Corona Virus

We are seeing the impact of corona virus on equity market across the world . India is off course no exception as well . 

The coronavirus outbreak halted trade , tourism , consumption and many other activities. The effect of this outbreak may push China’s economy into a period of dull growth for some time.  Will it impact other economies further?  …Yes if it spreads further…..Will market falls further? …..certainly if virus stays longer.  

Markets alway give knee jerk reactions for any positive or negative events . It is always overdone in the market . 

Long-term investing is often best disconnected from short-term economic reactions. 

We have seen such epidemic outbreaks in the past . Below table provide the sense of market reactions following major epidemics in recent history.

corona virus

Carl Richard has nicely depicted current scenario in his famous sketch BehaviorGap 

WhatsApp Image 2020-02-28 at 6.05.31 PM

We have written on couple of times on different events whenever the market corrected in past .

 

CoronaVirus will be history after few months .  You need to decide where to focus  on CoronaVirus or Karo Na Invest !!!

Happy Investing !!!!

Budget 2018 Decoded

– By Meghashyam Sinkar

That way Budget is regular affair but media makes every budget utmost important for ruling Government and every species on the planet .

This year budget created too much hype about equity taxation / LTCG (Long Term Capital Gain ) and how it is going to impact Aam Aadmi . Surprising critics cry foul about poverty , unemployment who does not have any money for investments ……forget about investing , they dont have any savings and then data shows hardly 5 -6% of population is putting money into equity and they are claiming how taxing these people take the sentiments down . Anyways , Let us try to decode the Budget 2018 in terms of personal finance and taxes .

  • LTCG ( Long Term Capital Gain )

Until now , there was no tax on equity or equity oriented funds if you hold it for more than one year ( Long Term ) under section 10(38) provided STT (Securities Transaction Tax ) is paid .However, now it will be taxable but comes with certain terms .

Long Term Capital Gain (LTCG ) exceeding Rs 1 Lakh on investments in equity or equity oriented funds to be taxed 10 % and ALL GAINS TILL JAN 31, 2018 WILL BE GRANDFATHERED .

The computation of long-term capital gains in different scenarios is illustrated as under –

Scenario 1 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 250.

As the actual cost of acquisition is less than the fair market value as on 31st of January, 2018, the fair market value of Rs. 200 will be taken as the cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 250 – Rs. 200).

Scenario 2 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 150.

In this case, the actual cost of acquisition is less than the fair market value as on 31st of January, 2018. However, the sale value is also less than the fair market value as on 31st of January, 2018. Accordingly, the sale value of Rs. 150 will be taken as the cost of acquisition and the long-term capital gain will be NIL (Rs. 150 – Rs. 150).

Scenario 3 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 50 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 150.

In this case, the fair market value as on 31st of January, 2018 is less than the actual cost of acquisition, and therefore, the actual cost of Rs. 100 will be taken as actual cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 150 – Rs. 100).

Scenario 4 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 50.

In this case, the actual cost of acquisition is less than the fair market value as on 31st January, 2018. The sale value is less than the fair market value as on 31st of January, 2018 and also the actual cost of acquisition. Therefore, the actual cost of Rs. 100 will be taken as the cost of acquisition in this case. Hence, the long-term capital loss will be Rs. 50 (Rs. 50 – Rs. 100) in this case.

Please note that any transaction made during Feb 1,2018 to March 31, 2018 will have existing treatment of taxes

  • There will be 10 % of dividend distribution tax on the equity dividend .Please note that the dividends will be tax free in the hands of investors.

  • Allow a standard deduction of ₹40,000 in lieu of the present exemption in respect of transport allowance (₹19,200) and reimbursement of miscellaneous medical expenses (₹15,000) . Please note that this benefit can be availed by Pensioners also which were not there initially .

  • To avail benefit of any deduction under section 80C, 80D, 80CCG etc. the person would have to file return within due date specified by the government .

  • Exemption of interest income on deposits with banks and post offices to be increased from ₹10,000 to ₹50,000 for senior citizens (Section 80TTB) .
    Please note that senior citizen who avail this benefit will not be able to avail deduction under section 80TTA i.e. deduction in the respect of saving bank interest upto Rs 10,000/-

  • The deduction under Medical Expenditure on treatment of critical diseases has incrased to Rs 100,000/- from Rs 60,000/- in case of senior citizen (Section 80DDB)

  • Limit of deduction for health insurance premium and/ or medical expenditure increased from ₹30,000 to ₹50,000, under section 80D for senior citizens

  • The lock in period of Capital gain bond under section 54EC has been extended from 3 years to 5 years from April 1 , 2018 .

    Pentagraph view on the budget is that Budget has come and gone . All the negatives and positives will have short lived impact on the market .  We strongly believe and suggest you to have your clarity on your financial goals and then invest accordingly .

    Happy Investing !!!

It’s different this time ……..Time will only prove it !!!!

One of the economist said that Stock market has short-term memory. We, at Pentagraph, truly believe in his statement.

Financial media says that it is different this time. It is difficult to come out from this local as well as global mess.

Lets study some past event and compare it with present event with some parameters.

1996-1998

  • Drop in GDP growth by 4 %
  • High Inflation
  • High Interest Rate
  • Sovereign Default – Russia , Mexico
  • Contagion in East Asia
  • Collapse in Financial Institution – LTCM
  • Govt Action ( Pokhran )- Drying out Foreign Capital flow

2008 -2012

  • Drop in GDP growth by 3.5 %
  • High Inflation  – 8 to 10 %
  • High Interest Rate
  • Sovereign Default – Greece , Portugal ( Now Spain is making a news)
  • Contagion in Europe
  • Collapse in Financial Institution – Lehman Brothers , Merrill Lynch etc
  • Govt Inaction – There is actually vast list but mentioning important ones .. Removal of Diesel/LPG subsidiary , FDI participation in Retail / Aviation / Insurance etc .

Investors know the past events and returns delivered by the market post events . But…. short-term memory .

We don’t know when the market recovers , what would be the future returns from market . We don’t  intend to predict anything .

But , We follow the advice given by Invetsor Guru –  Sir John Templeton.

“ Bull markets are born on pessimism ,grow on scepticism , mature on optimism & die on Euphoria”  

Pentagraph believes that we are somewhere between pessimism and scepticism.