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Monday, February
18, 2002, Chandigarh, India  
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Gold a
good option for investment
How trustworthy is your
jeweller? |
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Ambitious persons can
dream of success
Budget
expectations to propel share prices
Watch
price movements of Bharti Tele-Ventures
IT
return
Property
tax in Chandigarh
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Gold a good option for investment THE sudden spurt in gold prices, which rose to a two-year high last week, triggered by an aftermath of events, like aggressive buying by Japanese investors, that were due to panic, has brought the yellow metal once again into limelight. While the increase in prices made people sell their old gold stocks and jewellery, it has also led the common man think whether to consider gold as a sound investment or not. Rise in gold prices The bullion value soared last week or so with prices crossing even $300 per troy ounce in the European market, which was a two-year high. The Indian markets also witnessed an increase, with gold touching a three year peak at Rs 5,080 per 10 gram. On Friday (February 15), gold closed at Rs 4970 (Mumbai) per 10 gram. Increase in the international prices was witnessed more than a week ago with Japanese investors indulging in heavy buying due to concern over the safety of the country’s banks and from stock investors over the lingering fears of bankruptcies. Other factors like announcement that two mines in South Africa and Australia are cutting production substantially and collapse of Enron Corp also led to the price increase. Demand for the yellow metal Despite the fact that India is the largest consumer of gold, the demand here, which is at it’s peak during marriage seasons, has not been very encouraging, say the dealers. According to the World Gold Council, India accounted for a demand of 885 tonnes during the year 2000 and the demand between January 2001 and September 2001 was 662. 3 tonnes. The demand here is the maximum between the months of December and May (marriage season) with a short break in the mid of December. However, despite the ongoing marriage season here, there was not a noticeable increase in demand, say
marketers. Increase in prices occurred at a time when the marriage season demand was picking up. “This price phenomenon has rather reduced the demand”, said a trader. According to an official of the State Bank of India (which is also into gold retailing): “there has been no significant increase in the demand for gold as people no longer consider it as an investment”. With trends having changed, it is the diamonds and designer jewellery that have shown a substantial increase in demand. Our total sales where the share of diamonds used to hover around say, 20 per cent or so a few years back, now have an equal share of diamonds and gold, where the upper middle and upper class are going in for diamonds”, said Mr Sandeep Jain, Gujranwala Jewellers, New Delhi. He said increase in the gold prices is further likely to increase the demand for smaller diamonds. It is only a small proportion of people who look upon gold as an investment. “Following the situations like the UTI and the share market crisis, leaving the investors’ confidence shaken, a section of people have started re-considering gold as a secure investment”, said Mr Subhashchandra Jaitly, All-India Business Development Manager, Vanity Gold. However, this is particularly the middle class, with the upper class mainly going in for diamonds where the resale value is almost 90 per cent, said Mr Tejinder Bedi, owner, Zevar. Rise in speculation Following the spurt in the gold prices, speculations are also on an all time high. While a section of observers feel these prices would cross Rs 6,000 per 10 gram, there are others who consider this to be a temporary phenomenon. The rupee has shown an annual depreciation of 7 to 8 per cent against the dollar. Due to the weakness of the Indian rupee and with India depending heavily on imports for gold, there are chances that prices will rise and could even go upto Rs 6,000 per 10 gram in the coming days, said a market analyst. “The reducing confidence of the investors , globally, makes gold a very good option for investment. Apart from safety, the increasing prices are also likely to fetch one good returns”, he said. However, according to investment experts, the annualised return given by gold over the last 20 years has not been more than 7 to 8 per cent. “Compared to that, even the bank Fixed Deposits during this period gave better returns of more than 8 per cent (annualised), whereas Mutual Fund, during the last three-four years have been giving an annual return of around 10 per cent”, said Mr Gurpreet Singh, an analyst here, adding, “these facts only show that investment in gold can not be a wise decision. It should be purchased only for ornamental purposes”. The bullion prices have comparatively stabilised, and these might as well decline, he added. Soaring prices lead to sale Increase in the prices of bullion have only prompted people to sell their old gold stocks and jewellery. This is the best option considering the current situation where prices have moved up, said a jeweller. “Imports have already come to a halt and the market currently, is surviving with recycled gold”, he said. |
How trustworthy is your jeweller? THE first-ever market survey of gold jewellers in eight cities, conducted by the Bureau of Indian Standards (BIS), has shaken the very basis on which gold jewellery is purchased by consumers in India: trust. The results, showing that 88 per cent of the jewellers surveyed cheated on the purity of gold sold by them, brings home the fact that all that glitters is not 22-carat gold and that one should never trust a jeweller’s word when it comes to the purity of the yellow metal that he is selling. Also, while buying jewellery, a golden rule that one should follow is to look for third party authentication of gold quality or to put it simply, go for only hallmarked jewellery. Beginning with Delhi last October, the BIS personnel bought — as ordinary consumers — gold jewellery from 15 outlets in each of the cities that it surveyed: Kolkata, Delhi, Chennai, Mumbai, Bangalore, Ahmedabad, Hyderabad and Jaipur. And it got the samples tested at the gold assaying centers to verify the claim of the jewellers that they were of 22-carat purity. While in Kolkata, Hyderabad and Jaipur, not even a single piece of jewellery purchased was found to be of 22 caratage as claimed, in Mumbai as well as in Bangalore, only two of the 15 samples were made of 22-carat gold. In Ahmedabad and Delhi, three samples were of 22-carat purity while in Chennai, four pieces of jewellery were found to be of 22-carat gold. The samples were picked up from outlets of different sizes, located in different parts of the cities, along with a representative of a consumer organisation. The BIS, after consultations with its legal department and the Ministry for Consumer Affairs, has now decided to slap charges of unfair trade practice against the jewellers who cheated on the caratage, before the Monopolies and Restrictive Trade Practices Commission. Recognising the need for protecting consumers from such malpractices, the government, through the BIS, introduced in April 2000, hallmarking of gold jewellery in the country. Hallmarking is a system of analysing or assaying of precious metals like gold in a laboratory to ascertain its purity or fineness and certifying it. In other words, hallmarking gives the buyer a guarantee on the purity of gold, issued by an independent agency other than the jeweller. However, even though it’s almost two years since the voluntary scheme was introduced, it is yet to gain popularity. India, which is the largest consumer of gold in the world, consumes about 850 tonnes of gold per annum. Rough estimates put the number of jewellery-making units in the country at 100,000. And so far only about 265 jewellers have got the BIS certification for getting their jewellery hallmarked and there are only 12 assaying and hallmarking centres in the country. Well, when a jeweller is making huge profits cheating consumers on caratage, why should he go for a scheme that will considerably cut down on his ‘profit margin’? Even the small percentage of jewellers who are giving quality jewellery would not want to take the trouble of getting the jewellery hallmarked, unless there was a consumer demand. But that can come about only through consumer education and awareness. Certainly, the BIS survey has opened the eyes of consumers to the way they are being taken for a ride by jewellers, but for it to make a real impact, such surveys should be extended to rural areas too. This is particularly important because rural India, it is said, accounts for nearly 70 per cent of the gold consumption in the country. The Consumer Affairs Ministry and the consumer groups will have to play a major role here in educating the rural consumers. At the same time, additional assaying and hallmarking facilities should be created to cater to jewellers in these areas so as to meet the consumer demand for hallmarked jewellery. So, whenever you buy gold jewellery, go for a hallmarked piece. You can get the names of jewellers selling hallmarked jewellery in your city from the BIS website by logging on to http://www.bis.org.in/. Prefer outlets that sell only hallmarked pieces. You may have to pay about Rs 50 more for a hallmarked jewellery, but that’s small price to pay for quality. If, on the other hand, the jewellers sells you jewellery made of say 16.5 carat gold, claiming it to be of 22 carat purity, you will lose as much as Rs 1000-1200 for every 10 gm of jewellery bought (depending on the gold price). A hallmarked jewellery will have five marking: the BIS logo, the fineness number, the mark of the hallmarking centre, year of marking and the jeweller’s mark. Since they are very minute, a jeweller is expected to give you a magnifying glass to help you read them properly. The jewellers are also expected to display a board specifying the purity in carats since consumers are more familiar with it. For example, fineness expressed as 916 (parts of gold per 1000 of jewellery) corresponds to 22 carat, while 958 is 23 carat. |
Ambitious persons can dream of success Ludhiana How did I start my career? After completing my MBA, I had a stint with UK based international company, where I got rich experience in marketing, business planning and team work. I had helped the company secure and execute a big bicycle contract from an African country. This also involved interacting with Indian and Chinese suppliers. In the meantime, I realised that this product has a great potential in the international market. So I decided to make use of that opportunity and formed a trading house with an initial investment of Rs 4-5 lakh in 1994. Next year, I set up a manufacturing unit, and started exporting cycles under Hi-Bird brand name. Today my two brothers and wife are fully associated with me to manage five units of the Safari group. The group is making more than 50 models of cycles within a price range of Rs 550 and Rs 5000. Recently, we entered domestic market and are getting overwhelming response from the customers. How do I see the threat of competition? Competition is a challenge, which I have always relished. I have made efforts to cut down costs through experienced management and quality assurance. I have also visited China and other countries, and have found that their average per labourer wages are though higher than that of our companies, but due to zero-rejection rate policy, higher motivation level of workers and better working conditions, the labour productivity is much higher in these countries. We have also tried to imbibe their practices. Consequently, I have been awarded ‘International Europe award for quality’ from Paris in 2000 and ‘International star award for quality (Platinum category) from Geneva in 2001. What can the next government do to encourage young entrepreneurs in the state? The state government should understand that agriculture may be the main economic activity in the state but nothing can develop without industry. To make the industry universally competitive, a responsive bureaucracy is the need of the hour. The government would have to simplify tax structure besides abolishing ‘ inspector raj,’ which has created obstacles in the day to day working of entrepreneurs. It can also assist the entrepreneurs by investing in a big way in infrastructure including roads, power sector and communications, man power training and above all development of new technologies through investment in R& D sector in collaboration with industry. The emphasis should be on to build up forward and backward linkages to promote export units in the state. It will boost employment opportunities and development of the rural sector as well. Suggestions to young entrepreneurs In my opinion the magic word for young entrepreneurs is positive attitude. One needs professional training and a killer instinct to succeed in the ever increasing competitive environment. The right approach to handle interpersonal relations and consistent hard work also help one achieve higher goals in business. However, after tasting a success in business, one should not forget one’s social responsibilities, which are as important as the success and ethics in business. |
Budget expectations to propel share prices RENEWED buying interest from retail and institutional investors following the government’s commitment to promote reform and expectations of sops to various sectors in the ensuing Budget boosted the bourses last week. The Bombay Stock Exchange sensitive index surged 108.10 points or 3.09 per cent to 3,602.02 points from the previous week’s closing at 3,493.92. That is the sensex’s highest closing in nine months. Banking, financial and public sector undertaking stocks remained in focus nearly throughout the week. The major gainers included ICICI Bank which surged 37.7 per cent to Rs 127.05, IDBI Bank which gained 23.4 per cent to Rs 24.25 and Centurion Bank which rose 22.9 per cent to Rs 10.70. Among the financial institutions, ICICI jumped 28.6 per cent to Rs 60, IFCI 41.9 per cent to Rs 5.75 while IDBI 28.6 per cent to Rs 20.45. ICICI Bank, IDBI Bank The expectation that the government may soon reduce interest rates on small saving schemes by 50 or 100 basis points boosted the banking scrips. This will provide some relief to the banks which will cut their deposit rates. This will reduce their costs and effectively raise margins. Also a further cut in prime leading rates will boost the credit off-take. Banking and financial sector scrips were also in demand on the expectation of relaxed foreign direct investment (FDI) norms for the banking sector, privatisation of the state-run banks, reduction in interest rates on small savings schemes, and on expectations of some fresh government measures to tackle the high NPA problem of banks. ICICI Bank scrip, which closed the week at Rs 127.05, seems to have tittle steam left in it as the merger issue will soon come into play. The scrip is expected to remain under pressure until its merger with ICICI is through. On the other hand, the IDBI Bank gained over 23 per cent to close the week at Rs 24.25. The Industrial development bank of India (IDBI) seems to have dropped the idea of reverse merger with the IDBI Bank. Investors can lap up IDBI Bank as when this is confirmed by IDBI. The IDBI Bank will then be a target of FDI when IDBI decides to disinvest its stake in its subsidiary IDBI Bank. ONGC Oil exploration giant, ONGC surged 36.4 per cent for the week to Rs 232.74. The rally was fuelled by the proposed deregulation of the oil sector and the market talk that the government will declare a hefty dividend of Rs 70 per share. Investors go for PSU stocks as there are a lot of expectations about these shares but it remains to be seen how the government will take things forward. So profit booking should be the buzzword for investors in PSU stocks. Gujarat Ambuja Cement Gujarat Ambuja Cements, the fourth largest cement manufacturer in India, gained 9.4 per cent in the last two trading sessions to settle at Rs 233.95 on Friday. The scrip has been a big gainers in the past few months. From a 52-week low of Rs 140.30 on 24 September 2001, the scrip has rallied 66.7 per cent to the current level of Rs 233.95. The fresh rally in the counter is on the expectation that the budget will contain some benefits for the cement sector. There is a feeling that the government will increase its planned expenditure on roads and this will lead to a surge in the cement demand. Another expectation in that the excise duty on coal will be brought down and this will reduce the cost of production. Coming fortnight The bullish undertones continued through the last week. Several positive announcements by the government fuelled the rally and the market ended the week with a gain of 104 points. The government has approved the dismantling of Administered Price Mechanism (APM) from April 1, 2002 onwards. The RBI has relaxed its norms and allowed foreign banks operating in the country to borrow foreign currency from their main offices and show it as capital. The disinvestment moves seem to be catching momentum. The rally may continue at least till the Budget. On the up move, the sensex faces resistance at 3620 and 3680. The current rally, however, has the potential to go up to 3720. |
Watch price movements
of Bharti Tele-Ventures LAST week, I commenced the diary reminiscing over Abe Lincoln’s words of wisdom — “you cannot fool all the people, all the time.” With the promise of losses over the next half decade or so, the Bharti Tele-Ventures IPO “seemingly” sailed through. Well, like I said the market is a great leveller and though post-listing histrionics cannot be ruled out, chances are this stock will touch the floor and not merely its floor price. Watch this stock! By the time you read this, the stock should have been listed. Let us start off with a backgrounder. BTVL has been promoted by Bharti Telecom, Brentwood Investment Holdings (Warburg Pincus group) and Pastel (Singtel group). The company plans to provide cellular services in 15 of the most sought-after circles out of a total 22 circles. Besides, BTVL intends to provide basic telephony services in four additional circles, contend for international long distance (ILD) telephony services and widen its range of telecommunication services to provide broadband solutions and international bandwidth access. The net proceeds of its IPO are proposed to be deployed to fund the company’s cellular, fixed-line and national long distance (NLD) businesses. Besides, it is also worth noting that the proceeds will also be used for repayment of borrowings, making acquisitions of minority stakes in its subsidiaries and general corporate purposes, including investing in its broadband business. The total cost of BTVL’s project has been estimated at Rs 2,097 crore. Now let us move into an analytical mode. The company’s financials provide the first warning salvo as while there is topline growth, there is a glaring bottomline degrowth alongside. BTVL’s losses have galloped to Rs 104.3 crore during FY01 as compared to Rs 29.3 crore in FY99. In light of the capital-intensive nature of the business and expansion plans of the company, BTVL is expected to incur losses in the coming years as well. Furthermore, its broadband, VSAT and Internet Services projects hardly inspire confidence about their ability to stand up to a stringent revenue model scrutiny. Then, there is the issue of intensifying competition as TRAI has thrown open the doors in the basic telephony segment. The recent upheaval in the market caused by the entry of MTNL and BSNL at near suicidal rates has ominous overtones for BTVL and other private sector players. Confirming the fears of possible technological obsolescence is the introduction of code division digital multiplexing (CDMA) based wireless in local loop (WLL) on “limited mobility” services, which is emerging as a serious threat to cellular operators, especially in a country like India with extremely price sensitive customers. Is that all? No sir, but let us now defer the rest of the sordid saga to the next week. In the meanwhile, watch its price movements, and yes, avoid getting carried away by possible price histrionics. Remember, no stock without a fundamental story has ever sustained investor interest at any bourse. Listing today Bharti Tele-Ventures Limited (BTVL) shares would be listed and tradable at three stock exchanges from tomorrow. The company had obtained the listing and trading permissions from NSE, BSE and DSE.
UNI |
R. N. Lakhotia IT return Q: I am a Punjab Government pensioner and my age is 71 years. My annual pension is Rs 66,000 and I receive interest on bank deposits Rs 4,000. I own a telephone and a residential house area 350 sq yds. Since 1/6 scheme has been applicable to all urban areas, am I required to file Income-Tax return? — Kalwant Rai Aggarwal, Bathinda Ans: Yes, it is true that the income-tax return is to be filed compulsorily by persons fulfilling any one of the six economic indicators. However, there is an exception if the senior citizen is in occupation of house property in excess of the area as mentioned in income-tax law or owns a telephone even then he is not required to file his income-tax return specially when the same is below the exemption limit. In your case as your income is below the exemption limit you will not be required to file your income-tax return. Standard deduction Q: I am a government servant and also drawing ‘nomination pension’ from ‘Provident Fund Commissioner’ in respect of my deceased son. Whether I am eligible to take benefit of standard deduction on both incomes i.e. salary and pension separately. Please reply my question early so that I may deposit the tax due, in time. — G. Singh, Mohali Ans: The nomination pension received by you in respect of your deceased son will be taxable u/s 56 of the Income-tax Act, 1961. On this pension amount standard deduction will be permissible to you @ 33 1/3rd per cent of the pension amount subject to a maximum limit of Rs 15,000. Loan instalment Q: I am the only owner of house at Mohali and paying Rs 5804 per month as house building loan instalment to HDFC. I am getting rebate on instalment of HB loan (including interest component) in my income-tax statement. My husband is also a government employee. Can I give a house rent receipt to my husband so that he can take exemption in HRA? The annual amount of given house sent receipt will be my income and I will add it to my annual income as income from other sources. — Saroj Rani, Mohali A: The standard deduction in respect of your salary will be permissible u/s 16 (i) of the Income-tax Act, 1961. Thus, in your case the benefit of standard deduction on both the pensions would be available. On the facts stated by you, on the basis of house rent receipt issued by you to your husband he will be able to enjoy the benefit of tax deduction on the salary income received by him. However, the rental income will be added in your case. NRI Q: My son is a NRI (non-residential Indian). He is employed in the USA for the last three years and has not visited India since then. He has purchased a flat in Gurgaon, with a covered area of about 1500 sq ft. Recent announcement speak that persons holding landed property are required to submit income tax return. I would request you to please advice whether, my son, who is an NRI, is also required to submit income tax return from USA I understand the income of NRI’s is not taxable. —
B. L. Sood, Ludhiana Ans: If your son who is an NRI does not have income in India exceeding the exemption limit, then he will not be compulsorily required to file income-tax return merely for fulfilment of one of the conditions for compulsorily filing income-tax return. The exemption from 1/6 scheme is available to your son because he is NRI. |
Property tax in Chandigarh AS per available reports Municipal Corporation of Chandigarh is considering imposition of property tax. Few facts need to be kept in mind and no rash decision should be taken on this issue for its blanket application on all properties. The residents of Chandigarh are mainly salaried class, retired persons and other fixed income groups and industries are negligible. As such, majority of them pay income tax at source with no chances for concealment of income and this is the reason that income tax collections at Chandigarh are higher than even Ludhiana which is highly industrialised and residents are very rich and affluent. Some people’s argument that when residents of Ludhiana and other such cities are paying property tax, Chandigarh people should also pay does not, therefore, hold good. Large number of owners in Chandigarh are above 60 years and they had built houses with total earnings of their life and by raising loans and have pension or interest on savings as their only income. They cannot pay property tax as they are already paying exorbitant electricity, water and phone bills. The cost of living at Chandigarh is also very high compared to other cities. The corporation should, therefore, explore alternative measures for increasing its income and to plug wasteful expenditures and should also seek higher share out of I.T. collections of Chandigarh. Therefore, it would be advisable to have a debate on this important issue by inviting the representatives of welfare associations of different sectors and financial experts and only then a final decision should be taken on this issue. Dr M. S. Aulakh,
Chandigarh |
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Inflation falls
to 1.13 pc Hyundai Motor |
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Mr R.D. Sharma (42), is among those few successful entrepreneurs of the region, whose growth path is driven by wild ambition, imagination and meticulous planning. After starting his career with a consumer goods company in the UK, he started his cycle manufacturing unit in 1995. Within a span of six years, he has earned a reputation of supplying cost-effective cycles and cycle parts under Hi-Bird brand name in the European and domestic market. The annual turnover of his Safari group is around Rs 50 crore today.