28 January 2013

Goldman Sachs - Moving over the hump

HSBC -Asia Equity Insights Quarterly

World Ultra Wealth Report 2012 - 2013

Zinc prices likely to move sideways this year ::Business Line


Stock Strategy: Consider short straddle on Tata Motors ::Business Line


‘Sudden change in taxes is never welcome’ Edelweiss Financial Services. in::Business Line


Ongoing reform process, expectation of interest rate cut, improvement in corporate earnings and improvement in sentiment are key reasons for FII to become positive on Indian markets. — Vikas Khemani, President and Head-Wholesale Capital Markets, Edelweiss Financial Services.
Foreign institutional investors have been gung-ho on the Indian markets pumping in large amounts since last calendar. Is this flow sustainable, what is driving these flows and how concerned are they about General Anti Avoidance Rules (GAAR). Here is the take of Vikas Khemani, President and Head-Wholesale Capital Markets, Edelweiss Financial Services, on these issues.
Despite slowing corporate earnings and economic growth and weak rupee, FIIs have brought in $24 in 2012. What could have prompted this bullish stance last year?
There are two major reasons for such large inflows despite weak Indian macro and sentiment. One, Emerging Markets funds in general received large flows given the developed markets performance and secondly lack of many alternatives within EMs. China was going through slow down and amid political transition, Brazil, Russia and other markets are largely commodities dependent. Indonesia and Thailand did very well and did receive flows but they are relatively smaller economies to absorb large flows. Moreover, rupee was one of the few currencies which depreciated , and this acted as an additional attraction.
What are your expectations on the FII inflows in 2013?
Ongoing reform process, expectation of interest rate cut, improvement in corporate earnings and improvement in sentiment are key reasons for FII to become positive on Indian markets and put in more money. However, one needs to keep in mind that China coming back may divert some flows from India to China and hence the proportion of flows will not be same.
Of the various categories of FIIs — global mutual funds, pension funds, SWF, wealth management funds, hedge funds etc — which categories are most active in India? Is there a shift in the components of FII money over the years?
Post-2008 crisis, global trend has been in favour of passive long only style of management and the same has been reflected to a great extent in the Indian markets. Last year, a large part of money came from endowment funds, ETFs, long only MFs. There was insignificant hedge fund activity.
What is the feedback you have got from your clients on GAAR? Is the postponement good for our market?
GAAR created a huge amount of uncertainty in the minds of global investors including private equity funds. Everyone planned their structure and a sudden change left investors completely clueless about future course of action. This led to huge amount of inaction and upset within the community. Tax structures take time to create and unwind and any sudden change is never welcome. Postponement will give time to investors to plan their structure as per new rules.
Why are FIIs worried about GAAR? Is it because many are routing money through tax havens or is it because a lot of FII money is round-tripping money?
GAAR is not a new phenomenon and is prevalent in many countries. I think the key worry was the way it was implemented along with handling of Vodafone issues. This escalated worries in the minds of investors as to future tax incidence. Especially when you are managing third party money with open-ended exit, it leads to collapse of business model. As a manager you can’t absorb future tax liability and its recoverability in future is always a question mark in future as and when it gets levied. This uncertainty is not welcome by anyone.
What is the issue with the QFI route that the Government has opened last year? Why is no money coming in through this route?
There is nothing wrong with the QFI route. You need a hugely positive market sentiment around India to attract money from wealthy non-institutional investors across the globe. We had a year with poor India press and sentiment, this is unlikely to attract flows but I am sure it will pick up. Also investors will watch stability of environment and clarity of few issues around these guidelines. I am sure it will pick up in time to come.
Numbers show that equity derivative volumes were slightly down last year? Did FIIs also reduce their participation in equity futures and options?
Market volumes in general were down last year and derivatives being linked got impacted. FII participation over the years has shifted from onshore to offshore exchanges such as Singapore.
What are budget proposals that FIIs would like to see?
Foreign investors would like to see fiscal consolidation measures achieved though boosting growth and reducing expenditure. Any attempt to consolidate through additional taxes would be counter productive. Investors would also like to see measure to improve retail participation in the capital markets.

Jewellery, car attract wealth tax too ::Business Line


My father started investing in assets such as motor cars and jewellery, thinking this would get him out of the tax net. But were you aware that such assets are also subject to tax? Like my dad, most people tend to focus only on income-tax and are unaware of the fact that actually there is yet another direct tax that all of us are subject to, i.e. wealth tax.
The basic difference is that income tax is payable on income whereas wealth tax is payable on wealth. Wealth constitutes the assets you buy with your income after paying income tax.
Essentially, wealth tax is a tax on the value of the assets owned. Wealth tax is to be paid on the market value of the assets year after year, whether or not such assets yield any income. Every individual and HUF whose net wealth (assets less liabilities incurred to acquire the assets) as on March 31 exceeds Rs 30 lakh is required to pay wealth tax at the rate of 1 per cent, of the amount that exceeds the limit. Therefore, wealth tax will be applicable on the asset even if it is purchased at the end of the year. Conversely, those assets sold during the year and consequently not held as on March 31 escape the levy of wealth tax.

MF Direct plan and NRI investor:: Business Line,



As per a Securities and Exchange Board of India (SEBI) circular dated September 13, 2012, Mutual Funds/AMC have been mandated to provide separate plan for direct investments, i.e, investments not made through distributors in existing and new schemes.
This Direct plan will have lower expense ratio (excluding distribution expenses, commission, etc.). The plan shall have separate NAV.
In order to comply with the above regulations, Mutual Funds have classified the existing plans as Regular plan and have created identical schemes and their related options under the Direct plan as well. These Direct plans are available for investors with effect from January 1, 2013.
The FAQs below is Part 2 of a three-part series on Direct plan and are based on the general rules followed across all Fund houses.
However, some of the applicability may vary from Fund to Fund and hence SID/KIM/Addendums issued by the Asset Management Companies or their Web sites can be referred for more and latest details.
I have a running SIP/STP under existing/regular plan which is not routed through any distributor.
Should I give a request for conversion to Direct plan for the future instalments?
No. The request for the conversion is not required as the future SIP/STP instalments will be automatically converted to direct plan if the SIPs/STPs were registered not through a distributor.
However, the instalments already triggered and processed in the Regular plan will not be automatically converted into the Direct plan. If conversion for those assets is required, a separate switch request will have to be given for converting the entire unit balance in the Regular plan.
For STPs the target scheme (switch-in) will be considered for the conversion into Direct plan.
You may refer to the Addendums issued by the Asset Management Companies or their Web sites for more details.
Will the conversion of future instalments of my SIP/STP registered under the existing/Regular plan be governed by the terms and conditions applied at the time of SIP registration or will the terms and conditions be different for the future instalments?
The terms and conditions will remain the same for the future instalments of the SIP/STP registered under the Regular plan.
I have SIP registered through distributor in existing/Regular plan. Can I give a request for converting the future instalments of the SIP to Direct plan?
Yes. You can give a request for the conversion to Direct plan. However, the terms and conditions that prevailed at the time of original registration will continue for the future SIP instalments.
I am an NRI investor. Will TDS be deducted at the time of conversion from the existing/Regular plan to Direct plan?
Yes. TDS will be deducted as applicable for NRIs.