DTC comes in, the treatment of pension schemes managed by MFs and others will be similar."
We believe that Pension Products require long-term commitment from investors on one hand and professional fund management on the other. And with the mutual fund industry being one of the well regulated industries it would be a prudent step to introduce pension products under the roof of mutual fund industry.
However, care should be taken by the SEBI while structuring pension plans under mutual fund schemes as these (pension plans) would be subscribed to by the investors from their retirement planning point of view. Also, there should be similar and clear tax benefits to pension plans from mutual funds and other pension products in order to encourage mutual fund houses to launch more of such products.
Investors should keep in mind that retirement planning is an integral part of the financial planning exercise and must be undertaken keeping in mind one's risk taking ability, income, expenses, number of dependents, etc.
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| | Impact 
After beginning the year 2012 on a good note, the Indian equity markets lost its way a little on account of the news disseminating on the Euro zone debt crisis. While chances of "Grexit" was being talked about, Spain and Italy too were paining with banking crisis and and contraction in economic growth. U.K. too was exposed to the risk of a double-dip recession. On the domestic front too, lacklustre GDP growth rate for the fourth quarter of fiscal year 2011-12 (5.3%), slump in the industrial activity and high headline inflation kept the Indian equity markets edgy. On the backdrop of this lull, investors too weren't keen to take exposure to the equity markets either directly or indirectly through mutual funds.
Mutual Fund Industry AAUM over the last four quarters
(Source: ACE MF, PersonalFN Research)
The disinterest of the investors has been brought out by the graph above, wherein the Average Assets Under Management (AAUM) of Mutual Fund Industry declined to Rs 664,792 crore during Jan - Mar 2012 from Rs 712,742 crore during July - Sept 2012 (a drop of 6.7%). But the first quarter (April - June 2012) of the new fiscal year has witnessed renewed confidence amongst the investors mainly in the month of June 2012, due to the clarification over GAAR indicating that the popular Participatory Notes (P-Notes) will be spared from the ambit of controversial tax avoidance rules. This thus signalled a positive for the Foreign Institutional Investors (FIIs) since the draft rules (which are put for discussion) excluded them. For the quarter April - June 2012, the AAUM increased by 4.2% to Rs 692,705 crore from Rs 664,792 crore during the period Jan - Mar 2012, well supported by inflows in debt mutual funds.
In our opinion, the investors in mutual funds should look at such testing times as an opportunity to take exposure to the equity markets. It not only helps to take exposure at attractive levels but also helps in benefitting from rupee cost averaging. Despite the global and domestic factors affecting the Indian economy, the growth delivered by India looks promising as compared to its developed counterparts. Going forward too, if the policy measures are undertaken at a quicker pace and inflation is kept under control, then we may see India back on its growth trajectory. At present, delayed monsoon and chances of an "El-Nino" phenomenon pose to be risk, but impetus on manufacturing side could aid in posting appealing economic growth.
| Impact
Each individual thinks and behaves differently while dealing with day to day activities. Some follow a laid back attitude, take things for granted and often misuse the resources they have at their disposal. On the other hand there are individuals who are always on their toes, give cent per cent to whatever they do and try to achieve flawlessness in their daily activities. These latter one's (individuals) behave in a more responsible manner as compared to the former one's (individuals).
Similar is the case with mutual fund houses. Some of them despite underperforming schemes in their backyard, follow a laid back attitude in reviving the performance of those mutual fund schemes which ultimately result in loss of wealth for the investors. These fund houses lack consistency, do not follow prudent investment processes and systems and aim to garner more and more Assets Under Management (AUM) rather than improving performance. On the other hand there are fund houses which follow a well laid down investment processes and systems and consistently provide respectable returns to their investors.
To know what SEBI is planning to rein in underperforming mutual funds, please click here.
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| Impact
Technology, in this modern world is the order of the day. The innovation and development in technology has had a far reaching effect in the way we carry out our day-to-day life. May it be travelling, shopping, entertainment, sports, dinning or even relaxing, technology has touched every aspect of our lives. On an economic front too, financial markets have evolved tremendously with the help of technology. Moreover, advance technology has changed the way a customer does a banking transaction. Online payments have become the order of the day, and gradually more and more transactions are being done through the internet.
But until now, citing the above increasing online transactions, banks were charging their customers 1.8% on all online payments made using debit cards. Concerned about the high charges levied by banks on the debit card transactions, the National Association of Software and Services Companies (NASSCOM) had been demanding a reduction in transaction rate, arguing that payments made through debit cards are risk free for banks. Besides, the cost to banks for enabling use of online debit card is less than Rs 10 per transaction - way less than what they have been charging consumers.
To know the steps taken by RBI to encourage usage of debit cards, please click here.
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In an interview with the Economic Times, Mr Adrian Lim - Senior Investment Manager of Aberdeen Asset Management (which manages $3.8-billion Aberdeen Global Indian Equity Fund) shared his views on the outlook for Indian stocks, risks to the Indian economy and stagflation.
Mr Lim believes that the near term outlook for India is under-whelming. In his opinion high interest rates is clearly a hurdle which will weigh on consumer demand as well as deter companies from investing in any project as will have to yield at least a double digit return to be profitable. "This combined with falling rates of growth spells flat or even negative earnings growth for many companies this fiscal. The consolation is that investors have marked down stocks. If the Sensex continues to fall, then the market may look like having good value. But we are not there yet. Still, India is a market we instinctively like because of the quality of the companies. They are used to adversity. We just forget that because national expectations have been raised unreasonably these past few years," he added.
As far as the risk to the Indian economy is concerned, Mr Lim thinks that the currency is at the centre stage. He is of the view that weakness in the Eurozone is bad for the Euro but benefits the dollar placing additional pressure on the weak rupee which in turn will lead to expensive imports. Moreover, according to him a fatter fuel bill will, in turn, worsen the fiscal situation. Explaining further he said, "On the other hand, if the Eurozone becomes the world's problem, fuel prices may ease faster than expected and that could offset the depreciating rupee. The domestic slowdown is easier to read: industrial production, manufacturing and services are all flat-lining. These trends are likely to deter capital inflows, which are needed to help finance the deficit. Again, that would be bad for the rupee. So, whichever way you look at it, the currency is centre stage. But if the government showed more resolve over opening up the economy to competition, then these concerns would quickly dissipate and confidence would return."
Regarding concerns of stagflation in the country, Mr Lim feels that although there are structural reasons why India's inflation has been high historically, including the cost of food and goods distribution, red tape and monopoly controls, it would really take something out of the ordinary to see prices stay elevated for a sustained period. "We would discount even a bad monsoon, a resurgent oil price, further loss of confidence in government policy... or an unholy combination of two or more such factors. The RBI is not so foolish as to stake its reputation on such outcomes. As things stand, India has high growth; it's just not as high as it was recently," he said.
We are of the view that, in the backdrop of situation of debt-overhang in the Euro zone, the Indian economy would remain vulnerable to the news flows disseminating therefrom. Yes, economic growth has slumped and WPI inflation too is over the comfort zone of Reserve Bank of India (RBI); but we don't see a situation of stagflation. Moreover, our country still offers a better growth rate than offered by the developed economies as the average growth rate is above 6.0%.
Delayed monsoon and chances of an ‘El-Nino' phenomenon, are certainly adding to risk of inflation management, but we see prudent action from RBI to tame the same. Moreover, now with Mr. Pranab Mukherjee stepping down from the post of Finance Minister to contest the presidential election (to be held on July 19, 2012,), and Dr. Manmohan Singh handling the Finance Ministry portfolio in the interim (until cabinet rejig in September 2012); we see reforms being placed on the forefront, which can aid in reviving investment sentiments and thus better FDI flows. If reforms measures indeed are accelerated and myopic opposition is done away with, we could witness an impetus to economic growth as well.
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- The HSBC India Manufacturing PMI rose to 55 in June 2012 from 54.8 in the previous month, signalling improvement in business confidence in the country. This marks the fastest pace of growth for the Indian manufacturing sector in four months, with stronger domestic demand contributing to higher levels of new orders, according to a private sector survey of purchasing managers. India's PMI reading is in stark contrast to that of the rest of Asia where manufacturing activity slowed further in June 2012. HSBC's PMI for Japan fell below the 50-point mark to 49.9 in June 2012, while that of China slipped to 48.2 from 48.4 in May 2012 on a sharp moderation in demand from the US and the EU.
However, sub-components of the index showed that new orders, from both the overseas and local market, dropped and inventories rose, suggesting the rebound was partly because of stocking up in anticipation of an improvement in demand.
- The Society of Indian Automobile Manufacturers (SIAM), automobile industry body announced a voluntary vehicle recall policy, which recommended government to take action if any of its (SIAM) members failed to announce recall despite clear evidence that a fault exists. Under the policy, which is applicable for all manufacturers, from two-wheelers to commercial vehicles, if a company is of the opinion that there is a manufacturing defect that compromises safety of vehicles, it will voluntarily rectify the problem free of cost to the customer. Only vehicles within seven years of manufacture would be covered under the safety recall and companies are required to post information regarding recall on their websites.
However, SIAM has left it to individual members to decide on the minimum number of vehicles affected to constitute a recall and also whether to announce such an exercise or not. Moreover, SIAM would assess the need for a mandatory policy if the government decides to frame one, although it would not oppose such a move.
- Unemployment in the Euro zone reached its all-time high of 11.1% in May 2012 from 11% in the previous month according to Eurostat, the European Union's statistics office. That is the highest rate since the euro was launched in 1999. Unemployment has been edging higher for over a year as concerns over the debt crisis and the future of the euro currency itself have weighed on economic activity.
- The Central Board of Direct Taxes (CBDT) has issued a notification making e-filing compulsory for assessment year 2012-13 onwards for an individual or a Hindu Undivided Family (HUF) if his or its total income exceeds Rs 10 lakh. However, digital signature will not be mandatory for these taxpayers. Currently, Business Houses, with receipts of Rs 60 lakh and professionals with income of Rs 15 lakh are mandatorily required to e-file their return with digital signature. As on 31 March 2012, there were 19.6 million tax payers who had registered for e-filing.
- The Index of National Factory Activity for the United States fell to 49.7 from 53.5 in the previous month, according to the Institute for Supply Management. The manufacturing sector shrank unexpectedly in June 2012 for the first time in nearly three years as new orders tumbled, one of the starkest signs to date that the economic recovery in the United States is slowing. Manufacturing has been one of the stronger areas of the economic recovery, which appears to be losing momentum over fears about the euro zone debt crisis and uncertainty over domestic fiscal policy.
- In order to improve and expand access to housing, National Housing Bank (NHB) and three others have joined hands to form the country's first mortgage guarantee firm. The other members of the joint venture company, which has an initial paid up capital of Rs 120 crore, are Genworth, Asian Development Bank and International Finance Corporation.
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Mortgage Company: A company engaged in the business of originating and/or funding mortgages for residential or commercial property. A mortgage company is often just the originator of a mortgage; they market themselves to potential borrowers and seek funding from one of several client financial institutions that provide the capital for the mortgage itself.
(Source: Investopedia)
| | QUOTE OF THE WEEK
"Pessimists are usually right and optimists are usually wrong but all the great changes have been accomplished by optimists." - Thomas Friedman
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