Investments

No. The customer will be asked for renewal on the maturity of the deposit.

The interest is paid on a monthly/quarterly/half yearly/yearly basis or on a maturity basis and is sent either through a cheque or ECS facility.

TDS is deducted if the interest on a fixed deposit exceeds ₹5,000 in a financial year.

We work with many companies but the top ones include:

• ICICI Home Finance
• PNB Housing Finance
• HDFC Ltd.
• LIC Housing Finance
• Bajaj Finance
• Mahindra Finance

The following are the risks associated with debt securities:
– Credit risk: This can be defined as the risk wherein an issuer of a bond may be unable to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture.
– Interest rate risk: This can be defined as the risk emerging from an adverse change in the interest rate prevalent in the market to affect the yield on the existing instruments. A good case would be an upswing in the prevailing interest rate scenario leading to a situation where the investors’ money is locked at lower rates whereas if he had waited and invested in the changed interest rate scenario, he would have earned more.
– Reinvestment rate risk: This can be defined as the probability of a fall in the interest rate resulting in a lack of options to invest the interest received at regular intervals at higher rates at comparable rates in the market.
– Price risk: This refers to the possibility of not being able to receive the expected price on any order due to an adverse movement in the prices.

The issue and trading of fixed income securities by each of these entities are regulated by different bodies in India. For e.g., government securities are issued by banks and institutions are regulated by the RBI. The issue of non-government securities, comprising basically issues of corporate debt, is regulated by SEBI.

The segments in the secondary debt market, based on the characteristics of the investors and the structure of the market are:

• Wholesale debt market: Here the investors are mostly banks, financial institutions, the RBI, primary dealers, insurance companies, MFs, corporate and FIIs.
• Retail debt market: This involves participation by individual investors, provident funds, pension funds, private trusts, NBFCs and other legal entities in addition to the wholesale investor classes.

Yield refers to the percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note. There are many different kinds of yields depending on the investment scenario and the characteristics of the investment.

Yield to maturity (YTM): This is the most popular measure of yield in the debt markets and is the percentage rate of return paid on a bond, note or other fixed income security if you buy and hold the security till its maturity date.

Yield to call: The term ‘yield to call’ refers to the return a bondholder receives if the security is held until the call date, prior to its date of maturity.

The following are the main investor segments that could participate in the retail debt market:

• Mutual funds
• Provident funds
• Pension funds
• Private trusts
• Religious trusts and charitable organisations having a large investible corpus
• State level and district level co-operative banks
• Housing finance companies
• NBFCs and MBCs
• Corporate treasuries
• Hindu-undivided families (HUFs)
• Individual investors

The main features which you need to check for in any debt security are:

• Coupon (or the discount implied by the price as in the case of zero-coupon bonds).
• Timing of cash flows (interest payment).
• Information about the issuer.
• The credit rating.
• Check the yield to maturity (YTM) of the debt security with the YTMs of other comparable debt securities of the same class and features.
• Tenure of the instrument.

Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds mentioned above. All the mutual funds must get registered with SEBI. The only exception is the UTI, since it is a corporation formed under a separate act of the Parliament.

The NAV of a scheme has to be declared at least once a week. However, many mutual funds declare the NAV for their schemes on a daily basis. As per SEBI regulations, the NAV of a scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. However, the NAV of a close-ended scheme targeted to a specific segment or any monthly income scheme (which is not a mandatory requirement to be listed on a stock exchange) may be published at monthly or quarterly intervals.

Open-ended funds can issue and redeem units any time during the life of the scheme while close-ended funds cannot issue new units except in case of bonus or rights issue. Hence, the unit capital of open-ended funds can fluctuate on a daily basis while that is not the case for close-ended schemes. Another way of explaining the difference is that new investors can join the scheme by directly applying to the mutual fund, at applicable net asset value, and related prices in case of open-ended schemes while that is not the case in case of close-ended schemes. New investors can buy the units from the secondary market only.

In case of mutual funds, the investments of different investors are pooled to form a common investible corpus and gain/loss to all investors, during a given period, are the same for all investors while in case of a portfolio management scheme, the investment of a particular investor remains identifiable to him. Here the gain or loss of all the investors will be different from each other.

Yes, there are a number of mutual fund schemes which give you a fixed monthly income. Further, you can also get monthly income by making a single investment in an open-ended scheme and redeeming the fixed value of the units at regular intervals.

Mutual funds do not provide assured returns. Their returns are linked to their performance. They invest in shares, debentures and deposits. All these investments involve an element of risk. The unit value may vary depending upon the performance of the company and companies may default in payment of interest/principal on their debentures/bonds/deposits. Besides this, the Government may come up with new regulations which may affect a particular industry or class of industries. All these factors influence the performance of mutual funds.

An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for a subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to the main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsors track record, educational qualification and work experience of the key personnel including fund managers, the performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.

Mutual funds are meant only for a small investor like you. The prime reason is that successful investments in stock markets require careful analysis of scrips which is not possible for a small investor. Mutual funds are usually fully equipped to carry out a thorough analysis and can provide superior returns.

Qualified and experienced professionals manage mutual funds. Generally, investors, by themselves, may have the reasonable capability, but to assess a financial instrument a professional analytical approach is required, in addition, to access the research and information and time and methodology so as to make sound investment decisions and keep monitoring them. Since mutual funds make investments in a number of stocks, the resultant diversification reduces risk. They provide small investors with an opportunity to invest in a larger basket of securities.

The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc. It is possible to invest in small amounts as and when the investor has surplus funds to invest. Mutual funds are registered with SEBI. SEBI monitors the activities of mutual funds. In case of open-ended funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct investment in stocks/bonds.

Performance indicators like total returns given by the fund on different schemes, the returns on competing funds, the objective of the fund and the promoter’s image are some of the key factors to be considered while taking an investment decision regarding mutual funds.

• Growth plan and dividend plan: A growth plan is a plan under a scheme wherein the returns from investments are reinvested and very few income distributions, if any, are made. The investor thus only realises capital appreciation on the investment. This plan appeals to investors in the high-income bracket. Under the dividend plan, income is distributed from time to time. This plan is ideal for those investors requiring regular income.
• Dividend reinvestment plan: Dividend plans of schemes carry an additional option for reinvestment of income distribution. This is referred to as the dividend reinvestment plan. Under this plan, dividends declared by a fund are reinvested on behalf of the investor, thus increasing the number of units held by the investors.
• Systematic investment plan: Under the systematic investment plan (SIP), also called automatic investment plan (AIP), the investor is given the option of investing in a specified frequency of months in a specified scheme of the mutual fund for a constant sum of investment. AIP allows the investors to plan their savings through a structured regular monthly savings program.
• Automatic withdrawal plan: Under the automatic withdrawal plan (AWO), also called systematic withdrawal plan (SWP), a facility is provided to the investor to withdraw a pre-determined amount from his fund at a pre-determined interval.

The non-refundable fee paid to the asset management company at the time of purchase of mutual fund units is termed as entry load. Entry load is added to the NAV (purchase price) when you are purchasing mutual fund units.

The non-refundable fee paid to the asset management company at the time of redemption/transfer of units between schemes of mutual funds is termed exit load. It is deducted from the NAV (selling price) at the time of such redemption/transfer.

The purchase price is the price paid by you to purchase a unit of a mutual fund scheme. If the fund levies an entry load, then the purchase price would be equal to the sum of the NAV and the entry load levied.

The redemption price is the price received on selling units of open-ended schemes. If the fund does not levy an exit load, the redemption price will be the same as the NAV. The redemption price will be lower than the NAV in case the fund levies an exit load.

The repurchase price is the price at which a close-ended scheme repurchases its units. Repurchase can either be at NAV or can have an exit load.

SEBI guidelines stipulate that with effect from 1 August 2009, there shall be no entry load for any mutual fund scheme whether existing or new. SEBI guidelines further stipulate that investors will be required to pay upfront commission directly to distributors. This means that earlier if you invested ₹1,000 in a mutual fund, your total invested amount was reduced to the extent of entry load charged i.e., ₹22.5 (@ 2.25 per cent) thereby making your actual investment ₹977.5. However, w.e.f 1 August 2009, the entire ₹1,000 invested by you would be your investment in the mutual fund. However, while you will not be charged any entry load, you will have to pay ‘transaction charges’ directly to your distributor as per the applicable fee structure.

Yes, while placing any mutual fund order, modify or cancel option would be available to you till the final confirmation of the order is placed by you. Once you click on the final confirmation you cannot modify or cancel the order placed by you. You can only modify/cancel any systematic investment plan (SIP) / systematic withdrawal plan (SWP) order placed by you.

As soon as you confirm your order you can view the details of your transaction in the order book. Also, an email will be sent to your email address.

An investment professional will:

• Take the time to understand your goals
• Recommend investments that fit your needs
• Analyse how changing economic and personal situations affect you
• Deliver timely financial information

Investing is a commitment of resources now toward a future financial goal. There are many levels of risk, with certain asset classes and investment products inherently much riskier than others. However, essentially all investing comes with at least some degree of risk – it is always possible that the value of your investment will not increase over time. For this reason, a key consideration for investors is how to manage their risk in order to achieve their financial goals, whether they are short- or long-term.

CKYC refers to central KYC (know your customer), a new initiative by the Government of India. The aim of this initiative is to have a structure in place which allows investors to do their KYC only once before interacting with various entities across the financial sector. CKYC will be managed by CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India), authorised by the Government of India to function as the central KYC registry (CKYCR). The objective of CKYCR is to reduce the burden of producing KYC documents and getting those verified every time when the investor enters into a new relationship with a financial entity. Thus, CKYCR will act as a centralised repository of KYC records of investors in the financial sector with uniform KYC norms and inter-usability of the KYC records across the sector.

FATCA stands for the Foreign Account Tax Compliance Act. It requires foreign financial institutions (FFIs) to provide the internal revenue service (IRS) with information on certain investments of us persons invested in accounts outside of the US and for certain non-US entities to provide information about any US owners.

The purpose of FATCA and CRS is to aid the automatic exchange of information between bilateral treaty partner countries about account-holders/investors maintaining accounts in foreign jurisdictions and also to prevent citizens or residents of countries/territories outside India, whether individuals or specified entities, from using banks and other financial institutions to avoid taxation on the income generated from all offshore accounts. FATCA and CRS both, obligate such financial institutions to report information about persons from these countries/territories having accounts with them.

In the case of FACTCA and CRS, as mentioned previously, the Government of India has signed IGA and MCAA respectively for their implementation. Under the pact, India would be obligated to get its financial institutions to share the financial account information of account holders who are tax residents in any of the signatory countries. Likewise, India would also get similar information through the financial institutions of such treaty countries.

Yes, CBDT has already notified rules and guidance notes for the implementation of FATCA and CRS. The rules framed are called the Income Tax (11th Amendment) Rules, 2015.

In the case of FATCA, investors who have opened folio(s) on or after 1 July 2014 are termed as ‘new investors.
In the case of CRS, investors who open folio(s) on or after 1 January 2016 will be termed as ‘new investors.

Under FATCA all new investors with folios opened between 1 July 2014 and 31 October 2015 (individuals as well as entities) irrespective of indicium would be contacted and required to submit a self-certification and additional documentary evidence, if any, to establish the FATCA status. From 1 November 2015, it would be mandatory for all the new investors who wish to open a new folio(s) should provide HDF Mutual Fund with a self-certification and relevant documents if any.

Existing investors with indicia other than India and all new investors would be required to submit a self-certification and any additional document, thereof, as mandated under FATCA and CRS.

Investors will be expected to provide details such as country of tax residence, tax identification number from such country, country of birth, country of citizenship, etc. A separate form is made available, in which existing, as well as new investors, can submit such information along with any other document, thereof. In the case of entity investors, the above-mentioned information of the entity as well as of the controlling persons will have to be submitted. (Refer SEBI circular no. Cir/MIRSD/2/2013 dated 24 January 2013 for guidelines on identification of beneficial ownership). Apart from the above, HDFC Mutual Fund would be required to report any additional information sought by the local authorities from time to time.