Finogent View

BUY BACK Analysis : Tech Mahindra

2019-03-18T10:08:00.000+05:30

Overview :

These days we are seeing companies coming with the buyback offers. With investors seeing negative returns in the broader markets over past 1.25 years, coupled with lower yield in fixed income funds these share buy backs seems like a prince charming riding the White Unicorn to redeem investors from the sin of equity investing; and providing the bailout. However, there is much more than the price that an investor sees in the buy back. This article covers share buy back offer of Tech Mahindra.

Understanding Buybacks :

A buyback allows companies to invest in themselves. Reducing the number of shares outstanding on the market increases the proportion of shares owned by investors. A company may feel its shares are undervalued and do a buyback to provide investors with a return. And because the company is bullish on its current operations, a buyback also boosts the proportion of earnings that a share is allocated. This will raise the stock price if the same price-to-earnings (P/E) ratio is maintained. The share repurchase reduces the number of existing shares, making each worth a greater percentage of the corporation. The stock’s EPS thus increases while the price-earnings ratio (P/E) decreases or the stock price increases. A share repurchase demonstrates to investors that the business has sufficient cash set aside for emergencies and a low probability of economic troubles. (Source : Investopedia. )

Company Profile :

Tech Mahindra Ltd is an IT services and consulting company in India. It offers a variety of technology solutions and services in addition to business process services. The technology solutions include helping companies engage in cloud software, mobile solutions, network services, cybersecurity, and a variety of other options. The business process service is offered across various industries including telecom, financial services, retail, energy, hospitality, high-tech, agriculture, and food and beverage. The company's approach includes cost reduction, process optimization, and ownership through automation and productivity improvements. Tech Mahindra generates approximately half of its revenue from the United States.

Competitor Comparison & Analysis :

Tech Mahindra is a Large Cap growth stock with attractive P/E valuation at 16.33, along with the Price/Sales and Price/Book Value at 2.11 and 1.11 respectively. Its peers TCS and INFOSYS are overvalued at this point in time.

Price Vs Fair Value:

TechM is currently trading at 8% premium at INR 799.30 over its fair price of INR 723.94, as on 15th March 2019. Between 2015 - 2017 it grossly under-performed the market and saw a good turnaround in 2018 & YTD with outperforming the market by 48.36% and 6.65% respectively.

Valuation & Operating Performance :

It has maintained the healthy Enterprise Value / EBITDA at 9.64 in 2018. Since 2017, TechM has steadily increased the RoA (Return on Assets) from 11.34% in 2017 to 14.28% on TTM (Trailing Twelve Months) basis. RoE (Return on Equity) saw improvement from 18.26% in 2017 to 22.81% TTM (Trailing Twelve Months) basis.

Dividend :

There has been an increase in a health dividend increase over last 2 years, from DPS (Dividend Per Share) of INR 9 to INR 14. Trailing Dividend Yield and Dividend Payout Ratio has seen an increase from 1.15% to 1.94% and 21.74% to 30.26% from 2015 to 2018.

What turned good for TechM :

Growth across segments - enterprise business, communications, digital, telecom.
Multiple levers to trigger margin expansion.

change in business mix
yield management
improvement in performance of portfolio companies
higher offshoring
automation benefits and
higher realization.

The company’s valuations have nearly doubled in the past 18 months on the back of strong margin execution, and post the uptick from the announcement of buyback
There are some structural strengths in TechM’s business to drive much improved growth over the medium-to-long term:

Success in large deal wins and above-industry growth in the Enterprise segment is an encouraging indicator of improving competitive prowess.
Network management services have potentially expanded the addressable market for TechM, with directly addressable spend standing at ~USD40b.
TechM also has a sizeable scale in Engineering services, and the opportunity in the same can be leveraged, especially after the acquisition of Mahindra Engineering Services (MES).

What future holds for TechM :

Robust 5G opportunity to expand on.
Digital and Communication vertical would see enhanced momentum.

What does a Buy Back Offer Mean :

As the company is having sound fundamentals and financials, the buyback would result in providing the boost to the company's financial profile. Further that, as the outstanding shares would reduce, the EPS (Earning Per Share) would increase, which would further reduce the PE ratio, which is good for the company.

What are Tax Implications on the Buyback Offer :

For buybacks that are not conducted through stock exchanges, that is, no securities transaction tax (STT) is paid, the long-term capital gains become taxable. The difference between buyback price and cost of acquisition is taxable as capital gains under section 46A of the Income Tax Act. Short-term capital gains are taxable according to slab rates, while long-term capital gains are taxed at 20% with indexation and at 10% without indexation benefit.

The TechM Offer :

The acceptance ratio of the buy back offer is around 20%, which turns out to be minuscule in proportion, to make any sizable impact. Further that, as we are seeing attractive future prospects for the company over medium term; thus, it is advisable to not opt for the buy back offer.

Impact of China's Slowdown on India

2018-11-22T18:21:00.000+05:30

While Indian have been grappling with the volatility in Indian equity markets; where the broader segments / markets have seen corrections, with even leading large caps down by 25% - 30%; our immediate neighbour, China, has already lost $3 Trillion in market value since January 2018 with 7.9% drop in Shanghai Composite Index.

While a layman, would infer that trade war with USA being the reason; however, this is just one factor. As we saw IL&FS defaulting on its repayment obligations in India; China's deleveraging campaign led to bond defaults of unseen magnitude. The whole scenario is further impacted by rising interest rates and strong US Dollar.

Many investors are thinking and interpreting the fall in Chinese equity market and economy as whole, being advantageous to Indian markets. However, this is not as simple and straightforward as it seems. Arun Jaitley, the Finance Minister, had stated that India is not a part of Chinese Supply Chain and Indian could become the "additional shoulder", supporting the global economy. However, Dr. Raghuram Rajan differed from the opinion of the Finance Minister.

Trade Aspect :

India primarily exports chemicals, raw cotton, petroleum products & spices. Any slowdown in Chinese growth rate would result in the slowdown in demand for such products in China.

India majorly imports oil & other minerals; and slowdown in China means cheaper commodity prices. While on one hand this would benefit India; however, on other goods it might resulting in dumping of goods as slowing China means, more low prices of imported goods; as inventories would be building up in China due to slowdown.

Statistical Evidence :

As per Centre for Policy Research, India, the long - run elasticity of India's GDP to China's GDP is around 0.4, i.e., 0.5pp decline in Chinese Growth would wipe off 0.2pp from India's Growth. Regression & Scenario Analysis led to startling fact; if China slows by 150bp, India's GDP Growth would be negatively impacted by 80bp.

It is a remote possibility that India would replace China as the manufacturing hub. Infact, India missed the bus during the tenure of NDA, led by Late Shri Atal B Vajpayee, who infact wanted to change the archiac labor laws, which he had to shelve the plans, as there was serious opposition from within and outside the coalition government.

Thus, while slowdown in China would impact us, but not to the great extent; however, it would not result in any such gain in terms of productions being shifted to India from China. The slowdoen in China would not be something to be cheered about, as it would deeply impact those countries whose trade relations are deeper with China.

Dwarka sub-city residents prefer moving to larger homes within locality.

2013-12-14T22:58:00.003+05:30

Dwarka sub-city is mainly an end-user driven market with the whole infrastructure up and running. It is well-connected with Metro Rail and airport, and a destination of choice for home buying.

We have seen a trend wherein, existing residents of Dwarka sub-city look for better and bigger apartments within the Dwarka sub-city itself. These are primarily the ones who are residents of the earliest launched societies in the area and are now looking towards societies with better maintenance and construction quality. In a way they are looking for upgrade. Those who are already residing in a 3BHK with twin car parking, power back-up, etc and are looking towards 3BHK+servant’s room with other things remaining the same.

We have seen good inventory available in Sectors 21 and 22 and now Sector 19B being a hot spot. The price range for the 1,500 sq ft, 3BHK apartment, with parking facility and power back-up in Sector 7, is Rs 95 lakh to Rs 1.15 crore, depending upon location of the society, infrastructure quality, internal maintenance and many other factors.

Is it the right time to buy?

For Dwarka-Gurgaon Expressway, this is the best time for the first-time home buyers, as they will not only get the property at discounted rates, but also may get further discount of 3-6 per cent, in terms of freebies. The charges like PLC (Preferential Location Charges) and club membership can be waived off, based on the level of negotiation and the type of property.

For Dwarka sub-city, we have seen the prices softening for the past six months, and there is no reason for delaying the decision now.

Is it the time to invest?

For Investors, Dwarka-Gurgaon Expressway still holds a lot of opportunities, provided one can spot the properties under distress. We have been seeing the quantum of distress sales and one can have a great bargain in these times, when short term real estate investors are exiting.

It is not recommended to go for investment in the said stretch as far as the newly launched or already launched properties are concerned as better options are already available. An investor could rather consider other alternative such as Sohna in Gurgaon and also Neemrana.

Neemrana provides the best point of price-entry that many have missed at the Dwarka-Gurgaon Expressway. This is backed by the whole infrastructural development that is coming up to support it, with Japanese city coming into existence along with many other international firms setting up their base.

Rajat Dhar, managing partner, Cogent Advisory

The views expressed in this article are the author´s own. This article was published on magicbricks.com and can be accessed here.

Is Neemrana an investment opportunity?

2013-12-14T22:52:00.000+05:30

It has been proposed that Neemrana, Shahjahanpur and Bahrod be included as three sub-metropolitan cities in the National Capital Region (NCR). Surprised?

Not all deserve enough to be included in the Delhi-NCR and hence, there would be strong rationale for that. Here, we will discuss what has led to this being proposed. Our analysis is for the perspective of the retail real estate investor, hoping to make decent returns over a tenure, with some odds in his favour.

In the current recessionary scenario where property prices are heading towards the downward spiral across cities, everyone is scouting for the best option to invest in the real estate space. In this scenario, there are two aspects that a real estate investor should keep in mind – ‘the price point of entry’ and ‘location & type of property‘.

Gurgaon in the Delhi-NCR space has always been on a real estate investment destination map. However, lately with the rising real estate prices and recessionary environment it may no longer be an ideal investment option available or even qualify for being in the first three choices for real estate investments. Amid such a scenario, a real estate investor has to take an objective and long term view of the real estate investment.

From an investment perspective, it is better to identify satellite towns or cities that are coming up around Delhi-NCR with promising prospects. We have heard about the Gurgaon-Manesar-Bhiwadi-Neemrana-Jaipur belt being developed. These satellite cities/towns can be seen as the Dwarka-Gurgaon Expressway of yesteryears, providing an ideal price point of entry. Here, I would cover Neemrana, the least heard about as an investment destination.

Till a couple of years back, Neemrana was known as the tourist destination only with Neemrana Fort attracting foreign and domestic tourists. However, change in the state government policies with respect to setting up of businesses and attracting foreign companies to set up businesses, turned the tide for Neemrana. This was also because the place was marked by the government for setting up of business and supporting residential units, not to speak about necessary infrastructure support that will come up to support both of them.

Here, we are considering the DMIC (Delhi-Mumbai Industrial Corridor), wherein it has been decided to include Neemrana and Kushkheda, in the first phase, with development of industrial townships here on the lines of Noida, Faridabad and Gurgaon.

Rajat Dhar, managing partner, Cogent Advisory

‘The views expressed in this article are author’s own’. The article was published at magicbricks.com and can be accessed here.

Does Your Financial Advisor / Agent follow SEBI Circular on Risk Profiling..?

2013-12-08T22:28:00.001+05:30

When was the last time your agent / or financial adviser conducted your Risk Profile...?
Do you know SEBI has issued guidelines for financial advisers and advisory firms..?
Is your bank or agent following those and educated you abut those guidelines..?

Financial Advisory is going a sea change in India, with SEBI having come up with new guidelines and refining of the existing one. There are separate guidelines for banks and Independent Financial Advisers and Wealth Management Firms.

The regulatory body had to take strict decisions in reference to the wealth management services being provided by agents, brokers and bankers. The backdrop of this could be found in our blogpost here.

The key changes have recently been done by SEBI is in KYC (Know Your Customer) norms, that would impact your savings and investments, if your adviser or agent is not adhering to the same.

So, What Does SEBI Guideline Say..?

This is in reference to SEBI Circular No. CIR/MIRSD/11/2012, and it says that:

Intermediaries shall strictly follow the 'risk based due diligence' approach as prescribed by SEBI Master Circular on AML No. CIR/ISD/AML/3/2010 dated December 31, 2010.

Also, Intermediaries will conduct on-going due diligence based on Risk Profile and Financial Position of the client as prescribed in the master circular.

These guidelines are applicable for both new and existing clients.

What does risk profiling actually mean..?
Each individual has different perception and appetite for the risk he can take in his investments. While as, some are aggressively investing in equities or stocks of companies, others are
only comfortable in fixed deposits or government bonds.

So, it is imperative that a process is followed that enables to determine the investor's preference to investing in the type of securities.

What agents are currently doing...?
Currently, it has been widely observed that investor invests in funds or securities as recommended by their agents, brokers and bankers. Now, there had been cases where regulators have noticed that certain products were sold to investors that were totally against the need of the client. These were the cases of mis-selling. And there was no way to prove the same. Now, client has to fill the risk profile and sign the dotted line.

What does it mean for client...?
As clients have to fill in the risk profile, they are now more aware as to whether they are conservative, moderately conservative, balanced, moderately aggressive or aggressive client. While client finalises his investments with his agen, he can cross check as to whether the fund or security he is investing in actually falls in line with his risk profile.

How are clients safer now...?
As per the guidelines, risk profile has to be documented and the same process has to be done once every year. If at any given point in time it is found out that the funds or securities recommended to the investor didn't fall in line with the risk profile or if there is the case of mis-selling; client grievances can very easily be resolved now.

This is the one step more in the direction of investor protection and in regulating the intermediaries. There are a whole set of guidelines that have to be adhered to in the investment management space; and those agents and firms who will not change are surely be moved out of the market by the regulator and the competition alike.

Dwarka sub-city residents prefer moving to larger homes within locality

2013-11-01T17:42:00.000+05:30

The article was published at MagicBricks.Com and can be accessed at: here.

Dwarka sub-city is mainly an end-user driven market with the whole infrastructure up and running. It is well-connected with Metro Rail and airport, and a destination of choice for home buying.

We have seen a trend wherein, existing residents of Dwarka sub-city look for better and bigger apartments within the Dwarka sub-city itself. These are primarily the ones who are residents of the earliest launched societies in the area and are now looking towards societies with better maintenance and construction quality. In a way they are looking for upgrade. Those who are already residing in a 3BHK with twin car parking, power back-up, etc and are looking towards 3BHK+servant’s room with other things remaining the same.

We have seen good inventory available in Sectors 21 and 22 and now Sector 19B being a hot spot. The price range for the 1,500 sq ft, 3BHK apartment, with parking facility and power back-up in Sector 7, is Rs 95 lakh to Rs 1.15 crore, depending upon location of the society, infrastructure quality, internal maintenance and many other factors.

Is it the right time to buy?
For Dwarka-Gurgaon Expressway, this is the best time for the first-time home buyers, as they will not only get the property at discounted rates, but also may get further discount of 3-6 per cent, in terms of freebies.

The charges like PLC (Preferential Location Charges) and club membership can be waived off, based on the level of negotiation and the type of property.

For Dwarka sub-city, we have seen the prices softening for the past six months, and there is no reason for delaying the decision now.

Is it the time to invest?
For Investors, Dwarka-Gurgaon Expressway still holds a lot of opportunities, provided one can spot the properties under distress. We have been seeing the quantum of distress sales and one can have a great bargain in these times, when short term real estate investors are exiting.

It is not recommended to go for investment in the said stretch as far as the newly launched or already launched properties are concerned as better options are already available. An investor could rather consider other alternative such as Sohna in Gurgaon and also Neemrana.

Neemrana provides the best point of price-entry that many have missed at the Dwarka-Gurgaon Expressway. This is backed by the whole infrastructural development that is coming up to support it, with Japanese city coming into existence along with many other international firms setting up their base.

Rajat Dhar, managing partner, Cogent Advisory

The article was published at MagicBricks.Com and can be accessed at: here.

REIT: A new dimension to real estate investing - Part I

2013-11-01T17:14:00.001+05:30

The article got published on MagicBricks.Com, and can be accessed at: here.

Wished to ride the real estate wave for harvesting better returns but have been put off by high real estate prices in India? Introduction of Real Estate Investment Trusts (REITs) in India could open up new avenues for you.

Traditionally, an investor intending to venture into real estate would scout for the best residential or commercial properties with an intention of growth or regular income from the real estate investment.

For majority of investors, rising real estate prices have put them out of the market. This adds on to the fact that the investment would also be limited to one or two properties, and thus in this case a ‘Real Estate Portfolio Management’ can not be executed in the truest sense. On the other hand, consider the case where you have invested in a real estate project in Noida, and the land on which the project is being constructed comes under dispute between landowners and builders (like the case in Noida extension). With Real Estate Funds, your investment is not placed into one single project and hence your investment basket is protected.

There is a silver lining amid these high real estate costs. The answer lies in Real Estate Mutual Funds (ReMFs), ReITs and Real Estate PE (Private Equity) funds. The real estate investment scenario got a drastic change with the sector getting opened for Foreign Direct Investment (FDI) in 2005.

While ReITs & ReMFs will take some time to get structured in India, Real Estate PE funds have already made their way in the said space. Some of the funds active in the market include Tata Realty and Infrastructure, Indiareit Fund Advisors, HDFC Real Estate Fund, ICICI Venture; ASK Property Investment Advisors, ArthVeda STAR Fund from DHFL and Kotak Realty Fund.

What are ReMFs and ReITs, and what differentiates one from the other?
ReITs are popular and prevalent in developed markets. They are listed on stock exchanges and governed by transparent norms. ReMFs invest in commercial properties and own them. They make gains by renting out or selling their holdings; like mutual funds and share profits with investors.

Real estate PE funds are, however, different. These funds invest in real estate projects by tying up with the developer, wherein the developer sells a portion of the project to the fund. Some funds tie up with companies also. These funds are primarily for HNIs, for real estate investment purposes.

The PE advantage: PE takes care of all the due diligence required for selecting the properties to invest into; and there is a specialised team that does the valuation, assessment and screening before investments can be committed to the project. Moreover, investors’ amount is spread out over multiple properties, so that diversification plays out well over here.

Rajat Dhar, Managing Partner, Cogent Advisory

The article got published on MagicBricks.Com, and can be accessed at: here.

Avoid Bank Planners, says Law Firm

2013-09-10T20:22:00.001+05:30

Indian investor has been at the receiving end, when it comes to their wealth being managed by banks. SEBI accepted that there have been a rampant mis-selling of financial products at banks, and the same was mentioned by SEBI in their Wealth Management Guidelines dated 28th June 2013.

Based on their observation SEBI came up be the Wealth Management Guidelines for banks and Investment Advisor Guidelines for Independent Financial Advisers. But there is a long way to go as far as Indian Investment Management industry is concerned.

Australia, which is one of the mature financial & wealth management market, with a well defined wealth management process being followed and adequate consumer protection mechanisms in place; has come across a couple of cases of Investor grievances. This has again brought into limelight the fundamental factor that mars the wealth management, when practised by the bankers.

Maurice Blackburn, a law firm, has urged consumers to avoid taking advices from the financial planners employed by the banks. To this, the Principal John Berrill added that major banking institutions wanted to keep their money in-house. You can access details of their observations here, click here.

You, an investor and a saver, can very well identify with this logic clearly due to the fact everytime your banker visits you, he speaks about the Insurance based investment. This results into clients' money being rotated within the sister concerns of these financial institutions and banks, apart from the hefty commissions that banks make on the sale of insurance products (say ULIPS).

What an investor needs is a financial adviser and not bank relationship manager. The reason is quite simple; as the role of financial adviser is to provide the best possible investment alternatives available in the market to the client, alongside the ease to transact and management of the portfolio. Since, a financial advisory & wealth management firm is not a part of any banking group, so it is not limited in the types of product lines available or the platform. On the other hand, it has been observed that the bank has a very limited investment options to address the wide range of financial requirements of its clients.

The current wealth management set up at banks in India, is marred by conflict of interest; where by bank makes earning everytime the client's portfolio is churned. The portfolio is to be managed as the goal based portfolio and not transaction portfolio.

What is the way out for the clients...?

Simple, go and find a good financial adviser for you & your family; so like you are working to build the corporation you are employed at, so will your adviser build & manage a robust financial portfolio for you and your family.

You can read more about us here.

Banks' Wealth Services Under RBI Scanner - RBI Guidelines & Observations

2013-08-03T20:23:00.000+05:30

Reference: RBI Circular # DBOD.CO.FSD.No./24.01.026/2012-13

Draft Issue Date # June 28, 2013

Not long ago you might have felt being cheated by your bankers, on account of mis-selling of financial & investment products over past so many years. But, the irony of fact is that, it has been too wide spread across indian banking space; that now even RBI has taken notice and covered it in the draft of wealth management guidlines.

Taking in account recent and ongoing instances of misselling being experienced by clients at banks; RBI has now shown signs of coming down heavily and has issued draft guidelines for Wealth Management Marketing / Distribution Services offered by banks. For the first time RBI has come with the reasons as to why mis-selling has been observed to be so rampant at Banks; and that it is the need of hour to regulate the Wealth Services being ofered by banks.

Wealth Management

In the draft guidelines, RBI has quoted that, banks offering wealth management services are exposed to reputational risk. This has been evident on account of:

violation of KYC / AML Guidelines
mis-selling of products, or selling products unsuitable to clients,
conflict of interest,
lack of robust risk management system & procedures leading to frauds
lack of knowledge and
lack of clarity about products and frauds

RBI has also found out in the recent past that banks were involved in structuring transactions to aid tax evasion and fraudulant transfer of funds. It was observed that many of these transactions centered around WMS (Wealth Management Services) provided by banks as well as marketing of third party products.

Marketing & Distribution of Third Part Financial Products

RBI has clearly mentioned in the guidelines draft that, it has been observed that in some cases,

banks did not have clear segregation of duties of marketing personnel from other branch functions
bank employees were directly receiving incentives from third parties, such as insurance, mutual funds and other entities for seling their products.

These practices enable tendencies of mis-selling and distortion of staff incentive structure.

RBI has made clear that - "in case of a bank acting as distributor, the customer’s expectation from a bank in terms of the bank’s credibility is significantly different than that of any other agent of the product issuer. Thus banks are expected to take greater care while undertaking such services, including avoiding mis-selling."

As per the guidelines, mis-selling of products and services occurs when :

products that are unsuitable to the client profile are sold to him, particularly through misrepresentation or by linking it with banks’ own products e.g., making purchase of insurance compulsory along with a car loan.
there is a lack of knowledge of the product being sold, and occurs when untrained staff sell products.
mis-selling may also arise from the provisions regarding payment of commissions and incentives which distort the selling structure.

Section 10(1)(b)(ii) of the BR Act, 1949 prohibits a bank from employing or continuing the employment of any person whose remuneration or part of the remuneration takes the form of commission or of a share in the profits of the bank, save as exempted in the Proviso thereto. Accordingly, payment of a portion of the commission earned on marketing and distribution of third party products by the bank to the staff would fall under the said prohibition.

Accordingly, undermentioned are a few excerpts from the conditions proposed by RBI in addition to the extant instructions:

Banks should disclose to the customers, details of all the commissions/other fees (in any form) received, if any, from the various mutual fund/insurance/other financial companies for marketing their products. This disclosure would be required even in cases where the bank is marketing products of only one mutual fund/ insurance company etc.
Banks should disclose in the ‘Notes to Accounts’ to their Balance Sheet, the details of fees/remuneration received in respect of the marketing and distribution function undertaken by them.
As mis-selling is a serious issue in terms of consumer protection, the bank should put in place a policy approved by its Board regarding marketing and distribution of third party financial products which should, inter alia specifically consider the issue of addressing mis-selling.
The sales process should be transparent with full disclosure as to the details of the product. The selling should be need based and mapped to the customer profile.
Products should be marketed only in branches having specified trained personnel for the purpose.
The persons undertaking such marketing/distributions services, should not be entrusted with any other approval/transactional process at bank branches. There should be a clear segregation of functions between marketing and operational staff.
There should be a Code of Conduct for the sales personnel who should adhere to the same.
The fact that the bank is acting only as an agent should be clearly brought to the notice of the customer.
Banks should set up SIDD (Seperately Identifiable Divisions or Departments), so that conflict of interest be handled; and seperating marketing / transactional / advisory divisions.

It may be ensured that there is no violation of Section 10(1) (ii) of the BR Act 1949 in payment of commissions/incentives as well as of Guidelines issued by the regulator of the third party issuer. No incentive (cash or non-cash) linked directly or indirectly to the income received from marketing and distribution function should be paid to the staff engaged in marketing/distribution services of third party products. The staff of the bank is also not permitted to receive any incentive (cash or non-cash) directly from the third party issuer. Banks must ensure that there is no violation of the above in the incentive structure to staff.

There should be no evasion of these regulations by accepting several amounts for lower values from the same client to avoid the stated threshold.

We have taken excerpts from the draft guidelines issued by RBI. The comprehensive document covers PMS (Portfolio Management Services), IAS (Investment Advisory Services), and much more.

What Options Does a Client Have...?

Cogent Advisory has always maintained the stance that "Let The Banks Do Banking, You Should Have a Private Family Wealth Management Firm, managing your funds".

Banks are also limited in respect of products and services, where by it has been observed that they predominantly sell insurance and mutual funds. Hence, this results in the biasedness in the way investments are being managed.

When your approach a Pure Wealth Management & Advisory Firm, you have a better, diverse and advanced product and service choices; as these firms, in order to remain competitive, bring the best in class services & products to your desk. Moreover, fee based services remove the conflict of interest, with provider being able to meet its costs & client is saved from the risk of being sold higher commission based product.

Pointers On Real Estate Bill Passed By Cabinet.

2013-06-17T14:55:00.001+05:30

Finally, much awaited bill finds an approval with the Cabinet. It is beter late than never, wil real estate customer woes being over for now. Atleast, the process has been sent in motion.

The Union Cabinet approved the bill to set up a regulator for the real estate sector with provisions for jail term for the developer for putting out misleading advertisements about projects.

Here are 10 things you need to know about the bill:

The Real Estate (Regulation and Development), Bill 2013, seeks to make it mandatory for developers to launch projects only after acquiring all the statutory clearances from relevant authorities.
It also has provisions under which all relevant clearances for real estate projects would have to be submitted to the regulator and also displayed on a website before starting the construction.

The proposed legislation has certain tough provisions to deter builders from putting out misleading advertisements related to the projects carrying photographs of actual site. Failure to do so for the first time would attract a penalty which may be up to 10 percent of the project cost and a repeat offence could land the developer in jail. Moreover, any false advertising implies that buyers will get full refund of the money deposited with interest.

The bill also seeks to make it mandatory for a developer to maintain a separate bank account for every project to ensure that the money raised for a particular project is not diverted elsewhere. According to a CNBC-TV18 report, developers have to keep aside 70 percent of the buyers’ funds in a separate bank account to ensure timely completion of projects. The buyers are entitled to full refund with interest in case of delay in projects.

The proposed legislation provides for clear definition of the ‘carpet area’ and would prohibit private developers from selling houses or flats on the basis of ambiguous ‘super area’.

Under the proposed new law, builders will be able to sell property only after getting all necessary clearances. Registrations of projects with the regulatory authority is a must. This means developers cannot offer any pre-launch sales without the regulatory approvals. Moreover the authority must approve or reject projects within 15 days.

Developers will also be barred from collecting any money from buyers before completing all necessary permits to start construction on the project.

Builders cannot take more than 10 percent of the advance from buyers without a written agreement.

The bill also seeks setting up of a real estate appellate tribunal for adjudicating disputes. The tribunal will be headed either by a sitting or a retired judge.

It also suggests setting up of a national advisory council to be headed by housing minister Ajay Maken to suggest ways to advise the regulator on crucial matters.

Now, much of the transparency will come into the system that was long due.

We are following up and keeping track of developments. Stay connected for the updates.

BEAWARE & THINK Before You Accept An OPEN OFFER Put Forth By The Company...!

2013-05-12T12:44:00.002+05:30

Situation:

Imaging a situation that you are holding a 1000 shares of a company at a prices of INR 500 per share. This makes your holdings in that stock of INR 5,00,000/-. Also, Sensex is Trading at around 20,000 levels.

All the things seem in you favour and you get a good news that the same company in which you have invested your INR 5,00,000/-, has declared an open offer of a buy back. Your happiness knows no bound, since buy back price is always higher than the trading price.

Now, you intend to have the best of both the world's by tendering to that offer; intended to reap in better returns and realising the profit in the deal.

At this juncture you are unaware about the TAX BLOW that is waiting to happen if you execute the deal.

Real Life Example:

The above situation is best explained with the case of HUL (Hindustan Lever Limited), when the stock reacted the same way when open offer announcement for buyback was made by the firm. The stock price rocketed up by 17% to INR 583.60/-, when HUL announced its intention to buy 22.52% stake.

Share Selling Options Available & Tax Implications:

Sale In Open Offer: Whenever you make a sale in open offer, you have to pay tax; even if the shares were held in your portfolio for more than a year. You can not escape the tax net in this case.

Sale in open offer is just like any equity transaction; but is considered as a debt transaction, since there is no STT (Securities Transaction Tax) on it.

Now, a long term investor who had held shares for more than 1 year and sold under open offer, may take Indexation benefit on it. That means, lower of 10% with indexation, 20 % without indexation.

If however, the share sale has been done in less than the year, then the share holder is taxed as per his tax slab. There will be the additional tax of surcharge tax, if the income exceeds INR 1 Crore.

Sale In Secondary Market: Sale in the secondary market does not attract tax on the long term capital gains, if shares have been held for more than a year. Only STT of 0.1% will have to be paid in this case.

For the sale made in less than a year, the gains are taxed at 15% as short term capital tax gains. This could be beneficial for those who are taxed at the higher tax bracket of 20% and 30%.

For Whom it is Beneficial To Go For Open Offer...?

Tendering to the open offer made by companies, shareholders who are in 10% income bracket or retirees who have higher taxation exemption limit will have such offers advantageous. For those falling in 30% tax bracket, secondary market sale offer is the only best available alternative available.

(Important) I-T Returns Might Ask You To Disclose All Assets

2013-05-10T01:23:00.001+05:30

Finance Ministry's consistent efforts to counter tax evasion practises in India might lead you to disclose all your assets and liabilities in I-T returns disclosures. This might be made mandatory for individuals and HUF's (Hindu Undivided Families).

So, you might have to fill up a new I-T return form that would ask you to disclose all your assets and liabilities. The year that went by saw disclosure of assets and liabilities being made by those individuals who owned foreign assets.

This initiative by the Ministry of Finance is to bring into net those HNIs who earlier were evading from paying wealth tax.

Wealth Tax is currently charged at 1% of the assets exceeding 30 lacs. This does not exceed one residential property and financial assets.

Caution:

Kindly confirm with your Chartered Accountant about the implementation of the same and the date of effect, before taking any decision.

Bank Loans - No Interest Rate Reduction In Near Future.

2013-05-10T00:38:00.001+05:30

Irrespective of seeing a repo rate cut, we may not see reduction in the consumer loan rates; since, banks are still paying higher to depositors. Although, banking fraternity is satisfied the way cuts in repo rates are being done, but banks would not be able to cut lending rates till CRR (Cash Reserve Ratio) rate also cut. Cash Reserve Ratio is the rate at which RBI lends to banks.

Why Lending Rates Will Not Come Down In Near Future..?

Currently, banks do not have excess cash to lend to borrowers. Thus, they are compelled to provide higher interest rates to depositors, so that they receive higher inflow of deposits, that could be used for lending to borrowers.

Now, if a cut is introduced in the reserve ratio, this will release much needed cash for the banks for further lending. Since, in this case, as there is a lower cost of funds; this will in turn reduce the total cost of funds for the banks. Hence, then only can the banks pass on the benefit to borrowers.

Another way out for reducing lending rates would be sharp reduction in the deposit rates. But, this step can not be implemented in current circumstances as the deposit mobilisation has been sluggish.

BeAware of [1st June 2013] : Dividend Distribution Tax on Debt Mutual Funds hiked to 25%, will become Applicable.

2013-05-09T01:10:00.000+05:30

DDT on debt fund investments for retail investors has been increased to 25% from 12.5%

The dividend distribution tax (DDT) on debt fund investments for retail investors has been hiked to 25% from 12.5% (plus surcharge and cess).

DDT is the tax that debt mutual funds (MFs) pay on the dividend income distributed to retail investors. Although dividends from mutual funds are tax-free in the hands of the investor, your debt fund deducts DDT from the income earmarked for distribution, and gives the rest to investors.

Currently, liquid funds pay a DDT of 25% (plus surcharge and cess). All other types of debt funds pay 12.5% (plus surcharge and cess) on income distributed to retail investors; and even this is now increased to 25%.

Retirement Planning Strategy Takes A Hit:

This will be a big hit to those you use their mutual fund debt portfolio as a retirement portfolio, receiving income as dividend distributed to them on regular basis.

Hence, financial planers have a key role to take conscience of the matter and restructure retirement plans of their clients in accordance to the change that has come up.

Clients should ideally invest in growth option with more than a year of horizon in mind. This way they will be able to have the indexation benefits. hose who need regular incomes to be withdrawn from the portfolio, may opt for SWP (Systematic Withdrawal Plan).

However, in case of corporates, DDT paid by all types of debt funds continue to be at 30%.

A Word Of Caution:

Has your advisor / advisory changed debt funds from DIVIDEND to GROWTH Option. It Not, DO IT BEFORE 1st June ' 2013.

Reduce Tax Outgo & Also Increase returns by upto 2.5% On Debt Funds

2013-05-08T18:20:00.000+05:30

In the month of march, we see investors parking their surplus funds in fixed maturity plans and scores of other debt funds, to take advantage of double indexation benefit. But, the series of policy rate cuts by reserve bank of India and increased the expectation of capital appreciation on these investments.

Advantage of double indexation can be had by investing in March of year 1 (FY 2012-13) and then selling in April of year 3 (FY 2014-15). This virtually brings down the tax impact to a very low level if not to zilch. This means whole yield on such investments becomes tax free.

A rate cut will result in capital gains on these instruments.

A debt fund with 5 years average maturity could give you a capital appreciation of 250 basis point, or 2.5%, if interest rates were to drop by 50 basis points, or 0.5%.

That means, good days are ahead for debt fund investors in the coming year. If repo rates were to be cut by 1% you would get accrued interest of about 7.8% plus 5%, pushing up your effective rate of returns to 12.8%. In case repo rates are cut by 50 basis points, your total returns could be approximately 10.3%.

How does double indexation work

Double indexation would kick in if you invest in the first financial year and sell in the third financial year. So if you invest now in March 2013 (financial year 2012-13) and sell your investment in April 2014 (financial year 2014-2015), you can get the benefit of double indexation. This may help you to reduce your tax liability on long-term capital gains that will arise on redemption of mutual funds.

Let us take a simple example:

Suppose you invest 1 lakh in a debt fund in March 2013, with say an average portfolio maturity of five years. Now, you will get accrued interest of approximately 8% on this investment.

Assuming repo rates are cut by 50 basis points conservatively during the year, you can see a capital appreciation of 2-2.5%. So if you redeem the investment in April 2014, the total return will be approximately 10-10.5%.

Now, as per tax laws, you have the option of paying tax on long-term capital gains with or without indexation. Assuming a 10% return on your investment, your total fund value will be 1,10,000 (investment 1,00,000 and a capital gain of 10,000) in April 2014 .

Now the tax calculation works as follows: The CII (cost inflation index) for the year 2012-13 is 852. Assuming 7% inflation, for the next two years, the CII for 2013-14 will be 911 and that for 2014-15 will be 975.

If the debt fund is redeemed in April 2014, you can also take into account the CII of 2014-2015. Capital gain with double indexation in this case will be 1,10,000 - 1,14,437 = (-) 4,437. Thus, as per the calculation, you make a loss of 4,437. That means you will pay zero tax, or your returns are tax- free. In fact you can even carry forward this loss for eight years and can set it off against long-term capital gains.

What Are The choices You Have

For risk averse investors, who have invested in the debt market in March this year could be fruitful.

With both benefit of indexation and capital appreciation, this is a good opportunity for debt investors to get double-digit tax free returns.

Debt Fund category provides investors a number of products to choose from. Investors looking for capital appreciation plus benefits of double indexation can go for income funds, dynamic bond funds or gilt funds.

Dynamic Bonds are best suited for Investors with a time frame of more than a year. Here, the fund manager can change the maturity of the portfolio based on his assessment of the interest rate scenario. In this type, the fund manager actively manages the duration of the fund. He takes his decision based on the interest rate environment.

Therefore, the fund manager's view would be reflected by the maturity profile of the funds and its duration.

Typically, the duration and average maturity would tend to be longer if the fund manager feels that interest rates are likely to fall, or are falling. Birla Sun Life Dynamic Bond Fund, SBI Dynamic Bond Fund, Reliance Dynamic Bond Fund, IDFC Dynamic Bond Fund are some of the funds in this category.

Investors who merely want the benefits of double indexation and no interest rate risk, can opt for a fixed maturity plan (FMP). However, the returns on these would be under 9.5%.

A Note Of Caution:

It is very important for the investor to take, not only a right decision at the right time; but, also execute it. Wealth Management is all about timing well managed. Just because an investor is not aware of policy rate cut, and the funds that need to be acted upon at an immediate point in time, might loose the opportunity to have a double digit return.

Not only this, in the falling interest rate scenario funds being in the ultra/short term funds will see a fall in returns, a reverse trend to what would be seen in the long term debt funds.

Also, a critical point comes, if policy rate are revised upwards. The whole strategy has to change.

Thus, it is imperative that a investor has his funds being managed by a specialist firm, whose expertise is in pure wealth management; with state-of-art transactional platform (No Cheques involved). There higher chances of opportunity loss when you have to shift funds between different mutual funds firms (Asset Management Companies).

Last but not least, you advisor should be an advisor in the true sense and deed, and not with a trader bent of mind. he should be knowledgeable enough, and be able to implement his key thinking so that the returns for the clients are maximized.

2013-05-06T15:37:00.000+05:30

RBI is responsible for the development of the Government Securities market. Although, debt market in India is not matured; but RBI is taking steps in the good direction to address key concerns.

What Are Inflation Indexed Bonds:

In the developed debt markets, such as, United Kingdom, USA, New Zealand, Canada, Sweden, and South Africa the Inflation Indexed Bonds issued by the Government are one of the popular debt instruments. These Governments undertake issuance of the bonds at a regular interval with an aim to:

(a) provide a new instrument to investors that offers hedging against inflation risk,

(b) enhance credibility of anti-inflationary policies,

(d) create an additional avenue for fund deployment and thereby facilitating widening of Government securities

market.

Out of several variants of Inflation Indexed Bonds, the Capital Indexed Bonds (CIB) is the most popular and widely issued debt instrument internationally. In India also one variant of CIB (viz., 6 per cent Capital Indexed Bond 2002) was issued for the first time on December 29, 1997. Subsequent to that issuance, there was no further issuance of CIB mainly due to lack of an enthusiastic response of market participants for the instrument, both in primary and secondary markets.

Some of the reasons cited for the lackluster response are:

it only offered inflation hedging for the principal, while the coupons of the bond were left unprotected against inflation and
complexities involved in pricing of the instrument. Taking into account past experience as well as the internationally popular structure of Capital Indexed Bonds a modified structure of Capital Indexed Bonds has been designed.

Proposed Structure of new Capital Indexed Bonds

In line with the international standards, the proposed CIB would offer inflation linked returns on both the coupons and principal repayments at maturity.

The Basic feature of bonds would be that the coupon rate for the bonds would be specified in real terms.

Such coupon rate would be applied to the inflation-adjusted principal to calculate the periodic semi-annual coupon payments. The principal repayment at maturity would be the inflation-adjusted principal amount or its original par value, whichever is greater, thus with an in-built insurance that at the time of redemption the principal value would not fall below par. The inflation protection for the coupons and the principal repayment on the bond would be provided with respect to the Wholesale Price Index (WPI) for All Commodities (1993-94=100), the leading measure of inflation in India.

Repayment:

Based on the Wholesale Price Index for All Commodities, the principal value of CIB would be adjusted.

The inflation-adjusted principal value of the bonds can be obtained for any date by multiplying the par value by the index ratio applicable to that date. The inflation adjustment to the principal would not be payable until maturity.

At maturity the CIB would be redeemed at its inflation adjusted principal amount or its original par value, whichever is greater, with an inbuilt insurance that the redemption value would not be below par.

Taxation

The value of the investment in the CIB and the coupon payable thereon would be governed by the provisions of tax laws as applicable from time to time.

For further details on the same, you can reach us at:

contactus@cogentadvisory.com
Call Centre : +91 - 87 4402 2020

Direct Contact : Rajat Dhar (+91 - 9654.270.100)

Indian Americans: How to get your 2013 tax residency certificate

2013-04-30T22:23:00.001+05:30

(Source: Times Of India) Venkatraghvan | Apr 29, 2013, 06.54 PM IST

This is the first year that India is mandatorily seeking TRCs and there are likely to be teething troubles.

With effect from financial year 2012-13, India made it mandatory for all foreigners, including non-residents to obtain a Tax Residency Certificate with certain prescribed details from their country of residence in order to claim benefits of the Double Taxation Avoidance Agreement (DTAA).

The complete notification for this was released in September 2012, and hence financial year 2013-14 is the first full year when this will become applicable.

Let us quickly look at what the treaty benefits are and then go on to understand how Indian Americans can get the TRC from the US Internal Revenue Service (IRS).

Treaty benefits:

To put it in a nutshell, the India-US DTAA allows residents of the US who have income from India to pay a lower amount of tax in India provided tax on the same is paid in the US.

"Sections 90(4) and 90A(4) in this regard say that foreign vendors must 'obtain' a Tax Residency Certificate. What this means is that the NRI must obtain this certificate and keep it with him. If he claims the treaty benefits at the time of filing his tax returns, then he must be ready to present the TRC at the time of assessment. However, if he is claiming the treaty benefits at the time of Tax Deduction at Source (TDS), then the payer may ask him to furnish the TRC in order to deduct tax at the lower rate," explains Vineet Agarwal, Director - Tax, KPMG India.

Tax Residency Certificate:

The IRS issues this on Form 6166. Form 6166 is a letter printed on US Department of Treasury stationery certifying that the individuals or entities listed are residents of the United States for purposes of the income tax laws of the United States.

In order to obtain this certificate, you must fill up Form 8802, Application for United States Residency Certificate.

When to apply:

If you need the Tax Residency Certificate for 2013, you can apply now. "The TRC will be available only for one calendar year at a time. So if you need one for financial year 2013-2014, you will need to get two certificates, one for 2013 and one for 2014," explains Roy Vargis, CPA and promoter of IndiaCPA.com.

There are a few challenges here. First is that the IRS will issue the TRC for a future year only after Dec 1 of the earlier year. That means, if you need a TRC for 2014, you can apply only after 1st December 2013. So this is something NRIs must remember and act on later on to get their 2014 TRC.

Secondly, "If someone was deputed to US recently or is a recent migrant, he will not be eligible to file Form 6166 for TRC. The certificate will be issued only if a US tax return was filed. If for the current year you filed a 1040NR (a non resident return), then too you will not be eligible for the TRC," Vargis explains. In such case, you would need to pay tax in India and then claim credit in your US tax returns.

"To take this a step further, if you were a dual resident, a resident of US and India, your application for TRC may be denied. This is possible in a situation where you were either a Green Card holder or a Citizen of US living in India. In this situation, the application should be submitted with evidence to establish that you are a resident of the US under the tie breaker provision of the US India DTAA Article 4(2). Do note that US Citizens or Green Card holders who do not have a substantial presence or permanent home in the US during the tax year are not entitled to treaty benefits," Vargis adds.

Documents:

The IRS needs to know that you are indeed a US tax payer. So if you are applying for the TRC for 2013, then you should have filed your 2012 returns. Since the due date for tax returns for 2012 just passed, it is possible that the IRS may not have your tax return in their system. In such cases, it will be useful if you included a copy of the income tax return with your Form 8802. Write "COPY - do not process" on the tax return.

In addition, you must also sign a 'Penalties of Perjury Statements and Attachments' declaring that you would continue to be a US taxpayer in the year for which you are requesting the TRC, that is, for 2013.

Fee: You must pay a user fee of $85 for each Form 8802. The IRS advices applicants to request all forms 6166 on a single form 8802 to avoid paying $85 for processing a second form 8802.

This is the first year that India is mandatorily seeking TRCs and there are likely to be teething troubles.

Strategy A Fixed Income Investor Should Implement.

2013-04-21T15:51:00.001+05:30

In this article we determine facts and provide reason for including Income funds in the fixed income portfolio.

Our economy is on the downward trend since 2011, with GDP hovering around 6%. Other macro economic indicators as well as weekly and monthly statisticslike IIP numbers also show no sign of relief and the change the the trend. Although, inflation has lowered a bit, but fiscal and current deficit are still posing a grave problem to our economy as a whole.

In July 2012, our recommendation to investors was to park their investments in Short-Term funds with the horizon of 1 year, as we were anticipating reforms to be taken up by the government. However, not much was done in this direction.

INFLATION

We all are aware of the central bank's stance that to tackle inflation is its core responsibility. In the mid quarter monetary policy review do December 2012, the headline inflation was below RBI's projected levels. The same is expected to remain for the rest part of 2013-14. If the government take measures to reduce fiscal gap, and if the currency shows signs of appreciation that would have positive impact on the inflation front.

GOVERNMENT BOND's DEMAND SUPPLY EQUATION

In the current scenario, RBI actively manages liquidity in the banking system. Banks have been borrowing heavily (in the range of INR 80,000 crore to INR 1,00,000/- Crore) under LAF (Liquidity Adjustment Facility) is well above the comfort limit of INR 60,000/- Crore under LAF (Liquidity Adustment Facility) or 1% of Net Demand and Time Liabilities. Another important point to note here is that demand for government securities from banks which is set to rise on account of banks adopting play safe due to their Non Performing Assets (NPA's). Bankscurrently have exposure to Statutory Liquidity Ratio (SLR), well above stipulated ratio of 23%. All these factors would contribute towards the rallying, that could be foreseen in the bond market.

WHERE YOU SHOULD INVEST NOW

In the backdrop of above points, we have decided to shift our stance and suggest that investors start taking ex exposure to long term debt funds. All those who are well versed with the fixed income market, know that their is an inverse relationship between interest rates and bind prices. Thus, whenever there is an expectation that interest rates will be on the downward spiral, yields on the bonds fall resulting in increase in Bond prices. In such scenario, investors with thehorizon of 1 year should invest in Income Funds. Our recommended funds in this category are Templeton India Income Builder Account, DWS Premier Bond Fund and Canara Robeco Imcome Fund.

Research Desk

researchteam@cogentadvisory.com

US: +1(718) 713 8269. UK: +44(20) 3393 4285. IND: +91 87 4402 2020

Disclaimer:

Cogent Advisory or it's employees may own or have positions in the mutual funds of any Asset Management Companies mentioned or referred to in this article! And may dispose, switch to/from or buy more in the same of any other fund. This article should not be construed as an offer or solicitation for the purchase, subscription or sale of mutual fund. No decision should be taken without going through Key Information Memorandum and Statement Of Additional Information. Any information provided herein is made on general basis and does not take into account investment objective on individual or group or individuals. Investors should take professional investment,max and legal advice before taking and decision on investment. Past performance is not indicative of future performance of the fund. Opinions presented herein may change without prior notice. Kindly read disclaimer on our website www.cogentadvisory.com

3 Points and 3 Principles To Follow Before Investing In GOLD.

2013-04-19T00:43:00.001+05:30

GOLD has seen a steady crash in prices for the past couple of days. The fall was catalysted with news that Cyprus's central bank would sell its gold holdings. If that happens, it might trigger another countries in Europe also following the bandwagon. Currently US holds biggest Gold Reserves of approx 8,100 tonnes. What would happen if US decides to offload it's reserves.

Now, crucial question is, what an investor should do in such a scenario? Gold, as an asset class has always been considered as a hedge against inflation. Thus, also there should be a certain specific allocation made into Gold.

Basic points to consider while investing in GOLD:

1. Percent Allocation: Of the total investment corpus, allocate only 10% to GOLD.

2. Time Of Purchase: Buy at dips spread over a year, or if not sure of the timing invest using SIPs. Generally, Feb-Apr is the lean season and post which gold sees price rise.

3. Method Of Buying: Gone are the days when one would buy gold from Jewellers, banks for purely investment purpose. Now, state of art distribution channels are available for the clients to invest. NSEL enables investor to buy precious metals, such as e-Gold, e-Silver, etc on the DEMAT/TRADING Platform. On NSEL Spot, and investor can also take the delivery of the same, or even sell it. The best part remains that the holdings are in dematerislised form, and hence very low maintenance costs for the client, and at good price. A client can buy/sell online and even on recorded telephone lines. Contract notes are sent to the client via email or couries (as preferred). Also, the client can acess his Gold investments via an online access. Another option available is to invest in GOLD ETF (Exchange Traded Fund). This fund tracks Gold prices and hence returns closely follow that of gold. But, the delivery of gold by investing in these is not an option available to teh client. Third option is to invest in a product that would enable client to invest in Gold on daily basis; and on the date of maturity client has to take the delivery of the same. In this case, client has no other option but to take delivery upon maturity.

Fact to keep in mind:

Last couple of years have seen very good returns on the gold investment's. This had been predominantly on account of weak global markets and weaker currencies, which led corporates and central banks across the world invest in gold. With global markets showing signs of improvement, slowing emand of Gold in China and Cyprus's central bank's decision regarding selling of Gold reserves led to the crash in GOld prices.

What Should be guiding principles:

1. A investor should keep in mind that investing in Gold should be within allocation limits.

2. Investment horizon shold be long term. Short term investment could be counter productive.

3. Select best distribution channel for buying gold.

However, it is recomended that an investor should always have a financial plan made for his investments and undertake his investments according to the plan. This prevents an investor from falling prey to sentiments while investing. Also, tracking of investments and benchmarking of the same is also as important as investing.

Research Team

researchteam@cogentadvisory.com

http://www.cogentadvisory.com

Queens, New York, U.S.A London, U.K. New Delhi, India.
+1 (718) 713 8269 +44 (20) 3393 4285 +91 87 4402 2020

About Cogent Advisory

Cogent Advisory manages client finances across geographies, adhering to the Global Standards and needs of UHNW individuals & institutions.

Brand: Cogent Estate is Sub-Brand of Cogent Advisory, and the Real Estate Portfolio Management service is provided under this brand. Cogent Estate manages the client real estate assets as a complete portfolio, implementing the latest tools & expertise to handle & deliver upon the same.

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Contact Us at:

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+1 (718) 713 8269

London, U.K.
+44 (20) 3393 4285

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+91 87 4402 2020

Disclaimer:

The article is purely for informative purpose and hence not a solicitation for business/investment. It is not a investment advice. Kindly, refer your financial planner/adviser before taking any action. Neither Cogent Advisory, nor its employees or affiliate partners would be responsible for the any loss on account of investments undertaken by investors based on the information contained in this article.