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.
