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Apple, Amazon, Netflix, Microsoft shares beat NASDAQ last week; Facebook, Google falls behind

With the US Federal Reserve clamping down on Wall Street’s rally with a faster-than-anticipated revision in rates, S&P 500, Dow Jones, and NASDAQ closed with losses last week. The NASDAQ, however, suffered the least when compared to its peers, helped by some big-name tech stocks. Apple, Amazon, Netflix, and Microsoft were all in the green on a weekly basis at the closing bell on Friday, while Facebook and Good closed with marginal losses. A recent survey by Bank of America showed that fund managers were again lapping up shares of technology companies despite high valuations.

Apple’s stock rose 2.44% during the week to close at $130.46 apiece. The stock did see some weakness creep in on Tuesday but bounced back strongly from Wednesday. With the previous week’s strong run, the iPhone maker is now positive year-to-date. Apart from Apple, Jeff Bezos’ Amazon was also among the gainers last week. Amazon shares rallied 4.19% to close at $3,486.9 per share. The company will be organising its ‘Prime Day’ this week, which is expected to benefit the company as it lures in customers at attractive deals.

OTT platform Netflix has been a no-show so far this year. However, during the previous week, the stock soared 2.46% to close trading at $500.77 per share. Last week Zacks Research analysts said that a weak content slate and delayed production due to the pandemic is expected to hurt Netflix’s prospects in the second quarter of 2021. They believe rising competition from Apple, Amazon, HBO Max, Disney+ and Peacock is a major headwind for the company.

Microsoft continued to move higher during the week, advancing 0.61% to $259.43 per share. Now Microsoft has jumped 19% since the beginning of this year.

Facebook, Google fall

On the other hand, Facebook and Google were among the laggards. Facebook’s share price fell 0.48% and closed at $329.66 per share. However, last week’s performance is a small blip on Facebook’s performance year-to-date, zooming 22%. CNBC report Morgan Stanley analysts saying that they remain most positive on Facebook within the large-cap social media names seeing its leading ROI, product innovation, and monetization call options (Reels, Marketplace, Shopping, etc) enabling them to navigate through difficult near-term engagement headwinds. Google was the worst performer during the week, falling 1.15%.

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Returned Rs 17,777 cr to investors of 6 shuttered schemes: Franklin Templeton MF

Franklin Templeton Mutual Fund (MF) on Thursday said it has returned Rs 17,777 crore to unit holders of six shuttered debt schemes till June 15. This amounts to 71 per cent of assets under management (AUM) as on April 23, 2020, when the fund house shut its six debt mutual fund schemes citing redemption pressures and lack of liquidity in the bond market. Further, cash to the tune of Rs 580 crore was available for distribution as on June 15, Franklin Templeton MF said in a statement.

The schemes — Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund, and Franklin India Income Opportunities Fund — together had an estimated Rs 25,000 crore as assets under management (AUM).

“The schemes have returned Rs 17,777.59 crore to unitholders amounting to 71 per cent of AUM as on April 23, 2020,” the fund house said.

Under the first disbursement in February, investors received Rs 9,122 crore, while Rs 2,962 crore were paid to investors during the week of April 12, Rs 2,489 crore in the week of May 3, and in the latest disbursement during the week of June 5, investors were paid Rs 3,205 crore.

In March, the Supreme Court accepted the standard operating procedure (SOP) finalised by SBI Mutual Fund to monetise assets and distribute the proceeds to unitholders of the six debt schemes of Franklin Templeton MF. SBI MF has been appointed as the liquidator for the schemes under winding up by the Supreme Court.

Last week, Sebi barred Franklin Templeton from launching any new debt scheme for two years and imposed a penalty of Rs 5 crore for violating regulatory norms in the case of winding up of six debt schemes in 2020. Also, it was asked to refund investment management and advisory fees of over Rs 512 crore (including interest) collected with respect to the six debt schemes. This amount will be used to repay unitholders, as per Sebi order.

Sebi had found several irregularities in the running of the schemes, which impacted the interests of unitholders and the asset management company violated provisions of mutual funds norms.

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Income Tax dept notifies cost inflation index for FY22 for computing long-term capital gains

The income tax department has notified the cost inflation index for current fiscal beginning April 2021 for calculating long-term capital gains arising from sale of immovable property, securities and jewellery. The cost inflation index (CII) is used by taxpayer to compute gains arising out of sale of capital assets after adjusting inflation. The Central Board of Direct Taxes (CBDT) on June 15 notified the cost inflation index for the current fiscal (2021-22).

“The Cost Inflation Index for FY 2021-22 relevant to AY 2022-23 & subsequent years is 317,” the Central Board of Direct Taxes said while notifying the CII number. Tax experts said this inflation index of 317 seems reasonable for the computation of capital gains in the case of sale of jewellery and real estate properties.

“Covid pandemic led to the economy’s contraction, high revenue deficit, widening fiscal deficit, even then overall inflationary graph never spiked like what it used to be before 2013. All this led to a very nominal increase of 16 points in the cost of inflation index over the last financial year, and the inflationary impact of Covid could not be seen on the same,” AMRG & Associates Senior Partner Rajat Mohan said.

This inflation index of 317 seems “reasonable for the computation of capital gains in the case of sale of Jewellery and real estate properties during FY 2021-22, as the prices of both have remained intact even during the Covid times, Mohan added. This CII number would help taxpayers to compute the long-term capital gains on which they are liable to pay income tax.

Nangia & Co LLP Partner Shailesh Kumar said for calculation of taxable income in nature of ‘long term capital gain’, original cost of capital asset (including immovable property, shares, securities, jewellery, etc.) is indexed to level of cost inflation in the year of sale as compared to cost inflation index in year of purchase of asset. Explaining how the CII works in calculating long term capital gains, Kumar said if an asset is purchased in year when cost inflation index was 100 and is sold in an year where such index is 300, then actual cost of such asset will be multiplied by 3 while calculating long term capital gain on such asset.

Normally, an asset is required to be retained for more than 36 months (24 months for immovable property and unlisted shares, 12 months for listed securities) to qualify as ‘long term capital gains’. “By this notification, Government has notified cost inflation index for Financial Year 2021-22 as 317. For last Financial Year 2020-21, this index was 301. The index starts at 100 from Financial Year 2001-02,” he added.

Mohan said since prices of goods increase over time resulting in a fall in the purchasing power, the CII is used to arrive at the inflation adjusted purchasing price of assets so as to compute taxable long term capital gains (LTCG).

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Franklin Templeton CEO, fund managers fined Rs 15 cr by SEBI; forensic audit reveals discrepancies

Capital markets regulator SEBI (Securities and Exchange Board of India) has fined Franklin Templeton Trustee Services; FT AMC CEO Sanjay Sapre; and seven others to the tune of Rs 15 crore, in the matter relating to the abrupt closure of six debt mutual funds schemes last year. SEBI in its order said that the evidence seen by it does not indicate that the Trustees had exercised high standards of service, exercised due diligence, ensured proper care and exercised independent professional judgment to address risks. Earlier last week, SEBI had fined Franklin Templeton and asked it to return Rs 512 crore in management and advisory fees to investors.

CEO, CIO, fund managers fined
The SEBI order imposes a Rs 3 crore penalty on Franklin Templeton Trustee Services and another Rs 2 crore each on Franklin Templeton AMC CEO, Sanjay Sapre and CIO Santosh Kamat. Further, the order has imposed a Rs 1.5 crore penalty each on Kunal Agarwal, Sumit Gupta, Pallab Roy, Sachin Padwal Desai, and Umesh Sharma — all fund managers. The market regulator has also fined Saurabh Gangrade, the Chief Compliance Officer of the firm Rs 50 lakh. The order said that the penalty has to be paid within 45 days.

“The serious lapses and violations clearly appear to be a fall out of the FT-MF’s obsession to run high yield strategies without due regard from the concomitant risk dimensions,” SEBI’s order said. They further added that the terms of investment covenants were apparently not in the interest of investors and the deficiencies in the agreements were sought to be corrected through a ‘commercial understanding’.

Forensic audit reveals discrepancies
In the forensic audit, ordered last year, SEBI found that in the six closed schemes there were similarities in investment strategy although the investment objectives were different. “This was observed by way of high exposures in “AA and below” Corporate bonds in all the six schemes even though investment objectives as per the SIDs of these schemes are different,” the market watchdog noted. The audit found that in 42 instances (for FI-UBF) and 17 instances (for FI-LDF), exit options were in fact not exercised where available.

The audit also revealed that there were discrepancies in respect of valuation of securities where terms of the issue have been changed frequently which resulted in the declaration of incorrect NAV. It also found that FT failed to carry out due diligence with respect to investments in illiquid securities and observed that the pattern of investment transactions is “akin to giving loan to issuers”.

Franklin Templeton, reacting to the order said that disagrees with SEBI order. “We believe the company and employees have acted in compliance with regulations and in the best interest of unitholders in discharging their responsibilities. Based on our initial review of the order, we are considering all options with regard to next steps which may include filing an appeal before the Hon’ble Securities Appellate Tribunal (SAT),” a Franklin Templeton Spokesperson said. The six schemes under winding up have distributed Rs 17,778 crores to unitholders or 71% of the AUM of Rs 25,214 crores on the date of the winding-up decision.

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