Do equity mutual fund schemes, which deviate from their benchmark stocks, deliver better...
The move would help India get greater support from international authorities in its fight against black money and check the illicit flow of funds from and to the country
In a major boost to measures being taken by India against money laundering and terror financing activities, the Financial Action Task Force (FATF) today said the country has substantially addressed the deficiencies in its regulatory framework and has become largely compliant with global standards in this regard.
FATF is an inter-governmental body that sets standards, and develops and promotes policies to combat money laundering and terrorist financing for countries across the world.
With a substantial improvement in India’s regulatory provisions, FATF has also decided to remove the country from its regular follow-up process for determining its compliance to anti-money laundering and countering financing of terrorism (AML/CFT) regulations.
The move would help India get greater support from international authorities in its fight against black money and check the illicit flow of funds from and to the country.
In its latest report on India, FATF said it has “recognised that India had made significant progress in addressing deficiencies identified in its mutual evaluation report (of June 2010) and decided that the country should be removed from the regular follow-up process”.
India was earlier placed in the regular follow-up process for mutual evaluation purposes because of partially compliant ratings on certain core and key recommendations.
“Since the publication of the mutual evaluation report (in June 2010), India has been reporting back to the FATF on a regular basis on the progress made in the implementation of its Action Plan to strengthen India’s AML/CFT System.
“India has made significant progress with regard to the implementation of this action plan,” FATF said.
Among various improvements in the past three years, India has rectified “nearly all of the technical deficiencies identified with respect to the criminalisation of money laundering and terrorist financing and the implementation of effective confiscation and provisional measures”.
There are over 50 tax-saving mutual fund schemes to choose from. Considering the lock-in period of three years, choosing a scheme with a proven track record would make better sense
IDBI Mutual fund plans to launch an open-ended Equity Linked Savings Scheme (ELSS)—IDBI Tax Saving Fund. The scheme would offer income tax (I-T) benefits under Section 80C of the I-T Act, 1961. The objective of the scheme as mentioned in the offer document is to “provide investors with opportunities for capital appreciation and income along with the benefit of income-tax deduction on their investments.” Investments in this scheme would be subject to a statutory lock-in of three years from the date of investment to be eligible for I-T benefits under Section 80C. The scheme would invest 80%-100% in equity assets and the rest in debt securities. There are over 50 tax-saving mutual fund schemes to choose from. The only distinguishing factor is the performance and track record of the schemes, something which IDBI Mutual Fund lacks.
When it comes to choosing an ELSS, selecting the right scheme is crucial as your investment is locked-in for three years. Therefore, one needs to pick consistent performers. In our cover story, (Read: Tax Saving Tricks you don’t want to miss in 2013) we have analysed the performance of ELSS schemes and have picked the best performers. But apart from choosing the right scheme, when you invest is crucial. Many savers anxiously invest in these schemes between January and March each year. As with all equity investments, one should invest systematically over the year. When investing in such schemes, one should look at a long-term horizon spanning five years or more, even though the lock-in is three years. Compared to other tax-saving investments, ELSSs have done much better over such long periods with systematic investments.
IDBI Mutual Fund at present has just one actively managed equity diversified scheme—IDBI India Top 100 Equity. Launched in May 2012, the scheme has a track record of little over a year. Over the past year the scheme has delivered a return of 13.76% whereas the S&P BSE Sensex has delivered a return of 10.23% over the same period. Though the scheme has performed well, it does not have a long-term track record.
According to the offer document, the new scheme “would be geared towards constructing a well diversified portfolio of stocks without bias towards sector or market capitalization to generate opportunities for long-term growth in capital. The portfolio will seek to have a mix of all market capitalization segments (large-cap, mid-cap and small-cap) in varying proportions.” The performance of the scheme would be benchmarked to the S&P BSE 200 index. V Balasubramanian, who has over 14 years experience in the mutual fund industry and 16 years in banking, will be managing the scheme.
New Purchase – Rs500 and in multiples of Rs500
Additional purchase – Rs500 and in multiples of Rs500
Systematic Investment Plan (SIP)
Monthly option -- Rs500 per month for a minimum period of 12 months or Rs1,000 per month for a minimum period of six months
Quarterly option – Rs1,500 per quarter for a minimum period of four quarters
Annual recurring expenses: Up to 2.70% p.a. of the daily net assets. Depending on inflows from beyond top 15 cities, expenses will not exceed 3.00% p.a. of the daily net assets.