The Hindu Business Line : `Portfolio management schemes set to grow among middle class'

WITH the removal of long-term capital gains tax and steep cut in short-term capital gains in the equity markets, Portfolio Management Services are set to become popular among the middle class.

Addressing a press conference at Kochi, Mr Porinju Veliyath, CEO of Equity Intelligence, said: "Though the minimum entry level has been retained at the SEBI directed level of Rs 5 lakh, the promise of hassle-free transactions and increased returns are expected to attract the middle class into portfolio management services."

Equity Intelligence, the exclusive portfolio management service company was launching a scheme meant for NRIs. Mr Veliyath said: "Mutual Funds had a distinct advantage till now over direct investments and portfolio management schemes (PMS). However, the tables have been turned with portfolio management schemes attracting no tax on long-term investments and just 10 per cent for short-term, while Mutual Funds have to pay 30 per cent on short-term and 10 per cent on long-term gains."

While he hoped that the situation for Mutual Funds would change, in the present circumstances he said that they could no longer be used as a tax-planning tool. Dividend and bonus stripping have also been restricted and PMS has emerged as the prudent option to invest in equities.

Regarding NRIs, Mr P.R. Dilip, Director, Equity Intelligence said: "NRIs have been plagued with a very low return of 3 per cent on their bank deposits even as inflation in the domestic economy has scaled 6 per cent levels. In effect, NRIs today enjoy a negative return of 3 per cent. It is time for NRIs to look at equities as an alternative investment avenue."

Though PMS is a highly specialised and value-added service, it had not been popular due to lack of awareness and high tax incidence as against Mutual Funds. Now that anomaly is all set to be rectified. PMS also offers added advantages to customers over MFs such as privileged direct access with the Fund Manager, total transparency and personalised services.

There are very few SEBI-licensed Portfolio Managers and most of them are large banks and broking houses, who cater to a niche market of very high-net-worth investors. Equity Intelligence is an exception in this pack, Mr Dilip said.