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Monday,
February 3, 2003, Chandigarh, India  
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Demand for new gold jewellery dips Rise in world gold prices Increase in sale of gold Fall in demand Bankers’ views on gold sale Impact of stock markets Is it still safe to invest in gold?
FIIs’ net buyers at Rs 888 cr |
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Market watches closely US-Iraq developments
Insurers, don’t challenge verdict
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Demand for new gold jewellery dips With the gold prices hovering around Rs 6,000 per 10 gram, the local jewellers are witnessing a sharp fall in the demand for new gold jewellery. However, they are seeing an increase in the exchange of old jewellery. According to the market experts, a large number of customers are trying to cash in on the price spurt. However, a section of gold dealers is still hopeful that prices would rise till the fate of Saddam Hussain is decided by the USA. Despite the onset of the Indian marriage season, the jewellers are complaining of sharp decline in the sale of new gold jewellery. They say that rather the families are exchanging old family jewellery with the new one. To meet the challenge, some of the jewellers have slashed down the designing and making charges. Rise in world gold prices During the past one week, the gold market has seen ups and downs with the change in mood of Mr George W. Bush. The standard gold price which had reached Rs 6,020 per ten gram on January 28, witnessed a decline of Rs 40 to Rs 5980 per ten gram, the very next day. It has again firmed up, and the market experts do not rule out the possibility of further increase in prices. Though most of the people might be blaming the engulfed tension in the Gulf, for the increase in gold prices. But the market experts feel that along with the threats of the USA to attack Iraq, other factors are also influencing the gold prices. Mr Anil Talwar, a leading jeweller and a keen observer of the world gold market, said: ‘‘The possibility of a war on Iraq and decline in the value of dollar against rupee, appreciation of Euro value and increase in crude oil prices in the international market are pushing up the gold prices. Since the USA economy is not doing well in the recent past, and the European market is growing at a respectable rate, the demand for gold for investment purposes has increased.’’ He further says that even traditionally, during November-May period, the demand for gold is increased due to Indian festival and marriage season and the Christian New Year and Chinese New Year sales. Increase in sale of gold Market dealers admit that with the increase in price of yellow metal, a section of people who had stocked gold for investment purposes, are trying to cash in on the price rise. A bank employee, who had taken VRS, said:‘‘ Last year I had decided to invest worth Rs one lakh in gold, apart from keeping my money in fixed deposits. While the interest rates in bank has continuously declined, but with the increase in gold price, I decided to dispose off about 10 tolas in the market, and made a net profit of over Rs 5,000.’’ He asks can any bank or the shares of companies ever match this investment. Market experts agree that it is not the middle class, but people who had purchased gold for investment purposes, are selling gold. Most of the Indian families, said another jeweller, would never sell gold despite substantial increase in prices. He said, most of the North Indian families, where women have emotional attachment with the gold, are just postponing the purchase of gold, but are not selling it. Fall in demand According to World Gold Council, the demand for the gold in Indian marriage season is around Rs 300 billion annually. Some of the dealers who were selling jewellery worth crores of rupees every month here, are waiting for the customers. Said a leading dealer of Ludhiana, ‘‘Only rich industrialists are now purchasing jewellery for their families or to give it as gifts in the marriages. Others are rather waiting for the fall in prices or exchanging old family jewellery.’’ Mr Bhuwan Gaurav, Regional Business Manager, Tanishq, claims that to meet the challenge of increasing price of the gold, the company has decided to cut down making charges up to Rs 66 to Rs 99 per gram instead of up to Rs 165 per gram charges. He admitted that the company was expecting to touch an annual turnover of Rs 350 crore during the current fiscal against Rs 250 crore achieved last year. But, a large part of the business was now in exchange of old gold metal. He pointed out that the business in the exchange of gold jewellery has increased by about 50 per cent against the normal times, and the demand for new gold jewellery has proportionately dipped. Bankers’ views on gold sale The bankers also claim due to prevailing low interest rates in the market, a section of stockists is still investing in the gold, hoping to cash in on further increase in prices. One of the bank officials engaged in gold business, said,‘‘ People should not expect extreme increase or fall in prices. Whether there is war or not, the prices would stabilise around the prevailing price, once it touches a new peak.’’ Mr N.K. Marwaha, DGM, SBI’s Sector 17 main branch, disclosed that due to increase in international prices, the demand for pure gold has sharply
fallen. He said, ‘‘We used to import up to 25 kg gold on the behalf of local dealers every month, but during December, no dealer has come forward to buy gold from us. Though temple trusts are still coming forward to deposit gold in bulk.’’ The stock market experts say that the London Metal Exchange, which determines the price of gold in the international market, is highly sensitive towards the stock exchanges. Mr Tarvinder Dhingra, a stock market analyst at the Ludhiana Stock Exchange said, in addition to ‘war factor’ there was a inverse relationship between the performance of world stock markets and the price of gold in the international market. He said,
‘‘With the fall in stock prices, the big investors are moving their funds towards gold, a safe heaven, to keep their funds secure. It has created an artificial shortage in the market and leading to increase in prices. However, even after the end of war, the gold prices would settle some where at a marginally higher price than the prices prevailing in the market about a month ago.’’ There is general feeling that the gold has already touched its peak, and it is right time to sell gold. But there are other who say that the gold prices may rise up to $ 400 per ounce if the US-Iraq crisis explodes into a lengthy war, hitting the demand of the gold in the Gulf and other sensitive markets. Experts claimed that due to increased chances of war in Iraq and fluctuations in the price of Gulf currencies, demand of gold has already increased sharply in that area. The prices of gold are likely to reach a peak, after witnessing ups and downs, before stabilising around Rs 5,700 to Rs 5,800 per ten gram, after the resolution of Iraq crisis. |
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Inflation up at 4.42 pc
New Delhi, February 2 The latest reported week saw a substantial rise of 0.50 per cent in the point-to-point price change, as measured by Wholesale Price Index from 3.72 per cent in the previous week and the index was a mere 1.39 per cent a year ago.
PTI
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FIIs’ net buyers at Rs 888 cr
Mumbai, February 2 According to a data available with SEBI, FIIs, which are considered major players in the stock market had extended continuous support to the market when it was under tremendous selling pressure due to persisting worries over a possible war between Iraq and US coupled with corporate results announced by some of the prominent technology companies here which failed to match market expectations. The SEBI data also revealed that the domestic mutual funds (MFs), the other major players, recorded an outflow of Rs 396.19 crore in equities during the month. The 30-stock BSE Sensex has so far lost 127 points at 3,250 points (Jan-31, ‘03) as compared to 3,377 points in December 31, ‘02.
UNI
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Market watches closely US-Iraq developments Rising fears of the US-Iraq war, margin calls of brokers and expiry of the January derivative contracts took their toll on the market last week. The BSE Sensex lost 37 points to close at 3250.38 and the S&P CNX Nifty shed 14.20 points at 1,041.84. The third-quarter results from India Inc. have been strong although there is some disappointment from Satyam Computers, Mahindra & Mahindra and BHEL whereas Reliance Industries, ICICI Bank and SBI have met the analyst expectations. Telecom stocks hogged the limelight during the latter part of the week due to a Cabinet reshuffle wherein Mr Arun Shourie has been made the head and Telecom Ministry and IT. MTNL Investors lapped up the MTNL stock, sending it soaring last week. The buying was attributed to the hope that, with the change in the ministry, the disinvestment of MTNL will catch pace and it will be undertaken before the stipulated time. The buying was also attributed to reports that Mr Shourie will study the controversial proposal to merge the state-run telecom giants MTNL and Bharat Sanchar Nigam Limited (BSNL). The MTNL scrip soared 36.7 per cent last week to Rs 116.55. Satyam Computers Satyam Computers announced dismal third-quarter (ended December 31, 2002) results, which even fell below its own guidance. The company posted a 2.2 per cent fall in its net profit to Rs 116.73 crore from Rs 119.43 crore in the corresponding period of the previous year. The scrip suffered a sharp setback following dismal results and it has lost close to 25 per cent since December last. Yet, the downside for the stock could be limited due to its attractive valuation among IT stocks. High risk investors could add the scrip to their folio on declines. Digital Globalsoft on the other hand has shown strong performance for the third quarter. The company recorded a 9.7 per cent rise in its net profit to Rs 27.01 crore (Rs 24.62 crore last year) on a net sales growth of 26 per cent to Rs 109.98 crore (Rs 87.28 crore). The results have been good and they have come at a time when there are some apprehensions about the company’s integration with Hewlett Packard (HP). Reliance Industries Reliance Industries came out with its third quarter results last Friday that vastly beat market expectations. The company registered a 24 per cent rise in its net profit to Rs 1,083 crore on a total sales of Rs 11,243 crore (up 7.5 per cent). The strong performance can be attributed to continued focus on productivity improvement and cost reduction. Coming
Fortnight The market is now closely watching developments on the US-Iraq front, though the general consensus in the market is that war is unlikely to have its impact on India’s economy, given the comfortable oil reserves that the country has. Moreover the country has a comfortable position on foreign currency reserves as well. As stated a fortnight, the market will also now turn its attention to the Budget to be presented at the end of the current month. Technically, the Sensex managed a pull back from around the 3190 support and ended the trading session above 3245. The retracement levels for the index are 3280 and 3305. The bounce in the market is likely to be confined to select front-line stocks. |
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by Pushpa Girimaji Insurers, don’t challenge verdict A consumer court holds a doctor guilty of negligence. Guess who takes up the cause of the doctor and questions the Order? The insurance company which has to pay the damages! Of course, the insurer’s interest in challenging the “guilty” verdict against the doctor has more to do with having to indemnify the damages awarded by the court and less to do with it’s faith in the doctor’s infallibility. However, this adds a new dimension to medical negligence cases being fought before consumer courts and as far as consumers are concerned, this is not a happy development. Appeals filed by insurance companies challenging the verdict of medical negligence by consumer courts could well lead to inordinate delays in the complainant getting the compensation awarded by the courts. Fortunately for consumers, the apex consumer has taken very strong objection to such appeals filed by insurance companies. Saying that the insurer was abusing the process of justice and prolonging the agony of victims of medical negligence, the National Consumer Disputes Redressal Commission has sent a stern warning to all insurers that hence forth such petitions filed by them challenging the verdicts of the consumer courts in medical negligence cases will invite imposition of heavy cost. The warning has come in response to two separate revision petitions filed by New India Assurance Company, challenging the verdicts of the Punjab State Consumer Disputes Redressal Commission in two separate cases of medical negligence. In both the cases, the commission had upheld the Orders of the District Forum holding the doctors guilty of negligence. In the first case, where 45-year old Mohinder Kaur went into a coma during the performance of a surgery and failed to come out of it, her husband and two children had filed a complaint against the nursing home, the surgeon and the anaesthetist. Since the nursing home (Walia Nursing Home, Patiala) was insured with the United India Insurance, Dr R.P.S. Walia
(surgeon )with National Insurance and Dr Ajay Goel (anaesthetist) with United India Insurance and New India Assurance, the insurers were also named in the complaint. As far as the complainants were concerned, they were proforma parties to meet the liability arising out of the finding arrived at by the District Forum. The Forum, holding the doctors and the nursing home liable, awarded the complainants Rs 2 lakh along with 12 per cent interest from the date of filing the complaint till realisation of the compensation amount and said the insurers would pay the amount. All three insurance companies and Dr Walia (he filed a joint appeal with National Insurance) filed appeals before the State Commission, which were dismissed. Next, the New India Assurance filed a revision petition before the National Commission, earning the displeasure of the apex consumer court. Observed the commission: “It was incumbent on the insurance company to pay the amount under the policy and not to file this petition alleging that there is no medical negligence on the part of the doctors. It is not the case of the insurance company that the doctor conceded to the judgement or there was any understanding between the complainants and the doctors. It is a matter of common knowledge that no medical doctor would have a finding of negligence returned against him and he fights the case to the best of his ability. Perhaps that was not enough for the insurance company to pay up the amount under the policy. We certainly do not appreciate the action of the insurance company in challenging the order of the State Commission”. Said the commission further “....Rather it is an abuse of the process of the whole system and simply because the insurance company has means to challenge each and every order without regard to the circumstances of the case and its obligation to pay the amount under the policy. It was neither necessary nor proper for the insurance company to take up the cause of the doctors to save its own liability which it was legally bound to meet”. In the second case, where a minor’s hand had to be amputated, the District Forum had found the Singla Bone and Joints Hospital and Dr P.K.Singhla guilty of negligence and awarded Rs 2 lakh as a compensation and asked the insurance company to pay, as per the terms of its policy. However, the insurance company filed an appeal before the State Commission, impleading both the doctors as respondents. The complainant also filed an appeal seeking enhancement of the compensation amount. Both were dismissed. The Insurance company — New India Assurance — then filed a revision petition before the apex consumer court. Dismissing this, the National Commission said it must express its deep anguish over the way these petitions have been filed by the insurer. “Henceforth, if such petition is filed by any of the insurance companies, we will certainly impose heavy cost. Agony of a consumer must end at some stage. It is the duty of the insurance company to see that frivolous cases are not filed so as to clog the wheels of justice...” the commission said. Insurance companies would do well to remember this warning. |
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by R.N.Lakhotia Gift Q: I am working in a public sector undertaking of Punjab Government. On my retirement during the current financial year, I am likely to get above Rs 9 lakh from my employers as pensionary benefits besides about Rs 9 lakh standing in my GPF account. Out of Rs 18 lakh to be received by me, I would like to give Rs 4 lakh to my married son, Rs 4 lakh to my married daughter and keep the balance with me. Please clarify the following: 1. What will be the implication of Income Tax, Gift Tax or any other tax on me/my son or my daughter, in respect of the amount transferred to them. 2. What will be the implication of Income Tax on the interest accrued on the transferred amount? Whether the interest shall be added to my income or to the income of my son/daughter. 3. What will be the implication of Income Tax, if my son/daughter invests the amount for the purchase of immovable property (residential or non-residential). — B.S. Gill, Moga Ans: You may give gift to your married son and your married daughter without attracting any tax liability under the Income-tax Law or Gift-tax Law. Please remember that after October1, 1998 there is no levy of Gift-tax. The interest accrued as on the date of transfer will be treated as your Income, while the interest accruing after the date of gift will be treated as belonging to the donee. Your son as well as daughter are free to invest the gifted amount in any mode, as they like.
Tax rebate Q:
I retired on VRS on 31.3.2001. My pension is 39,000 a year and I get about 1,20,000 the interest from retired benefits, thus my total income 1,59,000 a year. In the year (2002-2003) one will get rebate of instruments purchased at 15 per cent if total income is more than 1,50,000. If from salary or pension income 13,000 is deducted as standard deduction the total yearly income comes 1,46,000. In this case I will have to get the rebate of instruments purchased of Small Savings and ICICI Bonds at the rate of 20 per cent which will save me from extra deposit of 5 per cent. Please let me know if I am correct to take the benefit at 20 per cent of the Small Savings and Bonds. — Prem Nath, Rohtak Ans:
As the net taxable income after standard deduction, etc. is less than Rs 1,50,000 hence tax rebate permissible would be 20 per cent and not 15 per cent. |
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