MoneyVedam

It is that time of the year when you look for TDS certificates, insurance receipts, medical bills or even capital gain statements to begin filing your income tax returns. As always, this year too brings some changes to the data collected by the ITR forms but the general structure and format of the forms remain the same. Which form to use? By now the newspapers and online portals would have elaborated on who should use which form to file their returns. A gist of it is given below: ITR-1: To file income from salary/pension, rent from one house property and interest ITR-2: To file rental income from more than one property, capital gains and interest ITR-2A: To file rental income from more than one property, capital gains from shares/MFs and interest income ITR-4S: To file income from business or profession Doubts on what to file! Most people know what incomes to file. However doubts arise as to whether one should report income(s) to which TDS has not been applied - such as in...

Functioning of SWFs Every SWF is like a fund house - they have their own investment offices, fund managers and asset managers. Each SWF also has its own mission, return requirements and investment horizon (akin to an individual's financial plan). SWFs by their very nature are net positive FDI (Foreign Direct Investment) countries. Note that net negative FDI countries cannot afford to have a SWF since they are cash starved and need overseas capital to spur infrastructure and industry development (like India, Indonesia etc). However the mode of operation of these SWFs are not very transparent due to which they have raised several key concerns such as affecting market dynamics and effecting undue influence on politics of other nations. What about India? India has not reached the position of a net positive FDI yet. Infact India is a net negative FDI nation, which means it continues to depend and receive FDI to develop the nation. India has not yet exhausted domestic investments to...

This is a much debated topic at all levels of government and private bodies. Prior to taking a side, we need to understand what a Sovereign Wealth Fund (SWF) is, its purpose and how it should function to yield the desired result. A SWF is basically a pool of funds created from assets owned by a nation. The assets could be physical commodity(s) or the result of productivity gains of the economy (aka industrial and financial assets). Most commodity based SWFs are created by oil rich nations such as Saudi Arabia, Norway, Kuwait, Qatar, Abu Dhabi etc. Non-commodity based SWFs are based out of Hong Kong, Singapore & China. Basically the SWFs are owned and operated by the government or its agencies. SWFs - Purpose & Size The main purpose of a SWF is to ensure that the excess capital generated from a nation's assets are pooled together and invested overseas so as to generate additional income or acquire new assets, which in turn could be used for the nation's future genera...

DIIs (Domestic Institutional Investors) The largest DII in the capital market is LIC followed by other insurers and Mutual fund houses. LIC has a total assets under management of Rs.17.69 Lac crores ($295bn) and it has an investible corpus of Rs.2.25-Rs.3 Tn ($38-$50bn) p.a to invest in capital markets. LIC predominantly invests its corpus in government debt (80%) and the rest 20% in equity markets. Typical size of equity investment is Rs.550 bn ($9.1bn). Mutual Funds too invest about 80% in debt market and 20% in equity markets but their total AUM (Assets Under Management) itself forms only 60% of LIC's AUM. RIs (Retail Investors) The so called 2% retail investors that invest directly in equities are typically driven by market sentiments. They buy high & sell low only to realize that equity is a zero sum game. However a selective few that understands the market have stayed long for 7-15 years and have realized 20-25% annualized returns. Is RI the ACTUAL DII? Looking at...

Market capitalization of India's equity market touched Rs.100 Trillion ($1.67 Tn) in early December 2014. Market cap is the market value of all listed stocks multiplied by their respective market value. On a relative scale, the market cap of India is now at par with Germany & France and have surpassed those of Australia, Brazil, HongKong, Korea & Switzerland. US has the highest market cap in the world at $18.66Tn while China and Japan come next at $3.7Tn. Five years ago, during the 2009 financial crisis, market cap of Indian equity market was Rs.30 Trillion. For those who had stayed invested for the long term, their annualized returns would have been 27% p.a. However we hear a lot about FIIs (Foreign Institutional Investors) entering and exiting the markets there by making huge money from Indian equities. Let us look at the FII and DII (Domestic Institutional Investors) statistics in detail. FIIs (Foreign Institutional Investors) As per recent reports, FIIs have inves...

When it comes to equity related investments, most people wonder about the effectiveness of SIP. There is a lot of apprehension (and misconception) prevalent on the street about SIP - that it would not give as good a return as a lump-sum invested during a down turn. Let us consider some scenarios from our real-life situation to understand the effectiveness of SIP. We take our tablets / health capsules daily, exercise daily, receive a pay packet monthly, pay our bills/taxes monthly and even diligently pay our insurance premium yearly. This is sufficient proof that a systematic and continuous plan works for most of our financial and non-financial matters of our lives. Scenario Analysis Now coming to SIPs, let us consider 3 investors, all investing the same amount of Rs.8.4 Lacs over an investment horizon of 7 years and compare their outcomes: A invests Rs.10000 in a monthly SIP and accumulates Rs.17.05 Lacs, with annualized returns of 19.88% B invests a lumpsum of Rs.1.2Lacs p.a using...

Although Mutual Funds is a single investment vehicle, it encompasses a wide variety of funds. It is often confusing for a new comer to comprehend the 1000+ mutual fund schemes offered by 30+ fund houses (aka Asset Management Companies). In this blog, let us look at the broad classification of these funds. Equity & Equity-oriented Funds - these funds invest 65-90% of their assets (money collected from investors) in equities - i.e stocks of companies listed in the stock exchanges BSE & NSE. Again there could be thematic funds depending on whether they invest in large-cap, mid-cap, small-cap or micro-cap stocks or across sectors such as banking, infrastructure etc. Debt Funds - these funds invest 75-90% of their assets in debt securities. They would choose to invest in a combination of government and corporate bonds, the details of whose allocation is specified in the scheme's SID (Scheme Information Document). Hybrid Funds - these are balanced funds with a 40:60 alloca...