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The big news of the day is that India has conducted surgical strike’s on the terror camps located inside the Pakistan occupied Kashmir. The DGMO of the Indian Army held a press conference at around 12 noon, and informed the nation that they had attacked around 7 terror launch pads the previous night and caused them heavy damages. As per the army each launch pad had around 25-35 terrorists along with Pakistan army men. Now you can calculate the probable number of casualties yourself.
As soon as the news was revealed by the DGMO, hell broke loose in the Indian Stock Markets. The Sensex and Nifty not only wiped off all the gains they were showing during the day, they got so terrorised of the news that both the indices closed deep in the red. Many in market actually feel that there may be a Nuclear war between India and Pakistan.
Many must be wondering what would happen in the markets now. We at VRIDHI know many would be confused about the situation and hence this article. But before coming to markets, let’s check on some crucial points.
Recently I had written my views on the ‘56 inches chest of PM Modi’ debate which public was engaging in, and the politicians were mocking at. These people were behaving like Emotional Idiots and wanted Modi to declare outright war on Pakistan.
The last sentence in the article read this : ‘This govt means action and looks like we will take measured actions’ You can read the full article here: https://emotionalidiots.com/2016/09/21/my-view-on-public-sentiment-on-56-inches/
Hence what we were anticipating from the government has happened exactly. Action in a controlled manner!
One more thing said in another article has also come out in expected lines. In the previous MarketFastFood article it was said: ‘Midcaps and Small Caps are on the costlier side hence caution is advised. No major correction is anticipated. On an index of 28000+ swift corrections of 5% to 10% should not cause any worries to us’ Read the article here: https://vridhi.co.in/2016/09/05/hold-on-to-your-investments-the-india-story-is-yet-to-unfold/
Sensex’s recent high was 29077 on 8-9-2016 and today it has hit a low of 27720, that’s a clean shave of 1357 points from the top which amounts to 4.67% meaning we may behave exactly as said in the above paragraph.
Now, let us come to the market and it’s likely movements in next few days. Those fearing that the situation may escalate and there can be a situation of nuclear war between the two countries may get a bit relieved after reading the below points. Yes, there would be some amount of escalation which Pakistan may do to save its face. Not that whatever we say can always come true, but we sincerely believe that things may not escalate to the levels of nuclear bombing!
*Firstly we need to be clear that India has not attacked Pakistan. India has just attacked the terror camps in PoK which actually belongs to India. Hence India has attacked terrorists in its own territory.
*India has neither attacked Pakistan or the civilians! Hence Pakistan can’t hope of help from China. China won’t risk being cornered by opposing strikes on terrorists!
*Thus if Pakistan tries attacking India the Indian army defeat them hands down.
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Now let’s check on the Nuclear War threat:
Pakistan had nuclear weapons even during Kargil war. Pakistan had then in same manner threatened to use them on India during Kargil, but instead of using them they surrendered to Indian forces.
In fact then American president warned then Indian PM Atal Bihari Vajpayee about this and said that usage of nuclear bomb by Pakistan can harm large part of India.
On this Vajpayee said: Let them use, if they take the first step of harming us with nuclear bomb we will make sure that entire Pakistan is wiped off in our next step!
Pakistan didn’t risk taking such insane step and I feel they won’t even now. Remember India has a No First Use Policy on nuclear weapons.
Hence we feel market will not take this situation too seriously for too long. We won’t be surprised if we see a recovery tomorrow itself and then further volatility before we settle down fully. Small escalations between the two countries can add another 5% volatility.
Mr. Vivek Karwa was on a business channel today where he was speaking about the stock IDFC Bank. We think you can use all opportunities which markets may throw up in next few days to buy few shares of the company for absolute long term. Read this also: https://www.facebook.com/vkarwa/posts/10207150602196259?pnref=story
We maintain our Target.1 and Target.2 and then again some volatility.
No country will dare to speak against India or against the strikes on the terrorists. Not even cunning China would dare!
Thanks and Regards
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Look at the performance of an ‘Unrated’ fund and then compare it to the Rated ones!
We are not saying that this is the best fund and others are bad. But investors looking at ‘stars’ *** and investing themselves can be dangerous!
Always seek advice and then invest..!
Don’t believe in stars of others, believe in your stars advisors study!
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This article from the personal blog of #VivekKarwa. It does not directly relate to Investments but then the on going conflict does impact investors indirectly, hence we are sharing the link to the article under ‘Vivek Speaks’ category instead of publishing the full piece.
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Income from F&O deals is almost always treated as business income, irrespective of frequency or volume of transactions
by Archit Gupta, 5-9-2016, Mint, Source: http://www.livemint.com/Money/GvW3JB9PpYhvw6dvHEENjI/How-to-report-FO-trading-in-your-income-tax-return.html
Taxpayers who deal in derivatives, describe their experience with the tax filing process as vague and confusing. Here are some basics that can help.
A derivative means an instrument whose value is derived. It has no value of its own. Its price is based on the underlying asset. Derivatives of stocks and indices can be traded on Indian stock exchanges. The most popular form of derivatives are futures & options (F&O). A futures contract means an agreement to buy or sell on a future date. This contract expires on a pre-set date. On expiry, futures are executed by delivery of the underlying asset or via payment. Options and futures are alike but when you do an options contract, you can choose to not make the transaction.
Income from F&O deals is almost always treated as business income. This treatment is irrespective of the frequency or volume of your transactions. That may come as a surprise if you are salaried and have never run a business. Taxpayers who have business income have to file ITR-4.
As per Indian tax laws, incomes are reported under five heads—salary, house property, capital gains, business and profession and other sources (any residual income that cannot be classified in other heads). F&O trade is reported under the head ‘business’ in your tax return.
Reporting F&O trade as a business means:
*You can claim expenses from your business income
*As a result you may earn a profit or incur a loss
*Losses must be reported and losses have tax benefits
*Your total income (from all five heads) continues to be taxed at slab rates.
Businesses may be speculative or non-speculative, and the tax treatment is different. The income tax Act says that F&O trade is considered as a non-speculative business. Intra-day stock trades are treated as a speculative business.
Remember that cost indexation and capital gains exemptions are only allowed on sale of capital assets such as equity shares, mutual funds, land, house, and others. Since F&O trades are considered a business, tax rules of capital gains rules do not apply.
The first hurdle is to prepare your business’s profit and loss details. To calculate gross income from F&O trades, take your transaction statement for the whole year. Look at your receipts; these may be a positive or a negative value. Sum these up for the whole year. Expenses can be deducted from your gross income. Some expenses that you can deduct include rent or maintenance expenses of premises used for the business; mobile or telephone; internet charges; demat account charges; broker commission; depreciation on laptop used for trading; and any other expense directly related to your work.
Business income is calculated for the financial year for which you are filing your return. You will also have to prepare a balance sheet which is reported in ITR-4. It is basically a statement of your assets and liabilities.
Many people get confused when they have more than one type of dealing in the stock market. Some do intra-day stock transactions along with F&O trades. Some may hold stocks as long-term investments and also invest in mutual funds. In such a situation, you should calculate your business income from all of these separately. F&O trade income and intra-day stock trading will have separate expenses. Don’t worry if you have consolidated expenses; for example, you use the same premises to trade in both, or use a single phone. Simply bifurcate these expenses on a reasonable basis. You can allocate them using a ratio based on time spent.
If you invest in stocks for the longer run, you can treat them as capital assets. These will not be reported as business if you don’t trade in them often. There is an element of judgement involved and the main criteria is your intent. So, choose carefully. If you have some stocks that you trade often and some that you hold for longer, you can separate them into business and capital assets. Remember to choose on a fair basis and apply your choice consistently. You have to report gains from capital assets under the head ‘capital gains’, which has different tax rules. Mutual funds, too, may be treated as investments and taxed separately.
You will end up paying higher tax if you do not report your losses since losses have tax benefits and reduce your total taxable income. Losses from F&O can be set off from income from other heads (except salary income). Say, your loss from F&O business is Rs.1 lakh, salary income is Rs.5 lakh, income from rent is Rs.2 lakh, and interest income isRs.50,000. Your total taxable income shall be Rs.6.5 lakh.
If losses are not fully set off in the same year, you can carry them forward for 8 years. However, in the following 8 years, it can only be set off from non-speculative business income.
If you have F&O loss, you must get your accounts audited. Audit is also mandatory if your turnover exceeds Rs.1 crore. If accounts are not audited, a minimum penalty of 0.5% of turnover may be levied (maximum Rs.1.5 lakh). The due date of filing of tax returns for financial year 2015-16, where audit is mandatory, is 30 September 2016.
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The previous personal article of mine under MarketFastFood series, written quite some time back on 17-1-2016 was titled ‘Markets have crashed, your confidence in investing need not’ you can Click Here to read the same. One of the lines related to markets in that article read like this: ‘I feel the worst case scenario for the whole year is in the range of 23300-23000’
The year 2016 had begun with despair. Market tumbled and most investors expecting better performance in the beginning of the year were left shocked at that point of time. Most advisors including us at #VRIDHI had to attend many frantic calls of clients who were not ready to believe what was happening, we had to console them and inject confidence.
You would have seen many people in market saying ‘we said so’ after the occurrence of various market events, but then most of us wonder when did he say so?
We at VRIDHI are not trying to boast here, but touch wood the Sensex has most of the times behaved the way we have been mentioning at various platforms, be it written articles of television shows.
In the beginning of the year we said 23300 – 23000 should be the worst case scenario for the market in 2016. Now let’s see what happened after we posted that article:
On 11-2-2016: Sensex hit a Low of: 22909, and then Closed at: 22952, which was hardly 50 points below our lower range 23000. +/- 300 points is negligible on an index of 23000.
On 12-2-2016: Low was: 22600, and the Close was at: 22986, again respecting us!
On 29-2-2016: there was panic in the market and hit a Low of: 22495, but then Sensex recovered as though it is reading our posts and Closed at: 23002, 2 points above 23000..!
Since the beginning of the year, also mentioned in the previous article was: “On the upper side Target.1 should be in the range of 29140-29500 and if that is broken decisively we may test Target.2: 30800-31320”
We are today at 28532 which is just around 700 points away from the lower end of our Target.1, hence we at VRIDHI thought that it’s all the more important now to post our views as the time is right. Frankly many investors tracking us closely have been asking us through mails and calls for our view.
Our view remains same, we are bullish on the India story and investors willing to wait will make money. Investing is a continuous process, you cannot put some money and then wait to make profit. Particularly in stock markets you need to invest as and when you have some surplus. Had you invested when the Index last hit 30000, chances are quite high that you must not be making big profits till date. But had you been putting in even little amounts as and when you had some surplus cash, you would be making handsome money by now.
No reasons to lose patience, just hold on to your investments in Equities or Mutual Funds. The India story will soon unfold. Ever since the present government assumed office, I have been very vocal that we will see #AchheDin only after mid 2017. Let government do any magic, showing results before that would not be possible. The government knows that actions have to be continuous and they are indeed working overtime and taking decisions fast. Click Here to see one such example.
The world is looking at us seriously today, be it under Make In India program or other schemes, companies from all type of sectors like Services, Start Ups, Manufacturing etc., are looking towards entering India and setting up their shop. Even Chinese companies have started looking towards India. The labour charges in China have shot up in recent past and India has the ability to provide cheap labour even now. Chinese mobile handset manufacturer #LeEco is also about to set up shop here in India.
Most of the economic parameters are improving in India. They will improve further in future. You can yourself see that even the opposition in India does not attack the government or the prime minister much on economic front. What they generally talk is Dalits, Kashmir, Army should not attack terrorists in Kashmir, Minorities, Reservations, Ambanis, Adanis and other retrograde topics which no youth in the country is interested in.
People of the country want growth and India has the ability to grow. In the process Investors will make money… ofcourse if they Invest! We find even in this 21st century people saying that #FixedDeposits are the best option an investor can ever get. Rubbish!
Stay invested, we will soon test the above mentioned Target.1 and Target.2, Midcaps and Small Caps are on the costlier side hence caution is advised. No major correction is anticipated. On an index of 28000+ swift corrections of 5% to 10% should not cause any worries to us.
If you have never invested in markets, take a call and decide to invest today atleast through #MutualFunds and we at VRIDHI assure you that we won’t charge any additional fee atleast till the end of this year. Work life is very fragile today and what we said for Techies is proving to be true again and again, after the recent job losses. Techies can read that article Click Here. So don’t miss the opportunity of getting some solid advice without paying any additional fees to us.
We will once again update when we are hovering around the Target.1 levels. If all other things remain same as they are today, we will test the first target before seeing any major correction, hence we at VRIDHI don’t look at any major support levels right now.
Fixed Deposit investors, read this article also: Click Here
Hence if Invested – stay Put and if Not Invested, what are you waiting for?
Thanks and Regards
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Attention VRIDHI Investors and future VRIDHI Investors
As per the latest circular, the folios of all those who still have not updated the FATCA details may get Auto-Redeemed.
Kindly update details immediately, you can do it online, details here in Table.1: https://vridhi.co.in/mf-online/
Update all: ‘CAMS Fatca’ ‘Karvy Fatca’ ‘FT Fatca’ ‘Sun Fatca’
In case you are not able to do it, please take prints sign and send them to VRIDHI office immediately.
Call us in case of doubts
Sunil Dhawan, Economic Times, 20/6/2016, source: http://economictimes.indiatimes.com/your-money/choosing-between-fixed-income-and-market-linked-investment-avenues/tomorrowmakersshow/52829574.cms
As an investor, one always wishes for the best returns from investments without any risk of losing money. However, it is common knowledge that there doesn’t exist any such investment product. In reality, risk and returns are inversely related, i.e. with more risk come higher returns and vice versa.
The decision to choose between the two is fairly simple. For a goal that is still a few years away, the reason to take risk might still exist while for goals
that need attention within a few months or years, it could really be a risky venture.
For investors, the choice between fixed-income investments and market-linked investments becomes more pronounced when it comes to meeting goals. Let’s see what they are and how different investment avenues may be put to use while chasing goals.
Fixed-income investments: Interest-bearing investments such as bank fixed deposits, company deposits, post office small savings
products and bonds are popular among fixed-income investors. They come with a fixed return and a pre-decided maturity period. They, therefore, belong to the debt-asset class. According to Vivek Karwa, Certified Financial Planner, Investment Adviser & Portfolio Manager, "You should be investing in these only when the requirement is fixed and certain in the near future since you need a sure shot cash flow and can’t risk any volatility."
The principal amount invested is fairly safe in such products. They, however, fail to generate high real returns, i.e. returns adjusted to inflation are low in such fixed-income investments. For example, if the return generated from them is 7 per cent while inflation is 6 per cent, the real return will be around 1 per cent. At the most, such instruments help in preserving capital and providing a regular flow of funds to meet monthly household requirements.
Market-linked investments: When returns depend on the performance of the underlying asset, which could be equity or debt, it is the case of market-linked investment. Returns, therefore, are neither fixed nor assured. Equity shares, mutual funds, Ulips, NPS are all examples of market-linked investments. As they are high-risk products, the potential to generate high return is also there.
Role of market-linked investments: As fixed income investments generate low real returns, it is imperative for an investor to look at equities. Karwa says, "In case you are young and have no responsibilities in the near future and can afford risk taking, then investing in fixed income securities will not take you anywhere. Keep in mind that post taxation you may not even beat the inflation."
Market-linked investments, especially those made in equities as the underlying asset class, are more likely to deliver high real returns. For this to happen, the holding period of equity should be long enough to ease out the volatility associated with equity. The more away the goal to be achieved is, the more reliance can be placed on equity-backed investments. Karwa says,
"Every product has its own cycle with its underlying factors changing. Proper investing based on time cycle and risk can help you beat inflation and give you real growth. If you have a horizon of 3+ years, then go with market-linked products. You will surely require some expert advice here." Be it one’s child education, marriage or one’s own retirement, equity plays an important role in creating a decent corpus even with smaller amount of regular savings.
Taxation: While choosing an investment product, taxability of the specific investment is equally important. The interest income from most fixed-income investments such as bank deposits, post office time deposits, NSC, KVP and bonds is fully taxable as per the income tax slab of the individual. The post-tax return from them therefore is much less than what they offer. Although interest is taxable, the 5-year tax-saving bank fixed deposit and post office 5-year time deposit qualify for tax deduction under section 80C of the Income Tax Act, 1961. PPF and tax-free bonds yield tax-free return while the former also gets tax advantage under section 80C.
Equity-oriented investments such as equity mutual funds, Ulips and NPS are more tax-friendly. The gains after holding them for a longer duration are tax-free except in NPS wherein it is partially taxable. Equity-linked savings scheme (ELSS), a variant of equity mutual fund, provides exposure to equities, gives tax-exempt return and even helps in reducing one’s tax liability under section 80C. Ulips offer similar benefits and in addition, provide protection through life insurance.
Conclusion: For an investor chasing long-term goals, it is important to make the best use of both the worlds. Both fixed-income and market-linked investments have a role to plan in the process of wealth creation. While market-linked investments help in navigating the volatility and in the process generate high real return, the fixed income investments help in preserving the accumulated wealth so as to meet the desired goal. In times when interest rate is on the down side, choosing between fixed and market-linked investment avenues should not be so difficult.
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