February 26, 2018

Gold MF schemes outperform other equity, debt schemes in last 2 months

A story I wrote, for the media company I work for presently, last week on gold ETFs & gold saving funds outperforming all other mutual fund categories, year to date, as equity markets waver & bond yields continue to rise

 Gold MF schemes outperform other equity, debt schemes in last 2 months

    Returns from gold saving funds and gold exchange traded funds have seen an uptick in the last few months on the back of a traction in the price of physical gold in the London bullion market.
    This has coincided with the recent decline in equity market and rise in bond prices. And, as a result, the gold funds category has outperformed equity and debt fund categories so far this calendar year.
    The year-to-date return of the gold saving funds category stood at 4.1% as of Feb 21, according to data from Value Research. This was significantly higher than 0-1% returns delivered by fund categories such as liquid funds, ultra short term debt fund and credit opportunities debt funds.
    Equity fund categories have been in the red in year-to-date performance, with equity multi cap funds down 4.6% and equity large cap funds down 2.6%, the data under review showed.
    The outperformance of gold saving funds has come on the back of gold ETFs touching one-year high in the last one month.
    HDFC Gold ETF, for instance, touched a one-year high on Feb 16, while Reliance Gold BEEs touched a one-year high on Jan 25.
    Domestic mutual fund schemes investing in gold include gold exchange traded funds. Gold saving funds do not invest directly but instead invest in the units of domestic gold ETFs.
    Gold ETFs are designed to mimic the price performance of physical gold in the London bullion market, carrying only the risk of foreign exchange rate fluctuations.
    On the London bullion market, the gold price touched a one-year high of $1,360.25 an ounce on Jan 25. Since then, it has shed some of the gains, but the positive effect on the performance of gold ETFs tracking the gold prices has remained.
    Gold prices have risen on the back of buying in two largest gold markets in the world--India and China. In January, India was loading up gold in preparation of the ensuing wedding season and China was readying for the lunar new year, said Chirag Mehta, fund manager of Quantum Gold Fund at Quantum Asset Management, in a monthly outlook note to investors.
    "In times of geo-political risks, weakening dollar or impending Fed rate cuts, gold has been perceived to be a safe haven currency," Abhishek Bisen, fund manager at Kotak Mutual Fund told Cogencis.
    The dollar index's recent nosedive to 88 mark led to sharp spike in commodities in general, and gold benefitted from the same and became one of the best performing asset classes in last three month, said Bisen, who manages Kotak Gold ETF.
    The outperformance of gold saving funds in the last two months follows a year-long period when it was underperforming almost all the fund categories during last year.
    As calendar 2017 ended, gold saving funds had turned in annual returns ranging from 2.3% to 3.9%. In contrast, equity multi-cap funds delivered annual returns ranging from 25% to 51%, and short term debt funds' annual returns came in between 5.2% and 9.4%.
    Gold prices in London bullion market had a golden run in 2010-2012. Around half the gains seen in this period were erased in 2013-2015. In 2016, gold prices rebounced again for a short while.
    The table below lists the returns from different mutual fund categories as of Feb 21:

                     YTD      6-month   1-year
                     ---      -------   ------
                              (in %)
                     -------------------------
Gold funds           4.1       4.5       2.2
Debt: Liquid         0.9       3.2       6.5
Debt: Ultra ST       0.9       2.9       6.4
Debt: Credit Opp.    0.7       2.3       7.1
Debt: Short Term     0.6       1.8       6.1
Debt: Income        -0.1       0.0       4.9
Debt: Dynamic Bond  -0.6      -1.1       3.6
Debt: Gilt          -1.6      -3.6       2.0
Equity: Large Cap   -2.6       5.9      16.4
Equity: Multi Cap   -4.6       7.3      18.6
Equity: Small Cap   -6.1      15.7      30.7
Equity: Mid Cap     -6.2       8.7      20.9
YTD: year to date

https://twitter.com/JournalistRGaj/status/968003436896751616

February 16, 2018

The case of PNB, Nirav Modi & Mehul Choksi -- 2 (Gitanjali Gems)

The case of PNB, Nirav Modi & Mehul Choksi -- 2 (Gitanjali Gems)

Mehul Choksi is named in CBI's FIR of Jan 30, 2018 He is MD of Gitanjali Gems Ltd, & the case could link to this company & its subsidiaries/associates

Gitanjali Gems Ltd
Consolidated financials (in Rs crore)
               EBITDA*      PAT**
H1FY18    472             133
FY17        930              166
FY16        910             104
*Earnings before interest, tax, depreciation & amm.
**Profit after Tax
Company has postponed Oct-Dec '17 results disclosure. No new date given.

Gitanjali Gems consolidated Net Debt (Long Term + Short Term - Cash) (in Rs crore) at the end of:
Sep'17     6,900
Mar'17     7,700
Sep'16     7,600
Mar'16     7,600
Figures are approximate

Auditors note in Gitanjali Gems FY17 (2016-17) Annual Report:
As of 31-Mar-17
Principal+Interest due in FY17 not paid to:
ICICI Bank (external commercial borrowings):$9.8 mln (around Rs 64 crore)
Bank of Baroda (ECB): $0.7 mln (Rs 5 crore)
LIC (non-convertible debentures): Rs 3.5 crore


As per Gitanjali Gems' annual report for FY17 (2016-17):
- working capital facilities from banks overdrawn by Rs 31 crore in FY17 due to non-servicing of interest
- outstanding working capital borrowing balance as of 31-Mar-2017 was Rs 4,994 crore, carrying interest rate charge of 5-13%
- the amount due for Principal+Interest payment in FY18 (2017-18) on external commercial borrowings is $43.5 mln (Rs 282 crore).

February 15, 2018

The case of PNB, Nirav Modi & Mehul Choksi -- 1 (Timeline)

The case of PNB, Nirav Modi & Gitanjali Gems -- 1 (Timeline)

Timeline in Nirav Modi - Punjab National Bank PNB scam case:

Feb 5: Media reports CBI filing FIR against Nirav Modi, Mehul Choksi (MD of Gitanjali Gems Ltd) & 2 others in a Rs 280 crore cheating case based on complaint by PNB


Feb 6: A tweet from says bookies were hearing about a Rs9,200cr scam on PNB matter


Feb 7: Gitanjali Gems informs stock exchange that Mehul Choksi is not involved in the dealings in the case (as reported by PTI on Feb 5) & is being falsely implicated

Feb 8: Gitanjali Gems informs stock exchange its Board Meeting will be held on Feb 14 to approve results for Oct-Dec 2017 quarter

Feb 13: Gitanjali Gems informs stock exchange board meeting of Feb 14 to approve Oct-Dec results is postponed as "due to certain pressing contingencies the quarterly results of the Company couldn't be finalized....."

Feb 14: PNB informs stock exchange it detected fraudulent transactions... worth $1771 million... in its branch.. (& that) the matter is already referred to law enforcement agencies.

General detail:
Nirav Modi's cos in India inclde Firestar Diamond International Pvt Ltd & Firestar International Pvt Ltd

February 10, 2018

Algo trading - no cause for panic: SEBI's Tyagi

"No cause for panic from Algo Trading... Algo trading adds liquidity to the market": SEBI chairperson Tyagi in today's press conference in response to my question to him on whether he agrees with the view that algo trades can accentuate any panic selling in the stock market.


February 02, 2018

Budget: Cap gains tax, dividend tax to reduce mis-selling by MFs

Story I wrote yesterday on impact of Budget move on LTCG and dividend distribution tax on mutual funds:

http://www.cogencis.com/differentiators/ShareNews.aspx?newsId=1132741

[C] BUDGET: Cap gains tax, dividend tax to reduce mis-selling by MFs
Cogencis, Thursday, Feb 1

    By Rajesh Gajra
    NEW DELHI - Equity schemes and equity-oriented hybrid schemes of mutual
funds will be hit by the Budget's imposition of a 10% tax on long term
capital gains from investments in equity oriented schemes of mutual funds.
    This came on the back of a similar 10% long term capital gains tax on
investments in equity shares of listed companies.
    Long term capital gains arise when an investment is sold off after a
minimum holding period of one year at a profit.
    The capital gains tax on equity funds will be applied prospectively with
January 31 being the base date for determining the cost of acquisition. The
derived capital gains will be taxed at 10% without inflation indexation
benefit.
    The Budget has also made dividends declared by equity oriented funds
subject to a 10% dividend distribution tax.
    The impact of the new tax proposals will be widely felt by the mutual
fund industry.
    Just last year, the industry witnessed saw record inflows into equity
funds last year. In calendar 2017, equity funds saw net inflow of 1.49 trln
rupees, four times more than in the previous year.
    Further, since the definition of equity oriented funds covers all mutual
fund schemes which invest more than 65% of its assets in equity shares, the
long term capital gains tax will also cover several hybrid funds where the
equity investments form more than 65% of assets size.
    In the second half of last year, when some investors got concerned with
the high valuations of stocks in the equity market, fund houses aggressively
marketed equity-oriented hybrid funds as a safe bet.
    Hybrid funds attracted strong net inflow of 881 bln rupees last year, 4.2
times more than in calendar 2016.
    A chunk of this inflow went into equity-oriented hybrid funds which were
investing 65-80% in equities and the balance in debt securities.
    Further, the monthly and quarterly dividend plans of hybrid funds were
pushed the hardest in an attempt to lure investors who would generally invest
in bank deposits and were disappointed with falling interest rates on bank
deposits.
    In fact, 41% of average assets under management of all hybrid funds in
the quarter ended September were in dividend plans, with the balance being in
growth plans.
    The 10% dividend distribution tax on dividends by equity oriented funds
will make dividend plans less attractive than before, and any one trying to
push dividend plans at the cost of growth plans will not find it easy any
more, G Pradeepkumar, CEO of Union Asset Management Co told Cogencis.
    The long term capital gains tax and the 10% tax on dividends will reduce
churn and reduce mis-selling, according to Aashish Somaiyaa, MD and CEO of
Motilal Oswal Asset Management Co.
    According to Pradeepkumar, the government had to levy a dividend
distribution tax on dividends as otherwise fund houses would have
circumvented the capital gains tax by using dividend plans to distribute
gains on investments to investors.
    Interestingly, the tax arbitrage between debt funds and equity funds
(including equity-oriented hybrid funds) will also reduce.
    According to Rajeev Thakkar, chief investment officer of PPFAS Mutual
Fund, taxation may cease to be a crtical factor in selection asset classes by
mutual fund investors.
    While long term capital gains tax on equity funds will be at 10% without
inflation indexation benefit, that on debt funds will continue to be at 20%
with inflation indexation benefit, he said.
    "Say a debt fund generates 8% returns and inflation is 5%. The tax will
come to about 20% on 3% or 0.6%. This comes to slightly less than 10% of the
returns," said Thakkar.
    According to Jimmy Patel, MD & CEO of Quantum Asset Management Co, fund
Houses may have to realign the income distribution strategy on their schemes,
and fund houses prone to use dividend stripping may get reigned in.  End

February 01, 2018

No more buoyancy in Personal Income Tax recepits expected?

In today's Budget 2018-19 presentation, the government's confidence in buoyancy in Personal Income Tax receipts appears to have waned.

Check these figures:

YoY change for Personal Income Tax receipts:
20%   (FY18 Revised Estimate to FY19 Budget Estimate)
25%   (FY17RE to FY18BE)
18%   (FY16RE to FY17BE)


Corresponding figures for Corporate Tax receipts:

YoY change:
10%   (FY18 Revised Estimate to FY19 Budget Estimate)
 9%     (FY17RE to FY18BE)
 9%     (FY16RE to FY17BE)