NABARD launches Tax Savings Bond on Republic day

NABARD (National Rural Development)hasd launched Rural Bonds on Republic day. Subscription to these bonds will be eligible for deduction under Section 80(c) of the Income Tax act. The issue price is Rs 1000 per bond with minimum subscription of 5 bonds and thereafter in multiples of 1 bond. The bonds will of 5 years tenure and will carry a coupon rate of 8.25% for general public and 8.75% for senior citizens.

The income from this bond will be taxable in the hands of the investor.

In the next blog, i will mention about the various investment options that are available to individuals today with respect to saving tax under Section 80(c).

Lotus India Mid N Small Cap Fund

Lotus Mutual Fund has launched a mutual fund called "Lotus India Mid N Small Cap Fund" which is 3 year close ended equity scheme that seeks provide long term capital appreciation by investing in a portfolio that is predominantly constituted of equity and equity related instruments of mid and small -cap companies.

The fund proposes to invest between 65% and 100% of the fund proceeds into Equity & Equity Related instruments of mid@ cap companies.

The fund proposes to invest between 5% and 40% of the fund proceeds into Equity & Equity Related instruments of small cap companies.

The fund proposes to invest between 0% and 30% of the fund proceeds into Equity & Equity Related instruments of companies other than the above.

The fund proposes to invest between 0% and 30% of the fund proceeds into Debt and Money Market Instruments.

Scheme Details

Issue Opens: January 07, 2008
Issue Closes: February 15, 2008

Type: Close ended equity scheme
Plan : Dividend Option,Growth Option. Dividend Option (with Payout Facility and reinvestment).

Minimum Investment: Rs. 5,000 and multiples of Rs 1
Minimum Amount for Redemption : Rs.1000/- or 100 units*

Entry Load: Nil
Exit Load: Nil, but, on redemption before maturity of the scheme, investors will be charged balance proportionate unamoritzed issue expenses on the applicable NAV.

Benchmark Index: CNX MIDCAP Index

AIG Infrastructure and Economic Reform Fund

AIG Mutual Fund has launched a mutual fund called "AIG Infrastructure and Economic Reform Fund" which is an open-ended equity scheme that seeks to generate long-term capital appreciation by investing in companies that may benefit from potential investments in infrastructure and unfolding economic reforms without having any bias towards any sector or market capitalization range.

Under normal market conditions and depending on the fund manager's views, the assets of the Scheme would be invested across stocks that represent a broad range of sectors of the economy as mentioned below in order to ensure adequate portfolio diversification:

Infrastructure: Infrastructure companies operating in but not limited to power, oil and gas, telecom, water, housing, real estate, construction, roads, ports, airports, shipping & shipping building, logistics, etc. and sectors that will benefit from the development in infrastructure such as but not limited to cement, metals, capital goods and banking and financial services.

Economic reform oriented: Companies in sectors that will benefit from the on-going liberalization in the Indian economy including relaxation in foreign exchange controls, FDI in banking and financial services and any other industry or sector where there is a trend to moving toward a freer market based model like retail, media and entertainment, mining, etc.

The fund proposes to invest at least 65 per cent of the fund proceeds into Indian equities but under normal circumstances they will invest between 80% - 100% in equities. It has an option to invest upto a maximum of 35% in Debt Securities and Money Market Instruments and Fixed Income Derivative and in normal circumstances, they will invest between 0% - 20% in debt securities.


Scheme Details

Issue Opens: January 10, 2008
Issue Closes: January 31, 2008
Ongoing Offer: February 29, 2008

Type: Open ended equity scheme
Plan : Dividend Option,Growth Option. Dividend Option (with Payout Facility and reinvestment).
Minimum Investment: Rs. 5,000
Entry Load: 2.25% if the investment amount is less than 5 crores. In case of investment through SIP, it will be 1.25%.

Exit Load: If redemption happens before 1 year and the investment amount is less than 5 crores, then there will be an exit load of 1%.

The AMC will disclose details of the portfolio of the Scheme every 6 months by either sending a complete statement to all the Unit Holders or by publishing such statement, by way of advertisement, in two daily newspapers. The same shall also be displayed on the website of the fund.

HDFC Infrastructure Fund

HDFC Mutual Fund has launched a mutual fund that will target investments in the infrastructure fund. It is not surprising to see everyone getting into this bandwagon with a a hope to garner as much investment as possible for this sector given the fact that the Indian GDP growth cannot be achieved if Infrastructure does not perform.

This mutual fund joins the long list of similar finds launched by JM Mutual, Kotak, UTI in the recent past with similar themes.

Its objective is to see long-term capital appreciation by investing predominantly in equity and equity related securities of companies engaged in or expected to benefit from growth and development of infrastructure. This is a close ended fund

The scheme aims to invest in sectors like airports, banking and financial services, cement and cement products, construction and related industries, electrical and electronic components, energy, oil & gas and allied industries, petroleum and related industries, ports, power and power equipment, telecom, industrial capital goods, etc.

The fund proposes to invest at least 65 per cent of the fund proceeds into Indian equities related to infrastructure and infrastructure related companies. It has an option of investing upto a maximum 35 per cent into equities other than infrastructure. It has an option to invest upto a maximum of 35% in Debt Securities and Money Market Instruments and Fixed Income Derivative.

The Scheme may seek investment opportunity in Foreign Securities (max. 35% of net assets). The Scheme may take derivatives position for hedging, portfolio balancing or to undertake any other strategy as permitted under SEBI Regulations from time to time (max. 20% of the net assets) based on the opportunities available subject to SEBI Regulations.

Scheme Details
Issue Opens: January 8, 2008
Issue Closes: February 21, 2008
Type: Closed-end, equity scheme with automatic conversion to an open ended fund after 3 years
Plan : Dividend Option,Growth Option. Dividend Option (with Payout Facility only).
Minimum Investment: Rs. 5,000 and in multiples of 100 thereafter
Entry Load: Nil
Exit Load: Nil.

The scheme will offer for redemption or switch over of units on an ongoing basis at monthly intervals at NAV-based prices and the redemption or switch over will be available on the first two business days of each calendar month.

General Insurance Industry moves into free-pricing regime

Till Jan 1st 2008, the company from where you took a policy did not matter as the premium that you paid for general insurance including automobiles such as cars, scooters and motor cycles were the same. What was different from the companies was the service, ability to pay over the phone, internet, credit card, cashless facility in case of claims, speed of processing claims, branch network etc.

However from January 1st 2008, insurance companies can have a different pricing policy for the same terms and conditions which will be the same across companies now. However, from April 1st 2008, insurers will also have the flexibility to change the terms of the policy. Thus it will become imperative for one to understand what terms and conditions are being offered and the premium that one needs to pay for the same.

It is quite possible that car owners with good track records for their cars could pay lesser premium while car owners with an adverse claims record may not only be denied discounts but also have to cough up higher premium.

Typically, insurers enjoy a margin of only 7-8% on a motor policy, after taking into account claims up to 60%, administrative cost of 20% and processing charges of 10%. If there is a 20% discount, all other costs remaining constant, the company will already be in the red. This kind of pricing where the prices are lower than the current prices will not be sustainable in the long term.

New players are expected to be aggressive and build on volumes in the absence of claims data on customers.

Given that the price factor will be a determinant only till April, what are the basic features that one must look for?

1. Look at features such as after sales service, number of locations where cashless transactions are offered, surveyor network, a 24-hour helpline and additional warranties, among others.

2. Look at the terms and conditions and choose the one that fits the possible usage of the car. One should take the appropriate insurance.

3. If there is an accident over a weekend, does the insurance company send a surveyor immediately, or the customer has to wait till a Monday? Or for that matter how soon do claims get processed? How much time does a customer have to spend to recover his claim? What price is the customer willing to pay for convenience?

4. For those who who like convenience, it is better to pay a small additional amount and subscribe to a number of features than save that small amount and have trouble in settling claims later.

I am sure now that many companies will come out with different schemes of automobile insurance just like life insurance and most people will clueless in terms of which insurance policy they need to take.

HDFC extends festival offer for Home Loans

THE country’s largest housing finance company HDFC has extended its festival offer upto the end of this month. Under the offer, the company offers borrower rates that are 75-100 basis points lower than its rack rates. The extension of the festival offer is seen as reflection of the slight easing of liquidity in the money markets in January after an initial tightening in end-December. HDFC has been offering floating rate loans at rates as low as 10.25% under the festival offer scheme. These rates were introduced towards the end of last year and were earlier valid up to December 31.

The finance minister’s statement asking banks to cut rates by 50 basis points is also seen as favouring a lower interest rate regime. However the increase in deposit rates by State Bank of India has sent mixed signals since HDFC benchmarks its retail deposit rates against that of State Bank.

News paper reports also suggest that HDFC was also looking at developing a scoring system where individuals who are seen as better credit risks are given lower rates. This would depend on the individual’s track record. A mechanism for tracking an individual’s credit rating is being developed by the Credit Information Bureau of India where incidentally HDFC is one of the promoters along with SBI. Although liquidity continues to remain easy, the outlook for interest rates continues to remain highly uncertain.

This uncertainty is reflected in the differential between floating rate home loans and fixed rate home loans offered by HDFC which is as wide as 3.25%. Because of this huge differential a majority of borrowers continue to opt for floating rates.

Reliance Natural Resources Fund

Reliance AMC has come out with an open ended fund called Reliance Natural Resources Fund where the primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources and the secondary objective is to generate consistent returns by investing in debt and money market securities.

Asset Allocation :
Equity and Equity related Securities of companies principally engaged in the discovery, development, production, or distribution of natural resources in - 65% to 100% ,
Domestic Companies - 65% to 100%
Foreign securities as permitted by SEBI/RBI from time to time - 0% to 35%
Debt and Money market securities (including investments in securitised debt)- 0% to 35%

Issue details
Issue Open : 1 Jan 2008
Issue Close : 30 Jan 2008
Offer Price : Rs. 10 per unit plus applicable load during NFO
Minimum Investment Amount : Rs. 5000.00
Plan Options : Dividend reinvestment, Dividend payment, Growth
Entry Load : 2.25%
Exit Load: NIL

Given the growth in the Indian economy and the demand for natural resources that are required for the economy to growth, i think this is a good option. At the same time, there is diversification in foreign assets as well as it being open ended fund, there is no lock in and in case of any adverse events, one can easily pull out their money

No more entry load in Mutual Fund when investing directly

As a New Year gift to mutual fund investors, market regulator Sebi on Monday exempted them from payment of entry fee on applications filed directly to the asset management companies (AMC).

"It has now been decided that no entry load shall be charged for direct applications received by the AMCs i.e. applications received through Internet, submitted to AMCs or collection centre/ investor service centres that are not routed through any distributor/agent/broker," Securities and Exchange Board of India said in a circular.


The exemption would apply for investments in existing schemes with affect from January 4, 2008 and in new schemes to be launched thereafter.


The Sebi circular further said, the entry fee exemption would also apply to additional purchases made directly by the investors under the same folio or for switching from one scheme to the other.

These exemptions, the SEBI said, were intended "to protect the interests of investors' securities and to promote the development of, and to regulate the securities market".

Sebi's move, however, would have adverse implications for the intermediaries who have been involved with the mutual fund industry.