30 March 2015


A mutual fund is a professionally-managed trust that pools the savings of many investors and invests them in securities like stocks, bonds, short-term money market instruments and commodities such as precious metals. Investors in a mutual fund have a common financial goal and their money is invested in different asset classes in accordance with the fund’s investment objective. Investments in mutual funds entail comparatively small amounts, giving retail investors the advantage of having finance professionals control their money even if it is a few thousand rupees.

Mutual funds are pooled investment vehicles actively managed either by professional fund managers or passively tracked by an index or industry. The funds are generally well diversified to offset potential losses. They offer an attractive way for savings to be managed in a passive manner without paying high fees or requiring constant attention from individual investors. Mutual funds present an option for investors who lack the time or knowledge to make traditional and complex investment decisions. By putting your money in a mutual fund, you permit the portfolio manager to make those essential decisions for you.

Advantages and disadvantages
  • Mutual funds have advantages over investing directly in individual securities
  • Increased diversification: A fund normally holds many securities; diversification decreases risk.
  • Daily liquidity: Shareholders of open-end funds and unit investment trusts may sell their holdings back to the fund at the close of every trading day at a price equal to the closing net asset value of the fund's holdings.
  • Professional investment management: Open-and closed-end funds hire portfolio managers to supervise the fund's investments.
  • Ability to participate in investments that may be available only to larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.
  • Service and convenience: Funds often provide services such as check writing.
  • Government oversight: Mutual funds are regulated by the SEC
  • Ease of comparison: All mutual funds are required to report the same information to investors, which makes them easy to compare.

Mutual funds have disadvantages as well, which include
  • Fees
  • Less control over timing of recognition of gains
  • Less predictable income

How does a mutual fund operate?

A mutual fund company collects money from several investors, and invests it in various options like stocks, bonds, etc. This fund is managed by professionals who understand the market well, and try to accomplish growth by making strategic investments. Investors get units of the mutual fund according to the amount they have invested. The Asset Management Company is responsible for managing the investments for the various schemes operated by the mutual fund. It also undertakes activities such like advisory services, financial consulting, customer services, accounting, marketing and sales functions for the schemes of the mutual fund.

Net Asset Value (NAV) is the total asset value (net of expenses) per unit of the fund and is calculated by the AMC at the end of every business day. In order to calculate the NAV of a mutual fund, you need to take the current market value of the fund's assets minus the liabilities, if any and divide it by the number of shares outstanding. NAV is calculated as follows:

                        Market value of securities + Accrued Income + Receivable + Other Assets –  Accrued Expenses    – Payables – Other Liabilities
NAV =            
 No of Units Outstanding of the scheme or Option

For example, if the market value of securities of a Mutual Fund scheme is   500 lakh and the Mutual Fund has issued 10 lakh units of   10 each to investors, then the NAV per unit of the fund is   50.

Open-ended Fund
An open-ended fund is a fund that is available for subscription and can be redeemed on a continuous basis. It is available for subscription throughout the year and investors can buy and sell units at NAV related prices. These funds do not have a fixed maturity date. The key feature of an open-ended fund is liquidity.

Close-ended Fund
A close-ended fund is a fund that has a defined maturity period, e.g. 3-6 years. These funds are open for subscription for a specified period at the time of initial launch. These funds are listed on a recognized stock exchange.

11 March 2015



The payment under your policy/ies will be to be credited, directly to your Bank account through
electronic mode of payment only. For this purpose, we require your bank details for making the policy

payment through NEFT (National Electronic Fund Transfer). The details of NEFT are described below.

You are requested to submit the NEFT mandate along with necessary enclosures to settle the payment
under your policy through NEFT. Kindly note, it is not possible for us to settle the policy payment in any other mode of payment like cheque.

1. What is a NEFT ?

It is a nationwide system that facilitates to transfer a fund from one account of any bank branch to
another account of any bank branch. This system is operated by Reserve Bank of India. For
transfer of funds the participating banks have to be NEFT enabled. At present around 74000
Banks all over India are participating under NEFT system. For details please refer to RBI website
on http://www.rbi.org.in/scripts/neft.aspx

2. Advantages of NEFT system for LIC Policy holders / Annuitants :

a) The policy holder / claimant will get the credit in his own account on the due date of payment
irrespective of the location of his bank.

b) NEFT will ensure speedier and secure mode of payment.

c) There will be no extra charges to the policy holders / claimant.

d) SMS and E-mail alerts may also be provided wherever the policy payment is made to the
policyholder/ claimants’ account through NEFT.

e) Each payment from LIC through NEFT will create one UTR(Unique Transaction Reference)
number. If there is any problem in credit to the account, policy holders / claimant can confirm
from their bank by quoting this UTR no. In other words it is easy to track a transaction of
NEFT, using UTR number.

3. Important information to the Policy holder / claimants opting for NEFT :

a) All the items mentioned in the enclosed mandate form should be filled correctly. This
mandate can be used for 6 different policy numbers of the same policyholder..

b) The completed mandate for NEFT should be sent to our Branch, servicing at least one of the
policies, listed in the mandate.

c) The policy holder / claimant should also submit either a cancelled blank cheque leaf or the
photo copy of the page of the passbook / cheque book where details of the Bank account are

d) If within two days of the due date, the amount is not credited to your Bank Account, then you
may contact the branch where you have submitted the NEFT mandate.

e) The account of the policy holder / annuitant should be operational at the time of receipt of
policy payment.

f) Before submitting the mandate form, the policyholder/ claimant should confirm from his bank
that it is NEFT enabled.

g) Policy holder’s/ claimants’ name under the policy should match with that of Bank A/c, else it
is likely to be rejected.

h) NRI accounts are guided by FEMA regulations; LIC has decided not to include NRI accounts

for fund transfer. So policy holders / annuitants are requested not to submit their NRI account

i) After submission of NEFT details, if there is any change in bank details then fresh mandate
form will have to be submitted.

j) If you are getting the annuity payments through ECS mode from our IPP cells, you may opt
for payment by NEFT by submitting the mandate or continue to receive the annuity payment
in the existing ECS mode.

Click for LIC individual policy NEFT mandate: 

02 March 2015

Union Budget 2015-16

The Union Budget 2015-16 is a good effort to rejuvenate and revive the economy. Though there are no big-bang reforms as was expected by some sections of the market, the finance minister has managed to meet the key expectation of a substantial increase in the allocation (up by 0.5% of the GDP) for capital spending in the infrastructure segments, namely roads, railways and irrigation. We view this as the biggest positive of the budget (which is also in sync with the higher capital spending envisaged by the railway minister in the rail budget earlier) since it is essential to revive industrial activity and investment cycle, and put the economy on a virtuous growth cycle.

On the other hand, the target to achieve a fiscal deficit of 3% of the GDP by FY2017 has instead been extended by one year to FY2018 which is negative in terms of influencing the pace of monetary easing by the RBI. However, it needs to be viewed in the light of the fact that the finance minister had limited fiscal space. Budget net tax revenues are increasing by a tepid 1.4% due to a surge of ~50% in the share of the revenue kitty to be transferred to the state governments as per the Finance Commission’s recommendations.

Overall, it is a well balanced budget with focus on boosting economic growth through higher capital spending, easing regulations for businesses and attracting private participation. At the same time, the allocations for the social schemes have been either retained or increased in some cases including NREGA. New proposals have been suggested to widen the social security net through schemes to provide health insurance, life insurance and pension schemes at nominal rates. Keeping with the tradition, the finance minister has also outlined the long-term policy priorities of the Narendra Modi government that encompass housing, power and water for all by the 75th year of India’s independence, ie 2022.

From the capital market perspective, the budget is positive in terms of favourable tax proposals related to the removal of tax on offshore funds managed from India and clarity on GAAR, which has been postponed by two years and would be effective for prospective transactions. The budget also proposes measures to increase financial savings through gold monetisation products and tax-free bonds aimed at funding capital investments in the railways, roads and other infrastructure projects. On the flip side, the higher effective tax rate (an effective tax rate of 34.6% with levy of additional surcharge) for corporates in FY2016 could marginally bring down the consensus earnings estimates for FY 2015-16.