TOI: EPFO to use Aadhaar-based cash transfers in 43 districts by December 31
Thursday, December 27, 2012
Want to in to invest in platunum ......here important tips.....
http://rediff.ly/1bot6 -via Rediff News for Android
Wednesday, December 26, 2012
Know all about cheque trunction system- known as CTS2010.
http://rediff.ly/1blyq -via Rediff News for Android
Tuesday, December 25, 2012
Mutual fund betting big on banking......exposure soars to 20.10%
http://rediff.ly/1bieq -via Rediff News for Android
Provident fund investment still good option for retirement planning.
http://www.valueresearchonline.com/story/h2_storyview.asp?str=21696 Adequate Retirement Savings - Value Research: The Complete Guide to Mutual Funds (from One Browser)
Sunday, December 23, 2012
Saturday, December 22, 2012
Saturday, December 15, 2012
Friday, December 14, 2012
Wednesday, December 12, 2012
Monday, December 10, 2012
Sunday, December 9, 2012
Saturday, December 8, 2012
Friday, December 7, 2012
Saturday, September 15, 2012
Sunday, September 2, 2012
Wednesday, August 15, 2012
Sunday, August 5, 2012
Friday, August 3, 2012
Financial products: Less is more - Moneylife Personal Finance site and magazine
Only a few products would meet your needs
From just a handful of products a few decades ago, the number of financial products has grown to thousands today. Do we need all of them? Can we even make a proper choice? While choices have certainly made our life more interesting, they have not made it easier. In fact, several research studies have shown that our mistakes get compounded when the possibilities of conflict arise among the options; therefore, exercising choice becomes difficult. In case of financial products, too much choice is definitely harmful.
Then there is false advertising and foolish articles in the media to make us lean the wrong way. The result is wrong and harmful choices. This leads to mental fatigue, wrong decisions and harmful consequences. For example, choosing the wrong insurance product can be disastrous. You may end up with low cover and low savings. More choices require more information to make informed decisions. According to the book Gut Feelings by Gerd Gigerenzer, an experiment was conducted on shopkeepers in a supermarket in California. There were two tables, one with six varieties of pickles and another with 24 varieties. Expectedly, it was recorded that 60% of the consumers stopped at the table with more varieties of pickles, while 40% stopped at the one with just six varieties. However, when it came down to the actual purchase, surprisingly only 3% of all the shoppers bought one or more jars at the first table, while a significant 30% of the consumers bought at the second table. Clearly, having fewer products to choose from was better. Not only does it benefit consumers but producers too, as they are able to sell more. When consumers are faced with fewer choices, their brains perform better as less information is involved which leaves ample room for processing it and translating into action.
As a greater variety of products flood the market, the importance of branding, promotion and advertising becomes paramount. Consumers get lured by flashy advertisements. Producers understand this and begin to spend less effort on product design; there is scant regard for addressing consumers’ needs. There’s a human tendency to start comparing products. People want ‘more’ and ‘better’ than the next person; they want only the ‘best’ product. This prompts people to start purchasing and accumulating needless stuff which, in turn, hurts their future financial situation. If one does the tedious homework of comparing, in reality, there are only a few products which are suitable for our needs.
Similarly, there are hundreds of mutual fund (MF) schemes which share common characteristics and have overlapping features. For example, you will notice that ICICI Bank, Infosys and Reliance will all figure among the top holdings of several schemes. There are 19 infrastructure funds and half-a-dozen gold funds. This herding mentality makes the MF landscape even more complicated. How does the consumer decide which MF scheme to pick? This is akin to choosing a sari in varying shades of red colour; more or less similar with similar benefits. Except that choosing a sari is a harmless action; choosing a wrong MF is not.
By asking yourself the question: “What do I really need?” you will surprise yourself—you actually need less, not more. With fewer options to evaluate, you will be a much happier person; you’ll spend more time with your loved ones and have more money at your disposal which can be used to invest wisely. Thus, you ought to make an effort to choose a few items that suit your needs. This will increase satisfaction over the long term and lead to less regrets. How does one apply this to the world of money? All you need is just two-three equity schemes, a term life insurance, a health plan and tax-saving instruments. Tune out the rest and you will do much better, if not the (mythical) best.
From just a handful of products a few decades ago, the number of financial products has grown to thousands today. Do we need all of them? Can we even make a proper choice? While choices have certainly made our life more interesting, they have not made it easier. In fact, several research studies have shown that our mistakes get compounded when the possibilities of conflict arise among the options; therefore, exercising choice becomes difficult. In case of financial products, too much choice is definitely harmful.
Then there is false advertising and foolish articles in the media to make us lean the wrong way. The result is wrong and harmful choices. This leads to mental fatigue, wrong decisions and harmful consequences. For example, choosing the wrong insurance product can be disastrous. You may end up with low cover and low savings. More choices require more information to make informed decisions. According to the book Gut Feelings by Gerd Gigerenzer, an experiment was conducted on shopkeepers in a supermarket in California. There were two tables, one with six varieties of pickles and another with 24 varieties. Expectedly, it was recorded that 60% of the consumers stopped at the table with more varieties of pickles, while 40% stopped at the one with just six varieties. However, when it came down to the actual purchase, surprisingly only 3% of all the shoppers bought one or more jars at the first table, while a significant 30% of the consumers bought at the second table. Clearly, having fewer products to choose from was better. Not only does it benefit consumers but producers too, as they are able to sell more. When consumers are faced with fewer choices, their brains perform better as less information is involved which leaves ample room for processing it and translating into action.
As a greater variety of products flood the market, the importance of branding, promotion and advertising becomes paramount. Consumers get lured by flashy advertisements. Producers understand this and begin to spend less effort on product design; there is scant regard for addressing consumers’ needs. There’s a human tendency to start comparing products. People want ‘more’ and ‘better’ than the next person; they want only the ‘best’ product. This prompts people to start purchasing and accumulating needless stuff which, in turn, hurts their future financial situation. If one does the tedious homework of comparing, in reality, there are only a few products which are suitable for our needs.
Similarly, there are hundreds of mutual fund (MF) schemes which share common characteristics and have overlapping features. For example, you will notice that ICICI Bank, Infosys and Reliance will all figure among the top holdings of several schemes. There are 19 infrastructure funds and half-a-dozen gold funds. This herding mentality makes the MF landscape even more complicated. How does the consumer decide which MF scheme to pick? This is akin to choosing a sari in varying shades of red colour; more or less similar with similar benefits. Except that choosing a sari is a harmless action; choosing a wrong MF is not.
By asking yourself the question: “What do I really need?” you will surprise yourself—you actually need less, not more. With fewer options to evaluate, you will be a much happier person; you’ll spend more time with your loved ones and have more money at your disposal which can be used to invest wisely. Thus, you ought to make an effort to choose a few items that suit your needs. This will increase satisfaction over the long term and lead to less regrets. How does one apply this to the world of money? All you need is just two-three equity schemes, a term life insurance, a health plan and tax-saving instruments. Tune out the rest and you will do much better, if not the (mythical) best.
Fund mergers: What mutual fund houses do to hide underperformance - Moneylife Personal Finance site and magazine
There would be three fund mergers over next two months and all these three schemes have poor performance. Are fund companies opting for fund mergers to hide scheme underperformance?
Over the past one year, as many as seventeen schemes have been discontinued and merged into existing schemes. Three of these schemes have been approved for merger since June 2012. UK Sinha, chairman, Securities Exchange Board of India (SEBI), had expressed concerns over underperformance of equity schemes at a mutual fund summit and said that they encourage merging of schemes. However, fund companies should not choose this as the best way out, he added.
But one can expect some more mergers in the near future as fund houses prefer to merge their underperforming schemes into larger schemes that are performing better. One of the main reasons why fund companies do this is because once a scheme starts underperforming, other investors would shun the scheme and therefore there would be no fresh inflows, in fact existing investors would start exiting. Take the example of the worst performing fund house—JM Financial—which over the past one year has merged 10 schemes into just three schemes. UTI MF too, which has a labyrinth of schemes, has discontinued five schemes and has merged them in to existing schemes.
Many of the schemes that have been merged would have just been fad schemes that were launched during a ‘hot’ period. However, once they got out of fashion and inflows dried up, merger seemed to be the best option. That is why one sees so many sector schemes among the list. We have always warned about sector funds. We have also written that there was nothing ‘contra’ about Contra Funds as these funds fails to live up to their name and objective, ING Contra Fund is one such scheme and has been merged.
If a scheme has a bad track record, it would take a long time before it becomes more appealing. Mergers reduce the management costs for the fund house and erase the bad track record. Schemes with a small corpus can cost more to mange than they generate in fees. The plus for investors is that the expenses ratio could get reduced in cases when the scheme which it is being merged with has a much larger corpus. However, what is more important is the performance of the new scheme.
If one of your schemes has got or is getting merged, then you may have been invested in the wrong scheme from the start. But if the performance has been reasonable, then probably the merging schemes have similar strategies. Therefore, investors must evaluate the new scheme objective whether it is the same and if it fits into your portfolio.
Let’s look at the two mergers that will be executed this August. SBI One India Fund will be merged into SBI Magnum Equity Fund and Principal Services Industries Fund will be merged into Principal Growth Fund. Both these schemes that are being phased out have pathetic performance. In the last thirty three-year rolling periods from 1 January 2007 to 30 June 2012, SBI One India Fund has underperformed the benchmark on 27 occasions and Principal Services Industries Fund has underperformed the benchmark on all but two occasions. Both these schemes have underperformed their respective benchmark by an average of two to three percentage points.
The investors of the SBI scheme would be better off in the new scheme—SBI Magnum Equity Fund—as it has underperformed the benchmark just twice and the expense ratio would come down from 2.27% to 2.24%. However, the same cannot be said of the Principal scheme. Other than the reduction in expense ratio, the performance of the new scheme is just as bad, underperforming the benchmark 29 times out of 30. There are better performing schemes of other fund houses which one can choose as well.
It is important for investors to keep a track of their schemes and keep an eye open for deteriorating performance. If your scheme begins to underperform its benchmark regularly it is time you switch and opt for better performing schemes.
Over the past one year, as many as seventeen schemes have been discontinued and merged into existing schemes. Three of these schemes have been approved for merger since June 2012. UK Sinha, chairman, Securities Exchange Board of India (SEBI), had expressed concerns over underperformance of equity schemes at a mutual fund summit and said that they encourage merging of schemes. However, fund companies should not choose this as the best way out, he added.
But one can expect some more mergers in the near future as fund houses prefer to merge their underperforming schemes into larger schemes that are performing better. One of the main reasons why fund companies do this is because once a scheme starts underperforming, other investors would shun the scheme and therefore there would be no fresh inflows, in fact existing investors would start exiting. Take the example of the worst performing fund house—JM Financial—which over the past one year has merged 10 schemes into just three schemes. UTI MF too, which has a labyrinth of schemes, has discontinued five schemes and has merged them in to existing schemes.
Many of the schemes that have been merged would have just been fad schemes that were launched during a ‘hot’ period. However, once they got out of fashion and inflows dried up, merger seemed to be the best option. That is why one sees so many sector schemes among the list. We have always warned about sector funds. We have also written that there was nothing ‘contra’ about Contra Funds as these funds fails to live up to their name and objective, ING Contra Fund is one such scheme and has been merged.
If a scheme has a bad track record, it would take a long time before it becomes more appealing. Mergers reduce the management costs for the fund house and erase the bad track record. Schemes with a small corpus can cost more to mange than they generate in fees. The plus for investors is that the expenses ratio could get reduced in cases when the scheme which it is being merged with has a much larger corpus. However, what is more important is the performance of the new scheme.
If one of your schemes has got or is getting merged, then you may have been invested in the wrong scheme from the start. But if the performance has been reasonable, then probably the merging schemes have similar strategies. Therefore, investors must evaluate the new scheme objective whether it is the same and if it fits into your portfolio.
Let’s look at the two mergers that will be executed this August. SBI One India Fund will be merged into SBI Magnum Equity Fund and Principal Services Industries Fund will be merged into Principal Growth Fund. Both these schemes that are being phased out have pathetic performance. In the last thirty three-year rolling periods from 1 January 2007 to 30 June 2012, SBI One India Fund has underperformed the benchmark on 27 occasions and Principal Services Industries Fund has underperformed the benchmark on all but two occasions. Both these schemes have underperformed their respective benchmark by an average of two to three percentage points.
The investors of the SBI scheme would be better off in the new scheme—SBI Magnum Equity Fund—as it has underperformed the benchmark just twice and the expense ratio would come down from 2.27% to 2.24%. However, the same cannot be said of the Principal scheme. Other than the reduction in expense ratio, the performance of the new scheme is just as bad, underperforming the benchmark 29 times out of 30. There are better performing schemes of other fund houses which one can choose as well.
It is important for investors to keep a track of their schemes and keep an eye open for deteriorating performance. If your scheme begins to underperform its benchmark regularly it is time you switch and opt for better performing schemes.
Thursday, July 26, 2012
Sunday, July 22, 2012
Saturday, July 21, 2012
Saturday, July 14, 2012
Wednesday, June 13, 2012
Friday, June 8, 2012
Thursday, June 7, 2012
Thursday, May 17, 2012
Saturday, February 18, 2012
Bond yields down as debt sale cut-offs cheer
MUMBAI: Indian federal bond yields ended slightly down on Friday, after lower-than-expected cut-off yields at a debt sale prompted some buying.
The 10-year benchmark bond yield ended one basis point down at 8.19 percent. It traded in a narrow 8.18-8.22 percent band during the session.
The RBI set a cut-off yield of 8.20 percent on the 2021 bonds, lower than a Reuters poll forecast of 8.23 percent. The 120-billion-rupee auction was fully sold.
"The cut-off was slightly aggressive on the 10-year bond, and that augured well for the market," said Prasanna Patankar, senior vice-president at STCI Primary Dealer.
Volume was low with total traded amount at 90.85 billion rupees ($1.84 billion) on the central bank's trading platform, sharply lower from 119.65 billion rupees on Wednesday and 186.40 billion rupees on Tuesday.
Post trading hours, the central bank said it bought 98.57 billion rupees of debt, as against 100 billion rupees notified via its open market operation in the secondary market. The RBI said it had bought 9.15 percent, 2024bonds at a cut-off yield of 8.28 percent, higher than 8.25 percent forecast in a Reuters poll.
"In this situation, when liquidity is such a big issue, traders could offload bonds through OMOs (open market operations) and it is encouraging that RBI has bought big chunk of the bonds offered," said a trader with a foreign bank.
Patankar of STCI expects the 10-year bond yield to be in a 8.10-8.25 percent band in the near term, with a cautious undertone likely next week. "Market will wait to see whether RBI will announce OMOs (open market operations) next week as well," Patankar said.
Since November, the RBI has bought about 906 billion rupees of debt through open market purchases. Indian treasury markets are shut on Monday because of a local holiday. The benchmark five-year swap rate was up 5 basis points at 7.32 percent, while the one-year rate settled 2 basis points up at 8.07 percent.
The 10-year benchmark bond yield ended one basis point down at 8.19 percent. It traded in a narrow 8.18-8.22 percent band during the session.
The RBI set a cut-off yield of 8.20 percent on the 2021 bonds, lower than a Reuters poll forecast of 8.23 percent. The 120-billion-rupee auction was fully sold.
"The cut-off was slightly aggressive on the 10-year bond, and that augured well for the market," said Prasanna Patankar, senior vice-president at STCI Primary Dealer.
Volume was low with total traded amount at 90.85 billion rupees ($1.84 billion) on the central bank's trading platform, sharply lower from 119.65 billion rupees on Wednesday and 186.40 billion rupees on Tuesday.
Post trading hours, the central bank said it bought 98.57 billion rupees of debt, as against 100 billion rupees notified via its open market operation in the secondary market. The RBI said it had bought 9.15 percent, 2024bonds at a cut-off yield of 8.28 percent, higher than 8.25 percent forecast in a Reuters poll.
"In this situation, when liquidity is such a big issue, traders could offload bonds through OMOs (open market operations) and it is encouraging that RBI has bought big chunk of the bonds offered," said a trader with a foreign bank.
Patankar of STCI expects the 10-year bond yield to be in a 8.10-8.25 percent band in the near term, with a cautious undertone likely next week. "Market will wait to see whether RBI will announce OMOs (open market operations) next week as well," Patankar said.
Since November, the RBI has bought about 906 billion rupees of debt through open market purchases. Indian treasury markets are shut on Monday because of a local holiday. The benchmark five-year swap rate was up 5 basis points at 7.32 percent, while the one-year rate settled 2 basis points up at 8.07 percent.
Should you add a co-owner to your property?
After three years of marriage, Prakash Mirpuri, a concept visualiser at a digital entertainment company, decided to make his wife Kamya a joint owner of his flat in Pune, last year. Mirpuri believed that it would only take a letter to the housing society to add his wife as co-owner in the share certificate. His misconception was soon dispelled. "The large amount of paperwork, in addition to the substantial cost that it would entail, has made me change my mind," says the 38-year-old. He discovered that he would need permission from various authorities and would have to pay about Rs 80,000 to complete the process.
Adding another owner to your property is a weighty decision, and not just in terms of cost. One of the biggest issues is that once the deed is made, any transaction related to the property would require the consent of the co-owner as well. So, consider carefully before taking this step.
How can I add a co-owner?
A joint owner will, by default, be the owner of half the property, but you can specifically mention the proportion of the ownership between the two individuals. Here are the two ways in which you can make another person a co-owner.
Sale deed: You can sell a portion of the property to the other person and he can use this sale deed to get himself registered as the co-owner of the property by paying the necessary charges. The stamp duty is typically in the range of 5-12.5% of the market value of the property (varies in different states), while the registration charge is about 1%.
How will it benefit me?
Co-owning a property can be beneficial for married couples because if one of the partner dies, the surviving spouse automatically becomes the sole owner of the house. So, the transfer of rights becomes easy.
Another advantage is that if the couple has taken a home loan jointly, each person can avail of the tax benefits. Under Section 24 of the Income Tax Act, both partners can claim deductions of up to Rs 1.5 lakh for the interest paid on the home loan. They can also claim tax benefits of up to Rs 1 lakh for the principal amount under Section 80C.
Adding another owner to your property is a weighty decision, and not just in terms of cost. One of the biggest issues is that once the deed is made, any transaction related to the property would require the consent of the co-owner as well. So, consider carefully before taking this step.
How can I add a co-owner?
A joint owner will, by default, be the owner of half the property, but you can specifically mention the proportion of the ownership between the two individuals. Here are the two ways in which you can make another person a co-owner.
Sale deed: You can sell a portion of the property to the other person and he can use this sale deed to get himself registered as the co-owner of the property by paying the necessary charges. The stamp duty is typically in the range of 5-12.5% of the market value of the property (varies in different states), while the registration charge is about 1%.
Gift deed: You can also share the ownership by gifting it to someone. In this case, you will need to get a gift deed executed on a stamp paper and register it at the registrar's office. A gift to a relative is not taxable. However, if you gift the property to a non-relative, the value of the house is treated as income and taxed according to the income tax rules for the relevant year. The stamp duty is generally 2% of the value of the property, along with 1% registration charge.
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How will it benefit me?
Co-owning a property can be beneficial for married couples because if one of the partner dies, the surviving spouse automatically becomes the sole owner of the house. So, the transfer of rights becomes easy.
Another advantage is that if the couple has taken a home loan jointly, each person can avail of the tax benefits. Under Section 24 of the Income Tax Act, both partners can claim deductions of up to Rs 1.5 lakh for the interest paid on the home loan. They can also claim tax benefits of up to Rs 1 lakh for the principal amount under Section 80C.
hat if the house is mortgaged?
Banks generally don't charge any money to just add a co-borrower to the loan. However, if you want to extend this and add the person as a co-owner, the lender might be more selective about letting you do so. The bank or financial institution from which you have taken the loan will probably ask the co-owner to become a co-borrower as well and then it will ascertain his/her credit worthiness. The mortgage deed will have to be redrawn and the new owner will have to pay additional stamp duty and registration charge along with the bank's processing fee.
A senior general manager with the Bank of Indiaexplains that they consult with their legal team before agreeing to add a co-owner to the property. "If it increases the eligibility criteria of the couple and gives them an opportunity to opt for a top-up loan, we certainly consider such a case," he explains.
According to the official, the bank levies all the charges that are levied in case of a new application. "We impose all the necessary charges, including the search and valuation, legal, administrative and processing fees, on the customer," he adds.
However, a bank will not let you add a co-owner if you only want to take advantage of a new scheme floated by it. "For instance, if there is a scheme under which we are offering a waiver of certain charges, we don't include the existing customers in it as it does not mean huge business inflows for us," adds the bank executive.
If the house you are buying is still under construction, you will be able to add a co-owner only if the builder agrees. "Most developers restrict or prohibit transfers before you take possession of the house, and if they do allow, you will have to pay steep transfer charges. However, the advantage of taking this step is that if the ownership is transferred before the sale deed is drawn, you will not have to pay an additional stamp duty or registration charge," says Naushad Panjwani, executive director, Knight Frank India.
Rights and taxation
According to the Transfer of Property Act, a co-owner has a proprietary right to the entire property. So, any transaction needs to be done with the consent of all the owners, unless specifically mentioned in the agreement. The co-owner has full rights to decide whether to reside in it, give it out on rent, or even sell it.
Whenever the house is sold, the co-owners will have to pay tax on the capital gains earned by them. In the case of the second owner, the capital gains will be computed on the basis of the market value of the house as on the date that it was sold or gifted to him.
Banks generally don't charge any money to just add a co-borrower to the loan. However, if you want to extend this and add the person as a co-owner, the lender might be more selective about letting you do so. The bank or financial institution from which you have taken the loan will probably ask the co-owner to become a co-borrower as well and then it will ascertain his/her credit worthiness. The mortgage deed will have to be redrawn and the new owner will have to pay additional stamp duty and registration charge along with the bank's processing fee.
A senior general manager with the Bank of Indiaexplains that they consult with their legal team before agreeing to add a co-owner to the property. "If it increases the eligibility criteria of the couple and gives them an opportunity to opt for a top-up loan, we certainly consider such a case," he explains.
According to the official, the bank levies all the charges that are levied in case of a new application. "We impose all the necessary charges, including the search and valuation, legal, administrative and processing fees, on the customer," he adds.
However, a bank will not let you add a co-owner if you only want to take advantage of a new scheme floated by it. "For instance, if there is a scheme under which we are offering a waiver of certain charges, we don't include the existing customers in it as it does not mean huge business inflows for us," adds the bank executive.
If the house you are buying is still under construction, you will be able to add a co-owner only if the builder agrees. "Most developers restrict or prohibit transfers before you take possession of the house, and if they do allow, you will have to pay steep transfer charges. However, the advantage of taking this step is that if the ownership is transferred before the sale deed is drawn, you will not have to pay an additional stamp duty or registration charge," says Naushad Panjwani, executive director, Knight Frank India.
Rights and taxation
According to the Transfer of Property Act, a co-owner has a proprietary right to the entire property. So, any transaction needs to be done with the consent of all the owners, unless specifically mentioned in the agreement. The co-owner has full rights to decide whether to reside in it, give it out on rent, or even sell it.
Whenever the house is sold, the co-owners will have to pay tax on the capital gains earned by them. In the case of the second owner, the capital gains will be computed on the basis of the market value of the house as on the date that it was sold or gifted to him.
Budget 2012: MPs want IT exemption limit hiked to Rs 5 lakh
NEW DELHI: Ahead of the Budget, some members of a Parliamentary panel scrutinising the Direct Taxes Code (DTC) Bill today pressed for raising the income tax exemption limit to Rs 5 lakh per annum.
The Standing Committee on Finance, which met under the chairmanship of senior BJP leaderYashwant Sinha, has decided to finalise its report by March 2, enabling Parliament to consider the ambitious reforms in direct tax regime.
"The Committee will meet again on February 24 and finalise the report on the DTC Bill by March 2," sources said.
Some members, they said, "wanted the IT exemption limit to be increased to Rs 5 lakh per annum in view of inflation and erosion in purchasing power of rupee."
The government is hoping for approval of the DTC Bill by Parliament in the next fiscal. Pending Parliamentary nod, the government may include some of its provisions of the Bill in the budget to be presented on March 16.
The Committee, in its draft report, has suggested that the income tax exemption threshold be enhanced to Rs 3 lakh per annum from Rs 1.8 lakh at present. The Bill proposes the limit of Rs 2 lakh and also provides for revising the tax slabs for all the three categories.
Currently, income of Rs 1.80-5 lakh attracts 10 per cent tax, Rs 5-8 lakh 20 per cent and above Rs 8 lakh, 30 per cent.
It had also proposed retaining the corporate tax rate at the existing 30 per cent.
The DTC, which will replace the Income Tax Act, 1961, was referred to the Standing Committee for scrutiny after introduction in Lok Sabha on August 2, 2010.
The Standing Committee on Finance, which met under the chairmanship of senior BJP leaderYashwant Sinha, has decided to finalise its report by March 2, enabling Parliament to consider the ambitious reforms in direct tax regime.
"The Committee will meet again on February 24 and finalise the report on the DTC Bill by March 2," sources said.
Some members, they said, "wanted the IT exemption limit to be increased to Rs 5 lakh per annum in view of inflation and erosion in purchasing power of rupee."
The government is hoping for approval of the DTC Bill by Parliament in the next fiscal. Pending Parliamentary nod, the government may include some of its provisions of the Bill in the budget to be presented on March 16.
The Committee, in its draft report, has suggested that the income tax exemption threshold be enhanced to Rs 3 lakh per annum from Rs 1.8 lakh at present. The Bill proposes the limit of Rs 2 lakh and also provides for revising the tax slabs for all the three categories.
Currently, income of Rs 1.80-5 lakh attracts 10 per cent tax, Rs 5-8 lakh 20 per cent and above Rs 8 lakh, 30 per cent.
It had also proposed retaining the corporate tax rate at the existing 30 per cent.
The DTC, which will replace the Income Tax Act, 1961, was referred to the Standing Committee for scrutiny after introduction in Lok Sabha on August 2, 2010.
What HNIs look for in a financial advisor
Managing a high net worth individual's (HNI) account is a lucrative job for any wealth manager. After all, the stakes involved are high and the sums involved are huge.
According to the 2011 Asia Pacific Wealth report from Merrill Lynch and Capgemini, high net worth individuals' (HNIs) wealth in India grew by 22% in 2009-10 accounting to $582 billion ( 28.4 trillion). India's HNIpopulation grew to 1.53 lakh from 1.27 lakh during the same period.
Looking at this huge growth and future potential, every intermediary is keen to grab a share of this growing pie. A number of brokerages, banks or boutique firms are expanding their reach beyond the metros by entering Tier II and even Tier III cities. So how do these HNIs choose their wealth managers?
"HNI needs are very different as compared to normal investors. Besides traditional products such as equities, mutual fund and insurance, HNIs may also need business funding, or advice on succession planning or formation of a trust.
They would consider things like capability and reputation of the organisation/wealth manager, bouquet of products on offer, before selecting a wealth manager," says Sunil Mishra, CEO, Karvy Private Wealth.
Why HNI needs are different
"A general investor's first priority is tax planning, followed by child's needs and financial planning to meet goals such as buying a home or a car or an overseas holiday," says Rajev B Sharma, an independent wealth manager. Basic products such as mutual funds, bonds and insurance would often help meet these needs.
However, in the case of most HNIs, many would have met these goals and would be looking beyond these. So HNI needs could include the likes of buying a property in Dubai, buying a structured product, picking up a stake in a promising or upcoming business, funding a real estate project through debt or could be even looking at the idea of buying into a distressed asset, or writing a complex will.
"These needs are far different from investment needs of a regular retail investor. Hence, they need someone with greater depth, understanding and necessary skill sets to meet these needs," says Rajesh Saluja, MD & CEO, ASK Wealth Advisors.
Choosing an organisation
Choosing a wealth manager is not an easy task, given that the wealth management industry in India is fragmented and highly unregulated. Since all big brokerages along with private banks as well as foreign banks offer wealth management, making a choice gets that much tougher.
Given the busy schedule of most HNIs, it is important to choose someone who can devote time and attention to minute details and handle things with confidentiality. The task becomes all the more difficult since wealth management firms do not have any audited or published performance report in the public domain. Hence, HNIs have to rely on their own judgment or seek references.
Larger organisations may have an edge since they can offer in-depth research and views from the best analysts in the industry. Smaller organisations may score on account of their flexibility and ability to offer personalised service to their customers.
Organisations have different ways of classifying HNIs. Some foreign banks ask for higher threshold levels, while some banks may call you an HNI if you have 50 lakh in deposit, or a brokerage house may call you an HNI if you hold more than 10-lakh worth of stocks in your portfolio
If you have specific needs such as succession planning or overseas investing, then choose your organisation accordingly. "Go with an organisation that has a longstanding track record and one which can cater to your specific need," says Rajev B Sharma.
Alignment of interest & trust
Since most organisations link a wealth manager's incentive to the amount of revenue he generates, often the wealth manager ends up selling high-revenue products irrespective of the fact whether that product fits in the client's portfolio or not.
This could expose you to higher risk or tilt your asset allocation. "Ask questions like what is the incentive structure for the wealth manager? Is it merely on revenue achieved or also on basis of clients' asset appreciation?" suggests Sunil Mishra.
This will give you an idea whether the organisation is looking to merely increase its profits by taking you as a client or there is more to it. At the same time, also see that the fees charged or charges are reasonable and is in line with industry trends.
According to the PWC Global Private Banking Report 2011: "In wealth management, reputation is everything. It is the foundation of trust, bringing successive generations to an institution for vision and advice."
"Finally, ensure that there is alignment of interest," says AV Srikanth, executive director, Anand Rathi Wealth Managers. Essentially, this means, for the wealth manager, the clients' wealth and objectives should always come first.
PPF Investment Limit increased to 1 lakh from 1.12.2011 and interest on loan against PPF will cost 2 percent extra
Public Provident Fund (Amendment) Scheme, 2011 –Amendment in paragraphs 3, 11 and Form A
NOTIFICATION [F.No. 1/9/2011-NS-II], dated 25-11-2011
In exercise of the powers conferred by sub-section (4) of section 3 of the Public Provident Fund Act, 1968 (23 of 1958), the Central Government hereby makes the following further amendment to the Public Provident Fund Scheme, 1968, namely :-
1. (1) This Scheme may be called the Public Provident Fund (Amendment) Scheme, 2011.
(2) It shall come into force on the 1st day of December 2011.
2. In the Public Provident Fund Scheme, 1968, -
(i) in paragraph 3, in sub-paragraph (1), for the letters and figures “Rs 70,000/-”, the letters and figures “Rs 1,00,000″ shall be substituted;
(ii) in paragraph 11, in sub-paragraph (2), for the words “one per cent, per annum”, the words “two per cent, per annum” shall be substituted;
(iii) in Form-A, in paragraph (iv), for the letters and figures “Rs 70,000/-”, the letters and figures “Rs 1,00,000″ shall be substituted.
Tuesday, January 24, 2012
CRR cut by RBI: No immediate change in home and auto loan EMIs
here is no immediate respite to home, auto and corporate loan borrowers in terms of their monthly equated instalments (EMIs) but with the RBI reducing the cash reserve ratio (CRR), banks will have more money to lend.
After the Reserve Bank unveiled the third quarterly review of the monetary policy, several bankers said that they may not go in for rate cut immediately.
However, a few like Oriental Bank of Commerce Executive Director S C Sinha said the CRR cut would "definitely lead to reduction in interest rates."
Chairman of the Prime Minister's Economic Advisory Council and former RBI Governor C Rangarajan said that as the primary injection of Rs 32,000 crore liquidity (through CRR cut to 5.5 per cent from 6 per cent) would have a multiplier effect, the interest rates would soften.
"The improvement in liquidity condition will automatically have effect on the interest rates. It would lead to softening of interest rates," he said.
CRR is the percentage of bank deposit that lenders have to keep with the RBI. The new rate would be effective from January 28.
Since March 2010, the retail and corporate loans have become expensive for the borrowers but the fixed deposit holders had benefited from the 375 basis point hike in the short-term lending rate by the RBI.
Canara Bank Executive Director A K Gupta said banks would now get much-needed liquidity. This will also allay fears of further hike in base rate.
"Probably, interest rates may not come down immediately," he said, adding, the banks will however will have more cash at their disposal.
Concerned over upside risk on inflation, the Reserve Bank however, kept policy rate unchanged.
The the RBI opted to keep the repo rate, at which it lends to the banks, unchanged at 8.5 per cent, compelled by the worsening global economic outlook and decelerating domestic growth.
Reverse repo (rate at which the RBI borrows from banks) is also kept at 7.5 per cent.
RBI itself said that "CRR is the most effective instrument ... the reduction can also be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them."
Bank of India Executive Director N Seshadri said, "I don't think with the CRR, there would be a reduction in base rate and definitely rate cut would happen when repo rate is reduced." Expressing similar view, Dena Bank Executive Director A K Dutt said, "Softening of CRR would lead to 5 basis point reduction in cost of deposits. However, it would not have any impact on the interest rates."
RBI Governor D Subbarao said in a statement, "in reducing the CRR, the Reserve Bank has attempted to address the structural pressures on liquidity in a way that is not inconsistent with the prevailing monetary stance,"
"Based on the current inflation trajectory, including consideration of suppressed inflation, it is premature to begin reducing the policy rate.
"However, the persistence of tight liquidity conditions could disrupt credit flow and further exacerbate growth risks. In this context, the CRR is the most effective instrument for permanent liquidity injections over a sustained period of time," Subbarao said.
Rupee drop makes realty attractive for NRIs
Many NRIs are teaming up with like-minded buyers on real estate group buying sites to shop for flats in India. The cheaper rupee and deep discounts offered by developers through these portals has triggered a substantial jump in property-related enquiries from NRIs in the US, UK and the Middle East in the last three months.
London-based Nayan Bhavishi has poured more money into the real estate market in the country than in any other geography or asset category. An avid real estate investor, Bhavishi snapped up two ready-to-move-in flats in Vaastu project in Thane for Rs 1.20 crore through real estate portal Groffr.com.
"I was scouting for properties in India and stumbled upon this site offering good discounts. I got 25% discount on my property purchases and the exchange rate at Rs 84 to a pound was a big draw," he said. Bhavishi said he bought the property at Rs 4,200 per sq ft when the rates in neighbouring properties were between Rs 5,800 and 6,000.
In an increasingly tough environment, developers are warming up to group housing portals. Sandesh Wadhwa, cofounder of group-buying portal groupbookings.in, said many people sitting on the fence have swung into action in the last three months. "There is more demand coming from NRIs for mid-sized housing projects in Gurgaon, Bangalore, Hyderabad and Chennai," he said.
Sandeep Reddy, co-founder of Groffr.com, said the website has seen a healthy sales conversion rate in the last two months primarily driven by NRIs. "The mood among NRI investors is buoyant as they now need to spend fewer dollars or pounds for the same property. The sub-Rs 60 lakh properties are most in demand ," he added.
Vaibhav Sharma, assistant professor of finance at Winthrop University in South Carolina, has booked two flats in Gurgaon through groupbookings .in. "If I were to invest in the US, the property value would fetch me a negative return. It's a good time to enter the Indian real estate market, where I think I can expect at least 6% annualized returns in the residential space," he said.
Sharma's purchase decision was also driven by the favourable exchange rate. He bought the flats last September when the rupee was close to 50 to a dollar. "I also received a 10% discount by signing up on the portal. I didn't have to haggle or make several house hunting trips," Sharma added.
The REal Estate-RBI-Rates-EMI-Loans
The real estate sector is booming for the last one year. Belying apprehensions that the economic slowdown will impact the realty sector in the short to medium term, the residential sector is performing well in all the micromarkets of the national capital region (NCR) of Delhi, so far.
Even the RBI's measure to increase interest rates to contain inflation has not dampened the mood in the sector. The increase in interest rates, however, has led to slowdown in the economy.
In the last one year, interest rates went up by around 3 percentage points across the board. Home-loan rates have gone up to 11-12 %. This has increased the EMI by over 20% in the last one year.
But, the rise in the interest rates and the slowdown in economy have not affected the demand for residential units in the NCR so far. In fact, the property prices have increased substantially in the region, in the last one year. Experts feel that this was mainly because of the development of infrastructure in the last couple of years ahead of the Commonwealth Games, which made the NCR one of the most sought-after investment destinations in the country. But, at the same time, as there were not many new projects launched in the region, prices went up sharply.
For example, property prices in South Delhi went up by around 25% in the last one year. Prices in Mayur Vihar, Patparganj and Vasundhara Enclave in East Delhi; Dwarka, Rohini, Paschim Vihar and Uttam Nagar in West Delhi, all appreciated by up to 30% in 2011. Price appreciation in Noida, Indirapuram, Raj Nagar Extension, NH-24 , and NH-58 was even sharper. In many areas like Indirapuram, prices appreciated by almost 35%.
The Allahabad high court order on the allotment of land to developers in Noida Extension created uncertainties in the area. The judgment put a question mark on the supply of over 2 lakh affordable apartments , which would have been in close vicinity of central Delhi . This led to a sudden spurt in demand in the just-completed projects in Crossings Republik and Raj Nagar Extension , in the same area. The prices in these areas jumped overnight, by around 25%.
But the maximum appreciation in the last one year was at Gurgaon and its adjoining areas ; in some places, property prices went up by around 50%. Even Dwarka Expressway saw a steep rise of 50% in the prices of recently-launched apartments. Many of the apartments, which are still under construction, were available at Rs 3,000 per sq ft in early 2011; now, the going rate is Rs 4,500 per sq ft.
Some of the apartments in the area launched at over Rs 6,000 per sq ft. Similarly, the prices of apartments on Golf Course Road, Sohna Road, DLF City Phase V, and Manesar , etc, appreciated by around 25% in the last one year. Apartments on Golf Course Road in Gurgaon are being quoted between Rs 11,000 per sq ft and Rs 12,000 per sq ft.
On top of this, most of the projects launched in the last one year have been nearly sold out in all the micromarkets like Noida, Gurgaon, Faridabad, Kundli, Sonipat, etc. So much so, developers are encouraged to launch premium products, like skyscrapers, in Noida and Gurgaon, where the base prices have been pegged at around Rs 8,000 per sq ft.
Developers feel that the slowdown will not affect the demand for residential units in the country . High economic growth will certainly help in creating fresh demand for residential units, says R K Arora, the chairman and managing director of Supertech . Even during this slow growth period, there is enough demand for residential units to meet the insatiable requirements of end users.
At the same time, as the inflation has been already contained, the RBI may soon decide to lower interest rates. "There should be sharp improvement in the prospects of real estate all around. Interest cycle is likely to turn and with the impending fall in interest rates, buying sentiment should improve," says Pankaj Bajaj, president of Confederation of Real Estate Developers of India (CREDAI), NCR. "We foresee Year 2012 to be very positive as the demand and supply seems to be quite promising," says K K Goel, chairman of KDP Infrastructure.
As such, the number of new projects by developers takes a hit during a slowdown . As the cost of financing increases, developers find it difficult to start a project . Because of the turmoil in the developed economies, the foreign direct investment (FDI) in India gets badly hit. According to the latest data available, the FDI in real estate has come down from around Rs 14,000 crore in 2009-10 to Rs 2,000 crore in 2011-12 .
This has affected the availability of capital in the sector. This is likely to force developers to cut prices to increase their sales to end users, so that they could meet their capital requirements .
Therefore, during a slowdown , competition among developers gets intensified. To increase sales, they launch residential units in the affordable range. "Developers are mostly avoiding the premium segment which is susceptible to greater volatility. Demand for middle-class housing, especially in Tier II towns, will continue to be robust. Developers who focus on execution and delivery should not face any stress," Bajaj says.
Therefore, the economic slowdown is a good time for end users to bargain hard and buy their sweet home. "Over all, both developers and homebuyers have a lot to look forward to in 2012," Bajaj says.
Reliance Industries' Rs 10,440 cr share buyback to start from February 1
The country's most-valued firm Reliance Industries today said its Rs 10,440 crore share buyback offer will start from February 1 and closes on January 19, 2013.
In a public announcement, Reliance Industries said that the buyback which is possibly the largest such programme in the history of the Indian capital market, would start on February 1 and closes on January 19 next year (12 months from the date, the board of directors of the company approved the buy back).
RIL would buy back up to 12 crore equity shares worth Rs 10,440 crore from the open market at a maximum price of Rs 870 apiece in its first share buyback since 2005.
"The buyback is expected to increase shareholder value. The buyback of equity share will result in reduction of number of shares accompanied by possible increase in earnings per share and return on capital employed," RIL said.
"The buyback will also provide a tax efficient mechanism to return money to shareholders and create long term value for continuing shareholders," RIL added.
Citigroup global Markets and DSP Merrill Lynch has been appointed as the managers to the buyback offer.
Shares of RIL jumped by 2.21 per cent in early trade. In The shares were quoted at Rs 781.80, higher by 1.40 per cent, on the BSE at 1112 hrs.
Analysts said share buyback could be aimed at helping the stock regain its lost glory, given their sharp plunge of 35 per cent last year, against a fall of about 24 per cent in the market benchmark Sensex.
Shares of the company had tumbled by 3 per cent yesterday after the company reported its first drop in quarterly profit in more than two years due to falling refining margins.
Analysts had also attributed to the fall in share price to size of the buyback, which represented 3.7 per cent of the company's equity capital. RIL had in December, 2004, offered to buyback 10 per cent of its equity at Rs 570 per share.
In a public announcement, Reliance Industries said that the buyback which is possibly the largest such programme in the history of the Indian capital market, would start on February 1 and closes on January 19 next year (12 months from the date, the board of directors of the company approved the buy back).
RIL would buy back up to 12 crore equity shares worth Rs 10,440 crore from the open market at a maximum price of Rs 870 apiece in its first share buyback since 2005.
"The buyback is expected to increase shareholder value. The buyback of equity share will result in reduction of number of shares accompanied by possible increase in earnings per share and return on capital employed," RIL said.
"The buyback will also provide a tax efficient mechanism to return money to shareholders and create long term value for continuing shareholders," RIL added.
Citigroup global Markets and DSP Merrill Lynch has been appointed as the managers to the buyback offer.
Shares of RIL jumped by 2.21 per cent in early trade. In The shares were quoted at Rs 781.80, higher by 1.40 per cent, on the BSE at 1112 hrs.
Analysts said share buyback could be aimed at helping the stock regain its lost glory, given their sharp plunge of 35 per cent last year, against a fall of about 24 per cent in the market benchmark Sensex.
Shares of the company had tumbled by 3 per cent yesterday after the company reported its first drop in quarterly profit in more than two years due to falling refining margins.
Analysts had also attributed to the fall in share price to size of the buyback, which represented 3.7 per cent of the company's equity capital. RIL had in December, 2004, offered to buyback 10 per cent of its equity at Rs 570 per share.
RBI cuts CRR by 50 bps, interest rates unchanged
As expected, the RBI has slashed the cash reserve
requirement (CRR) by 50 bps from the previous 6% to 5.5%. This move will
result in primary liquidity injection of around Rs 32000 crore into the
country’s banking system, which has seen the deposit growth rate
outpace the credit growth rate in recent times.
The RBI’s move came as a pleasant surprise for investors on the street, and the markets soared post the announcement of the CRR cut. The Sensex is currently trading strong at 17043.64 points, up 1.74% over yesterday’s closing value.
However, the central bank has decided to leave the key policy interest rates like repo and reverse repo rate unchanged at 8.5% and 7.5% respectively. This is because the RBI continues to maintain caution over headline inflation. Despite the recent fall in food and primary articles’ inflation due to abating food prices, inflation in other items like manufactured goods and fuel continue to remain firm, posing a risk going forward. Even on the food articles’ inflation, the RBI has stated that the prices of seasonal food items have depreciated sharply but others like protein-based items haven’t shown any significant downtrend.
In light of these facts, we expect the RBI to first review the Dec IIP numbers (which will provide a clear picture on the growth in industrial activity), then analyse the near-term trend in inflation, and finally take a call on the roll-back of key interest rates in its next mid-quarter review scheduled for Mar 2012. The interest cycle has certainly peaked out, and the only way the interest rate can go from here is southward.
Among the other highlights of the latest policy review, the RBI has scaled down its growth forecast from 7.6% (second quarter review) to 7% in line with slowing economic growth activity. Its projection for headline inflation by the end of March 2012 has been maintained at 7%, which looks comfortable in the current situation.
In conclusion, we at DSIJ believe that the RBI’s stance in its mid-quarter policy review today has brought great cheer to the market sentiments at a time when investors were preparing to digest yet another quarter of dismal corporate earnings. Coupled with this are the positive flows from Europe, US and the emerging markets of China and Brazil, which points towards a good year 2012 ahead. This rally that we have seen today is most likely to be carried forward, and investors would enjoy the ride.
The RBI’s move came as a pleasant surprise for investors on the street, and the markets soared post the announcement of the CRR cut. The Sensex is currently trading strong at 17043.64 points, up 1.74% over yesterday’s closing value.
However, the central bank has decided to leave the key policy interest rates like repo and reverse repo rate unchanged at 8.5% and 7.5% respectively. This is because the RBI continues to maintain caution over headline inflation. Despite the recent fall in food and primary articles’ inflation due to abating food prices, inflation in other items like manufactured goods and fuel continue to remain firm, posing a risk going forward. Even on the food articles’ inflation, the RBI has stated that the prices of seasonal food items have depreciated sharply but others like protein-based items haven’t shown any significant downtrend.
In light of these facts, we expect the RBI to first review the Dec IIP numbers (which will provide a clear picture on the growth in industrial activity), then analyse the near-term trend in inflation, and finally take a call on the roll-back of key interest rates in its next mid-quarter review scheduled for Mar 2012. The interest cycle has certainly peaked out, and the only way the interest rate can go from here is southward.
Among the other highlights of the latest policy review, the RBI has scaled down its growth forecast from 7.6% (second quarter review) to 7% in line with slowing economic growth activity. Its projection for headline inflation by the end of March 2012 has been maintained at 7%, which looks comfortable in the current situation.
In conclusion, we at DSIJ believe that the RBI’s stance in its mid-quarter policy review today has brought great cheer to the market sentiments at a time when investors were preparing to digest yet another quarter of dismal corporate earnings. Coupled with this are the positive flows from Europe, US and the emerging markets of China and Brazil, which points towards a good year 2012 ahead. This rally that we have seen today is most likely to be carried forward, and investors would enjoy the ride.
Key Policy Rates
|
Dec-11
|
Jan-12
|
Repo Rate
|
8.5
|
8.5
|
Reverse Repo Rate
|
7.5
|
7.5
|
CRR
|
6
|
5.5
|
SLR
|
24
|
24
|
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