Analysts warn of short-term volatility, correction in markets

Acombination of local and global factors is adding short-term uncertainty to Indian stock markets and the next two months will be fraught with volatility, according to fund managers and analysts, many of whom are predicting a decline of 5-10%.

That’s despite growth prospects for Asia’s third largest economy remaining intact. The government expects the economy to post 8.5% growth in the current fiscal.

The Sensex, India’s benchmark equity index, has gained some 4% this calendar year in comparison with a 3% decline for the MSCI World index. Last fortnight, it hit a 30-month high of 18,454.9 and has been hovering at those levels since.

State-owned Coal India Ltd’s `17,700 crore initial public offering, India’s largest new share sale, will be the key, investors say.

“The real test will be Coal India,” said Nandan Chakraborty, managing director of institutional equity research at Enam Securities Ltd. “Once it hits, we’ll have to wait and see if markets fall or rise.” He does not expect a correction to be more than 5% if it happens, but warns of short-term volatility.

“We expect the markets to correct by 7-8%”, said Nischal Maheshwari, head of research at Edelweiss Securities Ltd.

The reasons are obvious. The economic situation looks grim in the US and Europe. A weak US recovery will affect risk appetite and slow the pace of foreign institutional investor (FII) inflows into the country, if not reverse it.

“Bond yields in Europe have been rising again and the uncertainty regarding global recovery has emerged as a major risk and could impact FII inflows,” said Ullal Ravindra Bhat, managing director of the Indian arm of Dalton Strategic Partnership Llp, a global fund registered as an FII in India.

FIIs have pumped in some $13 billion (`60,710 crore) so far this year, with $2.5 billion coming in August alone. But the global nervousness poses a big question mark on the continued strength of these inflows despite a good set of domestic numbers, such as 8.8% first quarter economic growth and slowing of inflation.

“Household spending (in the US) is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in non-residential structures continues to be weak and employers remain reluctant to add to payrolls,” said the US Federal Reserve after its 10 August meeting.

“The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Federal Open Market Committee, the policymaking body of the Fed, added.

Housing prices in the UK fell for a second month in a row in August, fuelling recovery concerns.

What’s also spooking the market is the fresh paper supply among emerging markets that could soak up some $100 billion of investor money in the next few months as new share sales such as the $25 billion offering from Brazil’s Petrobras.

This investor money would have otherwise gone into buying secondary market equities and propped up share prices. Indian firms are slated to raise some $5-7 billion by the end of the year, with the Coal India issue leading the way.

With new norms for unit-linked insurance plans, or Ulips, likely to stem investment flows from this sector, there are enough indications of a correction waiting to take place, experts said. A cap on Ulip distribution charges and guaranteed returns on pension products means there may be less money coming through this instrument and a greater portion of inflows going to the market, they added.

“There are reasons to believe that a moderate correction could be on the cards. One has to be mindful that whatever rally has happened has been largely driven by FIIs, who might not be pumping in as much money this month as they were doing earlier, owing to weaknesses in foreign markets”, Bhat said.

“Given the weakness in domestic institutional flows and the uncertainty surrounding the insurance sector, this might be enough to pull down markets,” he added.

At current levels, the Sensex is trading at 18 times the estimated earnings for the fiscal.

“The growth in earnings has been satisfactory, but there is some amount of valuation discomfort,” said S. Naren, chief investment officer of ICICI Prudential Asset Management Co., India’s second largest mutual fund with `90,179 crore worth of assets under management.

“The (corporate) results have not provided any reason for cheer in the first quarter, and outlook about corporate earnings remains tepid for the next two quarters while the GDP growth recovery has already been factored in,” said Saurabh Mukherjea, head of Indian equities at UK-based investment advisory firm Execution Noble.

“The only trigger for the market to go up could be the Q2 numbers, which would give us greater visibility about the potential for earnings growth in FY11 and FY12,” said Dipen Shah, senior vice-president, private client group research, Kotak Securities Ltd.

That would depend on whether firms are able to pass on increased raw material costs to consumers, the impact of interest costs and the execution of capital-intensive projects with fewer delays, he said.

Source: http://www.livemint.com/2010/09/05211601/Analysts-warn-of-shortterm-vo.html?atype=tp

Fund houses will have to tap non-metro markets to grow

As per the country head of Bharti AXA, Vikaas M Sachdeva, stock exchanges are a good alternate distribution models for mutual funds. He also says that mobile phone technology will turn out to be a decent distribution avenue going forward. In an interview to FE’s Saikat Neogi, he said by simplifying the communication and conversion process, a higher retail penetration in MFs can take place. Excerpts:

Do you think a retail consumer is really aware of all the charges that he pays to buy and keep mutual funds?

Information about costs of investing in mutual funds is widely available through various sources like Websites, distributors and online platforms. The Scheme Information document provides every detail with respect to the fund and the costs of running it. Most of the investors today have a fair idea about the cost structure in mutual funds, particularly in larger centres. However, their decision to invest is seldom based on the cost structure of the funds.

How do you think the online platform will help fund houses to reduce costs and benefit investors in the long run?

Online platforms are technology driven and hence the cost of servicing, operations and manpower would go down significantly in the long run. This would mainly service the “Do-it-yourself” customer who compares and invests on the basis of information available on the internet. While the online platforms offer many positives like ease of access, availability, transaction convenience and availability of data at the click of a button, the ‘do-it-yourself’ concept may not go well with retail investors. As behavioural finance states that for an investment purchase decision to be made, the average person requires the ‘reassurance’ of an influencer. The role that the platform can play as an influencer is limited. Hence, the quality of investment advice and financial planning a distributor brings to the table might not be present in this avenue.

What are the other alternative distribution models fund houses should be looking at after the ban on entry load?

Of late, stock exchanges are an alternate distribution models, apart from the online/offline models available currently. It is possible for potential investors to buy into a mutual fund at the prevailing NAV by just calling his stock broker or on the online platform. Although spoken about quite frequently, mobile phone technology has not become as fast or as user friendly as one would like it to be, but this is something which will turn out to be a decent distribution avenue going forward. But these technologies and their acceptance along with acceptance of mutual fund as an investment vehicle is a time consuming activity. Having said this, the flip side is also true. It is imperative for the distributor to continuously look favourably at mutual funds as an investment vehicle. We are still not at the tipping point in this country that there is a mass conversion into mutual funds because of brand pull, financial literacy or sheer convenience and hence, a sizeable dependence is still on the distributor.

Do you think there should be a standardisation of products and the number of schemes should come down so that an investor does not get baffled?

The key word is “simplification” rather than standardisation of products. By simplifying the communication and the conversion process, a higher retail penetration is perceived. Standardisation of the products might not be the best solution as it would result in stifling innovation. Since most of the investments for funds houses come from metros, how can fund houses tap the other markets to grow their asset under management. Traditionally, India is a high ‘saving’ nation. Private savings potential as given in the Morgan Stanley research is over 23%, although most of the money comes from the top 10-12 markets. However, a per our internal calculations, mutual fund penetration is hovering at around 5% mark. Even the seemingly large numbers that seem to be coming in from the top cities doesn’t match with the potential that the industry can absorb. MF penetration has to grow manifold for the industry to achieve higher reach. With respect to the other markets, the informed investor will still be able to invest through many sources like online platforms, but investing as a habit is not inculcated in the average Indian yet. It requires a large force to reach out to the hinterlands and hence the requirement of the financial advisor gets significant.

Source: http://www.indianexpress.com/news/fund-houses-will-have-to-tap-nonmetro-markets-to-grow/676902/0

Online applications to help mutual funds meet new NFO timeframes

The mutual fund (MF) industry, which has to deal with reduced timeframe for launch of new fund offers (NFOs) and allotments of units, is getting help from companies, registration and share transfer agents to meet the deadline smoothly.

In a first effort, after Securities and Exchange Board of India (SEBI), reduced the launch period for MFs to 15 days and the timeframe for allotment of units to five days, a technology to help funds comply with the norms has been launched.

Computer Age Management Services (CAMS), the registrar and transfer agent, has designed an offering whereby investors or distributors on their behalf can apply online during the NFO period.

This will shrink the time needed for CAMS to allot units to 1-5 days.
“This will be through its website and will be available
to subscribers and distributors of MFs,” a source told DNA. The firm is learnt to have made presentations to various asset managers, which are keen on the offering.

Explaining the product, the source said, “On the www.camsonline.com website, existing fund holders can put in their folio number and some of the details such name, address, numbers would be automatically filled in. For new customers they will have to fill up details, but still there is help in filling as when you write `10,000 in application, the amount in words is
automatically filled in.”

Upon filling the application online, one has to take prints and submit it at locations, which can be CAMS offices, asset managers and participating banks. The list of closest locations would be known while applying online. “As the time period is now reduced to five days the processing can be on a T+1 cycle (one day) after submission of physical documents,” the source said.

At present, fund houses collect physical applications from investors, send it to CAMS office in Chennai in the physical form and then process it to finally make the allotment. The online procedure will directly supply the information the same day to the Chennai back office and await the physical submission of forms.

The product shall be of use more in case of equity MFs than debt as the number of investors applying for debt MF NFOs may be in thousands, but in equity it is in lakhs due to high retail participation.

A MF official said, “We can manage with pre-NFO activities in the 15-day deadline set by SEBI from August 1, 2010. But processing of applications and allotting of units in five days was a task. People usually apply towards the end of the NFO period and then there is a lot of burden to handle. This should help us fix it.”

“However, the know-your-customer (KYC) verification wherein the identity of the person is to be verified before accepting a MF application will have to be completed either before or during applying online. You can subsequently do your KYC as well,” the source said.

Source: http://www.dnaindia.com/money/report_online-applications-to-help-mutual-funds-meet-new-nfo-timeframes_1433923

DTC will have ‘no impact on the market' : CEO, Motilal Oswal AMC Ltd

Most participants had expected long-term capital gains tax to remain at zero: Motilal Oswal.

In India, equity as a percentage of financial savings stands at just 3 per cent today. This number has nowhere else to go but up. Mr Nitin Rakesh, MD and CEO, Motilal Oswal AMC Ltd

The roller-coaster ride the markets had since the new Direct Taxes Code (DTC) was introduced in Parliament could have unnerved some tepid investors. But for the long-term market buffs, the DTC comes with a load of goodies and for the retail investors, stock market investment should now come as a means of wealth generation.

True, the proposal to levy a 5 per cent tax on dividend payout that comes on the top of the SEBI diktat on dividend being paid out of the realised gains, and not from unit premium reserve, may come as a dampener to some of the investors looking for MF dividend as a dependable income stream, particularly in retirement. But this has been off-set by the proposal to exempt equity and equity-based MF units from long term capital gains tax.

With the Indian economic growth story intact, equity should form part of any retirement planning and regular investment in MFs would help in building a sizeable retirement corpus.

In an interview to Business Line, Mr Nitin Rakesh, Managing Director and Chief Executive Officer, Motilal Oswal AMC Ltd, Mumbai, shares his thoughts on the impact of DTC on mutual fund investments. Excerpts:

The latest tax code retains the long-term capital gains tax exemption on investment in equity and equity-related funds. Will that not be a huge relief to the investors? The continuance of long-term capital gains tax exemption has come as a relief. There is no impact on the market as most participants had expected the long-term capital gains tax to remain at zero.

The code proposes levy of 5 per cent tax on income distributed by equity-oriented MFs. Will this make mutual funds less inclined to distribute dividend, particularly as SEBI has mandated that the dividend should be paid out of profit made?

No, I don't think that would make a big difference as to alter a MF decision to declare dividends. There would be different schemes, and reinvestment option or growth option ‘would be much more popular' than dividend option.

Do you feel that in view of the tax changes, the growth option would score over dividend option in so far as MF investment is concerned? Which will be more tax efficient in the long term?

Yes and the growth option would be more tax efficient in the long term.

What is the likely impact of the removal of ELSS from the investments eligible for tax deduction? Do you expect the MFs to phase out these funds post -2012?

I don't think it will get phased out in FY12. People will start getting used to EET instead of EEE.

Don't you think that equity investment — direct or through MFs — should become an essential long-term investment strategy?

Markets don't have daily movements based on long-term view. They are guided more by sentiments. In India, equity as a percentage of financial savings stands at just 3 per cent today. This number has nowhere else to go but up. Direct equity investments, mutual funds and ULIPs would all be responsible in taking this number higher.

Source: http://www.thehindubusinessline.com/2010/09/06/stories/2010090650910400.htm

Rajan Krishnan, CEO, Baroda Pioneer AMC Limited

Rajan Krishnan, CEO, Baroda Pioneer AMC Limited, is a B.A (Hons) from Delhi University and a PGDBM from XLRI, Jamshedpur having over 23 years of experience in marketing, of which 14 years are in the mutual fund industry. Mr Krishnan was appointed Chief Executive Officer of Baroda Pioneer Asset Management Co. Ltd. in July 2008. Prior to his appointment, he was the Business Head (Asset Management) – Principal Pnb Asset Management Company Pvt Ltd from June 2003 to March 2008, Vice President ( Sales and Marketing) - Zurich Asset Management Company Pvt. Ltd between Dec 1999 to June 2003 and Vice President (Sales) – Kothari Pioneer Asset Management Company Limited from September 1994 to December 1999

Baroda Pioneer Asset Management Company Limited is a joint venture between Bank of Baroda and Pioneer Investments S.p.A. Since the formation of the joint venture in 2008, Baroda Pioneer has worked relentlessly to create an investment platform suited to the requirements of Mutual Fund investors in India. Baroda Pioneer offers a range of equity, debt and money market offerings. Its average assets under management (AAuM) stand at Rs.3,547 Cr. (as on 31 March’10) and operates out of 17 locations in India.

Replying to Yash Ved of IIFL, "At current valuations, the Indian markets are enjoying a premium in-line with historical averages and thus are not very expensive."

What is your view on the Indian stock market?

The Indian stock market has performed very well given the turbulence seen globally due to multiple issues like sovereign debt risk in Europe, fragile recovery in US and in other developed countries and a slow down in China.

As far as India is concerned, fundamentals have clearly improved. On the macro front, positives like 3G auction windfall, PSU disinvestments, proposed deregulation of oil prices etc should help in keeping the fiscal deficit under control. As of now, it seems that we would have a normal monsoon. This should help in bringing down food prices as compared to last year.

India historically has traded at a premium as compared to other emerging markets because of its ability to sustain high growth rates on the back of its demographics, high saving rate and lower linkages to global growth. At current valuations, the Indian markets are enjoying a premium in-line with historical averages and thus are not very expensive.

Going forward, given the growth and profitability prospects, the Indian markets would continue to enjoy this premium.

What is your view on the rupee?

Fear of a global crisis is not the only factor driving the sentiment in the currency markets. Global growth is just as critical. The US is considered as a proxy to the world economy and hence any slowdown there is considered as slowdown in the world economy. Lower than expected GDP numbers in the US can lower the dollar’s strength when measured against its peers.

At present, the rupee remains on the backfoot following rising trade deficit and slower pace of capital inflows even though the inflows from FIIs remain healthy. At this stage, sustained weakness of the greenback and low capital inflows do not support the case for a strong rupee. In the short term, the rupee may continue to trade with a weakening bias in the 46-47.50 range.

What is your outlook on the Indian economy?

India’s growth projection is likely to be upgraded to 8.5% from an earlier forecast of 8.25%. Rainfalls have been largely in-line with pre-monsoon predictions. Given this scenario, the farm sector is most likely to grow at a rate above 4%. The Government could improve its fiscal deficit from its budgeted 5.5% of the GDP in 2010-11 by following a path of better fiscal management.

Which are the sectors you are bullish and bearish on?

In the current market conditions, we are positive on defensive sectors like Pharmaceuticals, which in recent times have seen many an M&As in the generic space. We are also positive on Consumer Discretionary sectors like Automobiles.

We like Infrastructure and Industrial stocks because of the additional order flows expected in the coming years. Continued thrust on Infrastructure by the Government and increased participation of private players bodes well for companies in this space.

We also like PSUs Banks. In the near term, a higher credit off-take from industries and the retail segment would benefit the banking sector. We are underweight on Real Estate, Telecommunications, Consumer Staples and Materials - Cement.

What kind of cash levels you are sitting on?

We do not hold too much cash in our portfolio. Our cash exposure currently is about 3-4%.

What is your advice to retail investors?

Given India’s growth story, equity investments would continue to offer good returns. I would advise retail investors to invest in equities through the SIP route, as it is a time-tested strategy. Investors should also follow the concept of asset allocation to build up on their diversified portfolio.

Source: http://www.indiainfoline.com/Research/LeaderSpeak/Rajan-Krishnan-CEO-Baroda-Pioneer-AMC-Limited/20266862

MFs' AUM jumps as equity funds put up better show

The Indian mutual fund (MF) industry witnessed an increase of 3.3% in its average assets under management (AAUM) to around Rs 6.87-lakh crore by the end of August ’10, from Rs 6.65-lakh crore in July ’10.

In fact, this rise in the AAUM of the industry is amidst concerns of a fall in valuations of the liquid plus (ultra short-term) category of schemes; post-Sebi diktat on new valuation norms for these schemes that came into effect last month.

With new valuation norms requiring ultra short-term plans to value their debt securities with a maturity of more than 91 days to be marked-to-market, there were considerable concerns over the rise in volatility and valuations of these schemes by corporate houses that invest into these schemes.

However, a month down the line, ultra short-term plans have reported an average increase of around 0.43% in their net asset values (NAV) for August ’10, regaining the corporates’ confidence on these schemes.



As such, despite the new valuation norms having hit the floors, many fund managers have begun to realign their portfolios, incorporating debt with less than a 91-day maturity in their ultra short-term plans, in order to tone down the concerns of prospective rise in volatility in the returns of these schemes.

Thus, many prominent debt-dominated fund houses have witnessed a healthy rise in their AAUM for the month. These include Axis, Baroda Pioneer, JM Financial, JP Morgan, L&T and Peerless which have reported a double-digit rise in AAUM.

On the equity front, while most fund houses, dominated by equity assets, have shown an increase in their asset base, the rise can be mainly attributed to an increase in the valuation of equity assets held by these schemes over last month.

While the Sensex and the Nifty have returned around 2% gains over the past one month, the category of diversified equity schemes has clocked in an average of around 3.4% returns for this period.

With the market having gained significantly over the past month, most diversified equity schemes are currently commanding NAVs, almost nearing their 52-week highs. In fact, this marked improvement in the performance of equity mutual fund schemes can be used as a catalyst by fund houses to bring back their lost as well as prospective investors.

As far the AAUM race amongst fund houses is concerned, while Reliance, HDFC and ICICI continue to rule over as the top three fund houses in the country, Birla Sun Life has moved a notch up to bag the fourth position, pushing UTI to number five. Similarly, Franklin Templeton has moved up to grab the sixth position, pushing down SBI Asset Management to a seventh place. Again, DSP Blackrock has also moved a notch up to bag the ninth position pushing LIC down to number 10.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/MFs-AUM-jumps-as-equity-funds-put-up-better-show/articleshow/6482506.cms

Decoding Direct Tax Code

Income and Wealth Tax Rates

Increase in tax exemption on income from Rs 1.6 lakh to Rs 2 lakh, with no separate benefit for women.

Income from Rs 2-5 lakh to be taxed at 10 percent; Rs 5-10 lakh at 20 percent and 30 percent thereafter. Currently, income from Rs 1.6-5 lakh attracts 10 percent tax; from Rs 5-8 lakh, 20 percent and beyond Rs 8 lakh, 30 percent.

Tax exemption limit for senior citizens above 65 years to be marginally raised to 2.5 lakh per annum from Rs 2.4 lakh at present.

The changes will save up to Rs 41,040 for those earning more than Rs 10 lakh a year.

Corporate tax to be a flat 30 %. MAT has been increased from 18 percent to 20 percent of book profit of a company. Dividend Distribution Tax will be at 15 percent.

Exemption limit for imposing Wealth Tax raised to Rs 1 crore from current Rs 15 lakh. Wealth tax to be imposed at the rate of 1 percent, except on non-profit organisations which are exempt.

Tax Audit Limits

Tax Audit Limits raised from existing Rs 15 lakh for professionals to Rs 25 lakh, and from Rs 60 lakh for income from business to Rs 1 crore.

Exemptions

Exemption of interest up to Rs 1.5 lakh on housing loan retained. Deduction to be considered only on the interest component and not the principal amount.

EEE (exempt-exempt-exempt) mode of taxation for insurance and pension funds also maintained. Exemption on pension, Provident Fund and Gratuity Funds to be at Rs 1 lakh, while Rs 50,000 exemption provided on pure insurance, including health cover, and tuition fee payment.

LTA

Tax incentives on leave travel allowance to be scrapped.

For Investors

Existing provision of zero tax on long term capital gains to continue. Short-term capital gains tax for annual income up to Rs 10 lakh rationalized to benefit investors in the lower income bracket. Small investors with incomes between Rs 2 lakh and and 5 lakh to pay only 5 percent capital gains tax, less than one-third of the current 17 percent (15 percent + cess). Investors in income bracket of Rs 5 lakh and 10 lakh will pay 10 percent capital gains tax. Big investors having income over Rs 10 lakh to pay short-term capital gains tax at 15 percent.

Investment in equity-linked Mutual Fund schemes and ULIPs to attract 5 percent tax on the dividend paid by these entities. At present, there is no DDT applicable to equity fund schemes or insurers on income distribution to unit or policy holders.

Implication of DTC

While senior citizens benefit marginally, women would no longer be given a special status by the government for a higher exemption. Middle Class will continue to find purchasing a house a lucrative option, as exemptions on interests on home loans will continue. It will also give realtors some relief who are just emerging from a depressed patch.

As for the outcome of personal exemptions, there will be a marginal rise in savings as exemptions have been increased for investment in approved funds and insurance schemes to Rs 1.5 lakh in a year from Rs 1.2 lakh currently.

Raising the limit for imposition for Wealth Tax to Rs 1 crore is likely to improve compliance, which is currently very low. But the Rs 1 crore limit is markedly low compared to the proposed limit of Rs 50 crore, which was originally proposed. The adverse impact of the new provision comes from the fact that Wealth Tax would now include companies in its ambit. So far, they were out of the net.

Small and medium investors will gain substantially by way of saving on taxes on short term gains. DTC is also expected to boost investment flow into capital markets, as the government proposes to retain a zero long-term capital gain tax.

While corporates will get slight reprieve via reduction in Corporate Tax from current 33.22 percent (for incomes more than Rs 1 crore), increased MAT will counter the gain for industry.

Moreover, Special Economic Zones (SEZs), which are notified on or before March 31, 2012, will get income tax benefits, as per the proposed Direct Taxes Code (DTC) bill.

The Bill also proposes profit-linked deductions under the I-Tax Act to SEZ units commencing operations by March 31, 2014. This may have an adverse impact as there is no sunset clause at the moment, but improve commitment levels of players already in the fray.

Asked about overall implications of the DTC, tax expert and analyst R N Lakhotia told Zeebiz.com that one should not over worry about tax implications as the government has evened out losses and gains. That is, a hike in one place would be offset at another, as no government would want to be unpopular with the electorate. So the process is a mere rationalization.

Lakhotia advised that diversification of portfolio using personal discretion could be a good strategy. For example, insurance policies should be treated separately from ULIPs, whose dividend will not invite tax. A policy should be bought more with an idea of an insurance cover than anything else. A Unit, on the other hand, should be picked depending on the returns it is likely to fetch.

Besides Lakhotia asked tax payers to take a broader view of things, “The word ‘income’ comes before ‘tax’. The idea should be income and wealth creation. Tax is a secondary thing.”

We must try and maximize our incomes first using sensible investment policies. When there will be more and more money in your pocket, a person wouldn’t mind shelling out some of it as tax, he said.

As for the government, DTC will result in an estimated revenue loss of Rs 53,172 crore in 2012-13 as gross tax collection from direct taxes will come down from an estimated Rs 5.80 lakh crore to Rs 5.27 lakh crore.

Because there will be firmness and transparency in the tax structure, all in all, we will no longer wait for Union Budget with such baited breath as the personal income tax announcements will no longer be a part of the Finance Bill and thus the FM’s speech.

The tax rates have been reduced to some extent with the hope of widening the base, but the changes seem fairly cosmetic when considered in comparison with the proposals which were considered in the original draft of the DTC. The powers of the tax authorities under the General Anti-Avoidance Rules (GAAR) also remain the same.

Why DTC

As part of its financial reforms process, the government wanted to modernise and upgrade its direct tax laws i.e. the Income Tax Act and the Wealth Tax and bring them more in line with current times. DTC is expected to widen tax base, give moderate relief to tax payers, reduce unnecessary exemptions, and improve compliance thus improving collections.

It also seeks to address new realities like operations of foreign companies in Indian markets, foreign institutional investors and cross-border M&As.

For example, capital gains tax would be imposed on acquisitions made overseas if the acquired company holds over 50 percent assets in Indian company. This would affect companies like Vodafone Group for its acquisition of a 67 percent stake in Hutchison Essar from Hong Kong`s Hutchison Telecommunications International Ltd.

The government has also clarified that foreign companies, which were regarded as ‘resident of India’ if their control and management were wholly situated in India, will now be considered ‘resident’ if the “place of effective management” is in India.

DTC replaces the archaic Income Tax Act, 1961 and Wealth Tax Act, 1957. It will come into effect from April 01, 2012. First return of income under its norms will be filed after March 31, 2013.

Source: http://biz.zeenews.com/interviews/story.aspx?newsid=124

Principal Pnb Fixed Maturity Plan - 91 Days - Series XXIII Floats On

Principal Mutual Fund has launched a new fund named as Principal Pnb Fixed Maturity Plan - 91 Days - Series XXIII, a close ended debt scheme offering Fixed Maturity Plan. The New Fund Offer (NFO) price for the scheme is Rs 10 per unit. The new issue is open for subscription from 1 September and closes on 8 September 2010.

The investment objective of the scheme is to build an income oriented portfolio and generate returns through investment in debt/money market instruments and government securities.

The scheme offers two options viz. growth and dividend option. The dividend option will have the facility of payout and sweep.

The scheme would allocate up to 100% of assets in debt securities (including securitized debt) & money market instruments and government securities. Investment in securitized debt may be up to 100% of the net assets of the scheme.

Entry and exit load charge will not be applicable for the scheme.

The minimum application amount is Rs 5000 and any amount thereafter.

The fund seeks to collect a minimum subscription (minimum target) amount of Rs 35 crore under the scheme during the NFO period.

Benchmark index for the scheme is Crisil Liquid Fund Index.

The fund manager of the scheme will be Shobit Gupta.

Source: http://www.indiainfoline.com/Markets/News/Principal-Pnb-Fixed-Maturity-Plan-91-Days-Series-XXIII-Floats-On/3276286783