Mutual Funds
Taurus Mutual to launch balanced fund

Balanced funds are a misnomer. They are disguised equity diversified funds, because as much as 65% of the investment is put in equities

Balanced funds are designed for those who want to invest in a low-risk fund with modest capital appreciation. Balanced funds often have a pre-determined allocation of holdings. The risk is contingent on the amount of equity in ratio to other conservative holdings. Funds with a higher fixed income percentage are designed for conservative investors. In India, they are a misnomer. For, to take advantage of the tax-free benefit on long-term capital gains, they invest 65% of the money in equities.

The Taurus scheme too proposes to allocate 65%-75% of assets in equities and equity-related instruments. It would further invest 25%-35% of assets in debt and money market instruments with a low risk profile. The portfolio performance will almost totally depend on how well the equity part has performed.
 
On the other hand, these funds are usually found to be expensive. In reality, balanced funds aren't nearly as cheap as they should be. Internationally, investors in these funds are a different class; they are mostly those who have graduated from debt or monthly income plans for better returns, but their primary concern still continues to be safety of principal.

If you have to invest, there are better funds available in the market. The best is HDFC Prudence Fund.

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Rangarajan favours separate Debt Management Office

The RBI had opposed setting up a DMO under the Union government to manage sovereign debt, saying only the central bank has the requisite expertise to manage market volatility. However, C Rangarajan, a former RBI governor, said times have changed and the government could take up the job if it is "adequately prepared to undertake that function"

New Delhi: Joining the debate over hiving off the debt management activities of the Reserve Bank of India (RBI), Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan has favoured setting up a separate Debt Management Office (DMO) under the aegis of the central government, reports PTI.

"There are many countries in the world where the public debt office is managed only by the government. Therefore, even here, the RBI can continue to play its role as a monetary authority, without having the DMO under it," the PMEAC chief told PTI.

The RBI has opposed setting up a DMO under the Union government to manage sovereign debt, saying only the central bank has the requisite expertise to manage market volatility.

"Only central banks have the requisite market pulse and instruments to aid in making contextual judgements which an independent debt agency, driven by narrow objectives, will not be able to do," RBI governor Duvvuri Subbarao said at a meeting of the Central Bank Governance Group in Basel.

However, Mr Rangarajan, a former RBI governor, said times have changed and the government could take up the job if it is "adequately prepared to undertake that function".

He said that earlier the government required the helping hand of the RBI to enable it to raise the required amount, because prior to 1991, the borrowing rate of the government was well below the market rate.

"But things have changed since then... According to the Fiscal Responsibility and Budget Management (FRBM) Act, the RBI is not supposed to be in the primary market," he said.

The government has proposed to set up an independent Debt Management Office, aimed at separating the RBI's roles as the decider of the interest rate in the market and being the banker to the government.

At present, both the government's debt and fresh borrowings are managed by the central bank.

In his 2011-12 Budget speech, finance minister Pranab Mukherjee had mooted the proposal to introduce the Public Debt Management Agency of India Bill.

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MTNL to restructure loans taken to buy 3G, BWA

MTNL operates in Delhi and Mumbai and was allocated 3G and BWA spectrum about a year ago on the condition that the PSU would pay as per the final bid in the auction that ended on 19th May for 3G and 11th June for BWA

New Delhi: Facing cash crunch due to subdued financial performance, state-run telecom services major Mahanagar Telephone Nigam (MTNL) is planning to restructure its Rs7,000 crore loan taken for buying third generation (3G) and broadband wireless access (BWA) spectrum last year, reports PTI.

The PSU is planning to convert Rs3,000 crore loan into long term debt.

MTNL, which operates in two metros—Delhi and Mumbai—had raised a short-term debt of over Rs7,000 crore for acquiring 3G and broadband spectrum.

The company has already restructured Rs3,500 crore of debt, repaying Rs500 crore and tying up with two state-run banks for the rest Rs3,000 crore, sources in the know said.

The sources said the company is expected to convert this short-term loan into a long-term debt for a period of seven years and is likely to complete this process by July this year.

The company will pay the interest for the first three years and then will pay the principle amount and the interest for the remaining four years, the sources said while describing it as a ‘ballooning structure’ of payment.

These finances were arranged through short-term loans and at a very competitive rate of interest ranging between 7.3% and 7.5% annually. Prior to this, the PSU was a debt-free company and also had cash reserves.

MTNL operates in Delhi and Mumbai and was allocated 3G and BWA spectrum about a year ago on the condition that the PSU would pay as per the final bid in the auction that ended on 19th May for 3G and 11th June for BWA.

Delhi and Mumbai were the most expensive circles for 3G with the bid for Delhi costing Rs3,316.93 crore and Mumbai Rs3,247.07 crore against the reserve price of Rs320 crore each for both the metros.

Similarly for BWA, Delhi and Mumbai saw the highest bids at Rs2,241.02 and2,292.95 crore, respectively.

MTNL has already launched 3G mobile services.

Last week, the telecom major had reported a yearly net loss of Rs2,826 crore, up 8.27% from Rs2,610.9 crore in the same period previous year.

Total income rose to Rs3,841.2 crore as against Rs3,781 during the period under consideration.

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