Retain tax benefits for mutual fund schemes

The mutual fund industry expects the Finance Ministry to retain the existing tax benefits available to investors in MF schemes despite revenue and fiscal deficits, which are of grave concerns of the Finance Minister.

The industry is hoping for the continuation of tax benefits on MFs, particularly the exempt-exempt-exempt (EEE) system on tax-saving funds or equity-linked savings schemes (ELSS), which renders all the investment, interest and maturity tax-free for the investor.

Withdrawal of tax benefits would affect the mutual fund industry adversely as it is already struggling to make its way out from the global economic crisis. Besides, there have been a number of policy changes in the past one-year; hence the industry seeks the continuation of tax redemption together with the extension of zero-dividend distribution tax on equity funds to attract investments.

Source: http://www.thehindubusinessline.com/2010/02/14/stories/2010021451520400.htm

‘Our investment approach will be stock specific’ Sundaram BNP Paribas Mutual Fund

Companies with strong business models, large cash flows, and low levels of leverage will continue to do well even in a rising interest-rate environment, says T.P. Raman, managing director, Sundaram BNP Paribas Mutual Fund in an interview with Sanjay Kr Singh.

What are the factors responsible for the current weakness in global markets?
The weakness in select European nations like Greece, Spain and Portugal and in the US housing sector as well as the overall US economy are all acting as dampeners for markets worldwide. Geo-political issues like US-China relationship and the behaviour of the Chinese currency (Yuan) are also concerns for the Indian markets. Developments related to Iran’s nuclear programme and reactions from the global community to it is another area of concern.

What are some of the key issues to which market participants will expect some answers in the Budget?
Macro issues like a roadmap for fiscal deficit reduction, handling of subsidies, and next year’s government expenditure and borrowings programme to fund the spending are some factors the market will keep an eye on. Implementation of GST (Goods and Services Tax) and the extent of push given to the infrastructure sector will be some of the other key issues that the market will look forward to in the Budget.

Any particular wish or expectation that you have from the Budget?
Development of long-term instruments in the debt market to mobilise savings should be encouraged. This will help in funding the country’s huge infrastructure requirements.

NTPC’s follow-on public offer received a rather tepid response. What does the government or the disinvestment ministry need to do in order to make PSU IPOs/FPOs more attractive in future?
Attractive pricing will in future ensure a good response from the market.

The Kirit Parikh Panel’s recommendations on pricing in the petroleum sector have created a buzz around this sector. Would you bet on the sector currently (since it also requires taking a call on the political question of whether the panel’s recommendations will be accepted)?
Any sectoral investment should be looked at from a medium to long-term perspective rather than from the short-term perspective.

Against the backdrop of a likely increase in interest rates this year, which are some of the sectors that you think look promising currently?
More than sector, our approach will be stock specific. Stock selection as opposed to sector attractiveness or unattractiveness will be the decisive factor. Companies with a good business model backed by strong cash flows and low levels of leverage will continue to do well in a rising interest-rate scenario.

Source: http://www.indianexpress.com/news/our-investment-approach-will-be-stock-specific/579691/0

Equity schemes performance stood out last year

For Indian mutual fund houses, the year 2009 ended on a fairly satisfying note. The industry’s assets under management swelled to Rs 8,00,000 crore, much of it on the back of institutional money as retail penetration continued to be negligible.

Rather, the retail numbers appear to have worsened, especially after market regulator Sebi scrapped entry loads (read as distributor commission) on the sale of equity Mutual Fund(MF) schemes. The lack of enthusiasm on the part of distributors and investment advisors in promoting equity MFs has hit fresh sales of these products.

Add to it, a substantial amount of money also moved out of the industry, especially since August 2009. The net outflow from equity schemes was Rs 81 crore in 2009 despite the fact that the stocks markets generated returns of over 75% while equity MFs, on an average, posted returns of close to 84% in the year.

The negative inflows into equity MFs last year is in stark contrast to the trend observed in earlier years. For example, in 2008, when the markets tanked and fund houses were under heavy pressure to meet redemptions across the MF industry, net inflows in equity schemes aggregated at Rs 25,799 crore, and in 2007, one of the best years in the history of Indian equities , net inflows were at Rs 21,889 crore.

But for those who have invested in these schemes, ET Mutual Fund Tracker, like every quarter, continues to provide you a performance update of MF schemes across five broad categories of equity diversified, equity tax saving (ELSS), monthly income plans (MIP), equity-oriented balanced and debt schemes.

REPORT CARD AT A GLANCE

As many as 263 schemes were analysed this quarter and graded according to their performances as platinum, gold, silver, bronze and lead. With the tax saving season underway, investors can choose from among some of the consistent performers in the ELSS category such as Canara Robeco Equity Tax Saver, Fidelity Tax Advantage and Sundaram BNP Paribas Tax Saver. These schemes have figured in the list of platinum and gold grades consistently.

There has also been a major improvement in the performances of ICICI Prudential (I-Pru ) Tax Plan and HDFC Tax Saver over the previous quarters. While I-Pru Tax Plan has succeeded in moving up from silver to gold for the very first time this quarter, HDFC Tax Saver may have to work harder to regain the platinum grade.


Under the category of diversified equity schemes, a good number of funds have made it to the platinum grade for the very first time. These include
Birla Sun Life Midcap, UTI Opportunities, Templeton India Growth, HDFC Equity, ING Dividend Yield and Principal Large Cap.

Also racing way ahead in performance is I-Pru Discovery, which has been graded gold for the second consecutive quarter in a row. A fund based on a value style of investment, I-Pru Discovery has been highly acclaimed for its top notch performance in 2009. In fact, most ‘value’ funds such as Templeton India Growth, Tata Equity PE and UTI Master Value have shown a major improvement in their performances last year, especially during the last quarter. (For complete list of ratings, log on to www.etintelligence.com)

THE BEST FUND HOUSE

Reliance and IDFC continue to be the top two best fund houses for the second consecutive year in a row followed by HDFC, Birla Sun Life and DSP Blackrock. As a minimum of 1.5% of the total industry assets under management (AUM) forms one of the selection criteria for the best fund house, Canara Robeco, which otherwise tops the performance list with a score of 29.5, has not been considered in this category.

BEST FUND HOUSE - HOW WE DO IT

The number of schemes analysed by the ET Quarterly MF Tracker varies for each fund house. We thus consider the percentage of schemes falling under the platinum, gold, silver, bronze and lead grades for each fund house separately to ensure that there is a level playing field for all these fund houses. Each of the grades is assigned weights corresponding to their order of importance.

Thus, platinum gets the highest and lead the lowest of all weights. A weighted average score (WAS) is then arrived at for each fund house and the fund houses are ranked in the descending order of their WAS. Thus, the fund house with a higher percentage (and not number ) of total schemes in the platinum and gold grades will enjoy a higher WAS vis-à-vis the others.

Source:http://economictimes.indiatimes.com/Features/Investors-Guide/Equity-schemes-performance-stood-out-last-year/articleshow/5574502.cms?curpg=2