S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
18,682.31 | 7.1 0.04%	52.89 |(0.2) -0.38%	30,800.00 | (370.0) -1.19%	115.80 | 1.7 1.46%	7.50% - 8.50%

In a country where only 3% of population pay taxes, the Finance Ministry is mulling ways to increase the penetration of tax payers by making tax payments, as one of the fundamental duties under the Indian Constitution for the citizens of India. By paying taxes the citizens also contribute to the nation building process and therefore tax paying should be made a fundamental duty, according to the Finance Ministry. India's tax-to-GDP ratio, already one of the lowest among its peers, fell to 10.1% in 2011-12 from a high of 11.9% in 2007-08. This is largely blamed on the low tax base perforated by multiple tax exemptions, along with the slump in economic activity in the last couple of years.

It is noteworthy that, originally, there were ten fundamental duties included through the 42nd amendment, 1976. Subsequently, the 86th Constitution Amendment Act, 2002, added one more; by adding right to education for every child. Fundamental duties are more in the nature of moral obligations of citizens to help promote a spirit of patriotism and to uphold the unity of India. However, they cannot be enforced legally. Moreover, the Finance Ministry is proposing an amendment to make paying taxes for nation building, hoping to build on its earlier initiative to increase awareness about taxes by including a relevant chapter in school curriculum. The National Council of Educational Research and Training (NCERT), has introduced a wide variety of topics, including history of taxation, rationale for taxes, how the government raises revenues and spends as part of the curriculum, to be taught to children between 10-18 age-group.

We are of the view that, the initiative undertaken by the Finance Ministry may not increase the number of people paying taxes drastically. This is because fundamental duties are not legally enforceable. Hence, the other initiative of educating the people and making them aware about paying taxes may be a more effective way of making them responsible citizens, and introducing such awareness at the school level will turn out to be more fruitful.

An inseparable part of your portfolio, Gold

In times of economic turmoil, people splurge on the investment asset which gives them a sense of security. And this sense of satisfaction or security is not limited to individuals but also to large institutions and central banks of various countries. The classic asset class - Gold satiates this sense of security for individuals and institutions by providing them a hedge against the economic turmoil prevailing globally.

As evident in the past, the precious yellow metal - gold has stood out as one of the best hedge against the economic turmoil. Thus, smart investors need to stay invested in gold to benefit from its inverse relationship with other asset classes.
 
(Data as on October 16, 2012)
(For the purpose of explanation NAV values of Goldman Sachs Gold BeES have been taken due to its long history)
(Source: ACE MF, PersonalFN Research)
The chart above depicts that, if an investor were to invest a sum of Rs 10,000 in Goldman Sachs Gold BeES ETF on October 16, 2009 it would have yielded him or her Rs 18,797, as on October 16, 2012 whereas a similar investment in the BSE Sensex would have appreciated to just Rs 10,724. This shows that during times of economic and political uncertainty such as the one prevailing at present, gold acts as a safe haven and provides its investors the much needed cushioning in their overall portfolio.

We believe that, the risks emanating from debt crisis in the Euro zone, the precious yellow would continue to enjoy its place of being a safe haven and smart investors would continue buying gold. Moreover, the stimulus measures adopted by the central bankers of the world, looks positive for gold in the backdrop of global economic uncertainty. Going forward, the physical demand for gold is also likely to step up with the festive times of Dusshera (in October 2012), Diwali (in November 2012) and Christmas (along with wedding season as well). It is noteworthy that traditionally, the demand for gold in India (world's top consumer of gold) rises in the last quarter of the calendar year, and this cyclicality could push gold prices further northwards.

Given the above backdrop where long-term economic problems still persist - especially in the developed economies, we think the ascending move for gold is intact. Also the ascending move would be well supported if festive demand indeed picks up. Hence in this context GETFs would continue to do well, due to positive impact on gold prices. At Personal FN, we recommend that you should have a minimum of 5%-10% allocation to gold. Invest in gold with a long term perspective with a time horizon of 10 to 20 years.

SEBI reforms the IPO process, now keeping You in mind

Direct equity investing has always been viewed as being highly risky due to its volatile nature. But despite it being so, many investors often evince interest in the asset class and often fancy investing in IPOs expecting short-term gains. While few value propositions do indeed deliver good returns, there are many which turn out to be disastrous for investor's hard earned money Also, if the IPO is considered to be safe and promising; there are instances where the retail investors simply get very less chance, since most of them get oversubscribed. To know more about wide-ranging reforms undertaken by SEBI for the IPO market, please click here.

Your mutual fund scheme may give you a pension option soon

The recent market rally may have amused a lot of investors. However, the mutual fund industry saw their investor base erode by over 11,000 equity folios a day in the first half of the fiscal year 2012-13. The September rally in the stock markets has proved disastrous for the Indian mutual fund industry as far as their hard-earned retail investors' base is concerned. On account of profit booking at every upswing in the equity markets, the mutual fund industry received redemption request worth Rs 6,741 crore as against fresh investments of a mere Rs 3,182 crore (as seen in September 2012). With this, equity investors' base for fund industry got shrunk by over 2 million in just six months, which interestingly is higher than what was witnessed in the entire previous financial year. To know more about the steps undertaken by AMFI to attract long-term money for the mutual fund industry, please click here.

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• After successful buyout of Fidelity Mutual Fund by L&T Mutual Fund, Fidelity Mutual Fund has now kept open a 30-day window from October 15, 2012 to allow unit holders (uncomfortable with the new fund management team) to redeem their holdings without any exit load. Moreover, post the buyout L&T Mutual Fund proposed to merge, change name and features of Fidelity Mutual Fund Schemes. To know more about what should be your strategy for your investments in Fidelity schemes (now L&T schemes), please click here?
   
• The capital market regulator - the Securities and Exchange Board of India (SEBI) has clearly stated that it is now upto the mutual fund industry to take the reform measures forward. "For the time-being, our task is over and it's time for the industry to respond...we recently came up with new set of guidelines on MFs in our efforts to balance the need for attracting investment and help the industry," said SEBI Chairman Mr U.K. Sinha.
  
  We are of the view that, the SEBI has brought about numerous changes right from the entry load ban to increasing the expense ratio (although with the certain conditions). Thus, to survive and expand the mutual fund industry would have to take a leap forward and stretch their reach beyond the top 15 cities. Along with this, the mutual fund industry needs to educate the masses and create awareness about investing in mutual funds in order to gain investor confidence.
   
• In an effort to give respite to the Housing Finance Companies (HFCs) who play an important in fulfilling the social objective of increased home ownership and supporting the economy by creating demand for construction of new homes, the SEBI has decided that an additional exposure to financial services sector (over and above the existing 30%) not exceeding 10% of the net assets of the scheme in debt oriented mutual fund schemes will be allowed by way of increase in exposure to HFCs only.
  
  Earlier SEBI had directed mutual funds to ensure that total exposure of their debt schemes in a particular sector shall not exceed 30% of the net assets of the scheme. However, the move had raised concerns of adversely impacting the funding costs for HFCs. However, the current relaxation in terms of additional exposure to HFCs would be subject to certain conditions such as that the securities issued by HFCs are rated 'AA' and above. Also, the HFCs should have been registered with the National Housing Bank (NHB).
  
  We believe that, tweaking exposure norms for the safety of the investors is a prudent step. But at the same time, SEBI should not indulge in micro-managing them as this could lead to monotony and lack of interest in carrying out the financial services business.
   

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