The Budget What do you do now ?

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from the policy announcements. And will have to get an increased share of the portfolio.

However, certain financial services companies, largely reliant on investment banking income and brokerage incomes, are expected to see a year of weakness, reckon experts. Experts reckon the need to be extremely selective with real estate stocks, as they tend to be extremely volatile.

Ulip service

In case you are a fan of unit-linked plans, then this would be a year to reconsider the extent of their presence in your portfolio. Earlier, unit linked plans or Ulip asset managers would charge a measly fee from investors, largely because they managed large corpuses. But now with the implication of the service tax of around 12.3%, the service charges are likely to go higher and the companies would definitely pass these on to the investors.

Ranjeet Mudholkar, CEO, Financial Planning Standards Board of India reckons, “An average investor maintaining a nominal fund of Rs 10 lakh under these policies for average 25 years, paying an average 1.5% asset management fee will have to suffer an extra burden of Rs 1,854 on account of service tax on this fee which will result into a reduction of almost Rs 2.40 lakh into end result of his investment assuming a growth rate of 12% in Ulip policies after 25 years.”

This might prompt you to look at other avenues. Here, the fixed maturity plans or FMPs, which by virtue of receiving indexation benefits, remains extremely tax efficient and these should be included in the portfolio, especially when the direction of interest rates too looks uncertain. FMPs bring in some amount of certainty and also liquidity to the portfolio, reckons K Ramnathan, head of fixed income with ING Vysya Asset Management.

And liquidity will remain the key...

Every year, experts have been known to predict gloom in the Indian markets and every year, for the past three years, they have been proved wrong. Chances of this happening this year as well cannot be ruled out. And therefore, it would be prudent to maintain an increase portfolio share in liquid assets. Short term liquid funds and money market funds will always be preferred in such a scenario.