Foreign retail investors must have PAN for investing in Mutual funds

Individual foreign investors seeking entry into Indianstock markets will now have to acquirePermanent Account Number, or PAN, the passport to allfinancial transactions. The mandatory PAN was announced recently by the finance ministry while outlining the framework for foreign retail investment in mutual funds, a promise made in the February budget.

"The Central Board of Direct Taxes, the apex direct taxes body, will soon issue an instruction in this regard," a finance ministry official said. However, to ensure that the requirement does not make investing cumbersome, PAN will be issued on the basis of know your customer (KYC) scrutiny of the investor.

KYC conditions prescribed by the market regulator, Sebi, are quite stringent making them PAN plus, said the official.

However, experts say tax authorities should clarify that acquiring a PAN will not trigger an obligation to file income tax return here. "Primary concern these investors have is that PAN could trigger an obligation to file return," said Amitabh Singh, partner, Ernst & Young. PAN is a 10-digit alpha-numeric tax payer identification number that is allotted to an individual and is increasingly required to be quoted with financial transactions.

The government has allowed individual foreign investors to invest in domestic MFs, thus creating a new class of investors called Qualified Foreign Investors.

Sebi is expected to notify the norms governing these investors soon. These investors would be able to put money into domestic MFs through Unit Confirmation Receipts (DPs) or Depository Participant route. QFIs could be individuals and bodies, including pension funds, and cumulatively they can invest up to $10 billion (about 45,000 crore). Dividend income earned by these investors would be tax-free. At present, only FIIs, sub-accounts registered with SEBI and NRIs are allowed to invest in MF schemes in the country

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/foreign-retail-investors-must-have-pan-for-investing-in-mutual-funds/articleshow/9390894.cms

We Expect Yields to Move Up Gradually On Expectation of Further Rate Increase & Supply Fears

The policy is largely focused on inflation, both emerging and advanced economies due to higher commodity prices and domestic demand pressures.

On the global front, concerns over sovereign debt in the Euro region, medium term debt sustainability issues in US, supply chain disruptions in Japan and higher commodity prices led to some easing of the economic growth rates. The European Central Bank raised rates for the second time in order to fight back inflationary pressures. Emerging economies including China persisted with tightening monetary policy.

Domestic growth rates saw some moderation in the industrial production data. However, inflation numbers remained elevated, with non-food manufacturing inflation at 7.2% as compared to a long term average of 4%. Credit growth remained at 19.5%, higher than the RBI's revised projection at 18%.

The RBI thinks that the economic growth moderation will be limited by buoyancy in the consumption sector, due to increase in real wages. Inflation estimate has been increased to 7% from 6% due to:

Recent increase in fuel prices

Significant increase in minimum support price for agricultural commodities

Higher non-food manufacturing inflation

Uncertainty of increase in administrative prices of coal and fuel

Inflation and growth outlook still remains contingent on oil price, food price inflation emanating from the monsoon, foreign fund flows to fund current account deficit and fiscal deficit. Large fiscal deficit is a key source of demand pressure. The subsidy burden amounting to 1% of GDP is also a factor contributing towards inflation.

Going Forward

The RBI has continued with anti-inflationary policy. As the growth numbers are still sustaining and inflation is still high, the RBI has chosen to aggressively tackle inflation. The monetary policy stance in future will be determined by evolving inflation trajectory, which in turn will be determined by trends in domestic growth and global commodity prices. A change in stance will be motivated by signs of a sustainable downturn in inflation.

The corporate yield curve may flatten due to more rate pressures. We expect yields to move up gradually on expectation of further rate increase and supply fears.

Bond funds and Monthly Income Plans have been lately focusing on building duration selectively. We continue to seek duration at elevated levels post the policy. Short-end funds have maintained higher cash levels ahead of the policy. Thus, they should benefit from higher yields. We continue to believe that we are closer to peak of interest rates in the current cycle.

Source: http://www.adityabirlamoney.com/news/493523/10/22,24/Mutual-Funds-Reports/We-Expect-Yields-to-Move-Up-Gradually-On-Expectation-of-Further-Rate-Increase-Supply-Fears