Author: Team Humfauji

03 Feb 2021
Budget 2021

Budget 2021: Does It Change Anything in Your Life?

Firstly, our overall take on the budget 2021

This is definitely a good budget – focused on the short-term growth in the right areas without any disruptive taxation in these extraordinary times. One of the best budgets ever seen and could have been expected in current scenario. Execution of the same becomes critical now.

The biggest positive is that there are no negatives like taxes on the ultra-rich, no Covid cess or any tinkering with long term capital gains tax. So, we got a budget with no bad news, creating ease of doing business and a focus on growth.

The budget rightly strikes a reasonable balance between addressing the key pillars of Health & Well-being, Inclusive Development, Human Capital, Innovation and R&D, apart from laying the path for a robust economy by providing a major infrastructure boost. The array of measures announced are in line with people’s as well as market’s expectations and will go a long way to bring the nation back on track by boosting spending on infrastructure and rural development while fighting the pandemic through health focused measures.

Here are the highlights of the Union Budget 2021 as it pertains to you:

1. Rationalisation of Tax-Free income on Provident Funds: Interest earned on any new employee’s contribution more than Rs 2.5 Lakhs per year (Rs 20,833 per month) to Provident Fund (including EPF and DSOPF) is taxable from next financial year, ie, from 1st April 2021 onwards. It does not apply to interest earned on older contributions and accumulations in the PF.

2. Unit Linked Insurance Plans (ULIPs) get taxed: Income from maturity of ULIP policies will now attract capital gain taxation which was fully exempt earlier if your annual premium did not exceed 10% of the sum assured. This makes such high value investments less attractive for the taxpayers as they now have to pay capital gains tax on maturity. This is applicable for all ULIP policies bought from 1st Feb 2021 onwards. The advantage that ULIPs had over equity mutual funds (MFs) will also no longer be there as this provision has brought the gains made from ULIPs with premium over Rs 2.5 lakh at par with equity mutual funds.

3. No tax change: The government has left direct taxes unchanged, but took steps in direct tax incentives to ease compliance for taxpayers. The Finance minister proposed making it so that advance tax liability on dividend income shall arise only after payment of dividend. The Budget also looked at pre-filled tax forms with respect to details like salary income, tax payment and TDS.

4. Relief for seniors, small taxpayers: No tax filing for seniors above 75 with only pension and interest income. A dispute resolution committee for small taxpayers is being planned. Anyone with taxable income of up to Rs 50 lakh, disputed income of up to Rs 10 lakh eligible to approach dispute resolution committee.

5. Fuel and Liquor cess: Agri Infrastructure and Development Cess on a number of items including fuel and liquor was announced today but the finance minister also said there would be no additional burden on the consumer overall. Budget imposed a Rs 2.5 per litre agri infra cess on petrol, Rs 4 on diesel, and of 100% on alcoholic beverages.

6. What’s expensive? A large number of commonly used items, including refrigerators, air conditioners, LED lights and mobile phones, will become more expensive due to hike in customs duty on imported parts.

7. LIC IPO: The finance minister announced plans to privatise 2 PSU banks and one general insurance company in FY22. The Govt will bring the long-awaited LIC IPO in FY22, adding that it plans to complete the divestments of BPCL, CONCOR and SCI in 2021-22.

8. Direct and Indirect tax

  • Reduction in time for IT Proceedings: Reopening of Assessments period reduced from 6 years to 3 years except in cases of serious tax evasion cases
  • National Faceless Income Tax Appellate Tribunal Centre
  • Tax Audit Limit: Proposal of tax audit increased from 5 Cr. to 10 cr. (Only for 95% digitized payments business)
  • Propose to include tax holidays for Aircraft leasing companies
  • Late deposit of employee’s contribution by employer will not be allowed as deduction
  • Incentive to startups: Tax holiday exemption for one more year
  • Duties reduced on various textile, chemicals and other products
  • Gold and Silver (Basic Custom Duty reduced)

Some other Important Announcements

1. Access to deposits: The finance minister announced that in case a bank fails or withdrawals from the bank are stopped due to financial pressure on the bank, the depositors will be able to get immediate access to their deposits up to the deposit insurance amount of Rs 5 lakh.

2. Fiscal deficit: The finance minister pegged FY21 fiscal deficit at 9.5% of GDP, with FY22 fiscal deficit target at 6.8% of GDP. Hopes to get back to fiscal consolidation path by FY26. Fiscal deficit to reach below 4.5% by FY26. FY22 gross expenditure seen at Rs 34.83 lakh crore.

3. A Bank for roads: The Govt is set to introduce a Development Financial Institution (DFI). Rs 20,000 crore will be provided to capitalise the new DFI, with an aim to have a lending portfolio of Rs 5 lakh crore in 3 years. National Monetisation Pipeline for brownfield projects will be launched, the FM announced with NHAI and PGCIL having sponsored one Infrastructure Investment Trust each. She also added that vehicles will undergo fitness tests after 20 years for PVs, 15 years for CVs, announcing a voluntary vehicle scrapping policy.

4. Banking and companies: The Govt plans to allot Rs 20,000 crore for bank recapitalisation of PSBs. The FM also proposed to revise definition under Companies Act, 2013 for small companies by increasing their threshold for capitalisation to not exceeding Rs 50 lakh to not exceeding Rs 2 crore and turnover not exceeding Rs 2 crore to not exceeding Rs 20 crore.

5. Amendments: The Union Budget proposed to consolidate provisions of the SEBI Act, Depositories Act, Securities Contracts Regulation Act, and the Government Securities Act. The government aims to amend Insurance Act to allow higher FDI, increasing FDI limit in insurance to 74% from 49% and allowing foreign ownership.

6. Shot in the arm for healthcare: The allocation to healthcare in this budget has been increased substantially to Rs. 64,180 crores. The areas of focus will be preventive and curative healthcare as well as wellbeing, she said. The allocation is likely to be around Rs 2,23,846 crore, a 137% percentage rise from the previous budget. Rs 35,000 cr has been budgeted for COVID-19 vaccination expenditure in FY22.

Other provisions that may be of interest to some select few:

  • Affordable housing incentive extended by one more year and No change in definition of affordable housing.
  • 7 Mega Textile Investment parks will be launched in 3 years.
  • 5.54 lakh crore provided for Capital Expenditure.
  • 1.18 lakh crore for Ministry of Roads & 1.10 lakh crore allocated to Railways.

With Best Wishes for a Financially Abundant 2021.

15 Jun 2020
Investor updates


Silver prices are up about 25% in a month, Silver has strongly outperformed gold over the past month. Silver rates have been lifted on optimism that industrial demand of the metal may revive as countries reopen their economies. Silver rates surged in Indian markets today, extending their recent gains.

LIC may cut back on investing in stocks as new premium growth stalls. Official figures suggest that a cut back in equity allocation by Rs 10,000 could be the lowest in a decade. LIC invested around Rs 47,000 crore in equities in FY20, down 21% from the amount it invested in FY19.

Mutual Funds are looking at launching low volatility products- Equity as well as Hybrid, to give investors alternatives in the current market environment. ICICI mutual fund recently filed for an exchange traded fund (ETF) that will track the Nifty alpha low-volatility 30 index. It is part of a suite of smart beta indices with NSE, with the portfolio designed using a combination of two factors. 50% of the index portfolio is oriented towards low volatility stocks on the nifty, and rest is oriented towards the alpha component. Actively managed funds charge a higher fee because the manager invests time and resources in identifying winning stocks, whereas passive stocks just mimic the return of their underlying indices. Funds based on smart beta indices offer a middle path to investors. A smart beta strategy focusing on quality, will allocate more to companies with higher earnings growth, stable cash flows and low debt. A low volatility ETF’s portfolio will comprise companies with more stability in earnings and stocks with low volatility in price. Smart beta funds can potentially offer better risk adjusted return than a traditional index fund.

Wealthy Investors and Corporates are turning to additional tier-1(AT-1) bonds of large banks in search of higher yields in a declining interest rate environment. AT-1 Bonds pay a slightly higher rate of interest compared to similar, non-perpetual bonds. Banks have the right but not the obligation to pay back the principal amount after exercising a call option. AT-1 bonds had fallen out of favour after the Yes Bank fiasco in March 20. However, higher yield with decline in interest rate in other debt instruments has prompted investors to look at these bonds again. Yields on these bonds are higher than that given by non-convertible debentures and bank fixed deposits.

The severe dips in revenue during the lockdown has doubled the state government borrowings to over Rs 1.26 trillion from April to early June . The governments had to increasingly resort to borrowings to meet the funding exigencies, owing to severe revenue shortfall caused by the shutdown. Government borrows through issue of government securities, as the tax and non-tax revenue fall short in financing government spending programme. The decision to stick to its borrowing programme will largely keep the bond yields in check but this will increase the fiscal deficit with increase in interest obligation as public debt will go up leading to higher debt to GDP ratio.

Mukesh Ambani announced that his oil-to-telecom conglomerate RIL is now net debt free after raising Rs.1.69 lakh crore in last two months from global investments and right issues. Ambani says, “I have fulfilled my promise to the shareholders by making Reliance net debt free much before our scheduled date 31st March, 2021”. In the last 9 weeks RIL finalized 11 deals which include Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton, PIF, and Saudi Arabia’s Sovereign Fund. It has raised a total of Rs 1,15,693.95 crore from these global investors. And another 53,124 crores from rights issue in last 58 days. In an Annual General Meeting, on August 12, 2019, Ambani announced a roadmap to make Reliance a net debt free company by March 31, 2021.

RBI has imposed strict rules on Housing Finance Companies in order to prevent conflict of interest. RBI said that, either the HFCs can take exposure to group companies in real estate business or lend to retail individual home buyers in project of group entities, but cannot do both. RBI said in a draft regulation that “This is aimed at addressing the concern on double financing due to lending to construction companies in a group and also to individuals purchasing flats from the latter”. RBI further said that, HFC’s exposure (lending & Investment ) cannot be more than 15% of owned fund in a single entity in the group and 25% of owned funds in all such group entities. The RBI which directly regulates housing finance companies since August last year, suggested clarity in HFCs’ principal business, to make a half of their net asset in housing finance and proposed of loans to developers for construction of residential units, schools etc under home loans.

05 Jun 2020
Investor Updates - Hum Fauji Initiatives

Investor Updates from Hum Fauji Initiatives Bulletin Team

Targeted long term repo operations: RBI is said to be taking steps to make the TLTRO more effective and infuse liquidity in the economy, RBI told banks to borrow and invest at least half of money in money market instruments issued by small and medium sized NBFC and MFIs, in response to liquidity crises occured by covid 19 pandemic RBI announced TLTRO of 1 lakh crore to economy to restore and balance liquidity. LTRO is basically a tool to provide funds to banks. The funds can be obtained for tenure between 1-3 years at existing repo rate against mortgaging(collateral) the government securities. Usually repo rate is lower and bank can avail loan at cheaper rate, banks then are supposed to invest the borrowed amount in fresh acquisition of securities from primary and secondary market. RBI has directed banks that atleast 50% of the funds so borrowed should be invested in corporate bonds, commercial papers and debentures in the secondary market.

Swiggy is setting up a technology centre in Chennai in order to evolve beyond food to deliver groceries and other daily essentials to its customers. The reason why Swiggy wants to evolve is-

  1. With its core food delivery orders seeing a more than 40% drop and no signs of recovery in the coming months, Swiggy needs an alternate business avenue to remain relevant.
  2. This is a three-way marketplace where there are consumers, drivers as also on-demand-workers and restaurant partners. In order to fulfill the consumer demand, there is a need to maintain a balance in this demand and supply equation. There is a huge demand from consumer perspective but a huge challenge from driver and restaurant partner perspective to maintain a balance in this demand-supply equation across the three entities.


Swiggy sees this as a constant dynamic three-way engineering challenge.

The government is seeking to sell its entire stake in FMCG ITC and Axis Bank, the government held the stake via SUUTI (Specified Undertaking Unit Trust of India) of about 7.94% in ITC and 4.69% in Axis Bank. Disinvestment aims at reducing the financial burden, to finance India’s increasing fiscal deficit, financing large scale infrastructure projects, conclusively to meet the expenditure and consumption need of the nation. As per the recent and current scenario, return on capital employed by PSU is far lower than the borrowing/interest rate, which is also the reason for this action. Due to current revenue expenditure such as interest payments, wages and salaries of government employees, government is hardly left with any surplus for other projects and schemes. Disinvestment is a tool that can help in improving and increasing economic efficiency.

April month has passed off better for the Indian economy after a drastic March. Both Nifty & Sensex bounced back by around 30% in the month of April 2020. The pandemic has affected the domestic and global economy – so why is the Indian economy projected to have a good time?

It is all due to the expectations of the market, as the market is just a sentiment of millions and billions of investors. Fresh cases of pandemic are increasing at a declining rate now – the rate of increase of fresh positive cases all over the world is around 5.5-5.6% compared to the earlier 10-12%. The Indian government too has taken many measures to fight against this critical scenario. RBI has cut down the interest rates severely in order to maintain stability in money flow of the economy and provided Rs.50,000 crore of liquidity lines to MFs to manage panic redemptions. On the Fiscal Policy side as well, the government has announced a package of $1.7 billion to support weaker sections.

But after all this, it does not mean that all is going to be alright. The Indian economy will struggle to show any positive growth this year. The way ahead for equity market is full of volatility. In this phase of alternate bouts of optimism and pessimism, it would not be easy for one to manage own investment portfolio. So the investor should, instead of focusing on these short term movements, look only at long term and must invest systematically in this phase to make the best of the expected near-term volatility.

Likely issue of Tax Free Bonds by Govt. of India

The government is seeking to raise funds by issue of tax free bonds, to bridge the fiscal gap which has worsened after OVID-19 disruption. As the name suggests, the most attractive feature is that interest income is fully exempt from tax as per section 10. These bonds are issued for a specific time period and lock-in, are for long tenures, and default risk is negligible, and would suit a lot of people in the current risk-averse environment. Tax free bonds are very suitable for investors in higher tax slabs as the returns are not only higher than bank FDs but also do not attract any tax, investor can lock in at the given interest rates and do not have to worry about reinvestment risk or tax changes.

With a view to provide adequate liquidity in the system as well as to the banks, SBI, the largest public sector bank, has cut its Marginal Cost of fund Lending Rate (MCLR) by 15 bps (1% is 100 bps) in all loan tenures (will come into force from May10, 2020) and also reduced interest rates on retail Term Deposits by 20 bps in tenures up to 3 years (will come into force by May 12,2020).

The one-year MCLR will come down to 7.25 % from 7.40 %. The EMI on home loans (accounts linked with MCLR) will get cheaper by Rs 255 per Lakh and the home loan for 30 year of Rs 25 Lakhs. This is the 25th consecutive reduction in bank’s MCLR.

This reduction in the interest rates of term deposits will hurt Senior Citizens and those who depend on interest income for their livelihood. In order to provide safeguard to the Senior Citizens, SBI has introduced a new retail Term Deposit Scheme. Under this scheme, called the “SBI We Care Deposit”, it will provide an additional 30 bps premium on deposits of 5yrs and above. This Scheme would be in effect until September 30,2020. Thus, the effective Rate of Interest for this Term deposit for 5 year and below tenure will be 50 bps higher than the rate applicable for general public and that for 5 years and above tenure it will be 80 bps higher than the rate applicable for general public.

India is developing a land pool nearly double the size of land in Luxembourg to attract businesses moving out of China as it is the best opportunity for India to welcome businesses moving out of China after the coronavirus outbreak. At present, Land has been one of the biggest impediments for companies looking to invest in India. Providing Land, Water, power and road access may help to attract the investments for Indian economy that was slowing even before the coronavirus hit.

As per the news, a total area of 4,61,589 hectares has been identified across the country for the purpose. Luxembourg is spread across 2,43,000 hectares, according to the World Bank. The Government has handpicked 10 Sectors – Electrical, Pharmaceuticals, Medical Devices, Electronics, Heavy engineering, Solar Equipment, Food Processing, Chemicals and textiles – as focus areas to promoting manufacturing. The embassies abroad have been asked to identify companies searching for options. The government investment agencies have received inquiries mainly from Japan, US, South Korea and China, expressing interest in relocating to Asia’s third–largest economy. States have been separately urged to evolve their own programmes for bringing in foreign investments. Andhra Pradesh is in touch with Japan, South Korea and US, and Uttar Pradesh is also developing an online system for land allotment for the foreign investors. If these foreign investors actually come to India for manufacturing, it will be a great thing for Indian economy.

The Asian Infrastructure Investment Bank (AIIB) has approved $500 million loan to India for support in COVID-19 operations. The fund will enable the government to scale up efforts to limit the transmission of cases, strengthen the health system, prepare and expand its operations for returning back to normal routine, and managing future outbreaks. Apart from these, it will also support pandemic research in Indian Council of Medical Research. This will help the country to better its screening, improving and expanding laboratory diagnosis, procure personal protection equipment and set up new isolation wards. Hence, it can shorten the time to recovery, create growth, support small and medium enterprise and help the poor. In short, this amount is likely to strengthen the nation’s ability to support and respond better to COVID-19 pandemic.

RIL’s massive rights issue of Rs.53,125 crores opens today, The issue, which closed on 3 June, is the largest share sale the country has seen.

Investors wanting to subscribe to the share sale can make payments in three installments.

Asia’s richest man Mukesh Ambani’s Reliance Industries Ltd (RIL), which is on a fund-raising spree amid the COVID-19 pandemic, is set to open its massive Rs.53,125-crore rights issue. The rights issue, which closed for subscription on 3 June, will be the largest share sale India has seen—more than double the 2019 record held by Bharti Airtel Ltd and Vodafone Idea Ltd of around Rs.25,000 crores each. Reliance has hired a syndicate, comprising 14 investment banks, including Morgan Stanley, Citi, Bank of America, and Axis Capital, to manage it.

Ahead of the rights issue, Reliance sold a 14% stake in Jio Platforms to multiple investors, including Facebook Inc., across deals worth Rs.67,194.75 crore. The initiatives are aimed at helping RIL reach its ambitious goal of becoming a zero net-debt company by March 2021. RIL’s net debt stood at Rs.1.53 trillion on 31 December.

The company has set a price of Rs.1,257 per share for subscribing to the rights offering. Investors keen on subscribing to the share sale can make the payments in three instalments—25% of the amount at the time of subscription, another 25% in May 2021 and the remaining 50% in November 2021.

Analysts tracking RIL said its power to beat disruptions and its own value-unlocking abilities amid the pandemic make its rights issue attractive for retail investors.

“The pricing of the rights issues at Rs.1,257 per share is very confident pricing as the promoters will be subscribing to almost half of the issue and raise Rs.26,000 crore for the company. While the promoters and institution holders are long-term holders and will subscribe to the issue as the company’s prospects appear brighter than ever, this is also a critical stage for individual investors,” said Axis Securities.

The brokerage added that as RIL’s business-to-consumer (B2C) businesses offer high growth potential, the discounted price of the rights issue provides a good opportunity to participate in high growth businesses.

On Tuesday, RIL’s shares closed at Rs.1,408.15 apiece on the BSE.

The biggest rights issue in India will also be a litmus test for stock markets, which have been grappling with liquidity concerns. After a 32% rally in April, the stock has weakened this month. Currently, Reliance has 25 buy ratings, three hold and sell ratings by analysts on Bloomberg.

“If an investor one is looking at maintaining or increasing his equity exposure, then this issue can be subscribed. At the current juncture, there are very few companies that show the strength to withstand disruptions and have value unlocking triggers. Also the facility of making part payments is beneficial for shareholders in terms of parting liquidity,” said Deepak Jasani, research head, HDFC Securities.

The government is pushing public sector banks to provide additional working capital to small businesses at 7.5% interest and asking to ensure that senior citizens earn higher returns on their fixed deposits.

Currently small businesses are borrowing at 11-12% from state run lenders, with businesses of turnover up to Rs 100 crore and outstanding loans of Rs25 crore such businesses will get additional 20% working capital through a government guarantee with interest rate capped at 9.25%. The main motive is obvious here – that lenders should pass the benefit of rate cuts to the borrowers too.

Uber India fires 600 employees, a quarter of its workforce in the country. The job cuts come from across the segments, including customer and driver support, business development, legal, finance, policy, and marketing verticals. Uber has announced that affected employees will be provided with a 10-week pay out and medical insurance coverage for the next six months.

In this era of credit risks, redemptions, right offs and poor return in other debt funds, the combination of attractive returns and zero credit risk in gilt funds seems unbeatable. In the last one year, gilt funds have delivered returns in double digits. The average one year returns for gilt funds have been above 10% since June 2019. The returns of gilt funds come from capital appreciation which occurs due to cuts in interest rates or market expectations of cut in the future. The gilt instruments are the most liquid among debt instruments – that’s the reason the impact of rate changes is more in these funds. Returns in gilt funds normalizes with the period. Longer the period, lower the risk of losses. So, holding a gilt fund for at least 5-7 years will give the benefit of no credit risk plus reasonable returns. However, please remember that the market rates (NAV) of Gilt Funds could be very volatile, in line with interest rate movement and monetary and fiscal scenarios.

Foreign Funds have slashed their holdings in Indian government bonds to lowest in three years just as when nation embarked on huge borrowing plan. The amount of sovereign securities held by global investors slumped to Rs 76,700 Crore from this year peak in February. While the dollar cost of funding has come down for foreign investors, the cost of hedging foreign currency risk has stayed stubbornly high. The government has taken steps to ramp up the foreign investment with Rs 22 crore central and state government debt.

Credit risk scheme has seen continuous outflows, and there is consistent increase in Banking & PSU debt funds. The global recession (COVID 19 situation) has weekend the balance sheets and redemption pressure from investors have contributed to this shift. The interest rate cuts will increase the attractiveness of banking and PSU funds as their returns will improve, because of rate cuts by RBI. The fund is backed by sovereign guarantee and act as a cushion in prevailing uncertainty in the market.

On Wednesday evening (May 27,2020), the Government of India has announced that “7.75% Savings Bonds, also known as RBI 7.75% Bonds, 2018 shall cease for subscription with effect from the close of banking business on Thursday, the 28th May, 2020”. The bonds were an attractive instrument for retired investors who invested their money in these funds with a lock-in of 4-6 years according to the age of the investor. It is clear that it is not easy for the government to provide this high returns to the investors in the current interest rate scenario when 10-year G-sec is trading around 6% level, small savings rates have come down to 7.1% and the Bank FDs are providing 5-6% interest rates. This step was already expected though not so soon.

The Initial Public Offerings remained range bound even after several relaxations by SEBI. Last month, SEBI gave a six months’ breather to IPOs whose validity expires between 1 March and 30 September. Investors will be sceptical about investing in companies with limited public information. One needs to see more fund raising in secondary market space to gauge actual investor interest. However, well reputed companies with good track records will be able to tap the markets with rights issue, private placements and other sources.


Hope you enjoyed reading the news bytes of investor updates from the month of May, 2020. Keep Faith and Stay relevant to the present times and we will be back with more updates shortly.