The Union Budget for 2012-13 has come and gone. In hindsight one can term it as a non-event, but after the Railway Budget was presented there were expectations that the Government may bite the bullet this time and take some hard decisions. It was expected that with just one more budget before the next General Election this would be the tough one, but if only wishes were horses; unfortunately nothing happened. The Budget came and went and nothing happened and if one looks at it in retrospect it would have been better if instead of a budget we had a vote on account.
The budget as far as the Capital Markets is concerned has introduced a new scheme called the Rajiv Gandhi Equity Saving Scheme which is meant for new investors who have an income of Rs 10 lacs or less, and do not have a demat account. The investor would be entitled to a 50% rebate in income tax if investment is made directly in the equity market upto a ceiling of Rs 50,000. This direct investment means equity and surely new investors need to be guided by mutual funds. When the scheme details are announced mutual funds would lobby for this money as they have been at the wrong end of redemption.
The second issue is the divestment by the government which is expected to raise Rs 30,000 crs in the year 2012-13, against the previous year’s target of Rs 40,000 crs. The government was able to raise a mere Rs 14,000 crs which included the farcical issue of ONGC which raised almost Rs 12,800 crsbecause of the state Life Insurance Corporation or LIC bidding and bailing out the Government.
This brings us to a very important question as to what is to be done to assist the government in achieving the divestment target. The experimental auction has not been very successful and the way the same was done has raised lot of questions which need to be addressed before further auctions happen.
Yet another issue picking up momentum currently is that on corporate governance and minority shareholders rights. This applies to all companies wheth1er they are in the private sector or public sector. We all know how the government OMC’s (Oil Marketing Companies) and Oil producers like ONGC, OIL and GAIL are used as extension of the Government’s financing arm and actions taken are not prudent. Consumer activism is picking up and things could get challenging going further.
The largest shareholder of Coal India Limited is of course the Government of India and the second biggest shareholder is the Children’s Investment Fund UK. This fund has put the management of Coal India and its entire board of Directors on alert regarding interests of minority shareholders being ignored and things being done against their interest. It’s a welcome move and shareholders would and should support such causes. The question being asked is would a mutual fund from India to protect the interests of it mutual fund holders dare to right to the government of India on any such similar issue. Domestic Mutual Funds certainly own more than 1% in the oil companies mentioned above individually and much more than that collectively, but would any of them take up the issue?
The answer my readers is obvious, no action would be taken. In such a case would it be fair to ask first time investors to take the mutual fund route where his interests are not necessarily going to be looked after?
