Archive for February, 2010
26 Feb
Points Discussed in Budget :)
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Stay Tuned for More updates 🙂
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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here
25 Feb
India World”s 10th Largest Gold-Holding Country :)
The Economic Survey, which was tabled in the Parliament by the Finance Minister today noted that the year 2009-10 witnessed India becoming the world”s 10th largest gold-holding country, from a nation that pledged its bullion two decades ago to pay for imports.
The gold purchase by the government of 200 tonnes from the International Monetary Fund (IMF) took its total reserves to 557.7 tonnes, or about 6 per cent of the total foreign exchange reserves.
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India in 1991 had to pledge its gold to the Bank of England in order to pay for its imports.
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The survey said “Post-purchase, India has become the 10th largest official gold-holding country in the world,”.
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The Reserve Bank of India (RBI) in November last year concluded 200 tonnes of gold purchase from IMF as part of the country”s foreign exchange reserve management operation.
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The purchase, which was executed over two weeks during October, was an official-sector off-market transaction.
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Earlier, Finance Minister Pranab Mukherjee had said that the purchase of gold provided a healing touch to the pride of the nation, which was dented about two decades earlier when the country sold its gold for a few hundred million dollars.
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Meanwhile, the survey sates that IMF”s Executive Board, on September 18, 2009 announced its decision to sell 403.3 metric tonnes of gold as a central element of its New Income Model and in order to increase its resources for lending to low-income countries.
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The IMF also decided that the initial offer of the sale would be directly to official holders, including the central banks. Consequent of this, the RBI concluded the purchase of 200 metric tonnes of gold from IMF, under the IMF”s limited gold sales programme, at the cost of US$ 6.7 billion, in November 2009, as part of its foreign exchange reserves management operation.
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The purchase was an official- sector off-market transaction and was executed over a two-week period during October 19-30, 2009 at market-based prices.
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With this purchase, gold holdings in the country”s foreign exchange reserves have increased to 557.7 tonnes from 357.7 tonnes, which is about 6 per cent of the reserves. Post-purchase, India has become the 10th largest official gold-holding country in the world.
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Stay Tuned for More updates.
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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here
24 Feb
NRI Queries Related To Online Trading Account :)
On 6’th February 2010 we have discussed about Online Trading Services for NRIs 🙂 and Now we are discussing some of the common queries which can be asked 😀
NON-RESIDENTS UNDER FEMA, 1999
The definition under FEMA (Foreign Exchange Management Act) is explained in simple terms for individuals hereunder.
1. The residential status of a person leaving India shall be determined as under:
If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a non-resident from the day he leaves India for such purpose.
2. The residential status of a person returning to India will be determined us under:
If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a resident from the day he comes to India for such purpose.
In the definition, requirement of physical stay for a period of 182 days in India is also stated. However, in our opinion, the period of stay does not affect determination of status as explained in (1) and (2) above.
Thus if a person comes as a tourist, or for any purpose (not for employment or business in India), AND, he comes for a fixed or certain period of time he shall continue to be a non-resident.
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Who can open Bank Accounts?
Non Resident Indians (NRIs) including persons of Indian origin and overseas corporate bodies (OCBs) are permitted to open Bank accounts without prior approval of Reserve Bank of India (RBI). However, RBI permission is necessary to open accounts for Pakistanis & Bangladesh nationals, even if they may be covered under persons of Indian origin.
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What are Overseas Corporate Bodies (OCBs)?
OCBs include companies, partnership firms, societies & other corporate bodies in which at least 60 % of the ownership is with NRIs of Indian nationality/origin.
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Who is a Person of Indian Origin?
A person holding Indian Passport at any time.
A person with either of his parents or grand parents as Indian
A person with either of his parents or grand parents as permanent resident of undivided India at any time is considered to be a person of Indian origin.
A wife of a citizen of India or of a person of Indian origin is deemed to be of Indian origin even though she may be of Non-Indian parentage.
A husband, not being an Indian national of Indian origin, who is married to a lady of Indian origin or individual, is also eligible to open NRI accounts.
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What types of Bank Accounts an NRI can open?
Indian nationals and persons of Indian origin residing abroad can open the following types of accounts with authorised Banks out of the funds remitted from abroad or out of Foreign Exchange brought in from abroad or out of the funds legitimately due to them in India:
Non-Resident (External) Rupee Account [NRE]
Foreign Currency (Non-Resident) Accounts [FCNR]
Non-Resident Non-Repatriable Rupee Deposit Accounts [NRNR]
Resident Foreign Currency Account [RFC] for returning Indians
Ordinary Non-Resident Rupee Accounts [NRO]
Special Schemes viz. NRI Bonds, India Development Bonds
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What is an NRE Account?
NRE Accounts are maintained in convertible rupees. The entire credit balance held in the account inclusive of interest earned can be repatriated & converted to any other foreign currency. The NRE accounts can be maintained either as a Savings Bank A/c or Current A/c or Term Deposit A/c or Recurring Deposit A/c., in the name of the NRI or in joint names, provided all the persons are NRIs or in the names of minor who is represented by natural guardians. However, NRE accounts cannot be opened by NRIs jointly with residents.
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What is an NRO Account?
These are Rupee dominated non-repatriable accounts and can be in the form of savings, current, recurring or fixed deposits. These accounts can be opened jointly with residents in India. When an Indian National /PIO resident in India leaves for taking up employment etc. outside the country, other than Nepal or Bhutan, his bank account in India gets designated as NRO account.
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Who all can operate an NRE/NRO Account?
An NRE account can be operated by the following persons:
By the account holder, in the case of single account.
Either or survivor (both can operate individually);
Former or survivor (only former can operate during his life time, the survivor only after the death of former);
Latter or survivor (only latter can operate the account during the life time, the survivor only after death of latter).
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For more queries related to this you can visit our NRI Faq Page 🙂
23 Feb
BUDGET PREVIEW 2011 – Final Part :)
Continuing The Final Part Of The Budget Preview 🙂
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We believe that this year Finance Minister will take a gradual move towards fiscal consolidation by increase in Excise duty. Excise duty forms around 40% of Indirect Tax collections. Excise duty collections were down by 13% in April to December period to close to Rs. 70,000 crore comprising around 66% of Budgeted Estimates of Rs. 1,06,477 crore. The factors that contribute to our belief are; 😀
·Though the growth in corporate sales is not astonishing but profitability has improved to due to various cost control efforts which is quite evident by the corporate tax collection that have shown a growth of 44% in December 2009. Cumulatively Net direct tax collections increased by 8.5 per cent during April- December 2009.
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·India being a consumption story has shown healthy growth in sales of consumer durables. For instance Automobile industry’s sales went up by 32 per cent in December over the same month in 2009. It is believed that a gradual hike in duty will get absorbed without affecting medium term prospects of the industry.
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·Partial rollback would also help the finance ministry effect a calibrated integration of excise duty with the services tax by the end of the next financial year, when the proposal for a Goods and Services Tax is likely to be implemented.
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·Finance Minister had indicated that he would like the fiscal deficit for 2010-11 to be around 5.5 per cent of GDP. The proposal to raise excise duty by two hundred basis points is being endorsed also to help the finance ministry raise more revenue and stick to the projected fiscal deficit target.
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Disinvestment would be the key focal point in the Budget. We believe that the Finance Minister would place high targets from the PSU sale proceeds. The factors that contribute to our belief are:
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·In order to bring Fiscal deficit under control that would subsequently ease upward pressure on interest rates.
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·This will help Investment in social sector projects which promote education, health care and employment & will also help in Capital investment.
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On the Corporate Tax front, we believe that the Finance Minster is unlikely to lower tax to 25% from the current 30% as per Industry demands. The rationale behind our belief is:
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·The direct tax code that proposes corporate tax to be 25% will be implemented in fiscal 2011 – 2012 & Industry have to wait till its implementation as it will replace the existing Income Tax act.
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·Already, government is trying to make up more tax revenue & is unlikely to take step in this direction as it may come as an obstacle in order to control fiscal deficit.
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On deregulation of Petroleum sector, we believe that in order to cut down on subsidies government could provide the road map for partial deregulation of the petroleum sector. The road map may provide OMC’s to review the prices of petrol and diesel on a regular basis however, LPG and kerosene could continue to be administered by the government. Factors that complement to our belief:
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·In view of the commitment of the UPA regime to flagship social security programmes that require huge allocations, Mr. Mukherjee has told Mr. Deora that it would not be possible to provide huge subsidies to the OMCs in future.
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·On the External Economy side, we expect that the Finance Minister may continue to provide certain concessions like interest subsidy and extension of other export oriented schemes. The rationale to our belief:
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·In the recent two months i.e. November & December, merchandise exports registered a positive growth of 18.2% & 9.3% respectively. But in the period of April to December 2009, the exports were still negative to the tune of 20% as compared to the corresponding period.
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·The world economic recovery especially in US & Europe is still questionable & the regions constitute approximately 15% & 21% respectively of our merchandise exports, thus directly affecting the trade.
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·Sectors such as engineering goods, jute, carpets, handicrafts and leather goods are continue to be in bad shape, others such as gems & jewelry drugs, plastics and petroleum products are showing improvement.
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·Concluding, the main point is that it may not be a good time to take back the stimulus so soon that may derail the recovery.
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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here
22 Feb
BUDGET PREVIEW 2011 – Part 1 :)
At last the much talked topic “BUDGET” among AAM ADMI, CORPORATES or INVESTORS that comes to INDIA – is approaching. “The million dollar question is that will 2010 budget be another year to cheer the economy by giving some relief in indirect taxes, personal income tax and by implementing various schemes to induce social & infrastructure sector in order to maintain high trajectory growth”.
Generally, it is seen that the incentives which are given in the period of recession or slow down and moreover, when the government in power is about to complete its tenure, are above from expectations. It is seen that budget in two years usually comes good when the Govt. is in the last year of power & in the first year of the rule as a vote of thanks.The mid three years out of the five year term usually remains tight on the policies.
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For the common man, we expect that Finance Minister may raise the exemption limit in personal income tax & investment limit Under Sec.80C. The reason to our belief:
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1. The rocketing prices of food articles like sugar, pulses and vegetables have been cutting the pockets of a middle class.
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2. By coming out with these measures (above mentioned) the government will lower the tax incidence on the common man & will also help it to put the opposition on backfoot.
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By & large everyone is aware of the level of fiscal deficits globally and many of us know that it is essential to minimize deficits & returning to fiscal consolidation is necessary. The main question is why it is so important. Let’s look at the consequences of high fiscal deficit:
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A risk to high government borrowings leads to more debt servicing that cuts expenditure on various social welfare schemes, if TAX revenues do not matchup. In the current financial year, out of the 4 lakh crore borrowing, more than 50% has gone towards interest payments.
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Secondly, the higher government borrowing from market means less availability of funds to private borrowers. In the current Fiscal year, due to dismal credit growth, we haven’t seen pressure on Interest rates. But going forward we foresee normal credit growth in the next financial year. However as the government borrowing is expected to remain at same level in the next fiscal, pressure on interest rate is expected.
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So, this year the theme of Budget would any way be to maintain economic recovery through investment for building infrastructure rather than funding the expenses/consumption. But at the same time focus will be to bring down the fiscal deficit.
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The catch here is bringing down deficit by cutting expenditure means risk to growth & the other alternative is to increase revenues. While the direct tax collections are encouraging, on the indirect taxes front the government is still struggling to get desired revenues. This is because after September 2008, when the global financial system collapsed, the government came out with stimulus packages to keep up the desired growth pace.
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Excise rates since December 2008 had been progressively cut from 16, 12 and 8 per cent to 10, 8 and 4 per cent respectively depending on the product in question. Service tax was also reduced from 12 to 10 per cent.
15 Feb
Weekly Update of The Market (15th – 19th February)
Hello Friends, here, we bring you the weekly overview of the Indian as well as of the Global economy and latest global business and industry updates.
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Weekly Update of The Market (15th - 19th February)
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The much awaited gains in global markets which came in the week gone by, was a big relief for investors.
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Improving Australian Jobless rate (falling) to 5.3% from 5.5% & China‘s lending surged to 1.39 trillion yuan ($203 billion) in January, more than in the previous three months together lowered the concerns of global economic recovery and proved to be some of the triggers for the global markets gain.
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European Union statement that it is ready to support Greece somewhat eased pressure but China central bank another move to hike reserve requirement by 50 basis point to rein the credit growth spoiled the mood of the markets.
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Chinese banks disbursed 19% of the lending target in January alone.
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The existing reserve requirements stood at 16 percent for the biggest banks and 14 percent for smaller ones.
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Back at home, CSO expectations of decline in farm output to be contained within 0.2 per cent & robust recovery in industrial performance rejoiced the markets that GDP growth may come even better for the current fiscal year.
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On the flip side, market is cautious from budget outcomes on expected move towards fiscal consolidation.
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High fiscal deficit together with high inflation pose some long term risk for the equity market.
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The much awaited reforms in the areas FDI, BFSI & fuel and fertilizer subsidiary & a roadmap for implementation of Goods & Services Tax & Direct Tax Code can spark the rally in the domestic market.
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In the coming week, we may see some activity in capital goods sector on the back of very good IIP numbers.
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Industrial production witnessed a growth of 16.8% on Year on Year basis while cumulative growth for the April to December period has now inched up to 8.6% over the corresponding period.
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Overall the trend of most asset classes including stock markets around the world is down due to rising dollar index.
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Going ahead in the budget, we expect volatility to increase and markets to see big moves up and down.
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International cues are positive on the fundamental side but Europe problems and stimulus withdrawal along with rising inflation are having negative effect.
One should remain cautious going ahead.
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Nifty faces resistance between 4900-5000 levels and Sensex between 16400-17000 levels.
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A pick up in investor’s sentiments, softer dollar amid expectation of rescue plan for Greece have rejuvenated most of the commodities, especially metals and energy.
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We are expecting a thin trading in the beginning of the week, as US market is closed on Monday on the occasion of “President Day”.
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Absence of participation of Chinese market due to celebration of New Year holidays can limit the volatility of commodities further.
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If we talk about the trend, overall commodities may trade in a range now.
Any improvement in Japanese GDP data can give further boost in the prices.
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