I am an NRI now and my income in India is not taxable. Through some channels, I was being asked to buy gilt and long-term debt funds. But a simple NRE-FD makes more sense to me for the fixed-income product category as it’s tax-free.
MLF’s Reply: Debt schemes of mutual funds invest in low-risk (please note: not risk-free) bond securities and money-market instruments. As you may be aware, interest rates and bond prices are inversely related—when yields rise, bond prices (or NAVs of debt schemes) fall and vice-versa. Debt schemes are further categorised into long-term and short-term, depending on the duration (time to maturity) of the securities in which they invest. Long-term debt schemes, which have a longer tenor, are more sensitive to change in interest rates and can be highly volatile.
Therefore, your returns from gilt and long-term debt schemes would depend on the timing of your purchase and exit. It is important to note that bond yields are hovering around 8.50%, as the Reserve Bank of India (RBI) has kept the benchmark interest rate unchanged at 8%. Thus, given the high-yield scenario, it may be a good time to invest in debt schemes.
If you are looking for stable, non-volatile, returns and not having to keep a track of interest rate cycles, a bank fixed deposit would be a better option.
You may also find it interesting to read “Safe & Higher Returns: Look beyond Bank FDs”; “SIP in Bond Funds”; “Five Reasons not to Buy Debt Funds” .
Have a Mutual Fund Query? Try Moneylife Foundation’s Mutual Fund Helpline. Submit your query here: moneylife.in/mfhelpline.html
Somebody with knowledge of the merger between Prime Focus' unit and Double Negative boosted the company's share price. Even the number of shares traded in Prime Focus jumped ten fold since last Friday. Will SEBI wake up?
Prime Focus Ltd on Wednesday announced the merger of its creative services subsidiary Prime Focus World (PFW) and Double Negative (DNeg), one of the largest visual effects services providers in global film industry. Although the merger was announced today, somebody appears to have had prior knowledge of this deal and pumped the share price and volumes in the Prime Focus scrip, data from BSE shows.
Prime Focus closed on Friday at Rs41.45 on the BSE, with a trading volume of 3.99 lakh and number of trades at 3,819. However, this week there was a sudden spurt in the company's share price along with trading volume and number of trades. For example, on Monday, Prime Focus witnessed a volume of 33.89 lakh shares with 21,341 trades. It closed the first day of this week at Rs48.55, a jump of over 17% over the previous closing!
The same trend continued over the next two days, which saw Prime Focus's weekly average price rise to Rs49.87 per share. (see the chart below)
The suspicious spurt in volumes and price in Prime Focus calls for an investigations by the market regulator. But then while insider trading is rife in India, SEBI rarely acts, despite having spent Rs40 odd crore in sophisticated inter-market surveillance system.
Coming back to the merger deal, Double Negative, established in 1998, is Europe’s largest independent VFX house, with honors including an Academy Award for Inception and two BAFTAs for Inception and Harry Potter and the Deathly Hallows Part 2.
Prime Focus closed Wednesday 1.4% higher at Rs48.6 on the BSE, while the benchmark Sensex ended the day marginally down at 25,316.