Skip to main content

Debt Investment Market

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Investors should use the opportunity to invest in new bond issues as interest rates may fall going ahead

 


Tax-free bonds have caught the investor imagination lately. Housing and Urban Development Corporation's (HUDCO) tax-free bond issue has raised Rs 2,405 crore when it closed on October 14. According to market participants, new issues from Power Finance Corporation (PFC issue is currently open) and National Hydroelectric Power Corporation (NHPC) are likely to mop up even bigger amount from retail investors. However, amid the euphoria — 8.92% tax-free interest for 20 years — there is a bit of confusion among retail investors. Many of them are wondering whether they should wait for a few more days or weeks for new issues with even higher rates.


For example, many investors were extremely eager to subscribe to HUDCO bond issue when it opened a month ago, but had second thoughts about the issue when PFC announced that it was offering 8.92% for 20-year term. Suddenly, the coupon of 8.76% for 15-year tenure that HUDCO offered looked too little. Now, NHPC also has matched the interest rates offered by PFC and investors are — well, to put it mildly — greedy. They would like to take their chances and would like to wait for better returns. However, investment experts are busy asking their clients to put their money in the on-going issues. Do not wait for higher interest rates. You should lock-in your money in the ongoing tax-free bonds as the interest rates may move down gradually. And institutional and high net worth investors, are seen subscribing to his views. On the first day of PFC issue, it got bids worth Rs 2,332 crore against the maximum issue size of Rs 3,875 crore.



You don't have to base your investment decisions on others in the market, but a look at the macro-economic factors indicate a possible fall in interest rates. RBI has reduced interest rates on marginal standing facility to banks to 9% from 9.5% recently. Put simply, banks can now raise funds for a period of up to 14-days at 9%. Market participants believe this is the first step towards unwinding of all strict measures that RBI has taken to stop the fall in the rupee. If this theory holds, you may see tax-free bond issues with lower interest rates in future.


It is true that short-term rates may take cues from such events and head downwards soon; long-term interest rates may take some more time as inflation expectations continue to be moderate. For September, wholesale price index, a gauge of inflation, stood at 6.46% against 6.1% in August, primarily due to high food prices. However, experts bank on inflation tapering off in coming months.


Towards the end of the year, we should see food prices going down due to arrival of new crops, which should partly address food inflation. Another major component of inflation has been the rising prices of LPG and diesel, which many believe would be halted because of the upcoming elections. Though a hike in key rates by RBI in October cannot be ruled out, market participants believe the long-term rates should start falling in the medium term.


We cannot ignore the dwindling growth. IIP numbers for August stood at 0.6%. As US dollar stabilises against the rupee, RBI's focus should shift to boosting growth and it will gradually start reducing interest rates. As and when RBI decides to bring down interest rates, the coupon on the forthcoming tax-free bonds may not be as high as PFC and NHPC.


As the interest rates start their movement downwards, borrowers may decide to wait for a while before hitting the market with their new issues. This may deprive you an opportunity to invest at higher rates, experts say. Borrowers would be keen to issue bonds at lower interest rates.

What should be Your Strategy?

These bonds are very good investment options for retired individuals. They can simply buy and hold these bonds to enjoy timely taxfree income. They are a good option for even those in active service, to earn taxfree returns. Also, it is assured for a longer period of 15 to 20 years.


You may choose to invest in staggered manner. Invest a major chunk of your investible money in both PFC and NHPC. Do not wait for the last day of the issue as it may be subscribed early, even in the retail category. A small component of your money can be kept with you for future bond issuances if you are expecting even higher coupon, though most experts ascribe a very low probability to such a scenario. You can also play the interest rate cycle using 20-year bonds. If the interest rates fall by 100 bps over next one year, you will witness doubledigit capital gains on these bonds, in addition to the tax-free interest.

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

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Read more

WEALTH TAX

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 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...
Read more

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...
Read more

How to Pick Top Performing Mutual Fund Schemes

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   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...
Read more

8% Government of India Bonds quick guide

For those seeking comfort in safety of returns, the Government of India issued 8% savings bond once again comes to the fore. First launched in 2003, these bonds are issued by the government with a maturity of 6 years. The bonds are available at all times with specified distributors through whom you can apply to invest in them. Here is a quick guide to what the bond offers and its features to ascertain to check for suitability. What are Government of India bonds Government of India bonds are like any other government bonds with specified rate of interest. The rate is fixed at 8% per annum paid half yearly, or you can opt for cumulative payment of interest at the end of the tenure. You can buy these bonds from State Bank of India and its associates, other nationalized banks and some private sector banks such as HDFC Bank Ltd and ICICI Bank Ltd, among others. The bonds can be bought from the offices of Stock Holding Corporation of India as well. They are available in physical form onl...
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