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Tuesday, May 31, 2011

NFO Review: Union KBC Equity

Union KBC Mutual Fund has announced the launch of its first fund -Union KBC Equity Fund. It is an open ended equity diversified scheme.


Investment Objective and Strategy: The objective of this scheme is to generate long term capital appreciation by investing substantially in a portfolio of equity and equity-related instruments. The Fund Manager has the freedom to invest 75% to 100 % in equity and equity related instruments and upto 25% in money market instruments. The investment team will follow the combination of Top down and Bottom up approach while making investments.


Fund Manager: Mr. Ashish Ranawade will be the Fund Manager of this scheme. He has over 16 years of experience in investments. He has worked with UTI MF and ING Investment management (India) Limited as head of PMS with responsibilities of portfolio performance and business strategy.


Fund house: Union KBC Asset Management is a joint-venture between Union Bank of India, a leading Nationalised Bank in India and KBC Asset Management, the asset manager of Belgium-based Bancassurer, KBC Group.
Union Bank of India has around 3,000 branches in the country with a customer base of about 3 crores. For this product, the fund house will be targeting the Union Bank customer base through its branch networks.
KBC Asset Management is mainly active in its home markets of Belgium and Central and Eastern Europe.


Basic Details:
NFO Opens: May 20, 2011
NFO Closes: June 03, 2011
Options: Growth and Dividend
Minimum Application Amount: Rs.5000 for lump-sum, Rs.1000 for SIP
Exit Load: 1% if redeemed or switched out on or before completion of 1 year from the date of allotment and NIL thereafter.
Benchmark: BSE 100 Index
Fund Manager: Mr. Ashish Ranawade


Education Loan - How do you become eligible?


All you need to know about educational loans

The person who is seeking a student loan has to be a citizen of India The person should have got admission into a professional or technical course after taking an entrance test He/she should have secured admission into a university in India or institution overseas What is the interest rate charged for student/education loan?

Standard interest rates for getting student loans in India are 12-14% pa Another provision that banks provide you with is a choice between fixed and floating interest rates Income tax benefits for educational loans Under Section 80 (e) of the Indian Income Tax Act, a person can claim the interest paid towards the education loan as tax deduction.

The tax deduction can only be availed by the individual on whose name the loan has been taken.

This benefit can be claimed up to 8 years after the repayment has started.


Ø       Marksheets of the last qualifying examination for school and graduate studies in India

Ø       Proof of admission to the course for which the loan is being applied

Ø       Scheduling of expenses for the course

Ø       Copies of letter confirming the scholarship

Ø       If applicable, copies of foreign exchange permit need to be attached as well

Ø       Two passport size photographs

Ø       Bank statement for the last six months of the borrower

Ø       Income tax assessment order.

This should not be more than two years old Brief statements of assets and liabilities of the borrower If you do not have an account in the bank where you are applying for the loan, you will be required to establish your identity and give proof of residence


Online Income tax filing returns


Log on to and register yourself with your PAN — which acts as the user ID — and log in to your account.


From the 'Downloads' menu, select the ITR form applicable to you for assessment year (AY) 2010-11 and download the same. For a salaried individual with no other source of income, the relevant one is ITR-1.


Open the downloaded excel utility with 'macros enabled'. For example, if you are using Office 2003, then go to Tools > Macro > Security, set the security level at 'medium' and enable macros while opening the excel utility.


Fill in the relevant details with the help of the Form 16 issued by your employer.


Validate all the information by clicking the 'Validate' key and proceed to generate an XML file. It will be automatically saved in your machine.


Upload this XML file on to the website by going to the drop down menu under the 'Submit Return' section; select AY 2010-2011 and the applicable Form. Select 'No' for the question 'Do you want to digitally sign the file?', unless you have obtained a class II digital signature.



If you have followed all steps correctly, a message about successful efiling will be displayed on the site, along with a note that the ITRVerification form has been mailed to your e-mail ID.


Download the ITR-V form, print it out, sign the same and send it by ordinary post to Income Tax Department-CPC, Post Bag No-1, Electronic City Post Office, Bangalore - 560100, Karnataka within 120 days of filing your returns online. A failure to adhere to the deadline will mean going through the process all over again. If you do not have a printer at home, you can simply save the file in a pen drive/CD and carry it to a printing centre.


* This flow chart has been designed keeping in mind individuals with zero tax liability. For those who are liable to pay taxes or entitled to a refund, the flow chart will entail certain additional steps like entering the details of taxes paid, bank account number, MICR code and the like.




Monday, May 30, 2011

Buying DSP BlackRock Mutual Funds Online

Its Easy, Simple, Flexible and Convenient.
Follow Below steps to buy DSP BlackRock Mutual Funds online. There are 2 ways to do it.
1) With PIN (If you do not have PIN)
2) Without PIN (If you have PIN already)
Follow Below Steps:
1) Enter your Existing DSP BlackRock Folio number
2) Enter PAN Number
3) Provide Bank Account Number (Any bank with Net Banking facility)
4) Select Fund that you want invest in
5) Enter the Amount
6) Make the Fund transfer with Net Banking
No PIN or User ID required

2) Invest Online With PIN URL:
If you already have user ID and PIN then use below link to make new/additional purchase online.


Will - Certain documents can make up for its absence

   The death of a loved one is the most dreaded thing that can happen to any family. It can get even more traumatic when the family realises that the deceased has not left a will behind. In such a situation, the family is usually left running from pillar to post, trying to gain access to the property which, in many cases, could be the only saviour from doom. However, according to experts, the family can still get its due even in the absence of a will, provided it can get hold of a few documents. A succession certificate and a copy of the death certificate should solve at least 95-96% of your problem.


Usually, a succession certificate is the key document that you need. In the absence of a will, a succession certificate will be the primary document through which the heirs can stake a claim to the assets of a deceased relative. A succession certificate, under the Indian Succession Act, is a document that gives authority to the person who obtains it, to represent the deceased for the purpose of collecting debts and securities due to him or payable in his name. For a succession certificate, you need to apply to a magistrate or a high court. Usually, courts have a separate cell that issues succession certificates. When it comes to immovable property, there are other documents, like, for instance, a gift deed, that can help. In some states, in cases of intestate succession, property can be gifted or the share in the immovable property can be released by the legal heirs to each other. This can be done by executing and registering the gift deed or release deed with the registrar of assurances.


For access to the deceased's bank accounts, the process differs slightly. If the deceased has made some nominations, then naturally, the nominees will claim the balances. "If there is a nomination made by the deceased, then the nominee can claim the balances/investments based on the nomination. Banks, under RBI's guidelines, are bound to pay to the nominees if the nominations had been registered with the bank. Here registration refers to a confirmation from the concerned bank. But for most people, the real problem arises when there is neither a nomination nor a will. What do you do in such a case? You need a certified copy of the death certificate to gain access to the bank accounts. The banks usually look to see if the deceased had assigned a beneficiary for the account. If there is no beneficiary, then the succession rule would apply. Usually, the hospital or the crematorium issues the death certificate.


As, in most case, securities form a substantial part of assets. The process of transmission in case of dematerialised holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting necessary documents to the depositary participant (DP), whereas in case of physical securities the legal heirs/nominee/surviving joint holder has to independently correspond with each company in which securities are held. The claimant should also submit to the concerned DP an application in transmission request form (TRF) along with a notarised copy of the death certificate, in case of the death of the sole holder where the sole holder has appointed a nominee," he adds. Again, a problem will arise when the sole holder has not appointed a nominee. What would you do in such a case? In such a case, you will need a notarised copy of the death certificate of the holder and any one of the following certificates: succession certificate: a certified copy of the will and the probate (if there is any), a certified copy of the letter of administration (if value of holding is less than . 1 lakh).


Imagine a situation where the parent of a child has died suddenly without leaving a will. What can a minor child do in such a case? A minor child needs to file a case in any court or petition through a guardian under the law or a guardian appointed by the court. Although minors have the legal capacity to own property, they do not have legal capacity to manage it. Since minors are legally incapable of handling property, a guardian is appointed from among their relatives to manage the property. Should no one step forward to be a guardian (under the supervision of Court) on account of the fiduciary nature of the responsibility, the court may appoint a guardian and house the share of the minor with such a guardian. The court also ensures that minors are adequately protected. "If your children inherit a share of your house, your spouse will not be able to sell it, rent it out, or even refinance the mortgage without a court order. Getting court orders could be expensive and time-consuming. And when it comes to investing these assets, the court takes adequate steps to protect them as well. The court may pass additional orders to protect the interests of minors as to how the assets falling to the hands of minor are to be invested till the minor attains the majority.


The real problem arises when there are too many people vying for the same property. This is quite a possibility when the deceased has children, spouse as well as kin. All the heirs may not live in the same state, or they may not be able to agree on what should be done with the property. The more heirs you have, the more money and effort they will have to spend trying to get organised. In such a situation, relatives should opt for a mutual agreement, feel experts. If the specific relatives of the deceased have come to a mutual agreement as regards dividing the assets/properties of the deceased, then they may document, sign and witness and file the same to the succession court along with their application. This mutual agreement must be comprehensive and deal with all known relatives and kindred of the deceased. It cannot be prejudicial to any of the relatives/ kindred. This will greatly speed up the process of issuance of a succession certificate. But make sure you record your agreement. Gupta adds, "Any such settlement is to be recorded either by way of partition deed duly registered with the sub registrar of assurances or a decree passed by the court or a settlement before the court in a judicial proceeding. However, a mutual agreement is not conclusive. "A mutual agreement by itself is not sufficient. You need to get a succession certificate as well.

Even though the problem has a solution, most experts are of the view that it is best to keep a will in place so that your family is saved from the hassles of getting things in order.


Mutual Fund Review: HDFC TAXSAVER

Investment Strategy:

This fund focuses mostly on large cap stocks. In the past three years, large cap stocks on an average account for about 75% of the portfolio, midcap stocks account for about 15.5% of the portfolio, small cap stocks account for about 3.5% of the portfolio and cash holdings account for 5.0% of the portfolio.

Banking, Pharmaceuticals, Information Technology, Oil Exploration and Electric Equipment are the important sectors for this portfolio. These five sectors have accounted on an average for 45.5% of the portfolio across the three year period and about 48% of the portfolio in 2010. Banking sector has never had an allocation of less than 15% in the past three years and continues to be the dominant sector in the portfolio. Exposure to the Electric Equipment sector has seen a drastic reduction in the past three years; the allocation has decreased from 13.5% of the portfolio allocation in December 2007 to 4.3% in December 2010.

Asset Size:

The fund's AUM is around Rs. 3093 crore as at 31 March 2011.


This fund is one of the best performing ELSS funds in India and also the second best performing ELSS fund on our platform over a 5 year period (31 December 2005 to 31 December 2010).

As of 31 December 2010, this fund has outperformed its benchmark, the S&P CNX 500 Index across all periods, right from six months till since inception. Over a 1 year period, this fund has given 26.42% while its benchmark has given 14.13% and has given annualized returns of 17.9% over a 5 year period in comparison to 14.96% of the benchmark over the same 5 year period. 

Friday, May 27, 2011


Investment Strategy:

The fund invests in pharma and healthcare stocks across market capitalisation but focuses mainly on the large cap and small cap stocks. In the past three years, large cap stocks on an average account for about 46% of the portfolio, midcap stocks account for about 19% of the portfolio, small cap stocks account for about 28% of the portfolio and cash holdings account for 6% of the portfolio.

Investments in Pharmaceuticals companies account for about 89% of the portfolio on an average.

Asset Size:

The fund's AUM is around Rs. 552 crore as at 31 March 2011.


This fund is the best performing Pharma fund in India and also the best performing Pharma fund on our platform over a 5 year period (31 December 2005 to 31 December 2010). We have been recommending this fund for the past two years.

As of 31 December 2010, this fund has outperformed its benchmark, the BSE Health care Index across all periods except for the 6 months and 1 year periods. Over a 1 year period, this fund has given 31.9% while its benchmark has given 34.2% and has given annualized returns of 27.2% over a 5 year period in comparison to 16.7% of the benchmark over the same 5 year period. 

Health insurance - How much & What type?


Stories abound of how patients have realised the virtues of buying health insurance after taking one look at their hospital bills. As the television advertisement rightly says, hospitalisation bills can at times get you down worse than any ailment can. A health insurance cover enables you to meet unexpected medical expenses with confidence. Given today's high cost of treatment, people who live without health insurance court a serious risk every day of their lives. Health insurance can shield them from penury that could be caused by prolonged illness and the expenses thereof.


Awareness about the need to buy health insurance is increasing, especially in urban areas. At least those who are financially literate no longer subscribe to the view that health insurance is only for the old or the infirm. They buy health insurance as soon as they have the means to do so, which is the right thing to do. If you wait till you are, say, in your 40s, then insurers will insist on a health check-up. And then if some disease is found they may deny you coverage.


Today buyers have the option to purchase a comprehensive medical cover either from a general insurance company or from a standalone health insurance company.


These days a lot of employees also get a health insurance cover from their employers. However, it would be prudent not to depend on such a policy alone but to buy one of your own. In case you lose your job, not only will you be without a regular pay cheque, you will also find yourself without a health insurance cover.


How much?

The first question to answer is how much insurance you need. Financial planners suggest that irrespective of age, a person should have health insurance of at least Rs3 lakh. Senior citizens should have a cover of Rs5 lakh or more.


Individual or floater?

An individual policy means that you have a separate policy for each member of the family. So, if there are four members in your family, then you could buy four policies, each of which has a cover of, say, Rs3 lakh each. Buying such individual policies is expensive. The advantage, however, is that if more than one member of the family falls ill simultaneously, there is adequate cover to meet the needs of each.

In case of a family floater policy, a single policy covers all the members. So instead of buying four policies of Rs3 lakh each, a family could purchase a single policy of Rs5-7 lakh and any member of the family could avail of the benefits in case of an illness. The key attraction of a family floater policy is that it is more cost-effective.

Financial planners, however, don't favour buying a family floater policy. Their argument: what if one member of the family falls ill at the beginning of the year and uses up a substantial portion of the sum assured? The other members of the family will then be left with inadequate protection for the rest of the year. Similarly, what if more than one member of the family falls ill simultaneously? Though the probability of this happening is low, it could well happen.

Another disadvantage of a family floater plan is that it is renewed only till the senior-most member reaches the maximum age of renewability allowed by the insurer. This means that family members who are part of a floater plan will need to buy individual plans later in life. At this point, they will not get the benefit of their claim history and pre-existing disease coverage that comes when you renew the same policy. Especially for elder members of the family it may be difficult to get individual policies at such a late stage of life (again, the problem of denial of coverage to the elderly).

Similarly, when children reach a certain age (25 years in most cases), the insurer will not allow them to be part of the family floater plan. They too will have to buy a separate policy for themselves, and they too will be denied the benefits that come from renewal of the same policy.

Moreover, if the senior-most member of the family passes away suddenly, the policy gets terminated and the surviving members of the family are left without coverage.

Only in two circumstances is it advisable to buy a family floater plan: one, if members of the family already have individual plans but the family wants to enhance coverage. It could do so via a family floater plan. Two, you could buy a floater if the elderly members of the family do not have health insurance coverage, but there is the possibility of including them in a family floater plan.



Health insurance to go portable

Health insurance portability is consumer-friendly move. But wait to see how it plays out on the ground

After mobile numbers, it is the turn of health insurance policies to go portable in the country, beginning from July 1 this year. With this landmark regulation, the insurance regulator has set up, what one author of a marketing text book famously referred to, as a "dissatisfied customers' exchange".

It often happens that at the time of purchase, the health insurance company promises convenience, high-quality service, and above all, the assurance that your healthcare bills will be taken care of if and when you fall ill. In reality, customers sometimes have a different experience. You could, for instance, find that even though you own a cashless policy, the hospital demands the entire (in some cases, a part) of the total treatment expenses at the time of admission. Even if it reimburses the money at the time of checking out, this does involve an inconvenience. What if the illness is sudden and you are unable to cough up the cash (usually a huge amount)?

Two, you could find that the insurance company takes advantage of hidden clauses to wriggle out of its commitment to pay your bills. Three, the experience with the third-party administrator (TPA) could be unpleasant. Four, even if you have coverage of, say, Rs10 lakh, the insurance company could initially sanction only a part of the total amount, say, Rs3 lakh.
All these problems are quite commonplace. So far, you had no option but to grin and bear them. Switching your insurer was difficult because it meant a loss, in terms of the benefits that arise from a no-claims history, or the waiting period for a pre-existing disease.

Now, you may well switch to another health insurance provider. This is a landmark ruling that is expected to enhance service standards within the country. It is inspired by the American Health Insurance Portability and Accountability Act (HIPAA). For insurers, the advantage is that they will be able to share risk profiles and check frauds, which would in turn help them rein in insurance costs.

While the hopes from this ruling are high, one will have to wait and watch for the new portability regime to be implemented to see whether benefits actually accrue to customers.


What is portable?

Initial waiting period: The 30-day initial waiting period will no more act as a deterrent for the insured to change the insurer. Instead of deciding not to continue with a cover with a certain insurer (during or towards the end of the free-look period), the insured could well decide to shift to a different insurer.
Sum insured: When customers switch from one insurer to another, they will be able to get a policy for the same amount of sum insured. If they decide to augment the amount of cover, then the benefits on the existing value of the cover will remain. Only the additional sum insured will be treated as new and will need to pass the waiting period as stipulated by the new insurer.

Waiting interval: The waiting period for a pre-existing disease will be portable. This is the biggest benefit of this ruling. Pre-existing diseases normally get covered after three years. Earlier, if the insured moved to a new insurer, any waiting time that she had already served under the old policy was not considered. She had to undergo the waiting period again in the new policy. But now she will be able to carry over the waiting period already served under the old policy.


Mutual Fund Review: Fidelity Tax Advantage


Although not a very exciting offering, Fidelity Tax Advantage does provide stability & consistency…

Last year's returns were commendable. But it also stands out for its large-cap bias. In fact, only two tax saving funds (out of 37) fall in the large-cap space. The outcome is that it shields investors better than its peers during market downturns. Since its launch, of the total eight quarters in which its category has been in red, the fund has outperformed its peers in all of them. On the flip side, one has to deal with middling performance during market run-ups.



The fund has no restrictions in terms of market cap, sector or thematic bias. The focus is on bottom-up stock picking approach. The selection of the stocks will be done on the basis of the core strengths of the companies. The fund will control risk through a diversified portfolio with no high allocations to a single stock.


Fund Insight


The portfolio is biased towards large caps and clearly towards Financial Services. The sector has accounted for around one fifth of the portfolio since the launch of the fund. However, Kothari claims to have no bias towards any particular sector. He does believe that Financial Services, as a sector, is a good proxy to the overall growth in the economy. To add to it, India still has a low penetration in this space hence the potential to grow and compound returns over the long-term.

The decision to buy or sell a stock is made on the basis of the fund manager's understanding of the growth outlook, fundamentals and valuations. So even when Metals had a great run in 2007 and 2009, his exposure was limited to around 5 per cent.

Kothari goes by the balance sheet more than what the market is chasing. So it's not surprising to see that 17 of his holdings have been held in the portfolio almost since inception.


Portfolio Insight

Currently, close to one fourth of its assets are in Financial Services. Despite a large-cap bias, the portfolio is very diversified across 64 stocks. Apart from Reliance Industries, allocation to a single stock has rarely exceeded 6 per cent of the portfolio. However, the fund takes numerous small bets. In December 2010, 28 stocks accounted for less than 1 per cent of the fund's portfolio.



The large-cap bias does not make it a very exciting offering. While it does give stability, the concentrated sector bets (if the fund manager is comfortable with valuations) could hinder performance if they do not deliver.


Form 16: How to Fill up and what to check?


What is Form 16?

All salaried employees have to file their income tax returns by July 31, 2010. To do this, it is necessary to have the Form 16 document, issued by your employer. Form 16 gives details of tax deducted and the branch of the bank where it is deposited into the central government account. For example if a TDS of Rs 2,332 and education cess of Rs 68 are deducted from your April salary, Form 16 details the same. It does so for every month in the financial year. It is the final certificate issued by your employer giving details of the salary you have earned and the tax deducted on your behalf and paid to the government. This certificate is given to you at the end of the financial year, generally by April 30. In case there hasn't been any TDS from your salary, you just get a salary certificate and not the Form 16.

What is Form 16A and how is it different from Form 16?

If you are not a salaried employee and work as a professional for an organisation and earn fees, then the certificate that shows TDS details deducted while making payments to you is Form 16A.

What if you have worked for more than one company or changed jobs during the year?

At the end of the year, you need to collect Form 16 from both your employers as that is the basis on which you would file your returns. When you join a new organisation, you should furnish your TDS details from the previous employer to your current employer. This will help your current employer in deducting tax accordingly. If you do not mention your previous organisation details to your new employer, then you are liable to show the total income from both employees and calculate your tax liability accordingly.

What if I cannot get Form 16 from my previous employer?

Your best option then is to fill Form 12B and submit it to your new employer. The employer will take into account the previous salary you earned while deducting tax.

Do I need to attach Form 16 with my IT returns?

As per the IT department rules, it is not necessary to attach the original Form 16 with your income tax returns. However, in your interest, you could attach a photocopy of Form 16 while retaining the original with yourself.

What other particulars should be checked in Form 16?

The first thing you need to confirm in Form 16 is the PAN number. If it is wrong, you have to ask your employer to rectify it and give you a new Form 16. Besides, the employer needs to make correction at their end by filing revised return of TDS to credit the TDS proceeds to the correct PAN number.

What if there is an error in figures in Form 16?

You need to tally the figures in Form 16 with the tax declaration statement provided by you to your organisation at the beginning of the year. It's possible that the figures mentioned are either wrong, or not considered at all. The result would be that fewer deductions would have been shown, resulting in higher tax liability. You might not have submitted the proofs of all investments, or could have forgotten to submit some bills. If there is an error by the employer, you could request them to rectify it and issue a revised Form 16. If a higher tax has been deducted, you can claim a tax refund while filing your returns.

Thursday, May 26, 2011

What Is A Mortality Charge In Insurance?

When you buy a life insurance policy, the insurer levies a charge for the insurance protection upon death and to cover certain other expenses. This is known as mortality charge. It is the actual cost of insurance by the life insurance company. It is usually deducted with other charges in the policy, before investing your money. Mortality is dependent on the sum at risk (sum assured minus fund value) and should reduce as the fund value increases in the policy term. It is calculated per thousand of sum at risk. Higher the sum at risk, higher is the charge. Ideally, it should reduce as the fund value increases, but it does not.

How is mortality charge calculated?

It is mainly linked to the average Indian life expectancy ratio (which is about 67 years). Other factors such as gender (premium for women is 1520 per cent less than men), financial status, geography and occupation (a deep sea diver will be charged more than a teacher) are also taken into consideration. It is likely the premium charged for a product could differ based on the distribution channel. It is largely true for products sold directly by the company or through an online platform. When a product is sold online, no commission is payable and this benefit is passed on to the customer. Life insurance companies use the Indian Assured Life Mortality Table 1994-96 prescribed by the Insurance Regulatory and Development Authority for calculating the mortality charges. However, the number of claims for each life insurer may be different from the ones seen by the industry on an average, giving way to higher premiums frequently. Therefore, the insurers are allowed to base their policy rates on their own claim experience. The company can tweak the charges, but cannot exceed the maximum limit specified in the policy. Typically, mortality rate is higher for insurance cum-investment plans as against a term plan. Or, for plans with benefits such as in-built accidental death, children's plans that waive premium in case of death of the parent. It forms 8-10 per cent of your premium and is the highest in unit-linked insurance policies.

When are you charged a lower amount?

The mortality rate is lower for youngsters. However, it may not be true for all products and life insurance companies. Generally, in unit-linked child plans, the mortality charge increases from the age of seven till 14, as the risk to life is high in children. It starts decreasing till 20 years, after which it again starts increasing. However, different products across the life insurance industry charge varied premiums and show difference in mortality, too. This true for all age groups. You can benefit from lower mortality charges, if you buy the insurance policy at a younger age.


Mutual Fund Review: Templeton India Equity Income Fund


ENDORSING the conservative stratagem of investing, Templeton India Equity Income Fund is designed to invest in companies that have current or potentially attractive dividend yield both in India and overseas markets. It is thus one of the few schemes in the country to give the investor a global exposure in investments. Launched in May 2006, the scheme now manages an asset base of over 1,100 crore.


Benchmarked to BSE 200 equity index, Templeton India Equity Income has so far turned out to be an outperformer in both good and bad times. The very first year of its launch — 2006 — saw the fund beat its benchmark by a neat 7% margin. The fund returned about 18% gains during the first seven months of its launch against 11% returns by the BSE 200.

   While it did appear to slow in pace vis-à-vis its peers in one of the most happening years of the decade, 2007, generating about 57% returns in that year against over 60% hike recorded by the BSE 200, Templeton India Equity Income was quick to salvage its gait in the following years.

   While the financial meltdown of 2008 saw the fund's assets wane by about 52% against BSE 200's 56%, the recovery period of 2009 saw the fund bloom with more than 104% gains against BSE 200's 88%. Even amid the volatile times of 2010, this scheme has been able to maintain its calm and return about 24% gains against BSE 200's 16%.

   Thus, so far, the fund has earned about 115% absolute returns for its investors since the time of its launch against BSE 200's 72% absolute returns during the same period. This implies that every 1,000 invested into Templeton India Equity Income Fund in May 2006 is worth 2,150 now.


A brief review of the fund's portfolio since 2006 is bound to amuse one and all, for the scheme has hardly reshuffled the domestic composition of its portfolio ever since it was first incorporated in May-June 2006. The scheme currently has about 66% of its assets invested in Indian equities, diversified to incorporate about 23 odd stocks. Of these, nearly 83% of the stock composition is as old as 2006-07 and can thus be credited to have reaped in the gains of long-term investing for the investors. The only new entrants to the scheme are ING Vysya Bank, Coal India, MOIL, and    Usha Martin.

   It is also worth mentioning that while the fund's objective contemplates investment in stocks with good dividend yield, the fund's current portfolio does little justice to the stated objective. Except for stocks like HCL Infosystems, JK Cement and Gujarat Gas Company which have a reasonable dividend yield ranging from 3-7%, all other stocks holdings in the portfolio have dividend yields of less than 3%.

   Notwithstanding the fact that Templeton India Equity Income Fund has more or less a static portfolio as far as domestic equities are concerned, the fund nevertheless appears quite active in managing its overseas investments. An international fund manager can be acknowledged to be a prime reason for such an investment activity. Templeton India Equity Income Fund is managed by the noted global investment guru J Mark Mobius.


International investing has not found much favour with Indian investors so far, especially after the financial crisis of 2008. This is despite the fact that international funds are a catalyst to diversify investments geographically. Performance is another reason for the failure of these funds to
appeal to masses.

   However, Templeton India Equity Income Fund's performance, so far, has been impressive. Moreover, its conservative approach towards investment, especially as far as domestic equities are concerned, makes it less risky and thus, suitable for investors who do not seek over-ambitious returns from their mutual fund investments. Those looking for some global exposure and diversification across boundaries should consider investing in Templeton India Equity Income Fund.


ULIP Review: MAX NEW YORK Life Flexi Fortune (MNYL)


 MAX NEW YORK Life Flexi Fortune (MNYL) is a type II Unit Linked Insurance Plan (Ulip) that offers nominees a sum of both death benefit and fund value in the case of an unfortunate event. The unique feature of this scheme is the automatic jump in the sum assured every year by 10%, starting from the second year till the end of the policy term to keep pace with growing inflation. The scheme offers seven funds — investment options — of which four are more than six years old. They have performed well in both bullish and bearish phases of the stock market.


Flexi Fortune's cost structure is in line with most of its peers. Though the premium allocation charged by the scheme is a little high, its low policy administration charge keeps cost structure balanced. Mortality charges are very high under the plan and become more precarious for investors as sum assured increases. Mortality charges for policies with a tenure of 10 years are almost 50% higher than the usual LIC charges.


Flexi Fortune offers an exhaustive death benefit, giving investors choice to opt for a sum assured, between 10X to 30X the annualised premium. Furthermore, it automatically increases 10% on the original sum assured each year from the second year till the policy tenure. This is an in-built feature and provided at no upfront cost. However, any increase in the sum assured will lead to an increase in the mortality charge, thereby impacting the fund value. So, the cost surely exists, though in a different manner.


Although the scheme is only a few months old, the funds under the scheme are very much in place for long. Unlike other insurance companies which issue new funds with new schemes, MNYL has stuck to its old funds. Four of its funds — Balanced, Conservative, Growth and Secured Funds — are more than six years old. All these have exemplary track records. They have been well managed and have continuously outperformed their respective benchmarks. The Growth Super Fund, which was launched in 2007, has generated 15% returns as against 8.3% of its benchmark, the Nifty. Though the Money Market Fund and the Secure Plus Fund were rolled out two years ago, they still struggle to outperform the benchmark. There are debt-oriented funds and have very low asset under management.


Max New York Life has a balanced investment strategy. The equity portfolio like most insurance companies is tilted towards large caps, with just about 15-20% exposure in the mid-cap stocks. The fund manager is highly bullish on the consumption story of India, particularly the banking sector. Almost 30% of the equity portfolio is invested in banking stocks. Recently, the fund manager reduced the oil and gas exposure primarily due to the unrest at West Asian companies and the increasing crude price.

   Unlike many other insurance companies, the fund manager churns the portfolio frequently. Currently, the portfolio turnover ratio of this fund is 90%, which means, on an average, the fund holds a stock for 12 months.


Flexi Fortune offers the twin advantages of both sum assured and fund value on the death of the life assured. However, on maturity, the policyholder receives only the amount accumulated in the fund. For instance, if a 30-year-old healthy male invests 50,000 per annum in the Balanced Fund for 20 years, the sum assured will be 30 times the annual premium as prescribed in the plan. So, the total sum assured receivable, in the case of any eventuality, would be 15 lakh. By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value shall be 10, 56,144 and 18, 46,488, respectively, receivable at maturity. However, in the case of demise of the policyholder in the 10th year, the nominee receives the sum assured of almost 27 lakh, along with the existing fund value at that time.


Flexi Fortune, as the name suggests, is flexible enough to suit the requirements of different people and different needs. The increasing sum assured feature is unique to this plan. However, the same makes it costly and more insurance oriented rather than wealth building. The high risk return appetite investor can look at Growth and Super Growth funds, as they have generated robust returns over years now.


Investment Strategy:

This fund focuses on the large cap, midcap and small cap stocks almost equally. This can be seen from the analysis of the holding patterns of this fund. In the past three years, large cap stocks on an average account for 30% of the portfolio, midcap stocks account for 33% of the portfolio, small cap stocks account for 29% of the portfolio and cash holdings account for 6.1% of the portfolio. The fund managers use derivatives in the portfolio quite often but the allocation to derivatives is less than 4% of the portfolio.

Pharmaceuticals, Fertilizers, Electric Equipment, Information Technology and Sugar are the important sectors for this portfolio. Unlike most top performing equity funds, this fund does not have banking as one of the key sectors. These five sectors on an average account for 21.5% of the portfolio. This fund unlike HDFC Midcap Opportunities fund is invested across more sectors.

Asset Size:

The fund's AUM is around Rs. 1163 crore as at 31 March 2011.


This fund is one of the better performing domestic midcap and small cap funds in India. Even though the fund has a history of less than four years, this fund is also the best performing midcap and small cap fund on our platform over a 5 year period (31 December 2005 to 31 December 2010).

As of 31 December 2010, this fund has outperformed its benchmark, the CNX Midcap Index across all periods, right from six months till since inception. Over a 1 year period, this fund has given 29.62% while its benchmark has given 19.16% and since inception, this fund has given annualized returns of 16.98% while its benchmark has given 14.71%. 


Investment Strategy:

This fund focuses mostly on large cap stocks. In the past three years, large cap stocks on an average account for about 76% of the portfolio, midcap stocks account for about 9% of the portfolio, small cap stocks account for about 8% of the portfolio and cash holdings account for 5.2% of the portfolio.

Banking, Pharmaceuticals, Information Technology, Refineries and Cigarettes are the important sectors for this portfolio. These five sectors have accounted on an average for 45% of the portfolio in 2010, and 42% across the three year period. Banking sector has never had an allocation of less than 13% in the past three years and continues to be the dominant sector in the portfolio. Exposure to the Cigarette sector has increased tremendously in the past three years, from 1.4% of the portfolio allocation in December 2007 to 4.4% in December 2010.

Asset Size:

The fund's AUM is around Rs. 1281 crore as at 31 March 2011.


This fund is one of the best performing ELSS funds in India and also the best performing ELSS fund on our platform over a 5 year period (31 December 2005 to 31 December 2010).

As of 31 December 2010, this fund has outperformed its benchmark, the BSE 200 Index across all periods, right from six months till since inception. Over a 1 year period, this fund has given 29.23% while its benchmark has given 16.22% and since inception, this fund has given annualized returns of 19.38% while its benchmark has given 15.0%. 

Does your travel policy give hijack distress cover?


General insurers line up additional features in travel insurance OF those travelling abroad on a holiday, not more than 30% take a holiday insurance policy

TRAVEL insurance policies that cover medical expenses, baggage delay and passport theft are passé. General insurance companies are trying to outdo each other in coming up with travel insurance policies with additional features such as hijack distress allowance, arrangement of doctor appointment, repatriation of mortal remains and home burglary coverage, among others.

Travel insurance is still a nascent segment in the general insurance business in India. It is taken more out of compulsion, largely by people who travel abroad to visit their children or relatives. As for those travelling abroad on a holiday, people buy it if their travel agent has a tie-up with a firm, because insurance is still seen as expenditure in India rather than an investment, industry members say.

Of those travelling abroad on a holiday, not more than 30 per cent take a holiday insurance policy.

And those who travel to South East Asian countries such as Singapore and Malaysia do not bother much to buy a policy.

Instead of going for a policy with a cheaper premium, one should look at policies that offer highest reimbursement towards personal accident, loss of passport, checked baggage delay and dental care expenses.

"One could also look at additional benefits such as cover for missed flight connection, trip cancellation and compassionate visit where the return fare of a family member is reimbursed, in case the insured is hospitalised for more than seven days," Kumar added.

Many insurance policies do not cover eventualities arising out of taking up adventure sports while few others such as Chola MS and Iffco-Tokio provide the cover with a small additional premium amount. Many insurers also provide emergency cash in case the traveler loses money due to theft.

Most travel insurance policies are targeted only at customers travelling abroad. Very few such as Bajaj Allianz's Swadesh Yatra and Tata AIGs Domestic travel Guard policy target domestic travels and cover expenses like lost rail/air ticket reimbursement, arrangement of doctor appointments, arrangement of hospital admissions "Travel insurance constitutes hardly 1 per cent of the insurance market in India. However, considering that the overall insurance market in India has touched Rs 50,000 crore mark in India in 2010-11, 1 per cent of that sum is still big and insurance firms would not want to miss that opportunity.



Investment Strategy:

The fund manager aims to invest in equity shares that have a high dividend yield in comparison to S&P CNX Nifty at the time of investment. The fund invests in stocks across the entire market capitalisation but focuses mostly on large cap stocks. In the past three years, large cap stocks on an average account for about 68% of the portfolio, midcap stocks account for about 9% of the portfolio, small cap stocks account for about 7% of the portfolio and cash holdings account for 11% of the portfolio. The fund also invests in deposits regularly; these deposits make up 3.5% of the portfolio.

Banking, Information Technology, Cement & Construction, Power and Oil Exploration are the important sectors for this portfolio. These five sectors have accounted on an average for 35% of the portfolio across the three year period and about 43% of the portfolio in 2010. Exposure to the Cement & Construction sector has seen a dramatic pickup in the past three years; the allocation has increased from 1.1% of the portfolio allocation in December 2007 to 8.5% in December 2010.

Asset Size:

The fund's AUM is around Rs. 3263 crore as at 31 March 2011.


This fund is one of the better performing Dividend Yield funds in India and also the best performing Dividend Yield fund on our platform over a 5 year period (31 December 2005 to 31 December 2010).

As of 31 December 2010, this fund has outperformed its benchmark, the BSE 100 Index across 1 year, 3 year, 5 year and since inception periods. Over a 1 year period, this fund has given 24.27% while its benchmark has given 15.66% and has given annualized returns of 21.4% over a 5 year period in comparison to 16.58% of the benchmark over the same 5 year period. 

ASBA Not Used Widely In India

Most retail investors bidding for Initial Public Offers (IPOs) are not using the Application Supported by Blocked Amount (Asba) facility, even after four years of its availability.

Under Asba, an investor's money leaves his bank account only on allocation of shares; till then, it continues to earn interest. It takes at least 20 days for allotment of shares to retail investors after the issue closes for subscription.

An analysis of IPOs during 2010-11 showed only about 20 per cent of applications of retail investors in the year came through this route, said Prithvi Haldia of Prime Database, which provides primary market data.

According to market players, it is mainly stock brokers who are not pushing for Asba in smaller towns and cities. "In the past one year, over 80 per cent of IPOs were of small-size companies. Most of these companies are little known and take operator support to get their issue subscribed. Thus, those IPOs where operators use dummy investors to subscribe on their behalf do not use Asba and go by the traditional route. Also, brokers in such cases do not get any commission for pushing Asba, a chief reason why the facility has not shown any great results," said a Mumbai based broker.

That small company IPOs are witnessing high operator activity can be gauged from the fact that 74 per cent or 40 of 54 IPOs listed during 20102011 are trading below their issue price. A large number of issues fell by 25-80 per cent. Four IPOs are up less than 10 per cent since listing and three gained less than 20 per cent. As many as 35 issues were subscribed more than thrice. The Punjab and Sindh Among the top losers are Omkar Speciality, Glyscol Alloys, Commercial Engineering, Microsec Financial, Tirupati Inks, Midfield Industries, Aster Silicate, Tarapur Transformers and Texmo Pipes, all down 50-80 per cent from their listing prices. Recently, the Securities and allotment money and the sum to be returned to investors.

Also, applications in most public issues have been from smaller cities, which are not widely (or seriously) covered by SCSBs. Asba forms are not available in the rural branches of most SCSBs.

Wednesday, May 25, 2011


Investment Strategy:

ICICI Prudential Index Fund tracks the Nifty, and invested between 77% and 98% of the fund corpus in the index stocks in 2010. This fund never held more than 1% of the fund corpus as cash. However, this fund had exposure to Nifty futures in all the months of 2010. The percentage of the fund's corpus invested in Nifty futures was in excess of 14% during the first half of 2010. However, since June 2010, the fund's exposure to Nifty futures is below 10% of its corpus.

Asset Size:

The fund AUM is around Rs. 92 crore as at 31 March 2011.


Tracking error is the performance metric for an Index fund. So, we considered the tracking error for this fund from 1 year, 3 year and 5 year perspectives. This fund has tracking errors on the positive side for all the three periods and the tracking errors for 3 and 5 year have been more than 1%. The reason for high positive tracking error is due to fund's investment into Nifty futures.

Over a 1 year period, this fund has given 18.73% returns while its benchmark, the S&P CNX NIFTY has given 17.94% and on a 5 year annualized basis, this fund has given 18.08% while the benchmark has given 16.66%. 

Why is it important to file Income tax returns when you already pay tax?

There is a perception among several individuals that having paid taxes via TDS, filing of returns is not important, because after all, the government's main objective is to ensure that its tax kitty is getting the revenue due to it. This is a misconception and it is essential to know that it is our constitutional obligation to file tax returns when you are required to do so. So your job does not end at paying taxes, filing returns is equally important. This brings you to the question -

When does it become essential to file returns?

It is essential to file returns when your income crosses/exceeds the basic exemption limit even if it means that on account of you investment planning, your tax obligation may be nil. So for FY 2009-10, filing of tax returns is essential if 

  • Individuals have taxable income exceeding Rs.160,000 p.a.
  • Women have taxable income exceeding Rs.190,000 p.a.
  • Senior Citizens have taxable income exceeding Rs.240,000 p.a.

Tax Evasion

Income tax authorities allow you to self assess your income and accordingly pay taxes. Many people tend to believe that his/her income tax return is a drop in the ocean for the income tax authorities and hence not declaring income or understating income may well be worth because it saves you a few bucks. Deliberately hiding your income from the income tax authorities, to reduce your tax liability, amounts to tax evasion. Some examples of tax evasion include, not declaring interest received on bank fixed deposits or accepting income in cash and not route it through the official system.


In order to pick up cases of likely tax evasion, the tax department uses a computer-aided scrutiny system (CASS) that picks up cases by inputting various criteria. You may just be the unlucky one and you can come under scrutiny which is inviting trouble for yourself as you will be required to furnish all details that he asks for which could include, bank account statements, list of all assets owned by you and your family, details of all family members who reside with the you, and then the tax officer will do a match analysis of income and expenditure to figure out the amount of tax evasion.

The income tax officer can serve the scrutiny notice within one year from the end of the month in which you have filed your return. So, if you had filed your return of income for the FY ended March 31, 2008, on July 24, 2008, you may get a notice any time on or before July 31, 2009. The notice will be in a fixed format with your name, address PAN and the year in which it is issued and time and date when the tax payer should appear before the income tax officer. The tax payer need not appear personally before the income tax officer. He can authorize a representative to plead his case.

Impact of tax evasion

Individual found to be concealing income will be charged a penalty and that amount can be anywhere up to 3 times the amount of tax evaded. So if your tax evasion amount is Rs. 50,000, if your account is under scrutiny, you may have to pay a penalty of anywhere between Rs. 50,000 and Rs. 150,000 on a case to case basis.

Coming under the tax man's scanner is certainly not a pleasant experience as it can be emotionally and mentally draining. Hence it makes sense to comply with the income tax regulations and file your returns correctly. In trying to save yourself a few bucks, you don't want to be in a situation where you have the tax men chasing you resulting in sleepless nights.

Filing returns has advantages and hence it may make sense to file returns even if you're not needed to because it is an important document that has a lot of weightage.





Fulfilling proof requirements

Income tax papers are an important document that comes in very handy when you are applying for a loan or an insurance policy or even when you're applying for a visa to travel abroad. It is a proof of your income and other important details such as PAN card, address among other things are mentioned. This will ensure quick processing thus reducing hassles.

Not having the Income tax return proof can result in difficulty especially when it is a pre- requisite for may be a loan or an insurance policy or for completion of visa formalities.

Tax refunds

On the basis of the tax return filed, refund is paid at an interest of 8% p.a. with retrospective effect from April 1 of the year.

If you have not filed your return, but TDS has been deducted in excess by your company, unless you file your income tax return, you will not get a refund and hence you may end up losing money.

Income Official scanner

Filing accurate returns saves you from the hassles of getting caught by the income tax officials

If you come under the tax official's scanner, then you may end up having to pay tax with interest on the tax amount payable and penalty too. Besides, you will also be stressed as you need to fulfill all the needs of the income tax authorities in terms of documentation.



Documents to be kept handy for filing returns

In order to calculate your tax liability and file accurate returns, it is essential that you keep all the documents from which data is required handy. The documents required include

  • Form 16: This document contains information on your salary and tax deducted by your employer. You need to obtain it from your employer
  • Form 16 A: This you need to obtain from the parties who have deducted tax while making payments to you during the year. This includes banks/ companies with whom you have a fixed deposit, parties to whom you have given loan among others.
  • Copy of bank statements: This will give an idea of all the income earned and expenditure incurred. This will ensure that you have not missed out on any details which should be part of your income tax return.
  • Proof for all the deductions claimed in the return filed i.e. PPF, NSC, Mutual funds, insurance among others
  • Documents concerning investment in property: If you have bought any property during the year, you will need details. In case the property has been purchased on loan, all the loan documents along with a copy of the certificate of the payments made is needed.
  • Documents on purchase and sale of investments/assets: Keep a track of all your investments in shares, debentures or any other instrument. Record the purchase date and sale date so that you can assess the profit/loss for the purpose of filing returns.

The tax payer is not required to submit any documents at the time of filing returns. However, it is essential that all the above mentioned documents/information should be preserved at least for a couple of years as they may be useful to substantiate the return filed if it is picked up for scrutiny.


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