Mint, along with the Hindustan Times and NDTV, brings you a personal finance show called Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-linked issues. This is an edited transcript of the show that was aired over the weekend on NDTV Profit and NDTV 24x7.
Manisha: We will hear some of your reactions to the budget and the hits and misses. Let’s get the first-cut reaction from Monika Halan, editor, Mint Money, and Navneet Munot, chief investment officer, SBI Mutual Fund.
Savings advice: Manisha Natarajan (left) and Monika Halan hosting the Let’s Talk Money show. Ankit Agrawal/Mint
Navneet, the big one from your industry perspective—allowing foreign individuals and funds not registered with Sebi (Securities and Exchange Board of India) to invest in equity funds—will it increase the flows in a big way? So far NRIs (non-resident Indians) and registered FIIs (foreign institutional investors) haven’t been big on investing in them.
Navneet: Yes, it’s a very bold move. It also shows the commitment towards further opening of the capital account and it might be driven around the compulsion of the current account deficit and the funding of it, but even then, I think it’s quite a bold move.
In terms of immediate flow of money, I think it will take time. We need to look at KYC (know-your-customer) regulation in individual countries so it’s not going to be very easy that tomorrow anybody can walk in any country and get the money from foreign citizens, but from a longer-term perspective, there is a lot of potential to get money from foreign citizens. If you look at last year, a lot of money came through ETF (exchange-traded fund), India-dedicated ETF, which a lot of individuals have subscribed to in the US, Europe and other parts of the world, so I think there is lot of appetite for Indian equities among the citizens, and probably over a period of time, domestic mutual funds, given their track record and appeal, probably will be able to offer something to foreign citizens. I think it’s a very pragmatic move.
Manisha: Monika, so huge depth will come in, like Navneet is saying, not immediately, but it will take some time. What has prevented that depth from coming so far because you have foreign investors and registered FIIs who can invest, but the total sum is 5-6% so far.
Monika: I would have been happier if they would have done something to get domestic money into domestic markets, so why is it that nothing has been done to work out arbitrages between different products? We have seen on the show week after week that people want to invest, they don’t trust the advisers, they don’t trust the bank. I don’t understand why people can’t fix this handshake problem between people with money and funds, so what about Indian guys? We are not getting benefit of our growth.
Manisha: Only 7-8% of Indians invest in equity markets, I think that’s the statistics and if you take the total universe, it’s probably 15-16%, that’s very minuscule.
Manoj Kapoor, 24, IT professional, New Delhi
1. As the current inflation rate of last six-eight months, the tax-free income raise to Rs 1.8 lakh is not sufficient. We are expecting around Rs 2 lakh.
2. As per the draft of direct taxes code (DTC), there is no provision of equity saving in 80C except for NPS (National Pension System), which most of us are not aware of.
3. I am hoping that after implementation of DTC, the tax slabs must change keeping in mind the inflation rate.
Monika: I think when you look at average tax rates, it’s not so much in India. I think what is worrying Manoj more is the absence of ELSS (equity-linked savings schemes) in 80C, which will become 80C deduction next year. They want to benefit long-term benefits into products like NPS, PPF (Public Provident Fund) and EPF (Employees’ Provident Fund), so if you want that benefit, NPS is such a low-cost vehicle. And again, equity schemes are so beautifully tax advantage, you just hold on for a year, it’s tax-free.
Manisha: I am sure Navneet has a different view. Navneet, you would have been happier if they got that status of 80C under DTC, isn’t it?
Navneet: Yes, as you mentioned, equity penetration is very low in our country, a large number of investors have not taken advantage of the equity markets. An ELSS with some tax incentives would have been a very good vehicle to garner that money, and I think if you look around the world, every country has incentivized the investment into long-term equity markets at different stages of their different cycle, as Monika clearly mentioned that you have long-term capital gain benefit... But even to attract investment at the initial stage, some tax incentives for some more time are required, so we would have been happier if government allows ELSS in Rs 1 lakh bracket or even higher, considering the high inflation.
Manisha: Navneet has been very open about that fact, but yes, having said that, Monika, on ELSS, we have seen through hundreds of mails we have got that it is the first point when a retail investor starts nibbling at equity, so that’s the petition that policymakers are hearing from Navneet and lot of our viewers, if it could be considered.
Kaanadh Godse, 30, IT professional, Bangalore
Is it a good idea to invest in infrastructure bonds?
Manisha: Infrastructure bonds after this budget, that extra Rs 20,000 limit that was given to infra bonds has been continued. It’s clear that the country needs money for long-term infrastructure building. Should he invest, it does increase the limit to Rs 120,000, so why not?
Navneet: Yes, of course, you have different vehicles and infra bond is one of them and probably some of the issuing entities are high-grade instruments, so you don’t have to worry too much about credit quality, but otherwise you need to do some credit research. The other option is mutual funds and other bond funds. Let’s say the bond funds where the fund manager is taking care of credit risk and interest risk and the liquidity risk within those portfolios, but I think, given the tax incentives, infra bonds are also a good vehicle.
Monika: The rates of interest you are getting are not bad at all. You are getting 10% and 18% in certain post-tax calculation, so yes, people should get into that bond. In a country where everything still has to be built, why would infrastructure funds will not do well in long term?
Manisha: It’s just that I am tired of waiting Monika.
Monika: At least 5% of your portfolio should be in infrastructure.