Union Budget 2011: Mutual Funds will continue to generate returns from market movements

Budget 2011 does not make any major changes in the structure of fund investments. For corporate investors, the dividend distribution tax on debt fund investments has been increased, removing their tax advantage over bank deposits. This takes away one of the imperatives for investing in these funds.


The budget also allows equity mutual funds to access foreign investors. While this market will take some time to develop, it isn't something that will impact the returns that domestic fund investors can generate.


From the perspective of immediate investment prospects for MF investors, this is a low-impact budget. Fund investors’ gains will largely come from the direction that equities take in general, rather than any differentiated impact for specific sectors or corporates.


The budget has a rural push. There are no major funds with this specific focus.


However, given that growing rural prosperity and disposable incomes are now well correlated with FMCG markets, we are including FMCG funds.


Higher plan outlay and continued all-round emphasis for infrastructure will boost the sector. Moreover, the relaxation of FII investment in infrastructure bonds will give infrastructure companies easy access to credit.


For allied sectors like cements and power, the reduction in import duty on raw materials and equipment will benefit the companies related to this sector.


Lower-than-expected government borrowings will lessen the pressure on the money market, freeing up more resources for corporates. Banks will be under less pressure to participate in the gilts market. It may indirectly lead to a fall in interest rates, which will boost the treasury gains of banks. Hence we are including banking funds and longer term debt funds.


Lack of expected negatives is little bit positive for the auto industry, while realty may be able to take some comfort from the relaxation of limits for low-cost housing.


Anima Sinha

PGDM 2nd Sem 

63 people under scanner in 2G spectrum case, CBI tells SC

NEW DELHI: Sixty-three persons, including promoters and CEOs of 10 telecom firms have come under its scanner in the 2G spectrum case, the CBI on Tuesday told the Supreme Court which expressed satisfaction over the ongoing probe.

The central government, which is also party to the case, informed a bench of justices G S Singhvi and A K Ganguly that it is in favour of setting up a special court to try the accused in the 2G case and the law minister has written a letter to the Delhi high court chief justice asking him to constitute a court and identify a judge for this purpose.

"The matter is under consideration," additional solicitor general Indira Jaisingh told the bench, which wanted to know about the progress of investigation into the case.

Senior advocate K K Venugopal, representing the CBI, apprised the bench about the progress by the CBI and placed the probe status report in a sealed cover.

"63 persons including promoters and CEOs of 10 companies have come under the scanner of the CBI in its probe into the 2G spectrum scam," Venugopal said.

The bench asked the CBI and the Enforcement Directorate to place before it their reports about the investigation by March 10 and posted the matter for further hearing on March 15.

Senior advocate Harish Salve, appearing for Tata group of companies, meanwhile, pleaded for in-camera proceedings.

Earlier on February 10, while hearing a plea by Centre for public interest litigation for probe into the 2G case, the Supreme Court had asked the CBI to widen its probe ambit and include into it high flying corporate honchos without getting influenced by their status.

While giving the CBI a free hand to probe the case, the court had also asked the government to set up a special court to exclusively try the spectrum scam case accused.

"We have a large number of persons who think themselves to be the law. Law must catch them. It should be done with greater expedition. Merely that they are on the Forbes list or they are millionaires does not make any difference," the bench had remarked after perusing the CBI's probe status report in which names of big corporate houses and their officials had been mentioned.

But counsel Prashant Bhushan appearing for petitioner CPIL had pointed out to the court that the agencies have not questioned the heads of several companies including those of Swan Technology, which was controlled by Anil Ambani's Reliance Group, when the spectrum was allocated.

At this, the bench said, "Top authorities of companies were not questioned. It is surprising that the managing directors were not summoned".

Seeking to widen the CBI's probe ambit, the apex court had said the agency's freedom to investigate the matter should not be curtailed in any way and asked the agency to go beyond the role of the four persons, including former Telecom Minister A Raja, already arrested in the case.

"This investigation has led to prima-facie conclusion about the culpability of four persons. What about the beneficiaries. They are part of a larger conspiracy. We want to know about them. You (CBI) take instructions and tell us what action you are planning to take," the bench had told the CBI

 

ROHIT KALIA

PGDM 2ND SEM

HDFC hikes home loan rates again

MUMBAI: Home loans for HDFC borrowers have turned more expensive with the mortgage finance company revising its benchmark rates for the second time in less than four weeks.

On Monday, the country's largest mortgage finance company said it was increasing its retail prime lending rate (RPLR) on housing loans by 25 basis points (bps).

Last month, HDFC raised its RPLR by 25 bps to 15.25% following a 25 bps hike in key interest rates in the monetary policy.

With this, the total increase in HDFC’s RPLR this financial year, from April 2010 to date is 175 bps as compared to 175 bps to 200 bps rise in the banking and financial system, HDFC said in a statement.

For new borrowers, HDFC has maintained the rate at 9.75%, 10% and 10.25% for loans up to Rs 30 lakh, Rs 30 to Rs 75 lakh and Rs 75 lakh.

Bankers are divided on the outlook for interest rates. A section of lenders feel that liquidity is expected to increase following increased government spending.

Also since the government borrowing for the next fiscal is lower than expected, they feel that pressure on interest rates would subside. However, there are a few who feel that nothing has changed in terms of external circumstances.

If oil prices continue to remain high it is very likely that there will be either pressure on inflation or an
increase in government borrowing to fund the oil subsidy.

In either case, there will be an upward pressure on interest rates. 

Vivek Kumar

PGDM 2nd Sem