Skip to main content

Equity to debt transfer can yield good returns


   A joke in the equity markets is that when everyone expects the markets to move up, a correction phase sets in and vice-versa. During the just concluded week, the domestic stock markets, like their global peers, had this happy situation of proving the experts wrong and scaled a level of 19,000 (Sensex) after a fairly long time. The domestic markets' recovery story is not in isolation and is in line with the good performances shown by other markets.

Challenges ahead    

But what should be heartening for investors, is the fact that the recovery has come at a time when there are clear signs of non-performances on the government's front. It is difficult to remember when the government made any major announcements last. Caught by various challenges ranging from battling corruption to inflation, the government at the centre hasn't found time to focus on the reforms process. In fact, many attributed the lack of foreign institutional investor (FII) participation in the month of June to the lack of focus on governance.


   However, the turnaround in mood aided by a drop in crude oil price has been a pleasant surprise though one is not sure how long the good mood will continue on Dalal Street.

Results season factor    

The major worry for the markets in the coming weeks is the announcements of the quarterly results. While a below-par performance has already been factored in, the actual announcements when published are unlikely to be ignored. The high cost of funds has been a dampener of sorts though it has managed to serve the central bank's aim of cooling down the economy. Hence, it will be interesting to observe the impact of the tight money policy during the last few quarters on the performance of India Inc.


   A few sectors that would be interesting to watch are banking, automobile, and chemicals and fertilizers. Banking has been under pressure during the previous quarter due to a spike in interest rates. The rise in deposit rates was much steeper than that in lending rates in the last few months and there were also clear signs of a slowdown in the economy. As an indicator of things, the credit growth projections have been scaled down to 18-20 percent from an earlier target of over 20 percent by many bankers.

Markets hold potential    

Despite the lowerthan-expected growth rate, India still offers an opportunity for investors as the overall growth rate of the economy continues to be impressive. On the back of lack of turnaround in other economies like the US, the global investors are likely to find the domestic markets attractive over the long term. However, the risk for this story to sustain would be the political risk as the government seems to be hopping from one crisis to another. Hence, the global investors have been blowing hot and cold in the last few months.


   From a domestic and retail investors' point of view, the next few months, like in the recent past, will have to be managed on a more active basis as volatility has been on a wide range. An exit and entry strategy at regular intervals could boost the overall portfolio returns though timing them is never an easy task.

Debt attractive    

Investors can look at the option of exiting at the 20,000 levels and be in debt as the fixed returns products in themselves have been offering good returns. Despite their tax component, they have the potential to offer 5-6 percent returns, and if one were to take into account a profit booking strategy, the overall returns can be in double digits.


   For instance, if an equity investor reinvests his holding after an 8-10 percent dip in prices, the overall returns can be in the range of 15-16 percent which is very good in the current environment. The key, of course, is to get the timing right, which requires plenty of patience.

 

Popular posts from this blog

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now