I had put some money in one of the initial public offerings (IPO) currently under investigation by the Securities and Exchange Board of India (Sebi). The share price of the company has fallen a lot since its listing. What should I do with my investment? I want to exit, but if I do so now, I will be incurring a huge loss.
Individual investors should not invest through IPOs, because it is difficult to know the company details. They can rely on the ratings provided and the analysts' views, but these may not be enough. In 2011, many above-average rated IPOs did not do well.
One should, ideally, put money in stocks fundamentally strong and available at reasonable valuations. This, only after researching the company's background, balance sheet and management. If the company invested in is sound and attractively valued, you could hold on and wait for its stock price to recover.
However, if you had invested on a tip or without research, and feel the stock is not worthy, you should exit and salvage what you can.
I have read once the Direct Taxes Code (DTC) is implemented next year, equity-linked savings schemes (ELSS) will lose their tax saving advantage. If this is true, and this year is the last chance for investing in equities for tax benefits, should I allocate a lump sum?
Under the Income Tax Act, tax saving under Section 80C is available up to a limit of Rs 1 lakh. Therefore, you could invest in an ELSS, among other approved investments, up to that limit for the current fiscal. You could invest the surplus or in small tranches.
There is no clarity on when DTC will be implemented. However, when it comes into effect, according to its last draft, tax saving under Section 80C through ELSS will be done away with.
Hence, if DTC is implemented from the next fiscal, you may not be able to invest in ELSS to get tax benefits.
The writer is CEO, Dalmia Securities. Views expressed are his own. Send your queries to yourmoney@bsmail.in
