Moving quickly to contain public outrage ahead of key state polls, Union Finance Minister Nirmala Sitharaman on Thursday Morning announced that the move by her ministry on March 31 late evening to slash rates of small savings schemes was an “oversight” and the previous rates will continue for April-June quarter.
“Interest rates of small savings schemes of GoI shall continue to be at the rates which existed in the last quarter of 2020-2021, ie, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn. @FinMinIndia @PIB_India,” Sitharaman said in her Twitter handle.
The rate cut announcement and then the hurried recall is unique.
On March 31 late evening, the Finance Ministry had announced the lowering of interest rates on various small saving schemes such as National Saving Certificates (NSC) and Public Provident Fund (PPF) between 40 basis points and 110 basis points. The pay-out on PPF has now come down to a multi-decade low of 6.4 per cent. This would have hit fixed income investors, especially those in senior citizens group.
The new rates were said to come into effect from April 1 i.e. be valid till June 30. Contributions made on or after April 1 would have fetched a lower rate, while those made till March 31 would have got old rates. The small savings schemes basket comprises 12 instruments, including the National Saving Certificate (NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP) and Sukanya Samriddhi Scheme. If the latest round of cuts held, interest rates on small savings schemes have been reduced by a full 110-250 basis points in financial year 2020-21.
As per the Finance Ministry announcement on March 31, with effect from April 1, 2021, Public Provident Fund (PPF) will fetch 6.4 per cent down from 7.1 per cent earlier, National Savings Certificate (NSC) will get you 5.9 per cent, down from 6.8 per cent earlier, Sukanya Samriddhi Yojana (SSY) will give you 6.9 per cent, down from 7.6 per cent earlier. Post office time deposit rates across tenures have been reduced and will earn between 4.4 per cent and 5.8 per cent compared to earlier range of 5.5 per cent to 6.7 per cent. Senior Citizen Savings Scheme will fetch 6.5 per cent, down from 7.4 per cent previously. Kisan Vikas Patra will fetch 6.2 per cent, down from 6.9 per cent earlier. Savings deposit rate will be 3.5 per cent, from 4 per cent earlier.
The government can revise the interest rate at the beginning of every quarter. Since 2016, interest-rate resetting has been done based on yields of government securities of the corresponding maturity, with some spread on the scheme for senior citizens, as advised by the Shyamala Gopinath Committee.
This was the second time the government had cut interest rates on small savings schemes in the past twelve months. In the April-June quarter of 2020-21, the government had slashed rates of small savings schemes by 70-140 basis points. 100 basis points/bps is equal to 1 per cent.
Category: Investment
SEBI postpones perpetual bonds valuation by MFs till April 2023
The Securities and Exchange Board of India has revised the deemed residual maturity period for Basel III AT-1 and Tier 2 bonds.
As per the revised circular, the deemed residual maturity for Basel III AT-1 bonds will be:
10 years — for call option up to March 31, 2022
20 years — for call option falling between April 1, 2022 and September 30, 2022
30 years — for call option falling between October 1, 2022 to March 31, 2023
100 years — for call option for period April 2023 onwards
It is expected that bond yields will adjust to SEBI’s revised view, which means there will still be some NAV impact in mutual funds holding these instruments.
Unless banks call back the perpetual bonds or mutual fund companies are able to sell the bonds quickly, on the effective date the new rules will be come into play. It remains to be seen what kind of valuation matrix AMFI comes up for the revised SEBI guidelines. As per latest data, banking & PSU funds, low duration funds and short duration funds as categories are most exposed to AT1 bonds.
Do note that the 100 years maturity issue has also not been completely done away with. So, it remains to be seen if the revised 100 year maturity valuation norms are again changed when they come to close to getting effected in April 2023.
The regulator has said that in case the bond issuer does not exercise call option, then the valuation will be done considering maturity of 100 years from the date of issuance of all such bonds issued by the entity. This means bond holders like mutual funds will lobby hard with bond issuers like banks to exercise call option. To fund call options, banks may have to raise cash as low credit growth and impending NPA issues mean less free cash.
In a March 10 circular, SEBI had asked mutual funds to treat the maturity of all perpetual bonds as 100 years from the date of their issuance for the purpose of valuation.
This was a drastic change and in contrast to perpetual bonds so far being valued by funds on a yield-to-call basis. MFs hold about Rs 35,000 crore in AT1 bonds, which would have possibly become zero if the earlier valuation norms became effective. This would have impacted investor returns.
Investments that provide tax-free income
When you make investments, you might get income from those investments which could include interest income. Most of the time the income from investments is taxable. However, there are some traditional investments that provide tax free income. Here are the ones you can consider.
Sukanya Samriddhi Account
This scheme is good for those who have a girl child at home. This is among the best tax-free investments in India. The advantage for investors is that the interest rate is 7.6 per cent. This is better than most fixed income investments in the country including bank deposits. The second advantage with the Sukanya Samriddhi investment is that it offers tax free interest income to all investors.
The third advantage is that investments of up to Rs 1.5 lakhs will qualify for tax exemption under Sec 80C of the Income Tax Act. You can invest in the names of up to two girl children. The minimum deposit for the investment is only Rs. 250. The deposit will be for 21 years from the date of opening the account. You can set up auto debit for the investment. Once your child is 18 years of age, you can withdraw 50% of the balance in the account as the previous financial year. This should be for either education or marriage of the child.
Public Provident Fund (PPF)
There are a number of reasons why you should invest in the PPF. The first and the foremost advantage of investing in PPF is the sovereign guarantee. The second advantage is that the interest rate for the investment is a good 7.1%. Note that now, all small savings schemes offered by the Department of Posts are linked to government securities. Since government securities are traded every day, their prices keep changing constantly. However, since savings scheme interest rates cannot be volatile, the interest rates for the investments are reset every quarter.
There is no other investment that is backed by the government that gives you more interest than the PPF at the moment. The third advantage is that you can get tax benefits for the investment under Sec 80C. You can start a PPF account with a bank or post office. The interest is tax free and is paid every year. You only need Rs. 100 to start a PPF account.
Employee Provident Fund (EPF)
EPF enjoys the Exempt-Exempt-Exempt (EEE) status. The interest amount from your EPF account will be tax-free. You can claim tax deductions under Section 80C for the amount invested. You can also make voluntary contributions over and above the amount contributed by you and your employer. You could invest up to 100% of your basic salary and the dearness allowance. All contributions that you make will earn interest. If you don’t have a job, you can withdraw from EPF.
Tax Free bonds
Tax free bonds from various companies offer you a good interest rate. The interest from these bonds is totally tax free. These tax-free bonds are traded on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). There is no Tax Deducted at Source (TDS) for the bonds. You can purchase the bonds using your demat account.
Deposits
For a resident individual who is 60 years or less or a Hindu Undivided Family (HUF), interest earned up to Rs. 10,000 in a financial year is exempt from tax. This is allowed as a deduction from income and is for interest income earned from:
- Bank savings account
- Savings account with a co-operative bank or
- Savings account with a post office
Note that senior citizens are not entitled to benefits under section 80TTA.
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Hurun Rich List: Elon Musk tops at $197 bn, Mukesh Ambani 8th richest globally
The rich keep getting richer. There are 3,228 billionaires in the world, up from 414 last year. Despite coronavirus, total wealth of billionaires rose $3.5 trillion or 32% to $14.7 trillion, according to the Hurun list. Asia accounts for 51% of the world’s billionaires, and 45% of their wealth, compared with North America with 24% of the billionaires and 33% of the wealth.
To see it in context, the world added 412 billionaires in 2020 i.e. roughly 8 billionaires a week or 1 billionaire a day. As many as 2,312 billionaires saw their wealth increase, of which 610 were new faces. 635 saw their wealth decrease, and there were 194 drop-offs. 32 billionaires died. 282 saw their wealth stay the same. The average age of a billionaire is 65.
Led by Mukesh Ambani ($83 billion) India now has 209 billionaires, of which 177 live in India, compared with 689 in the US. India last year added billionaires at a similar rate to the US, 50 compared with 69. China has pulled away from the US, leading with 1058 billionaires, compared with 696 US billionaires. China and the US make up over half of ‘known’ billionaires in the world. India is third with 177, up 40. Germany, UK and Switzerland follow with 100+ each.
China dominated With 66% of the world’s self-made women billionaires, led by Zhong Huijuan, 60, of drug-maker Hansoh With $23 billion. Richest woman in the world is Alice Walton, 71, of Walmart, With $74 billion.
In terms of the richest, Elon Musk of Tesla added a record $151 billion to become richest man in the world for first time, with $197 billion. Jeff Bezos, last year’s richest man, came in second with $189 billion, despite adding $49 billion. Bernard Arnault, Bill Gates, and Mark Zuckerberg were in third, fourth, and fifth places with $114 billion, $110 billion, and $101 billion. Warren Buffet is sixth ($91 billion), YST’s Zhong Shashan ($85 billion) is seventh, Ambani is eighth, Steve Balmer is ninth ($83 billion) and Hermes’ Bertrand Puech & family is tenth ($80 billion).
California-based Austin Russell, at 25 years, of car sensor maker Luminar Technologies is the youngest self-made billionaire with $3.5 billion, followed by UK-based Benjamin Francis ($1.1 billion) of Gymshark, HK-based Sam Bankman-fried ($10 billion) of Blockchain Platform Ftx, as Well as Andy Fang ($2.8 billion) and Stanley Tang ($2.8 billion) of US food delivery platform Doordash, all 28 years.
Hurun Report chairman and chief researcher Rupert Hoogewerf said, “Despite the disruption caused by Covid-19, this year has seen the biggest wealth increase of the last decade. A stock market boom, driven partly by quantitative easing, and flurry of new listings have minted eight new dollar billionaires a week for the past year. The world has never seen this much wealth created in just one year, much more than perhaps could have been expected for a year so badly disrupted by Covid-19.â€
The speed of wealth creation is nothing short of staggering. Three individuals added more than $50 billion in a single year, led by Elon Musk with $151 billion, whilst e-commerce billionaires Jeff Bezos of Amazon and Colin Huang of Pinduoduo added $50 billion each.
Rising bond yields: What it means for equity, debt investors
Indian financial markets and global financial markets right now have something in common: rising yields. By the end of third week of February, the average increase in India’s G-Sec yields across 3,5 & 10 years was around 31 basis points since the Union Budget on concerns of the market borrowing plans of the government. Things haven’t improved much. Currently, the 10-year G-Sec yield is now ruling at 6.25 per cent.
On the other hand, US yields have risen too. The 10-year US treasury yield has increased to nearly 1.5 per cent from 0.7 per cent six months ago, creating fear in the minds of investors across the globe. In this context, it is important for investors to understand how to read these changes for debt and equity investments.
Understanding rising yields
Simply put, rising yields on bonds means that bond prices are falling.
India’s G-Sec yields are not softening in a hurry. Research firm Acuité Ratings & Research expects India’s 10-year sovereign yield to rise to 6.40 per cent by March 2022.
From a classical economics standpoint, the rise in bond yields hikes up the cost of capital for companies. When the cost of capital rises for a company, it can affect earnings and, by extension, its valuations.
One thing is clear. Global and local central banks have kept interest rates low for long. So, the increase in yield is in-line with some normalisation that eventually had to happen.
Whenever the bond yield increases, investors are likely to withdraw from equities and look at bonds, who are offering higher money at lower risk.
Indian context
Yet, it is also true that some investors are panicking too much on account of the rising yields. Rising yields is not necessarily a very bad thing. The global rise in yields does not mean a ‘sell call’ on equities.
In the US, the key premise on which bond yields are rising or rather normalising to pre-Covid levels is that US economic recovery will be faster than earlier envisaged resulting in rising inflation. Is US and Indian economic recovery bad for equities? No!
“In our view, equities as an asset class perform better in an environment of ‘rising growth’ and ‘moderate inflation’. For example, despite the rise in Indian bond yields from ~5 per cent to 9 per cent and US yields from 3.5 per cent to 5 per cent from 2003 – 2007 as demand-led inflation picked up, global stock markets including India had their best run as growth kept surprising on the upside,” says ICICI Securities.
However, do keep a close watch on the situation. You can take a negative stance when the environment has rising yields and slowing growth or stagflation. This happened in the 2012-2013 period when India GDP growth dipped to ~5 per cent while yields climbed to 9 per cent, coinciding with the taper tantrum. This is the worst environment for stocks.
How to play debt funds
Enough of explanation for equities, let us look at debt – specifically debt funds. The fundamental characteristic of your debt fund’s return is guided by yields. As yields move up the prices of bonds fall. This fall is sharper in longer duration bonds and slower in lower duration bonds.
But if yields move up, the fall in bond prices will be inevitable. So, when yield moves up, there can be losses in debt funds. When the yield up move is gradual, the fall in returns will be gentle. When the yield jump is sharp, the fall in debt fund returns will be sharp.
Do note that debt funds with longer duration are more sensitive than the ones with shorter duration.
The yield impact on debt funds’ existing investments will be progressively lower as and when the funds start buying bonds with higher coupon rate.
Note: If you would like to know what should be your portfolio strategy in an environment of rising yields, connect with the experts at Wealthzi.
Despite tax, VPF is still a good investment option
The latest budget proposed that interest earned on an employee’s annual contribution to the Employees Provident Fund (EPF) above Rs 2.5 lakh a year be taxed at the applicable tax slab.
Voluntary Provident Fund (VPF) is the contributions made by the employees that are over and above the minimum contribution set by the Employees’ Provident Fund Organisation (EPFO). However, the employer will not contribute more than 12 per cent of the basic salary, regardless of how much the employee contributes. So, many employees opt for VPF as they don’t have to make any other investments and it’s easy as the amount is directly deducted from their salary.
As a result of tax on EPF contributions, there are concerns that VPF (Voluntary Provident Fund) which was hitherto a popular investment option for many employees with assured safety and tax free returns, may no longer be the favourite investment option. In such a scenario, many are looking for alternatives for employees who were investing more than Rs 2.5 lakh in EPF. But truth be told, tax or no tax, EPF is still a good vehicle for the debt portion of retirement savings. Here’s why.
Not final
Do note that the Budget proposal to tax interest on employee’s contribution to EPF of over Rs 2.5 lakh a year has not been notified yet. It could be subject to a review.
However, even if the proposal is notified as it is, the taxability of interest earned on EPF contributions will not make EPF an unattractive vehicle for your retirement savings.
There are two solid reasons why the VPF is still one of the best fixed income options. One, only the PPF offers higher interest than the VPF. But PPF has an investment limit of Rs 1.5 lakh in a year. If you want to invest more, the VPF is your best bet. Two, in the 30% tax bracket, VPF as of now would still give 5.85% returns, which is higher than what other fixed income options offer.
So far, the scheme has consistently credited more than market returns to its subscribers. The rates it has declared have also been quite resilient to ups and downs in economic conditions as well as the interest rate cycle.
Between FY15 and FY21, for example, the EPF’s interest rate has dipped only marginally from 8.75 per cent to 8.5 per cent. Over the same period though, India’s repo rate halved from 8 to 4 per cent. The yield on the 10Â-year government bond has declined from above 8 per cent to 6 per cent.
Even assuming rates on the EPF are cut to 8 per cent for FY21, and this made taxable, this return would still compare extremely well to similar options such as the Public Provident Fund at 7.1 per cent and the GOI Floating Rate Taxable Bond at 7.15 per cent.
With the secular fall in rates arrested, one should expect returns on longÂ-term debt mutual funds to deliver lower returns over the next few years too. Therefore, tax or no tax, the EPF remains a good vehicle for the debt portion of retirement savings.
Diversify
Ideally, the VPF cannot be your only avenue to save towards retirement. There are uncertainties associated with the scheme.
1. You don’t know if interest rates will be aligned with markets in future.
2. You don’t know whether the scheme will see further regulatory or tax changes to discourage higher income earners.
You must diversify your retirement savings across other avenues. Consider the following:
* PPF
* GOI Floating Rate bonds
* Bond offers from public sector entities
If you are to get to an adequately sized corpus by the time you retire, it would be essential to have a substantial equity component to your retirement portfolio.
In addition to your VPF contributions, consider investing in SIPs in good large and midcap, multicap or flexicap equity funds. Take the help of an advisor to track and review fund choices in future.
You can also consider SIPs in Nifty Next 50 and Nifty500 index funds.
Given that gold can smooth out portfolio returns and hedge against equity downside, some allocation to gold ETFs can be good too.
At the risk of repeating, the taxability or otherwise of the interest on VPF should only be a peripheral consideration to your retirement plan.
5 reasons why debt funds are better than fixed deposits
Fixed deposits offered by banks in India are paying interest rates of around 3% to 5.5% for a year. This is very low when compared to a few years ago when these bank deposits gave investors more than 9%. Do you know that debt mutual funds can provide you with returns of more than 7%? This is one of the reasons why debt mutual funds score over fixed deposits. There are many other benefits to investing in debt mutual funds.
Higher earnings
Debt funds gain when there is an increase in the value of bonds in the fund’s portfolio. This happens when interest rates fall. When interest rates rise, the mutual fund will reinvest the proceeds from maturing bonds at higher rates. This is how debt funds are able to provide good returns to investors in any scenario. If you had invested in a well-performing banking and PSU debt fund for five years, you would have earned around 8% while a five-year deposit would have earned just 6.9%.
Better taxation
The post-tax returns on fixed deposits are very low as the interest from this investment will be taxed as per your tax bracket. For instance, if you invest in a deposit that earns 5.5%, your post tax returns will be 3.8% if you are in the highest tax bracket. This is where debt funds can provide investors with higher returns.
The difference in post-tax returns from debt funds will be much higher as the long-term capital gains tax rate is just 20% plus indexation benefits. You can get the indexation benefit on gains from debt funds that have been held for more than 36 months. The cost of acquisition of your investment will be revised as per inflation and this notionally brings down the taxable capital gains. So, your tax liability is reduced. In comparison, interest earned on bank deposits will be taxed at the investor’s income tax slab bracket.
Liquidity
Unlike bank fixed deposits, there is no penalty for withdrawing your money from open-ended debt funds. You can withdraw money any time you want. For a bank deposit, around 1% of your return will need to be paid as penalty if you exit the deposit prematurely. Exit loads on short- and medium-duration funds will be applicable only if the withdrawal is made within a year of investing. Most debt funds have no exit loads. Debt funds also allow you to regularly withdraw from the funds if you want regular income.
Variety of schemes
Most advisors suggest that clients try to match the debt fund’s duration to the investor’s financial goals, time horizon and risk profile. Since different funds have different durations ranging from overnight funds to long term debt fund with 10 years duration, you can easily choose ones that are right for your goals.
Note that debt funds come with risks. However, you have the flexibility to decide what type of risk you want to take. You can choose shorter term funds if you don’t want to take much risks. For instance, banking and PSU debts are considered to have credit profile that is of a bank deposit. So, you can choose from various funds that are right for your goals.
Portfolio diversification
Most debt funds invest in a diversified portfolio. So, portfolio exposure to a single security that may be downgraded is minimised. Default risks are also reduced. For instance, in the case of the DHFL default, the exposure of open-ended funds to the security from this company was typically below 5%.
Unlike debt funds, bank deposits come with high concentration risks because investors hold large sums of money in one bank and run the risk of losing it all if things go wrong with the bank. There is very little information available to investors in case a bank goes bankrupt. They have very few options for exit or redressal. That’s why open-ended debt funds score higher. Open-ended funds are required to provide regular information to investors on the fund’s portfolio and performance.
So, debt funds are better than fixed deposits. However, you need to select well-managed funds that have performed consistently and make sure that the portfolio is a well-diversified portfolio. If a fund is taking too many concentrated bets or has more credit risk than its peers, you shouldn’t invest in the fund. Reviewing the fund once a year is a good way to stay invested in good funds.
Beginner’s guide to investing in Gold in India
During the corona virus pandemic, gold prices had soared to more than Rs. 5,900 per gram. However, after vaccine for the virus was launched, gold prices have quickly slid down and are now near Rs. 4,871 per gram. Even though gold prices have fallen, gold is regarded as a safe investment by investors, especially in India. India is a gold loving nation and the precious metal is used for consumption as well as investment. Here are the reasons why gold is a sought-after investment.
Inflation hedge
Usually, gold is considered as a hedge against inflation. What does this mean? Typically, gold prices rise when inflation goes up and gold prices fall when inflation falls. According to a study by the World Gold Council, the demand for Indian gold increases by 2.6% when there is a one per cent increase in inflation. Gold as an asset is able to significantly beat inflation over the long term. That is why it is considered a hedge against inflation.
Diversification of portfolio
Gold has a negative correlation with stocks and fixed-income securities such as bonds. This means that when these investments go down, gold prices will go up and vice versa. So, you can use gold to diversify your portfolio. However, you shouldn’t use this relationship to time your investment in gold. There are periods where gold has fallen along with stocks and bonds. So, nothing is guaranteed. Don’t invest in gold just because the markets are down. It is best to invest in gold when gold prices have fallen.
How to invest in gold
Physical gold
You can purchase physical gold from jewellers, banks, designated post offices or using a commodity exchange such as the multi-commodity exchange (MCX). While this can be used for consumption, using it as investment is disadvantageous. Why? This is because it entails high costs that includes making charges (if you are buying jewellery) and storage costs. When you buy gold jewellery, you need to pay for wastage and making charges, which reduces the value of your gold considerably. The resale value of such gold will also be low.
There are also frauds related to buying jewellery. Not all jewellers sell genuine gold jewellery and buying gold that isn’t pure could result in lower sale costs for the jewellery. Most jewellers don’t buy back jewellery for money. You can only give your old jewellery and get new jewellery. So, liquidity for gold jewellery is very low.
Gold ETFs
You can also invest in gold using Gold Exchange Traded Funds (ETFs). Gold ETFs invest in physical gold and are listed on the stock exchanges. Each unit of a Gold ETF represents 1/2 gram or 1 gram of 24 karat physical gold.
Gold ETFs are traded on the stock exchanges at the prevailing market price of physical gold. So, gold ETFs provide ample liquidity and can be sold in the stock markets. Gold ETFs investors do not need to pay making charges or any premium for investing. Also, investors don’t need to worry about purity of the gold, storage of gold and insurance of gold stored. Investors can use their demat account to invest in gold ETFs.
Sovereign Gold Bonds
SGBs are government securities that are denominated in grams of gold. These are bonds that are issued by the Reserve Bank of India (RBI) on behalf of the government. These bonds are issued in denominations of one gram of gold and an individual can invest up to 4 kilos of gold using SGBs in a financial year. You can also get interest on these bonds. The interest is fixed at the rate of 2.50 % per year. This interest is payable semi-annually. SGBs will provide investors with the market price of gold at the time of selling.
Note that these bonds come with a tenor of 8 years. You can redeem these bonds prematurely only after the fifth year from the date of issue. SGBs are tradable on the stock exchanges, if you have held them in your demat account.
How are Gold ETFs and SGBs taxed?
The capital gains that you make on gold ETFs will be taxed at 20% plus indexation benefits if you hold them for over three years. Note that the interest you earn on the SGBs will be taxable. The capital gains you receive on redemption of SGBs has been exempted from taxes. If you sell the bonds before maturity, the indexation benefits will be provided to the long-term capital gains after selling the SGBs.
SIP in gold
The best way to go about investing in gold is through a Systematic Investment Plan (SIP) like you do for mutual funds. Why? This is because it has several advantages. No one can predict gold prices. Even so-called experts haven’t accurately predicted gold prices. So, if you invest in gold every month, the cost of purchasing gold gets averaged out in the long run. Note that gold prices increase in line with the standard of living. So, buying gold regularly will help you acquire higher amounts of the precious metal at lower costs. Another strategy is to invest more in gold whenever prices fall. When prices correct significantly, you can consider stepping up your monthly investment.
If you are investing in gold, make sure that your gold investments do not exceed 10% of your investment portfolio. Why? This is because historical data suggests that equities have given higher returns than gold in the long run.
Small, midcap PMSes perform better than large, multicap peers in January 2021
With markets stumbling in the first month of calendar year 2021, it was a spirited show by small and midcap PMSes to stay afloat as largecap and multicap strategies tripped. In a month where Nifty fell 2.5 per cent, Valentis Advisors Rising Star Opportunity and Invesco Caterpillar were the top PMS funds with 8-9 per cent gains. Unfortunately, the going was not as easy for the rest. Over 100 strategies posted negative returns in January 2021, but as PMSBazaar data shows thankfully 70 per cent of them performed better than the Nifty. Read on to know more details.
Top strategies
The correction was concentrated to largecaps in January. So, pure-play largecap focussed portfolios as well as the ones with largecap bias paid a price. The stock market correction, after a healthy rise, happened on account of Budget fears. This month a PMS manager did not need to do anything innovative to come on top. Just 9 per cent gain was enough for the top fund. Though cash level data is not available, we reckon some strategies could have simply out-performed based on enhanced cash cushion.
Valentis Advisors Rising Star Opportunity, a small & midcap PMS, clocked 9.08% this month, the highest among over 190 schemes tracked by PMSBazaar data. The second rank-holder was Invesco Caterpillar, a midcap scheme, with 7.51 per cent return. Negen Capital Small Cap Emerging was 3rd with 4.66 per cent, followed by Phillip Capital Emerging India Portfolio (mid cap) with 4.43 per cent, and SageOne Small & Microcap with 4.40 per cent. Others in the top-10 club were Right Horizons Minerva India Under-Served (smallcap), Right Horizons Alphabots India Prime, Nafa Asset Managers Emerging Bluechip and Roha Asset Managers Emerging Champions.
Category wise
Multicap PMSes are the biggest category with over 100 products. They posted an average return of -1.46 per cent in January, which is slightly better than the 1.8 per cent loss of BSE 500. The 3 best performers this month, with very small amounts of gains, were Buoyant Capital Opportunities, Credent Asset Management Growth Portfolio and Bonanza Value. On the other hand, the worst multicap PMS performers were Basant Maheshwari Wealth Advisors Equity Fund, Marcellus Consistent Compounders and Tamohara Investment Managers SWAT.
In the Largecap PMS category, ICICI Pru Largecap Portfolio was the lone strategy with positive returns, while the rest were in the red. Varanium Capital Advisors Large Cap Focused Fund, Composite Investments Lighthouse and Asit C Mehta Intermediaries ACE 50 all lost over 7 per cent each, earning them a spot among the notable laggards.
In the Midcap PMS space, the picture was slightly better even though top performers, such as Master Portfolio Services Vallum India Discovery, Ambit Good & Clean India Fund and Centrum Multibagger, did not generate high returns. The top laggards in the Midcap PMS segment this month were Tata Emerging Opportunities, Nippon India Emerging India and Renaissance Midcap Portfolio.
The story was the same for the Smallcap PMS category. The best performers this month were Nafa Asset Managers Smallcap, Ambit Emerging Giants and Centrum Micro. The laggards included Nine Rivers Capital Aurum Small Cap Opp., Sundaram Alternates Rising Stars and Marcellus Little Champs.
Note that PMS is a long-term investment and equity-linked products should be given more than five years to perform. Any decision to invest or exit should be based on relative performance assessment and over longer periods such as 1, 3 and 5 year as well out/under-performance with respect to the PMS benchmark index.
Retail investors can open Gilt accounts with RBI
As part of continuing efforts to increase retail participation in government securities and to improve ease of access, the RBI has decided to move beyond the aggregator model and provide retail investors online access to the government securities market.
Now, the access will be provided in both primary and secondary markets along with the facility to open their gilt securities account (Retail Direct) with the RBI. Details of the facility will be issued separately.
Encouraging retail participation in the Government securities market has been the focus area of the Government of India and the RBI. Accordingly, several initiatives viz. introduction of non-competitive bidding in primary auctions, permitting stock exchanges to act as aggregators/facilitators for retail investors and allowing odd-lot segments in the NDS-OM secondary market, had been taken in the past.
Providing direct access to government securities will provide a new avenue for retail investors and at the same time provide a channel for the government to fund economic growth, according to ICICI Direct Research.
“Providing retail investors a direct option to invest in government securities is a good development from a long term perspective,” says Lakshmi Iyer, CIO – Debt & Head – Products, Kotak Mahindra AMC.
“It may just be the beginning of a viable substitute for small savings schemes at market rates. However, much like sovereign gold bonds, likely pick up pace will be at a slow rate,” opines Mahendra Jajoo, CIO, Fixed Income, Mirae Asset Management India.
Usually, the government securities market is majorly driven by institutional investors like mutual funds, banks, insurance companies. Small investors are also allowed to bid for government securities via their demat accounts. But such access was allowed only to the secondary market in government securities via the Reserve Bank of India’s NDS-OM System. The latest move widens the access to both secondary and primary market segments.
Primary markets are where a security is issued for the first time, while secondary markets are where buying and selling of already issued securities happens.
