Budget 2011 – Quick takes

Some quick takes on the Budget from investors’ perspective:

• Most interesting announcement was the one about foreign investors being allowed to invest in Indian equity mutual funds. However, there is not enough clarity on this just yet. By “foreign”, does it mean Foreign individuals or institutions? If it is individuals, then how could they do KYC? Do they get PAN numbers and file Indian taxes? What about repatriation? What about debt funds? The next few days will, hopefully, provide some answers. We’ll see….
• Keeping on the subject, will this lead AMCs in India to lose focus of Indian retail investors? Indian AMCs have an image of chasing AUM. Within India, the target was to get institutional (treasury) money into the debt schemes to boost AUM numbers. Now, if foreign institutions can invest – in dollars and pounds – will the retail investor in India even matter any more to the AMCs?
• On the other side, it could potentially make AMCs more profitable and make the industry more healthy.
• Apart from this news, precious little in the budget for individual investors – the IT limit increase by 20K will save too little in taxes and will not even be enough to keep up with the food price raises.
• The super senior category for IT limits (5 lakhs limit for 80+ year olds) is one of those feel good announcements – it will make people happy while not costing the government much (Of course, households will start shifting rental and investment incomes from their parents’ names to grand parents’ names 🙂 )
• Looks like the tax-free infra bonds will continue next year also…
  

And, if anybody expected any relief on the ELSS front – disappointment. The year 2011-12 will be the last year for ELSS schemes.