Highlights - Interim Budget

Rs 4,900 cr allocated to Bharat Nirman Scheme
Rs 8,300 cr for mid-day meal scheme
Rs 1,200 crore for Total Sanitation Programme
Rs 6705 cr allocated for child development schemes
Tax collections in 2008-09 to exceed that of 2007-08
FY09 fiscal deficit seen at 6% of GDP vs 2.5 %
Tax collections down by Rs 60,000 crore over estimates
Plan expenditure revised to 3 lakh crore
Revenue deficit revisied at 4.4% of GDP
Custom duties rates steadily reduced in UPA rule
Tax collection to increase in 2008-09
Govt expenditure estimate revised to over 9 lakh crores
Pranab Mukherjee resumes Interim Budget speech
Kerala MP falls ill; session adjourned for 10 minutes
Part of NIF proceeds also to be used for capital investment
PSU turnover up 84%
Centre has pumped in Rs 652 cr into Regional Rural Banks
Personal Income tax structure has been rationalised
Tax rates must fall during the time of crisis
Turnover of PSUs rose by 84% in 2003-08
Young widows to get priority in ITI admissions
The RIDA corpus was hiked from Rs 5,500 to Rs 14,000 cr
Indira Gandhi National Widow Pension Scheme for widows
Govt to provide subsidy to farmers in 2009-10
Six new IITs started in 2008-09
Educational loan schemes revised
2 new IITs in MP and Rajasthan in 2009-10
Rs 65,300 crore in loans loans waived off for farmers
Industrial production fell by 2 pct in 2008 on a YoY basis
Govt took prompt stimulus packages to curb slowdown
Allocation to agriculture increased by 300%
Outlay for higher education increased 900 per cent
Govt took prompt stimulus packages to curb slowdown
Govt approved 37 infrastructure projects
Tax to GDP ration risen by 12.5%
60.12 lakh houses built under Indira Awaas Yojna
Highest priority to rural development
Per Capita income grew by 7.4% in UPA regimen
Agri revival package implemented in 25 states
Employment generation schemes to be expanded
Economic growth has to be sustainable and inclusive
Manufacturing and agriculture sector are the growth drivers
FRPM targets being relaxed
Export growth for the first 9 months of the current year down to 17.1%
Export growth slowed down to 17.1% for the last 9 months
Export growth at 26.4% annually in the last 4 years
Government has approved 37 new infrastructure projects
Serious chocking of credit due to global downturn
Export growth at 26.4% annually in the last 4 years
India second fastest growing economy at 7.1% growth
Agriculture annual growth rate 3.7%
Savings rate up to 30.7% in 2008
Farmers real heroes of our success story
Investment rate has grown to 39%
Fiscal deficit down by 2.7%
Focus to maintain growth rate of 7-8%

Highlights - Interim Rail Budget

2 per cent cut in AC-Fares.
43 new trains to be introduced in FY-2010.
Feasibility study for Delhi-Patna Bullet train going on.
Rail passenger growth up 14%.
43 new trains to be introduced in FY-2010.
Freight rate to remain unchanged.
Railways to spend Rs 4000 crore on pensions.
To invest Rs 2.3 cr in the next five years.
Railways has invested Rs 38,000 crore in 2008-09.
Railways cash reserves touch Rs 90,000 crore .
4 call centres set up for rail enquiry.
Customers can now book tickets online.
Profits registeres without hurting the common man.
Freight capacity up by 78%.
Railways got loans at 4%.
Mishap rate has dropped drastically.
Lalu: Our Rail Budget has always been for the poor.
This would be UPA's last railway budget during this term.
The budgetary support to the railway plan will be about Rs 10,800 crore, representing a significant step up of 37 per cent compared with Rs 7,874 crore in 2008-09.
Government officials said the minister was keen on gifting lower fares to the janata in an election year despite resistance within the ministry.
Expectations are that Lalu Prasad's populist budget for 2009- 10 will include a substantial investment of Rs 12,000 crore for the ambitious East-West freight corridor.
Lalu Prasad Yadav looks all set to keep his date with history when he rises to present the interim rail budget in Lok Sabha.

Financial Crisis in Cartoons

Check out this SlideShare Presentation:

Financial Crisis in Cartoons

View more presentations from Thismakes Myday. (tags: cartoon economy)

WHEN INTELLIGENT PEOPLE SAVE TAXES, THEY MAKE MONEY

The most common question in respect of investment to save on tax would perhaps be “what is the best way to save on taxes”. With several tax saving instruments (NSC, PPF, Bank FDs, and Equity Linked Savings Scheme) available in the market, investors need to figure out the one which has clear edge over others. Equity Linked Savings Scheme (ELSS) is one such option which is an ahead of others. A quick comparison will let us know more o this.

Advantages of ELSS

1. Being the only equity based tax saving instrument available in the market that offers tax deduction under section 80C
2. As an asset class they carry higher growth potential. The 3 Year lock in period extends flexibility to fund manager to focus on long term opportunities.
3. ELSS has potential to counter inflation and notch up healthy inflation adjusted returns.

T..IT..ANIC

Systematic Investment Plan

A simple approach to help you achieve your financial goals through SIP.
Why is it good for you?
Mutual Fund gives us four good reasons for investing through an SIP.
Lighter on the wallet
Makes timing of market irrelevant
Helps build for future by the power of compounding
Rupee cost averaging lowers your chances of losses.

So what's a Systematic Investment Plan?

SIP is a way of investing specifically designed for those who are interested in building wealth over a long-term and plan out a better future for themselves and their family. It is useful for those who want to get their investments going, but don't have a large sum of money to invest.

Who can buy a Systematic Investment Plan?

Anyone can enroll for this facility by starting an account with minimum investment amount - usually Rs 500 per month for one year. One can give post-dated cheques based on one’s convenience.

Why you should invest in a Systematic Investment Plan?

Discipline
The cardinal rule of building your corpus is to stay focused, invest regularly and maintain discipline in your investing pattern. A few hundreds set aside every month will not pinch your monthly disposable income too much. You will also find it easier to part with a few hundreds every month rather than investing a big lump sum in one go.

Power of compounding
Investment gurus always recommend that one must start investing early in life. One of the main reasons for doing that is the benefit of compounding. To explain with an example. Person A started investing Rs 10,000 per year at the age of 30. Person B started investing the same amount every year at the age of 35. When they attained the age of 60 respectively, person A had built a corpus of Rs 12.23 lakh while person B’s corpus was Rs 7.89 lakh. A rate of return of 8% compounded has been assumed. So the difference of Rs 50,000 in amount invested made a difference of more than Rs 4 lakh to their end corpus. That difference is due to the effect of compounding. The longer the compounding period, the better for you.

Now instead of investing Rs 10,000 each year, suppose person A invested Rs 50,000 after every 5 years, starting at the age of 35. The total amount invested, thus remains the same, which is Rs 3 lakh. However, when he is 60, his corpus will be Rs 10.43 lakh. Again, he loses the advantage of compounding in the early years.

Rupee cost averaging
This is especially true for investments in equities. When you invest the same amount in a fund at regular intervals over time, you buy more units when the price is lower. Thus, you would reduce your average cost per share or per unit over time. This strategy is called 'rupee cost averaging'. With a sensible and long-term investment approach, rupee cost averaging can smooth out the market's ups and downs and reduce the risks of investing in volatile markets.
"In developing economies like India, where securities markets (equities and fixed income instruments) can be volatile and it is rarely possible to time the markets and predict the future. We can seldom accurately predict when a particular stock will move up or where the interest rates are headed."

"Systematic Investment Plan makes the volatility of the securities markets work in your favor. Since the amount invested per month is a constant, the investor ends up buying more units when the price is low and fewer units when the price is high. Therefore, the average unit cost will always be less than the average sale price per unit, irrespective of the market rising, falling, or fluctuating. This concept is called Rupee Cost Averaging (RCA)."

Return Assumption
15% is what the sensex has grown at since its inception in 1980 when it started with 100 points which is also a reflection of corporate earnings growth

Other Notes

Historically over the last 10 years, some MF schemes have given returns in excess of 25% like Reliance Vision, Franklin Prima, Birla Sunlife Tax Relief '96 etc.. SIPs absorb market volatility, exhibit a compounding force and inculcate a sense of Savings discipline in the individual, thereby act as a WEALTH BUILDER tool in the long run

How to select the right tax-saving mutual fund?

Most investors select tax-saving funds (also called equity-linked saving schemes - ELSS) for the Section 88 (of the Income Tax Act) benefit.

As blunt as that may sound, it is the main reason why tax-saving funds find their way into investor portfolios.

We are not saying there is anything wrong with that, but equities are too risky an investment to let tax breaks dictate your decision-making.

Once investors appreciate that the tax benefit is just an add-on, they will treat tax-saving funds at par with regular diversified equity funds.

In other words, they will use the same yardstick to select a tax-saving fund as they would any diversified equity fund. Which means that performance, investment style, expenses and other critical parameters come into play and 'tax benefit' takes a back seat. We have tried to outline some of the key parameters that need evaluation before you select the right tax-saving fund.

1. Performance
Among other things, investors must evaluate the tax-saving fund on NAV returns. While performance isn't everything, it is nonetheless a critical parameter on which a fund must redeem itself before you can consider investing in it.

The fund must have put in a solid performance vis-�-vis the benchmark index (Sensex, Nifty, BSE 200, as the case maybe) as also its peer group. And since tax-saving funds have a 3-year lock-in, this performance must stand out over longer time frames 3-year, 5-year.

In reality, all equity-linked investments need to be considered with a 3-5 year investment horizon, but ironically it takes a lock-in in a tax-saving fund for investors to evaluate equity funds over that 'extended' a timeframe.

While evaluating performance, you need to put a premium on consistency across market phases. Most, if not all, funds do well during a bull run, and most funds do just as poorly during a market slump. Choose tax-saving funds that have put in a reasonable show during the upturns and the downturns.

For this you need to look at calendar year returns, not just compounded annual growth returns (CAGR).

2. Investment approach
Equally important, if not more important than NAV returns, is the investment style and approach of the fund manager. Typically, mutual funds are either managed through strong systems and processes or they are managed with a strong individualistic trait, wherein the fund manager has sufficient leeway to make investment decisions.

Of the two styles, the first one is preferable as there is greater emphasis on an investment team that follows a well-defined process that is known to the investor before hand and does not come as a shock to him at a later stage.

To cite an example, Sundaram Tax Saver has a well-defined investment process that does not allow the fund manager to invest more than 5 per cent of net assets in a single stock.

While this may be a defensive investment strategy, it also gives a lot of comfort to the investor who knows well in advance the risk levels associated with the fund.

Given that you invest in a tax-saving fund with a minimum 3-year commitment, there is merit in selecting conservatively managed funds that look for undervalued stocks as the fund manager has the luxury of taking longish investment calls.

3. Volatility and risk-return
Great NAV (net asset value) returns in isolation do not amount to much. A fund could have done exceedingly well during a bull run by pursuing an aggressive investment strategy and could have slumped as hard during the bear phase after that.

What this means to the investor is that his fund's NAV is up sharply one month and down even more sharply the next month. This is the kind of turbulence that most investors can do without.

Admittedly, equity funds cannot really eliminate turbulence in their performance given the nature of equities. But it can be kept under control by pursuing a disciplined investment approach. You need to identify funds that have a lower 'standard deviation' -- a measure used to gauge volatility in NAV performance.

Likewise, look for tax-saving funds that have rewarded investors more per unit of risk taken by them. This is calculated by the Sharpe Ratio; a higher Sharpe Ratio indicates that the risk-return trade off has worked in the investor's interest.
So a lower standard deviation and a higher Sharpe Ratio make for an ideal mutual fund investment.

4. Expenses
Managing a fund entails costs like fund manager's salary, marketing/advertising costs and administration costs. The cost of investing in a mutual fund is measured by the expense ratio. The ratio represents the percentage of the fund's assets that go purely towards the cost of running the fund.

Typically, tax-saving funds have expense ratios in the region of 2.25-2.50 per cent. A lower expense ratio has a positive impact on the returns of the fund as the NAV (net asset value) is calculated after deducting the expenses.

5. Other parameters
Some other parameters that you must look at are entry load and track record of the asset management company. Most tax-saving funds have an entry load of 2.00-2.25 per cent. Some fund houses waive off the entry load on investments made through SIPs (systematic investment plans).

Likewise track record and asset management pedigree also need to be given due weightage. A fund house that has been embroiled in a controversy in the past can be given the miss. Likewise, a fund house that has just been launched can be considered only after you have exhausted other options.

Remember, with a tax-saving fund, the fund house needs to have a minimum 3-year track record over which it should have witnessed market upturns and downturns.

Investing in tax-saving funds must be given its due research and planning. By only playing the tax benefit angle, you run the risk of settling for a compromise and forfeiting the opportunity of making a great equity investment.
Your tax-saving fund shopping list:

1. Less than 40% of net assets in the top 10 stocks of the
portfolio.
2. Expense ratio less than 2.25%.
3. Standard deviation of less than 6.00%.
4. Sharpe Ratio higher than 0.60%.
5. Compounded growth of over 25% over 5-year.