March 30, 2009
Old habits die hard. This proverb aptly suits the sensex. The reason is that the sensex showed a sign of weariness on Monday after a pull back rally. The upmove in the Indian key indices ended as profit booking set in after several days of gains. Equities opened lower on Monday owing to the weakness across the overseas markets. Apart from the healthcare segment, all the sectoral indices were in the red. Banks and technology stocks were the worst hit.
Bombay Stock Exchange’s Sensex fell 227.69 points to 9820.80. National Stock Exchange’s Nifty lost 61.8 points to 3042.85.
Wall Street witnessed huge losses on Friday. It was because the investors booked profits in the wake of the recent upward surge. What added to the gravity of the situation was the drop in the bank shares. The bank shares dropped after the bank executives indicated that March had been a tougher month for the industry than the previous two.
The Dow Jones industrial average fell 148.38 points, or 1.87 per cent, to 7,776.18. The Standard & Poor’s 500 Index shed 16.92 points, or 2.03 per cent, to 815.94 and the Nasdaq Composite Index slid 41.80 points, or 2.63 per cent, to 1,545.20.
Asian stocks also traded lower Monday. The Nikkei shed 1.5 per cent, Topix lost 1.93 per cent, Hang Seng fell 1.92 per cent and Straits Times slipped 1.83 per cent.
On the other hand, oil fell nearly $2. US crude traded down $1.96 to settle at $52.38 a barrel.
However, economists believe that there are certain stocks that people must watch out for. Reliance Industries is one of them. The reason being being that Reliance Industries will begin gas production from the Krishna Godavari (KG) basin in the next 24 to 48 hours. This production will open up a potentially vast revenue stream for the oil-to-yarn conglomerate and is estimated to add close to $2 billion to RIL’s bottomline at peak production levels.
L&T is a good stock because it is perceived to be the strongest and most serious contender for Satyam. L&T already possesses 12% stake in Satyam. Other stocks to watch out for are IBREL, HDIL, L&T, Sun Pharma, ACC, TVS Motors, and DLF.
US Treasury Secretary Timothy Geithner stated that subsequent to this bear market rally, some profit booking would set in. He also stated that this sharp decline in the markets should be used as an aggressive opportunity to build a long-term portfolio.
Therefore, people holding good stocks must not panic. A little patience is sure to give them huge rewards.
March 23, 2009
Tata Motor’s Nano – the world’s cheapest car - launch provides a fresh breath to the sensex. Markets all across Asia boosted the investors confidence and opened on a high, on Monday morning. Shares of Tata Motors were in the limelight. The upmove in the sensex was led by the metals and oil and gas stocks.
With revenues of Rs 32, 426 crore, Tata Motors is the country’s largest automobile company. And with Nano in its kitty, its position is all set to strenghten. Tata Motors is expecting to sell 15,000-20,000 units per month of Nano by the end of FY 2009. At a very conservative margin of 5 per cent, this sale adds close to Rs 100 crore to the company’s books.
Global auto analysts predict that in the next five years Tata Motors will sell over 12 lakh units of light vehicles per year, of which Nano will constitute more than half. This is a good news for people who are holding Tata shares in their portfolio. Nano has given a good chance to the share to trade in the green.
The Nano effect was quite evident on the moods of the bourses on Monday morning. Bombay Stock Exchange’s 30-share Sensex was up 150.10 points at 9116.78 on Monday. National Stock Exchange’s benchmark Nifty climbed 47 points or 1.67 to 2859.65 from Friday’s close. Japan’s Nikkei average rose more than 2 percent to a six-week high on Monday.
Other Asian markets were also trading high. The reason was that they were optimistic that the US government’s efforts will revive lending and ease the global economic slump. The Nikkei was up 2 per cent, Topix rose 1.95 per cent, Hang Seng climbed 2.29 per cent and Straits Times advanced 1.56 per cent.
Meanwhile, US stocks slid on Friday as the Federal Reserve’s plan to rekindle consumer and small business lending fell short of expectations and General Electric was hit by analysts’ bearish comments.
The Dow Jones Industrial Average slipped 122.42 points, or 1.65 per cent, to 7,278.38. The Standard & Poor’s 500 Index shed 15.50 points, or 1.98 per cent, to 768.54 and the Nasdaq Composite Index lost 26.21 points, or 1.77 per cent, to 1,457.27.
With the present status of sensex and the growing popularity of Nano, people holding shares of Tata Motors can breadth a sigh of relief.
March 16, 2009
The very mention of the word ‘Tax’ triggers an unrest in a person’s mind and he starts looking for options to save it. Majority of people opt for National Savings Certificate (NSC) or Public Provident Fund (PPF) for tax saving purpose. Backed by the government, both NSC and PPF are considered as safe investment options by people at large.
The question that most people ask is whether they will have to pay tax on their earnings from NSC. The answer is Yes. But, NSC offers huge tax benefits. When a person invests in NSC, he gets a deduction under Section 80C of the Income Tax Act. The deduction is up to a limit of Rs 1,00,000 and includes a person’s investment in the Employees Provident Fund, Public Provident Fund, life insurance premium payments as well as principal repayments on his home loan.
Till the Financial Year 2004-2005, an individual could have availed of a deduction under Section 80L of the Income Tax Act up to a limit of Rs 12,000 of interest income received during the financial year. However, this deduction has been done away with from FY 2005-2006. Now, all interest income is taxable at the respective slab rate of the individual. The income of a person is taxable under the five heads of income:
- Salary
- Income from house property
- Profits/ gains from business/ profession
- Capital gains
- Income from other sources
Interest on NSC is taxable under the head ‘Income from other sources’. Generally, it is advisable for a person to declare accrued interest on NSC on a yearly basis.
However, there are better options than NSC to save your tax. The tax savings deposit schemes offered by the most commercial banks have a tiny edge over instruments like NSC and PPF. Most banks offer a slightly higher rate of interest on their five-year tax savings deposits as compared to the 8% rate offered by the NSC or PPF. This helps people save more money.
The commercial banks are likely to keep their interest rates unchanged at least for the next 15 days, the period when income tax payers typically rush to invest in tax benefit schemes under Section 80C of Income-Tax Act, 1961.
At present, the State Bank of India, the Allahabad Bank, the Bank of Baroda, and the Central Bank of India are offering an 8.5% rate per annum on their five year tax benefit scheme. The Bank of India, Canara Bank and Uco Bank offer 8.25% a year, while Indian Bank and the Union Bank of India are at par with postal tax deposit schemes. On the other hand, Indian Overseas Bank (IOB), the Oriental Bank of Commerce, and the United Bank of India have special offers for tax savers. They offer a special rate of 9% a year. IOB offers this special rate for deposits of over Rs 10,000. Their normal five-year deposits, however, attract less than this rate.
Among private banks, ICICI pays 8.25%, while Axis Bank and HDFC Bank have an 8% rate in offer. The banks are taking these steps to create a market for their tax benefit schemes.
March 9, 2009
The current ruling of the Delhi bench of the Income Tax Appellate Tribunal (ITAT) might act as a breather for the expatriates during this time of recession. The ruling states that tax liability of the expatriate employees responsible for operations of a company in India as well as other countries in the region could go down substantially, as they will no longer be required to pay tax on salary earned outside India for work unrelated to Indian operations.
However, the expatiate will have to substantiate the same with documentary evidences. If an expatriate is able to prove that he has not performed any activity relating to Indian operations while working outside India, his salary for those days would not be taxable in India.
This ruling relates to a case pertaining to Ellis D’ Rozario, an expat employee of Dubai-based Master Foods Middle East FZE. The company had posted Mr Rozario, an Australian national, as regional manager for the Indian sub-continent at its New Delhi liaison office. His duties involved traveling outside the country to look after the regional operations. Mr Razario was a ‘resident but not ordinarily resident’ for the relevant tax year 2000-01.
According to the Income Tax Act, an individual is a resident in a previous year (the year for which tax liability is being calculated) if he has been in India during that year for 182 days or more. He is also treated as a resident if he is in India for 60 days or more in a year provided that he has also been in India for 365 days or more in the preceding four years.
The income-tax department contended that the salary received during Mr Rozario’s visits outside India was liable to tax, as he also took updates from India as well. This was disputed by Mr Razario. He contested by saying that the services performed outside India were unrelated to the Indian operations. However, he was not able to produce any documentary evidence in respect of work and so the matter was sent to tax authorities who passed the current ruling.
This is not an isolated case. There are numerous such cases in India. The reason is that there are many such multinational companies which do not have any direct operations in India. They just have their regional offices which are supervised by some expatriate. On one hand, this ruling comes as a boon for the expatriates as it would increase their disposable income in this period of recession, while on the other hand, it is a loss for our government, as its tax revenue will go down by a substantial amount.
March 2, 2009
There is a reason to smile for all car lovers. The Punjab National Bank (PNB) has reduced the interest rates on car loans by 50 basis points from March 1, 2009. The new car loan rates will now be in the 10.5-11.0 per cent band.
In past recessions, the wealthy were insulated by their money, but not this time. This recession is sparing none from its clutches. As a result, the luxury car sales are off by at least one-third compared to last year’s numbers.
My friend was planning to buy a car, but the prevailing circumstances just did not let her do so. The reason being both my friend and her husband were working with a good Multi National Company (MNC) and could afford a good car, but my friend was laid-off during the ongoing recession. She did get a job, but at half the salary that she was drawing in her previous organization. All their dreams of buying a car suddenly crashed. However, with the slash in the interest rates announced by PNB, they are again planning to buy a car.
Punjab National Bank, the second largest public sector bank in India, has entered into a pact with Hyundai Motor India Ltd for auto loans. The pact will accelerate car loan disbursals for Hyundai vehicles and also offer competitive auto loan schemes for Hyundai’s potential customers across India.
This tie-up will help both the partners to reach out to wider market and make loans convenient and easy to finance.
The State Bank of India (SBI) is not behind. After causing a stir in the home loan market, SBI has once again surprised competitors by slashing auto interest rates on loans for new cars. SBI will offer new car loans at a fixed rate of 10% for one year, 1.75 percentage points lower than the prevailing rate offered by market leader, HDFC Bank.
While, SBI is leading the change, other PSU banks, such as Bank of India, Bank of Baroda, Canara Bank, and Syndicate Bank are also following its footsteps. This will mean a better opportunity for those wanting to purchase a car.
Not only this, PNB has also reduced interest rates on retail term deposits by 50 basis points in the time slabs of 46-90 days and 180 days to less than a year from March 1. All these initiatives may boost the economy in this ongoing recession.
February 23, 2009
If the ongoing recession was not enough to dampen the spirits of the investors as well as the economy, the Satyam crisis added fuel to the fire. However, the fund managers in Bangalore have got a reason to smile, despite the general gloom. The reason is that it is after a period of one-and-a-half years that Infosys Technologies, the country’s second largest IT/ITeS exporter, has decided to reinvest in mutual funds. It is believed that Infosys Technologies will invest around Rs 160 crore into liquid schemes with four mutual funds.
According to Infosys CFO, V Balakrishnan, the company’s investment in mutual fund is an ongoing treasury/investment activity. The company decided to revisit the mutual fund market because the yields on liquid schemes have begun to improve recently.
Not only for the company, this is a good news for the investors as well. Infosys Technologies is a brand in itself and people associating themselves with it are sure to expect good returns in future. Investors are also happy because they will have a secure option to invest their money. Liquid funds are not only considered as an alternate to short-term fixed deposits, but the dividends from liquid funds are also tax-free in the hands of the investors, unlike the bank fixed deposits.
Mutual fund market, which had suffered a major set back during recession is sure to bounce back with Infosys jumping into the play. The reason is that other companies will also take some action witnessing the step taken by Infosys.
The action has already started with Taurus mutual fund introducing a new concept in the Indian mutual fund industry. Taurus launched its Taurus Ethical Fund. It is India’s first equity oriented Shariah compliant mutual fund, wherein investment will be made only in a universe of 152 companies in compliance with Shariah norms.
Even the Unit Trust of India (UTI) is planning to use the SMS service in mobile phones to deepen and widen its penetration, especially in rural areas. UTI is taking this step after the success of its strategy to use ‘dabbawallas’ for promoting sales of its mutual funds.
For the Infosys employees, it is a welcome step. The reason is that besides the higher rate of interest on bank FDs, MF is also being used for tax planning. The tax deducted at source (TDS) by the banks could be used to set off against the minimum alternate tax (MAT) liability of corporates. Lesser liabilities will account for more profits.
The Mutual fund industry analysts believe that Infosys might invest around Rs 1,200 crore to Rs 1,500 crore of incremental cash flow into such funds before the end of the current quarter. This will improve the situation even more.
February 16, 2009
The UPA government’s last Railway Interim Budget (2009-2010) in its ongoing term has been announced by the Railway Minister, Lalu Prasad Yadav. Recording a whopping Rs 90,000 crore profit, the Indian Railways stands out as one of the most profitable sectors even amidst recession.
Although the Sixth Pay Commission is likely to increase the expenses of the Railways by Rs 13,500 crore in 2009-2010, it is not going to affect the profit ratio significantly. This is due to the probability of making more revenues by the Railways owing to a fall of 2% in all AC and mail train fares. Also, the future prospects of Indian Railways are looking quite bright, as there has been a 14% growth in passengers traveling by train. This is surprising, as the recent trend suggests that more and more people are developing a likability towards traveling by airplanes. However, now we can say that there is still a large section of the Indian population who cannot afford to travel by plane and railways would always be a prime necessity for them. Also, the recent efforts of the railways to offer a more hygienic environment to all passengers, both at the platforms and inside the trains, have become quite successful in tilting the balance in favor of traveling by trains.
To complement the growth figures in railway revenues and also the future growth prospects, Lalu Prasad Yadav announced some developmental projects, requiring a total outlay of Rs 35,900 crore. This would include building more capacity in all passenger trains, creating 88% more capacity in all goods trains, setting up of 4 Railways inquiry call centers, undertaking research work on bullet trains, creating connectivity of railways to Kashmir, increasing the frequency of trains on each line, and many more such tasks. In fact, there would be an investment of Rs 2,30,000 crore in the 11th Plan.
Having invested Rs 70,000 out of its surplus, the Indian Railways has shown a remarkable growth last year, which is likely to improve over time. With an increase in revenue by 39 paise and a fall in costs by 7 paise per tonne/Km since 2001, Indian Railways promises to generate more revenues in coming years. Also, the electrification of 1000 kilometers of rail lines has been successfully completed. It is not only the efficiency that has increased, but also the effectiveness of Indian Railways. The evidence to this fact is a fall in the number of train accidents from 325 in 2003-04 to 194 in 2007-08. However, more efforts are still required to bring down this number to zero.
However, Karnataka’s Chief Minister showed his complete dissonance over the Railway Interim Budget. Even industry experts criticized the budget as merely rhetoric, with no intention to offer some impetus to the sagging industrial growth. In fact, there should have been an announcement on freight charges. A good percentage reduction in freight rates is absolutely necessary to give a boost to the economy in this global slowdown.
February 9, 2009
Salvaging Satyam Computer services and cleaning up its mess is not a cake walk for the newly appointed chief executive officer A S Murty and chairman Kiran Karnik. The reason is that Satyam issue involves the livelihood of 53,000 employees and investment of three lakh shareholders. Moreover, Satyam has been debarred by the World Bank and has also been suspended from the vendor database of the UN Secretariat.
The trauma of the flailing IT company does not end over here. Satyam is also losing its big clients. Assurant, a Fortune 500 firm (ranked 309) and Visa Inc, the world’s largest electronic payment gateway, have both severed off their contracts with Satyam in the last two weeks. The company has also lost some of its clients from its New York Stock Exchange profile.
Insurance major Assurant, which manages over $25 billion assets and has annual revenues of $8 billion, has moved the work Satyam had been managing for it to another Indian IT company—Zensar Technologies. Global payment, on the other hand, has severed its ties with the company owing to the World Bank’s revelation of an 8-year ban on Satyam.
The reduction in the client base of the company is an issue of serious concern. Employees are worried about their job and salary, while the shareholders are concerned about the return on their investments. I know what the employees are going through because I have a friend who is working in Satyam. Their fear is that if two of their clients can sever off, other can also take the same step. That would further worsen the condition of the company.
The new CEO has installed some faith in the hearts of the employees and shareholders. It is because he plans to chart a precise and practical 30-60-90 day plan that will encompass and address the interests of all stakeholders. The company aims at working together its board, special advisers, and the Boston Consulting Group to achieve its plan within a week’s time. Not only this, salary to its staff is among its top priorities. The procurement of a bank loan of Rs 600 crore marks the first step towards this plan. Both the employees and the shareholders are now believing it to be a new beginning of the company.
The World Health Organisation’s (WHO) statement that it found no evidence of fraudulent practices by its vendor Satyam has further instilled confidence in the minds of the people. However, WHO is reviewing carefully its current contractual agreements with Satyam. WHO is also making contingency arrangements in case Satyam is not able to complete its GSM project work on time.
At the time, when the company is trying to settle down all its issue, the act of our political parties is disheartening. The ruling UPA and opposition NDA are indulging in mudslinging over the Satyam scam, with the two sides charging each other with the involvement in the country’s biggest financial fraud.
It’s high time that our political parties rose above the party politics and did something to support the nation as a whole.
February 2, 2009
The global recession may have hit the economies badly, but it has brought along a reason to smile for the Ambanis. Hong Kong-based journal, Asia Asset Management has named Reliance Mutual Fund as the country’s best fund house for 2008. According to this international publication, Reliance Capital Asset Management showed an impressive growth in the domestic as well as international market even in the midst of the ongoing global economic crisis. And their commitment to serve the industry is the reason behind bestowing this honor on them.
The publication has also named Vikrant Gugnani, the CEO of Reliance Mutual Fund from October 2005 to December 2008, as the best CEO in the MF industry. Currently, he is the CEO of International Business of Reliance Capital.
Reliance Mutual Fund manages a corpus of over Rs 70,208 crore in the country and has over 71 lakh investors as on December 31, 2008. I was elated with the news because I have invested in Reliance Mutual Fund. And this recognition will make the company more committed towards serving its investors with better products and services.
Investing your hard earned money in mutual funds is always better than investing them in shares. It is because mutual funds collect money from millions of investors and therefore, they achieve economies of scale. Mutual funds are typically very liquid investments. Unless they have a pre-specified lock-in period, your money will be available to you anytime you want.
Moreover, mutual fund companies offer you the services of a qualified fund manager who diversifies your investments in different sectors. If you invest most of your savings in a single security or one investment becomes very large in your portfolio, you are exposed to the risk that is attached to those investments. For instance, if you have Rs 2 lakh, you will be able to purchase only some shares of a reputed company belonging to a particular sector. And if that sector goes down or that company suffers a loss, you also stand to suffer a huge loss. On the other hand, a fund manager efficiently invests your limited funds in different sectors so that even if one sector is down, your investments do not suffer as much.
So, I feel that this recognition offered to the Reliance Mutual Fund has enhanced its reputation in the eyes of the investors. Now, more and more people will be attracted to invest in the company, further strengthening its position in the market.
January 22, 2009
Although the ongoing global recession has shattered the hopes of investors worldwide, there has been quite a few positive developments in the markets since the beginning of January, 2009. The good openings at the Indian stock markets have been the outcome of bailout package announced by the government as also the interest rate cuts and petrol price cuts in the past one and a half month.
The positive sentiments created in the market have been well reflected in the form of higher openings of the Indian stocks, led by advances in banks and realty stocks. However, not every sector is equally blessed. The FMCG (Fast Moving Consumer Goods) and consumer durables opened quite lower. This brings us face-to-face with the fact that the current market conditions are not having an equal impact on all the sectors. While some sectors that of realty, IT, banking, Telecom, and few more are enjoying a positive phase in the ongoing market conditions, others are not having a good time as far as their stocks are concerned. In such a scenario, it becomes very important for the investors to keep a tab on the market developments. This will give them an opportunity to switch from under-performing stocks to those that have been showing good signs for the future. A knowledge of the out-performing sectors is crucial at this point of time to make your investments profitable.
The Bombay Stock Exchange climbed 126 points and closed at 8905.37 on Wednesday. The National Stock Exchange benchmark Nifty also closed at 2749, registering a rise of 28 points. One of the sectors that has been performing quite well on this front is the Telecom sector. This is evident from the 2.5% rise in the shares of Bharti Airtel. Not only this, there has been a whopping 15% rise in the net profit of the Telecom sector for the October-December quarter over the immediately preceding quarter. So, if you are looking for an out-performing sector, Telecom is right there to take a place in your portfolio.
The US stocks have also jumped on Wednesday with the Dow Jones Industrial Average up by 3.51% and the Nasdaq Composite Index by 4.60%. The IT sector is in the limelight for the moment following positive earnings reported by IBM. Like India, all other Asian stock markets are keeping their eyes on the Wall Street. With the new US government all geared up to announce optimistic policies to curb the financial crisis, the whole world is waiting for the global recession to end.
