The Nifty and Sensex have improved and the results for most of the major companies have come out during the month. It is of course the time to pay some thought to the possibilities ahead and to keep the funds in safe pockets.
For about a year you have been advised to be a safe player in light of the fact that the insurance and pension schemes policies are for long term and it is more advisable to avoid risk. I am happy to say the average rate of return for the whole body of the policy holders under my consultancy have got returns of over 27% annually for the past three years inspite of taking only reasonable exposure in equity related funds. Since Jan 04 the Nifty has delivered returns of about 25% annually.This is very satisfying in every way.
If we look at the Indian markets at present , the P/E discounting (almost 22%) here is very optimistic and is on par with the other optimistic and performing big economies of USA and China. The latest quarterly results have been good beyond expectation but the markets have not shown the kind of stable up move as may be expected. These two things do suggest that the risk reward ratio has tilted in favour of playing safe and be mostly invested in debt funds. Since there still would be some companies doing better and the smaller proportion of holdings equity stocks in any fund would possibly give returns far better than the whole equity fund due to its power of shifting in to and out of the debt in some proportion for making funds available for the opportunistic equity investment and moving back after opportunistic disinvestment. Our quest for such a fund ends with defensive fund. Please do keep your entire fund in defensive fund at present till the next advice.
This view would get further confirmation with RBI's policy declaration . It is expected that the dear money policy would be pursued and it would then be the only best thing to do as has been suggested in the previous para.
Further more, your gains would be booked, all without tax . Your future investments would automatically go in to balanced fund as in most cases this has been the choice.
Now I suggest to those who have Unit Linked Endowment Plans and those who have Unit Linked Young Star Plans, to top up more money equal to the 20% of the risk cover including the premium installment. This additional and other investment would entitle them to earn interest and gains entirely tax free. They would be entitle to claim exemption u/s 80 C for the top up amount also. Your benefit does not end here, your interest earning and gains would also be free from tax when you withdraw money ( the policy holders before 30 Jun 06 are entitled to withdraw money any time ). You should therefore not loose the opportunity of making two way tax saving investment, this is the only scheme with such an advantage now.This is also the precise reason that I prevailed on you to go for this plan.
The modified plan still has the given advantages but with the restrictive period of three years. You may consult me for your future requirements.
Hari Om
Krishna Kumar Khandelwal
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