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Bankers indicate cut in lending rates
MS bid: Yahoo to take time in evaluation
Fuel Price Hike
No hike in VAT tax slab
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Pump in over $5 b
Govt may issue shares to AI workers
Tax Advice
Market Scan
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Bankers indicate cut in lending rates
Mumbai, February 3 At least three state-owned banks have indicated to cut rates by as much as done by HDFC, with more likely to follow in the coming weeks. Union Bank of India (UBI) chairman M.V. Nair said the bank's asset-liability committee (ALCO) would be meeting next week to consider a revision in rates. “There is a case for deposit rates to come down, and the lending rates as well. Deposits are growing at around 25.5 per cent, much above the RBI’s projection,” he said. The RBI, at the quarterly review of its monetary policy in end-January, had hinted that there was a case for banks to lower their lending rates, which had peaked during the course of the last year. However, HDFC’s rate cut is expected to trigger a spate of rate cuts in the banking industry as peers are likely to feel the pressure in an increasingly competitive environment. However, ICICI Bank said it might not lower its rates in the short-term and would prefer to wait and watch the evolving situation. Another public sector bank, Bank of Maharashtra is, however, readying itself for a cut in rates in selective segments, its chief M D Mallya said. "We might affect a 0.25-0.50 per cent cut in certain portfolios. Out AlCO is meeting next week to take a decision on the matter," Mallya said, adding that the rising cost of funds has affected the profitability of the bank in this fiscal as compared to the previous one. According to senior bankers, there is a general slow-down in the credit-offtake this fiscal, which declined to 20-22 per cent from an average 33 per cent in the previous fiscal. Kolkata-based UCO Bank also seems inclined to revise downwards its benchmark prime lending rates soon. Bank of Baroda, however, has no plans for an immediate cut in its lending rates and would prefer to watch market movements before deciding on the issue. ICICI Bank, which has no plan to cut its rate presently, would closely monitor the market before effecting any change in its rates, its executive direcor V Vaidyanathan said. According to him, ICICI Bank would focus on growing its retail deposits and current and savings accounts in the approaching month. "The credit offtake has been quite tepid throughout this year. We expect it to remain this way for the last quarter as well," Vaidyanathan said. — PTI
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MS bid: Yahoo to take time in evaluation
Washington, February 3 It was undertaking a deliberate review of Microsoft's offer to pay Yahoo shareholders either $31 in cash, or 0.9509 of a share of Microsoft common stock, Yahoo said in a media release posted on the company website. The review "will include evaluating all of the company's strategic alternatives including maintaining Yahoo! as an independent company," the posting said. "A review process like this is fluid, and it can take quite a bit of time." "That process will take some time, but the board will ultimately pursue the option that it believes can best maximise value for our shareholders." In response to a frequently asked question about whether Yahoo would seek proposals from other companies, the company said its board "is going to evaluate all of Yahoo!'s strategic alternatives and pursue the option that it believes can best maximise value for our shareholders". In reply to another question about what would a deal like this mean for Yahoo's users, advertisers, publishers, partners and people, it said as the Yahoo's board is going to evaluate all aspects of this proposal it wouldn't be appropriate to speculate about the potential benefits or challenges of a deal. Meanwhile, the Wall Street Journal said Microsoft's offer for Yahoo representing a 62 per cent premium over the Internet company's recent share price is a sign of its determination to narrow Google's growing lead in the online advertising and web search-engine wars. By absorbing Yahoo, Microsoft hopes to gain the heft it has long sought with consumers, advertisers and other online publishers, providing access to roughly 500 million world-wide monthly users of Yahoo's Internet services. The bid is the biggest Internet-related deal since the 2001 merger between America Online Inc. and Time Warner Inc. — IANS
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Fuel
Price Hike
New Delhi, February 3 Sources said the Cabinet will look at the suggestions of making a "moderate" hike in the price of petrol and diesel and cutting excise duties. Sources also said suggestions received by the Cabinet include raising price of petrol between Rs 2-4 per litre and of diesel between Rs 1-2 per litre. However, sections within the government are keen on measures which can prevent the burden being passed on to consumers. The government has also received suggestions for reducing custom duty and excise duty on petroleum products. It has also been suggested 6 per cent ad valorem component on petrol and diesel should be done away with. Oil PSUs say they are losing Rs 9.20 per litre on petrol, Rs 10.94 on diesel and Rs 19.89 per litre on kerosene. The loss on LPG per cylinder is to the tune of Rs 331.34. The under recoveries for oil PSUs have been estimated at Rs 70,000 crore for 2007-08. Sources said final decision on fuel hike by the government will also weigh in political factors as the UPA can ill-afford adverse publicity on price rise in the year in which 10 states are scheduled to face assembly polls.
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No hike in VAT tax slab
New Delhi, February 3 The increase of VAT was proposed from slab of 4 per cent to 5 per cent and in furtherance of earlier declaration the CST will be reduced from 3 per cent to 2 per cent from April 1 this year. "Reduction in CST to 2 per cent from April, 2008 will cause a revenue loss of about Rs 1300 crore to state governments and the Union government will compensate such loss and no extra burden of tax will be levied on traders and people," Delhi Finance Minister Dr A K Walia said. He further said that ground realities of Indian business system will be kept in mind while enforcing Goods and Service Tax (GST) from April 1, 2010 in the country and necessary preparations have already been made for formulating a roadmap to GST. The GST taxation system will also remove complexities of tax structure and burden of paper work and formalities of different taxes from the head of traders. Earlier, while speaking at the conference, CAIT secretary general Praveen Khandelwal stressed the need of formation of a separate Ministry of Internal Trade both at Centre and State levels.
— UNI |
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Pump in over $5 b
New Delhi, February 3 Despite some brief recovery in a few trading sessions, including a gain of about 600 points on Friday last week, the stock market benchmark Sensex is still close to 2,400 points or more than 11 per cent below its January 10 level. The total market value of all the listed companies has dropped by close to Rs 12 trillion during this period in a plunge primarily driven by foreign investors and some panic selling by retail investors. However, the trading pattern shown by the domestic MFs indicate that they have held their nerves in this crisis and purchased shares worth close to Rs 20,000 crore by taking advantage of buying opportunities from falling share prices. Madhusudan Kela, equities head, Reliance Mutual Fund, which invested close to Rs 2,000 crore in last few days, said long-term strategy is about buying good companies’ shares at good valuation. Interestingly, a number of fund houses are believed to have diverted their capital from debt market to the equity market during the recent correction. In January, MFs were net buyers of equities worth more than Rs 5,500 crore, even as they were net sellers to the tune of more than Rs 4,500 crore in the debt market. MFs were net buyers in stock market during more than half of the 15 trading sessions since January 11 and made net purchase of shares worth about Rs 4,000 crore. — PTI
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Govt may issue shares to AI workers
New Delhi, February 3 "As of now, there is no decision on the proposal by the Nacil, which runs Air India. It is aimed at encouraging the employees participation in running the national carrier. The percentage of the capital share and other details would be announced later," Civil Aviation Secretary Ashok Chawla said. The government is likely to issue up to 5 per cent of National Aviation Company India Ltd's (Nacil) equity capital as shares to employees.
— PTI |
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Tax Advice
Q. I am a disabled military officer, who retired from the post of Colonel. I have received total pension of Rs 2,19,953 during 2006-07 from which tax of Rs 7140 has been deducted at source by the bank. While deducting tax at source the bank did not consider my disability element. On my request the bank furnished me the following details of my monthly pension:-
Basic Pay 8,550 The CBDT vide F.No. 200/51/99-IT.AI dated 2.7.2001 have clarified that entire disability pension i.e. "disability element" and "service element" of a disabled officer of the Indian Armed Forces continues to be exempt from income tax. Please clarify the term "service element", whether my entire pension is exempt from tax if not what is my tax liability. I am a senior citizen. Photocopies of my form no. 16 and CBDT's letter referred to above are enclosed. A. In accordance with the circular no. F.No. 200/51/99-ITA-I dated 6th May 2000, the entire disability pension admissible to Armed Forces Personnel is exempt from tax. The service element in my opinion would mean the pension attributable to the service period. You can therefore approach the tax department for the allowance of the refund of tax at source deducted by bank while making the payment of your pension. You will thus have to file the return of income for the relevant year for seeking refund of tax deduction at source. IT rebate for disabled
Q. I am a permanent Central Government employee and have lost an eye in an accident. The Medical Board of Civil Hospital (Government) has issued me a certificate of 25 per cent disability due to permanent loss of one eye. Please advise whether I can be qualified as handicapped under Section 80U of Income Tax and amount of deduction allowable. Please also advise whether this deduction under Section 80U can be allowed by the employer or is required to be claimed from I.T. Deptt after filing the return. A. Section 80U of the Income-tax Act 1961, defines a person with disability as a person referred to in Section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act 1995. According to the said Act the person with disability means a person suffering from not less than 40 per cent of any disability as certified by a medical authority. The disability certified in your case being 25 per cent, you would not be covered within the term 'a person with disability' to whom a deduction up to Rs 50,000 is allowable. The circular issued by the Central Board of Direct Taxes with regard to deduction of tax at source permits the Disbursing Authority to allow the benefit of deduction under section 80U of the Act. In case you become entitled to the deduction allowable under section 80U of the Act, the Disbursing Authority can allow the deduction while computing the deduction of tax at source. Gift of shares
Q. I have held equity shares of a few companies for some years (10 to 20 years). If I transfer these share from my D-mat a/c to my son's Mat Account in that case. (i) Can I gift these shares and shall I have to execute any gift deed or other documents. These I want to transfer free of cost. (ii) After the transfer is affected, can my son dispose them by sale through his broker and will be have to pay any capital gain tax on the amount so received. (iii) In case he holds these shares for more than one year, in that case will he be exempted from any tax as we understand that long-term capital gain (if securities are held for more than one year) in that case is nil. (iv) How my son can show the transaction in his income-tax return. A. (a) You can gift the shares to your son. It will be advisable to prepare a gift deed for the transfer of such shares in favour of your son. (b) Your son can sale these shares. The long term capital gain arising on the sale of such shares would be computed with reference to the cost incurred by you on acquisition of such shares. The period of holding of your son will be considered for allowing the benefit of cost inflation index. (c) The benefit of cost inflation index would be available with reference to the period of holding by your son if the shares are sold after more than one year of his holding such shares. Your information that the long term capital gains tax is exempt from tax is correct. However, this is subject to the proviso that the sale is through recognised stock exchange and has been subjected to Securities Transaction Tax. (d) Your son will have to indicate clearly the details of shares received as gift. In case of sale thereof by your son, the income from capital gains will have to be indicated in column relating to "Income claimed to be exempt" if it is so exempt. Tax on MFs
Q. Please clarified the given information if I hold the following fund and share in which term or time period then it will become tax free. A. I presume that you are seeking information with regard to the exemption of income arising from attributable to units owned by you in the mutual funds specified in the query. The answer is therefore based on such presumption. Any income received in respect of units of mutual fund specified under clause (23D) of Section 10 is exempt from Income-tax. Further income arising from the transfer of a long term capital asset being a unit of an Equity Oriented Fund is also exempt from tax provided the sale of such units has been subjected to Securities Transaction Tax. The units of mutual fund or shares of a company if held for more than twelve months are considered to be a long term capital asset. You may therefore examine the mutual fund in which you have made the investments so as ascertain whether the same are covered within the categories specified hereinabove. |
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Market Scan
During the last week the Sensex closed almost flat with a fall of only 129 points (0.70 per cent) from 18,362 points on January 25 to 18,233 on February 1, 2008. Indeed, the Sensex would have shown a more negative slide if last Friday the market had not risen by 585 points.
IT stocks and Reliance Industries fuelled the Sensex rise on that last trading day of the week. Market sentiment is still weak for a number of reasons: apprehensions about the US economy and relatively poor performance of the Indian corporate sector in recent 3rd quarter results and uncertainty about the global markets.
How the Indian stock market behaves today will largely depend upon the behaviour of the global stock markets, including the US and Asian markets. Downside risks of the growth in the US economy remain. In spite of a cut in the interest rates by the Federal Reserve within a period of eight days, the US stock market has only reacted positively to some extent but the recession in the US economy is possible.
The US economy growth has already slowed down to 0.6 per cent in the 4th quarter of 2007. In case there is a further slide in the US stock markets this week, it certainly will have its impact on the Asian and the Indian stock markets. It has now been conceded by our Finance Minister that the 2008-09 financial year is likely to be less rosy than the current financial year. Retail investors have to be very cautious about making their investments till the stock market stabilizes. It is, however, time for the retail investors to keep on the watch list some good and sound scrips of the companies which are well-managed and have good prospects but are now quoting at much below their intrinsic value and growth prospects. Tata Chemicals
One such scrip is that of Tata Chemicals, a major Tata group company. Last week, Tata Chemicals acquired US-based soda ash maker General Chemical Industries Products (GCIP) for Rs 4000 crore ($ 1.05 billion). This will add another 2.5 MTPA to the Tata Chemicals’ total capacity to raise it to 5
MTPA.
This would make Tata Chemicals the second largest (from the third largest) producer of soda ash in the world. GCIP has natural soda ash mines whose production cost is cheaper by 40-45 per cent as compared with synthetic soda ash which is also power-intensive. Tata Chemicals has also announced good 3rd
quarter results.
The new acquisition will give it access to the US market as its previous acquisition of UK- based Brunner Mond in 2005 had brought Europe and West Asia within its reach. In spite of its good fundamentals, excellent Tata management and rosy growth prospects, its market price came down last Friday to Rs 290 for equity share of Rs 10 face value.
Tata Chemicals not only is the second largest producer of soda ash in the world but also one of the largest manufacturers of fertilizers in India. This share is bound to make substantial gain in the market price within a month or so. Oswal Chemicals
Oswal Chemicals, which had been recommended at Rs 53 some weeks back but is now quoting at Rs 46, has announced excellent nine months’ results. Its net profit for the nine-month period is Rs 229.99 crore as against Rs 74.37
crore.
Against a paid-up equity share capital of Rs 256.81 crore it has ‘free reserves’ of Rs 1913.22 crore. Its EPS for this period is Rs 8.96 as against Rs 2.90 in the corresponding period last year. Another share which looks under-priced is Power Grid. This company’s nine months net profit is up by 52 per cent. |
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