IFCI Long Term Infrastructure Bonds

IFCI is offering Long Term Infrastructure Bonds – Series 1.

This issue is open till 31st August 2010.

Investments upto a maximum of Rs.20,000 in this is eligible for deduction u/s 80CCF for the Financial Year 2010-11. An Individual or HUF can avail of this benefit in addition to the limit of Rs.1 Lakh u/s 80C. 

The details are as follows:

·        The tax benefit would be limited to a maximum of Rs.20,000 although the investor can invest any amount

·        The tenure of the bonds is 10 years. However, the lock-in period is 5 years if the investor chooses the buy-back option.In case the investor does not opt for buyback, the principal amount would be refunded back after 10 years, i.e. September 15, 2020

·        The bonds will be listed on BSE. It can be sold after a minimum holding period of 5 years.

  

Options	I
	Buyback/Non-Cumulative
Minimum Amount/FV (Rs)	5,000
In Multiples of (Rs)	5,000
Buy-back Option	Yes
Interest Payment	Yearly
Coupon	7.85% p.a.
Yield on redemption	7.85%
Coupon Payment Date	Sep.15 every year
Redemption Date	Sep.15,2020
Buy-back period	Every year between Aug.16 to Aug.31,starting from the year 2015 till 2019

II	III
Buyback/Cumulative	Non-buyback/Non-Cumulative
5,000	5,000
5,000	5,000
Yes	No
NA	Yearly
7.85% comp. annually	7.95% p.a.
7.85%	7.95% p.a.
NA	Sep.15 every year
Sep.15,2020	Sep.15,2020
Every year between Aug.16 to Aug.31,starting from the year 2015 till 2019	NA

IV
Non-buyback/Cumulative
5,000
5,000
No
NA
7.95% comp. annually
7.95% p.a.
NA
Sep.15,2020
NA

SENSEX SURGED ALONG WITH GLOBAL MARKETS

Indian markets saw biggest rally yesterday. The 30-share BSE Sensex closed at 17330.55, up 561.44 points and the Nifty rose 175.55 points to settle at 5193.60, which touched 5200 in late trade. All the global markets were upwards after European Union and International Monetary Fund (IMF) agreed a massive rescue package to control Greece's debt crisis spreading to other Euro zone countries.

The European Union ministers agreed an emergency aid worth 500 billion Euros (USD 670 billion) of loans and loan guarantees to any euro zone countries needing funds, plus about 250 billion Euros from the International Monetary Fund.

Income Tax Rates/Slab for Assesment Year 2011-12 (F Y 2010-11)

Individuals/HUFs

Upto Rs 1,60,000 - Nil

Rs 1,60,000 - Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

Woman Resident

Upto Rs 1,90,000 - Nil

Rs 1,90,000- Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

Present Tax Slab

Senior Citizen (>65yrs)

Upto Rs 2,40,000 - Nil

Rs 2,40,000- Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

ULIP issue agreed to settle @ HLCC : RBI

Mr. D Subbarao today revealed that market regulator SEBI and insurance regulator IRDA had mutually agreed to settle the jurisdiction issue over ULIPs at the High Level Coordination Committee (HLCC).

Mr. Subbarao, who is also the chairman of HLCC disclosed that both the regulators-IRDA and SEBI-have mutually agreed to settle the issue bilaterally among themselves.

HLCC on the other hand is a high level forum chaired by RBI Governor and works as an interface among the various financial sector regulators. The forum constitutes representatives of the finance ministry along with banking, insurance, pension and capital markets regulators. Adding further on the settlement of the issue Mr. Subbarao said, What turned up is a legal issue. Perhaps there should be an agreement... to settle at the legal forum.

SEBI had been arguing that since the money raised through ULIPs is used by these companies for making investments into equity and debt markets, hence the same should fall under the regulation framework of SEBI and not IRDA. However, in its response to SEBI, IRDA had later asked the insurance companies to continue doing business on the usual lines.

Following the issue contradictory orders from the two regulators the Finance Ministry had intervened in an effort to persuade both SEBI and IRDA.The finance ministry's intervention was then followed by an issue of a fresh order by SEBI stopping the insurance companies from issuing any new unit-linked insurance products (ULIP). The 14 insurance companies that were affected under the ban by SEBI includes the likes of SBI Life, ICICI Prudential, Tata AIG, Aegon Religare Life, Aviva Life, Bajaj Allianz, Bharti AXA, Birla Sunlife, HDFC Standard Life, ING Vysya Life, Kotak Mahindra Old Mutual Life, Max New York Life, Metlife India and Reliance Life.

MARKET OUTLOOK

If we look at the Interest rate side, it should ideally go up. But it is coming down. If interest rate increases the corporate and big companies will be in trouble. So, they will not increase interest rate now. This is a very big factor.

On 29^th Jan 2010 Central bank surprised markets by raising banks' cash reserve requirements by more than expected and warned of mounting inflation, setting the stage for lifting interest rates in the coming months.

Banks worldwide will be restricted. US will come up with lot of restrictions for Banks. This can be a negative factor for the markets.

FII’s invest into India for Long term, Short term as well Medium term period. For FII’s India is small economy. We clearly don’t know for what Term they have invested in India. They can pull money from any one of the above as they have to pay back their loans and keep the money safe.

I believe that markets may see more downside in near-term. But things are unpredictable; you do not know how globally things pan out and in this to just map liquidity and say the markets will get supported because liquidity has a habit of chasing prices and vanishing when you need it most.

BHARTI AIRTEL ??

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group has a diverse business portfolio and has created global brands in the telecommunication sector. Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles.

The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) –

1) Mobile Services

2) Airtel Telemedia Services

3) Enterprise Services

To talk about the Bharti price fall, it will not stop as long as it doesn’t take any decision to reply TATA DoCoMo`s 1ps/Sec Tarif. There would be occasional rallies after the results. I feel that Relcom also will travel along with Airtel to find new bottom as their new strategy is not the answer for DoCoMo. Airtel share holder can keep hope only upto the results.

Bharti would be timing of the announcement of new tariff which can match DoCoMo`s 1ps/sec plan.

There are two things to be addressed.

1) Is to retain the customer

2) Is to announce the Tariff (it can offer only 1ps/sec billing other wise customer will not take it.).

Both are complimentary one can not be without the other.

Bharti in particular can go down to Rs.310 and from there probably some buying support is likely to emerge. Start buying Bharti from current price and accumulate for every 5 to 10% dip. Bharti will do good business by adding more and more customers even with lot of competition in the sector. If one second pulse rate implemented good number of customers will be added to Bharti.

I think a stock like Bharti from these levels can easily give you a return of 25-30% in next 12-15 months.

Markets @ current levels

At this point of time i would be advising clients to be cautious. The rally may last as long as liquidity lasts but investors should be cautious. As of now there is no clear picture over what earnings growth in FY11 would be, so it was difficult to arrive at a fair value for the market based on earnings expectations.

If we look at the valuations,they are at the higher end. We are already trading at about 21-22 times. Markets have been able to meaningfully sustain above these levels at 2000 and early 2008. So,from a valuation perspective, the markets are now in a probably euphoric zone, it’s only liquidity or any of the unexpected positive news flows which could drive this market higher from here.

On FII and DII front, FIIs are buying and DIIs are not selling in this rally.There is a lot of momentum in the market. The volumes have steadily picked up these last few days and the breadth continues to be good. DIIs are not selling in this rally as they are following the insurance company's trend. Insurance company's sell when FIIs continue to buy and eventually the market comes down.