9,300 is very exciting, as no doubt will 10,000 or 11,000 or 15,000. Or perhaps it isn't actually very exciting. Over the last few days I've noticed a distinct 'Sensex fatigue' set in among the business media. I mean, the darned thing now hits a new high about twice a week. How long can one reasonably expect the poor business news anchors to keep screaming about 'all-time' highs on a more or less continuous basis? I think the media has now decided to conserve its energies. A crash, if and when it occurs, will surely be far more newsworthy. Perhaps there will even be a scam like the last couple of times. Now that'll be real news.
Anyway, regardless of whether you consider the daily highs exciting or mundane, as investors we shouldn't ignore the even more mundane opportunities that come our way. We've been saying this for a while but it bears repeating once more. This year onwards, tax savings under Section 80C offer a great opportunity to maximise the amount of tax saving investments you can make in equities. In theory (and in practice of course if you want to), the entire Rs 1 lakh can be invested in ELSS funds and thus exploit the equity opportunity.
However, given the high levels at which the market is, and the kind of volatility that we are seeing every day, the normal investment pattern that most of us follow when it comes to making tax saving investments can be specially harmful. What is this 'normal investment pattern'? I am referring of course to the habit we have of forgetting about tax breaks for the entire year and then waking up to around 4 p.m. on March 28.
This year, do yourself a favour and even if you haven't made your 80C investments so far, please spread them out over the three months or so that are still left. On March 28th, the markets may be at 12,000, or they may be at 8,000 but by any measure the next few months do not look set to be a calm and stable time when it does not matter when you invest. Any way you look at it, we are in volatile times and the idea of investing gradually and averaging your cost is specially well-suited to times like this.
Moreover, the tax saving investments that you make this year, could very well be the last one you get to make on a completely exempt 'EEE' basis. As anyone who has been reading up about taxation recently knows, the current exempt-exempt-exempt (EEE) style of tax-breaks is fast going out of fashion. EEE means that your tax break investments are exempt when they are invested, exempt while they are growing and exempt when they are withdrawn. The future is likely to be EET. The investments will get you a tax exemption (E) when you make them; they will be exempt (E) while they are accumulating but they will be taxed (T) like any other capital gains when you withdraw them. Of course under current law all long-term equity gains are tax-free but that may not last either.
If you haven't already done so, I suggest you immediately choose a couple of good ELSS funds and invest an equal sum in them over the next few months. Eventually, that'll bring more real excitement into your life than anything you may read in the newspapers nowadays.
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