Invest in ELSS before the sun sets with DTC

It’s that time of the year when most of us would have started our investment planning for the year to save taxes. Probably, we all would have got deadline from our employers to submit investment proof for tax purposes. Whatever the reasons, it’s time to act again. So what all we have to save our taxes this year?

Equity Linked Saving Schemes (ELSS), a tax saving mutual funds is an option for you. Part of Sec 80C limit to the extent of Rs 1 lakh, an ELSS is similar to diversified equity funds units, with the only difference being the added tax benefit. Also, one can invest in an ELSS with as little as Rs 500, unlike the other equity oriented funds, which generally demand Rs 5,000 as the minimum investment amount.

Now why it make sense to take ELSS for saving your taxes. Firstly, ELSS is only tax saving vehicle having substantial equity exposure and hence potential to earn higher returns. The National Pension Scheme (NPS) offers an option to invest up to 50 per cent of your annual contribution in equities, but still lower than ELSS. Secondly, ELSS comes with the shortest lock-in among all aforesaid tax-saving instruments, just 3 years of lock-in. Finally, it’s your last chance to take equity exposure while enjoying the tax benefits as Direct Tax Code (DTC), which proposes to take tax benefit away from ELSS, is all set to get implemented from April 2012.

Right ELSS for you

Once you decide to buy ELSS, there are some points to ponder over. First is of course about returns. Ideally, one should assess the ELSS performance over a 3 year time frame at least, as this would enable you to judge whether they have created wealth for you post the lock-in period. Then there are other things skins to mutual funds investing including the expense ratio of mutual funds scheme, its portfolio, whether it’s biased toward one particular sector or script, the fund manager’s past track record, whether the fund managed by her/him has delivered returns to investors. Further, like any other mutual funds, ELSS provides an investor three options including growth, dividend payout and dividend reinvestment option. While growth option is the ideal one to allow compounding benefits to build up substantial wealth over time, the dividend option allow the investors to earn tax-free dividends periodically. Dividend option in ELSS makes it the only investment option that gives benefit of interim cash flow even in its lock-in period. However, investors must avoid dividend reinvestment option, simply because you get locked in forever. Dividends get reinvested and locked in for 3 years and it gets into a cycle.

The Final Word

So, while ELSS schemes offer good opportunities for long-term wealth creation, it’s imperative that you complement your financial planning exercise with your tax-saving by considering the aforementioned aspects of age, income, risk appetite and financial goals as this would enable in making a prudent investment decision. Moreover, please do not wait till the eleventh hour as this may lead you to making a wrong choice.

Source: http://www.indianexpress.com/news/Invest-in-ELSS-before-the-sun-sets-with-DTC/884024/

Expectations high over euro meet; but sentiment not great

Will the much-hyped summit of European leaders this week reach a solution to stem the growing Eurozone debt crisis? That's the question which has been nagging investors on the heels of the best weekly gains by the market in more than two years on Friday.

Investors need positive news to justify the recent strength, but the European Union (EU) finance ministers' meet last week and a proposed summit this week are unlikely to give them much comfort. News over the weekend that the government has put on hold the decision to open up the nation's retail sector to foreign giants could weigh on the domestic stock market, mainly the shares of retailers early this week.

Such a move will be seen by investors as the government's inability to push through key economic decisions in the face of determined opposition. Opening up the sector to foreign multi-brand retail investors such as Walmart was hailed by many as a bold move after many months of inactivity.

Brokers said any reversal of decision on foreign direct investment in the country's supermarket sector may not go down well with investors. On Friday, German chancellor Angela Merkel threw cold water over investors' expectations from the EU summit, saying that resolving the crisis may take years. US markets reacted to Merkel's remark on Friday, erasing gains spurred by a decline in the jobless rate.

Fund managers said Indian stocks could follow suit early next week. "There are very little expectations that the EU summit would be able to deliver a quick-fix solution to the Eurozone crisis. And so one is not looking forward to a return of optimism," said Anand Shah, chief investment officer, BNP Paribas Mutual Fund.

"The recent market rally globally could fizzle out even before the event," he said. India's main indices gained almost 8% last week. A commitment from Eurozone politicians to restore fiscal discipline at the EU summit will be key to calming Europe's nervous bond markets, which have been the key sentiment driver for financial markets in recent weeks.

Investors fear a further rise in yields on sovereign bonds in Europe will trigger a crisis similar to the one after the collapse of Lehman Brothers.

"Germany will probably accept an aggressive programme of bond purchases by the ECB if they can quickly get all the members of the Eurozone to accept a supervision of their fiscal budgets by the technocrats of the EC," said Ed Yardeni, president and chief investment strategist of US-based Yardeni Research Investors will closely watch China's inflation data in November on Friday that is considered key to the next monetary policy move of the nation's central bank.

China's consumer inflation may slow down in November to 4.5%, the lowest so far in 2011, according to Barclays Capital. The People's Bank of China cut banks' reserve requirement ratio last week suggesting the government is shifting focus to growth than managing inflation. At home, a widely anticipated cut in cash reserve ratio - the percentage of cash that banks need to keep with the Reserve Bank of India - will boost investor sentiment.

But investors remain skeptical about the recent market strength as it was largely driven by short-covering.

Source: http://economictimes.indiatimes.com/markets/global-markets/expectations-high-over-euro-meet-but-sentiment-not-great/articleshow/10987188.cms

Bank of India gains on Bharti-AXA JV deal

Shares of Bank of India (BoI) surged over 2% in early trade on Monday after India's fifth largest state-owned bank announced that it will buy 51% stake in the mutual fund joint venture between telecom major Bharti Enterprises and AXA Investment Managers.

BoI will buy Bharti's 25% stake and AXA's 26% stake in the asset management company. The deal brings down the AXA's stake in Bharti AXA Investment Managers to 49%.

"The management of BoI is confident to get regulatory clearance on the Bharti AXA deal by early FY13," said N Seshadri, ED, Bank of India in an interview with ET now.

Highlighting plans of the JV, Seshadri said, "We got a fair valuation on Bharti Axa deal and will focus on third part sales via the MF JV with Bharti-AXA."

According to estimates, the value of the deal should be about Rs 5.3 crore. BoI will exclusively sell Bharti AXA Investment's products through its branch network.

he deal will help Bank of India to re enter into the 41-member-strong local mutual fund (MF) industry after shutting its MF shop in 2004.

"Since the ban on entry load, or the fee that mutual funds used to charge investors to pay distributors, in August 2009, which have made distributors disinclined to market mutual fund schemes, banks have been in demand as partners for funds. In particular, small funds, which lack the network to market their equity schemes, are keen to tie up with banks," according to an ET report.

At 10:55 a.m., shares of the company were trading 2.3% higher at Rs 348.60. The stock has hit a high of Rs 349.50 and a low of Rs 341.05.

Source: http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/bank-of-india-gains-on-bharti-axa-jv-deal/articleshow/10989742.cms