Skip to main content

Inflation- indexed bonds from next month

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

The first tranche of inflation indexed bonds (IIBs) would be issued on June 4, the finance ministry and the Reserve Bank of India ( RBI) announced today.

"Pursuant to the announcement in the Union Budget 201314, the government, in consultation with RBI, has decided to launch ( these) as instruments that will protect the savings of the poor and middle classes from inflation, and incentivise the household sector to save in financial instruments rather than buy gold," said the announcement.

The returns would be calculated by using the rate of Wholesale Price Index- based inflation of the corresponding four months ago, it said. " Final WPI with a four- month lag will be used, that is September 2012 and October 2012 final WPI will be used as reference WPI for February 1, 2013, and March 1, 2013, respectively. The reference WPI for dates between February 1and March 1, 2013, will be computed through interpolation," said RBI.

The government has been planning such bonds to wean investors away from gold, soaring imports of which are considered to have led to the high current account deficit. India's trade deficit widened to almost $18 billion in April on heavy gold import, according to data released on Monday.

Details

The IIBs would have a fixed real coupon rate and a nominal principal value that is adjusted against inflation. Periodic coupon payments would be paid on adjusted principal. "Thus, these bonds provide inflation protection to both principal and coupon payment. At maturity, the adjusted principal or the face value, whichever is higher, will be paid," said the central bank.

The initial series would be for all categories of investors, including institutional ones. In the second half of the financial year, another series would be released exclusively for retail investors. The portion under noncompetitive bidding, mainly for retail investors, has been raised from five per cent of notified value in the present issuance of bonds to 20 per cent for IIBs.

The first series would help in determining the coupon rate for the bonds through auction. This would help in benchmarking IIBs. Based on the experience in the initial issuances, a second series of IIBs for retail investors has been proposed for issue around October.

In the case of revision in the base year for the WPI series, a base splicing method would be used to construct a consistent series for indexation.

At present, 2004- 05 is used as the base year for WPI.

The index ratio would be computed by dividing the reference index for the settlement date by the reference index for the issue date.

RBI said for appropriate price discovery and market development, it was necessary to issue comparable instruments through auctions to institutional investors such as pension funds, insurers and mutual funds. This would create demand for IIBs and help in making these tradable in the secondary market. Each tranche would be issued through auctions on the last Tuesday of each subsequent month during 2013- 14.

These issuance would target various points of the maturity curve to have benchmarks. To begin with, these bonds will be issued for a tenor of 10 years. Each tranche of IIBs would be for ₹ 1,000- 2,000 crore and the total issuance would be for ₹ 12,000- 15,000 crore in 2013- 14, RBI said. The terms of issuance of IIBs for retail investors would be announced in due course. Background Lack of alternative financial instruments is often given as the reason for huge gold imports to hedge against inflation.

However, many analysts and players believed the attraction towards gold will come down, as inflation is on a downward swing. WPI- based inflation plunged to a 41- month low of 4.89 per cent in April. Consumer price index- based inflation also fell to a 13- month low, of 9.39 per cent in April, though it still was at an elevated level.

India's trade deficit zoomed to $ 17.8 billion in April, 27 per cent higher then the $ 14 bn in the same month last year. Imports were $ 41.95 bn, almost 11 per cent up over $ 37.8 bn a year before.

Imports of gold and silver jumped 138 per cent in April, due to the Akshaya Tritiya festival, considered an auspicious occasion to buy gold.

In April, India's merchandise exports rose a marginal 1.7 per cent to $ 24.2 bn, against $23.8 bn in the corresponding month last year. However, imports surged a massive 10.9 per cent. In April, gold imports alone were $ 7.5 bn, against $ 3.1 bn in the year- ago period. This constituted nearly 25 per cent of non- oil imports.

The size of gold imports is worrying the government, as it widens the trade deficit and, in turn, the current account deficit. The latter widened to a record 6.7 per cent of GDP in the third quarter of 2012- 13. The government hopes CAD will not exceed five per cent of GDP in 2012- 13. This year, it is pegged at below five per cent.

 "Final WPI with a four month lag will be used, that is September 2012 and October 2012 final WPI will be used as reference WPI for February 1, 2013, and March 1, 2013, respectively."

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Save Tax With Mutual Funds

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       Mutual funds are ideal as long term investment avenues for retail investors. To encourage investments in this avenue, the Government of India offers investors a spate of tax benefits thus ensuring maximum benefit from mutual funds held beyond a year. Sample some of the key benefits and refer to the table for a detailed list of tax rates for different types of schemes ·        Avail deductions under Sec 80C of the Income Tax Act by investing up to a maximum of Rs. 1 lakh in designated Equity Linked Savings Schemes (ELSS). Such investments have a compulsory lock in period of 3 years. ·        First time retail investors in equity with a gross total income of up to Rs. 12 lakh can invest up to Rs. 50,000 in specific MF schemes un...
Read more

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...
Read more

Buying a Used Car

Invest in Mutual Funds Online Download Mutual Fund Application Forms   Pre-owned car can make sense in these inflationary times. But buying one can be trickier than getting a new vehicle    If you are thinking of buying a car but are worried about the rising inflation and higher EMIs eating into your budget, you should consider buying a used car. For those learning to drive, the general advice is that they should hone their driving skills in a used car. However, buying a used car is not an easy task. Though a used car costs less, there are a lot of aspects to be considered while buying one. You should do your due diligence before buying such a car. For example, two cars of the same model would carry two different prices. The difference in price could be on account of the age of the car, how many people have driven, etc. First Fix Your Budget Since used cars are available in a wide variety of models and prices, the starting point would be to determine your budget befor...
Read more

Debt Mutual Funds Best Fixed Income Investments

Debt Mutual Funds - Invest Online     In the last one year, except for a select few sectoral funds and small cap funds, not many of the equity funds have given great returns. On the other hand, debt funds have done relatively well in terms of returns. So far in the new year too, the stock market has been extremely volatile, pushing investors to look for safer havens. In this context, debt funds are looking safer bets for those investors who do not have the appetite for higher level of volatility. Investors who look for a regular income stream, also look at fixed income products like debt funds, bank fixed deposits and post office monthly income schemes.  Among the fixed income products, debt funds score over others because of chances of higher return, has nearly similar level of risks and liquidity. According to Shah, people looking for regular income could opt for a systematic withdrawal plan (SWP) in debt funds , which, if done judi ciously could also save on taxes. Shah explaine...
Read more

Diversification is key to gain more

Even those who prefer debt for its safety are looking at more options    It is not often that you find more than a couple of asset classes producing good returns at the same time. Invariably, assets such as gold and equity don't perform in tandem, and hence it was easier to allocate to them in line with the risk profile of the investors. In the last couple of quarters, however, more than one asset has turned attractive - gold, debt and equity. In line with the trend, you even have monthly income plans with a combination of more than two assets.    In the past, those who stuck to debt were a different class of investors who didn't wish to take risk with their money. The changing lifecycles and the growing integration of investment markets across the globe have pushed even individual investors to embrace the concept of asset allocation. Hence, you have individuals who were using debt to park profits being prepared to take advantage of other assets.    For instance, when the...
Read more
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