(This column was first published on Value Research Online.)
It would be quite an understatement to say that 2014 has been an eventful year. On most fronts, the year has been significant. Of course, nothing that has happened has been of more significance than the Lok Sabha election results, primarily because the outcome is expected to change our country for many coming years.
From an investment perspective as well, there were 3 major events that defined 2014, all of which had its roots in the election results. Firstly, the highs the equity markets touched. The markets couldn’t get enough of the development story, which it kept smoking to reach highs that were never reached before. Sure, the journey has been riddled with bumps, and this trend is expected to continue through 2015 as well. But, there’s no denying that the sentiments are largely positive and equity investors with a long-term perspective are going to have smiles on their faces.
Which brings me to the second event of significance from an investment perspective, another thing that is good news for long-term investors – the raising of the Section 80C cap to Rs 1.5 lakh per year. It’s a big-time cliché that money saved is money earned, but it’s as true as a cliché can ever be. And the new government has made it possible for you to save Rs 50,000 more every year. There are a lot of avenues that you can use to invest money and get this tax rebate, but given the long-term prospects of equity, the best in our view are equity linked saving schemes. ELSS funds come with a 3-year lock-in, so the investment outlook is long-term by default and the gains become tax-free by the time the lock-in ends. On top of that, whatever you invest in it becomes eligible for income tax deductions. It’s a sweet deal that got sweeter in the new government’s budget.
But at the same time, the budget made things sour for fixed income investors. Debt fund investors will now have to stay invested for 3 years, instead of the earlier 1 year, to get the benefits of long-term taxation on their capital gains. This has been a major dampener, which has hurt individual debt fund investors significantly. The change was made with an eye on institutional investors, but why individual investors were brought into it as well is anybody’s guess. This third significant event of 2014 puts a blemish on the investment front. But that apart, the year has been the beginning of good times to come with the hope that the positive sentiments turn into positive actions as well. A good government has been long overdue for India, and she and its citizens needs it desperately.
From a personal point-of-view, 2014 has been significant for me as well because this weekly column kicked off this year. And going by the comments I’ve received, I can say that the feedback has been just like the equity markets – largely positive, but with a few downers in between. All in all, a good year!