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Rupee fall may make India Inc foreign loans costlier by $5 bn
Now, foreign investors warn against ‘policy paralysis’
Gold makes govt richer by over
Rs 1 lakh cr in two years
Govt okays action against Reliance
‘Plan panel erred in inflation forecast’
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IT dept to get Rs 80 cr tax on stashed money
Top 9 Sensex cos lose nearly
Rs 82k cr in m-cap
Tax Advice
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Rupee fall may make India Inc foreign loans costlier by $5 bn
New Delhi, November 20 The corporates had been increasingly tapping overseas loans, mostly in the US dollar, till a few months ago to save costs arising out of higher interest rates and liquidity constraints within the country, but the subsequent fall in the rupee value has negated the benefits, experts believe. Indian companies have borrowed close to $29 billion in foreign currencies, through ECBs (external commercial borrowings) and FCCBs (roreign currency convertible bonds), since the beginning of this year, as against such loans worth $18 billion during the entire 2010. A sharp fall of about 17 per cent in the value of rupee -- from near Rs 44-level against the US dollar at the start of 2011 to below Rs 51-level currently — has made the cost of repaying these foreign loans costlier by a similar margin. For example, an Indian company would now need to pay an amount of about Rs 5,134 crore (based on current rupee value of Rs 51.34 per US dollar) towards the principal amount to a bondholder of $1 billion, while a similar loan amount would have been worth about Rs 4,400 crore at the beginning of 2010, a banker said. Adding to the woes of the companies, the shares of the companies having issued FCCBs have fallen sharply since the time of their issuance, thus making it unattractive for the bondholders to convert their loans into equity. According to the estimates, FCCBs worth about $10 billion are due for redemption in the next 12-18 months and over 80 per cent of these bonds might not be converted into shares, said an official with a private sector bank advising some companies on restructuring on their foreign loans. The possibility of such a scenario increases the risk of loan default by their issuer companies, he added. SMC Global Securities' strategist & head of research, Jagannadham Thunuguntla, said that the additional burden due to the rupee depreciation so far this year could be of Rs 25,200 crore for the Indian companies on their ECBs worth about $30 billion raised this year. Ashika Stock Broking's research head (equities) Paras Bothra said that the liabilities for the companies having raised these loans a year ago could be about 10 per cent and above on the principal amount, if the their loans mature in the current situation. — PTI ‘Re slide not to hurt Indian econonomy’Depreciation in the rupee is not a bad news for the Indian economy, though it will have some implications for the industry, says India's representative to the International Monetary Fund Arvind Virmani. "I don't think depreciation of rupee hurts the Indian economy. When we have slowing economy and rupee depreciates, it is positive for India," he told PTI. However, he admitted the falling rupee will definitely hurt those companies which have borrowed in the overseas markets.
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Now, foreign investors warn against ‘policy paralysis’
New Delhi, November 20 Asserting factors like a slow decision-making process and delay in implementing key economic reforms are leading to a slowdown in economic growth rate, the experts have asked the government to immediately gear up to benefit from the underlying positive points of the India story. CLSA, one of the top investment banks in Asia and a major foreign investor here, has said in a strong-worded report on the country that "the government's policy paralysis in the last year has added to the cyclical slowdown." — PTI |
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Gold makes govt richer by over Rs 1 lakh cr in two years
New Delhi, November 20 The appreciation in the gold bought from the IMF) itself is about Rs 30,000 crore, as the prices have nearly doubled from near Rs 15,000 per ten gram level at the time of the purchase. The total gold holding with the Reserve Bank of India, which keeps the precious metal as part of its forex reserves on behalf of the government, is currently estimated at 557.7 tonnes. The value of gold held by the central bank, just before its 200-tonne purchase from IMF on November 3, 2009, stood at about Rs 50,718 (US $10.8 billion), according to RBI data. Based on the current price of about Rs 29,000 per ten gram in the domestic market, the total value of the gold held by the central bank, at present, stands at about Rs 1,60,000 crore. However, the latest data available with the RBI puts the Reserve Bank's total gold holding at Rs 1,31,442 crore ($26.9 billion) as on November 11, 2011. A Reserve Bank working paper last month said that the central bank should go for more purchase of the precious metal. "India's purchase of gold as a diversification strategy is fully justified and is in line with the global trend and still there is scope to increase its holding," the paper had said, while noting that the country's physical gold holding has remained static since the purchase from the IMF in 2009. — PTI
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Govt okays action against Reliance
New Delhi, November 20 Contrary to the production sharing contract, the ministry has decided to disallow expenditure incurred in constructing production/processing facilities at Dhirubhai-1 and three gas fields in KG-D6 block that are currently under utilised/have excess capacity because of falling output. Oil Minister S Jaipal Reddy on Nov 9 instructed "scrupulous" action may be taken against RIL. — Agencies |
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‘Plan panel erred in inflation forecast’
New Delhi, November 20 "It is true that we were hoping that this (moderation in inflation) will happen earlier, to that extent our credibility becomes a question," he said in a interview for CNN-IBN's TV programme Devil's Advocate when asked why government's repeated projections on inflation proved false. "You should recognize that short-term forecast is subject to error," he said. He, however, asserted inflation would moderate to 7-7.5 per cent by March, 2012. He said the stubbornly high inflation has hurt the government's credibility and if not curbed in a couple of months, it would send a signal that the policymakers are clueless in controlling the menace. Top policymakers, including Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee had projected that inflation would come down to a comfortable level of around 6 percent by the end of this calender year. Headline inflation has remained over nine per cent for several months and was 9.73% in October. The food inflation stood at 10.63% for the week ended November 5.Inflation has remained stubbornly high despite repeated assurances by several government functionaries that it would moderate. Responding to criticism of India Inc that there was a policy paralysis in the government, Ahluwalia said: "Industry has been a lot more focused on decisions that are holding up infrastructure projects, and not the (financial) reforms". The government, he said, "is keen to push (reforms) ahead but needs to develop political consensus and if the measures like GST, DTC and other reforms are delayed, that does not mean that they wound not happen." — PTI, IANS Inflation to remain high till Dec: Citi
Global financial services giant Citigroup has forecast that headline inflation in India is likely remain above the 9% mark till December, before moderating to around 7.8% by March, 2012. "We expect inflation to remain over 9% for the Nov-Dec reading. Post that, primarily due to the base effect, the wholesale price index (WPI) is expected to come off to sub-9 per cent levels during January-February and end the fiscal year with a reading of 7.8%," Citi Investment Research and Analysis said in the latest issue of its India Macro Report. — Agencies |
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IT dept to get Rs 80 cr tax on stashed money
New Delhi, November 20 Sleuths of the enforcement and investigation wings of the IT department carried out searches in the last two months on 22 individuals based in New Delhi who have admitted to holding accounts and stashing funds in the foreign bank. The information was extracted on the basis of details of over 700 HSBC accounts received from the French government. “Rs 18 crore has already been remitted to the department after the searches were launched. The IT department is preparing final search and seizure documents in all the cases and has asked these tax payers to provide their documents related to their finances in the last two assessment years,” sources close to the department said. Of the 22 individuals none are politicians but have businesses of various types. The department’s special wing, working on the case, has got “on paper” admission of a total of Rs 80 crore as unpaid taxes by these individuals. The sources said the defaulters have agreed to pay Rs 80 crore as taxes. — PTI
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Top 9 Sensex cos lose nearly Rs 82k cr in m-cap
Mumbai, November 20 However, Bharti Airtel bucked the trend and saw its market valuation surge. During the week it added Rs 816 crore to its market capitalisation, which stood at Rs 151,008 crore as of November 18. Nevertheless, RIL retained the numero uno status in the top 10, while ONGC held on to the title of the country's second-most valuable company. TCS emerged as the third-most valued firm, while CIL was at the fourth place, followed by Infosys, ITC, Bharti, NTPC, SBI and HDFC Bank. RIL saw the maximum erosion in investor wealth during the past week. The company witnessed a Rs 24,819 crore decline in market cap to Rs 264,583 crore, while state-owned ONGC's m-cap dropped by Rs 5,603 crore to Rs 221,801 crore. IT bellwethers TCS and Infosys together shed Rs 10,440 crore in combined market capitalisation. As on Friday, the market cap of TCS stood at Rs 212,955 crore, while that of Infosys was Rs 1,57,302 crore. Coal India’s market worth declined by Rs 17,685 crore to Rs 1,88,417 crore, ITC saw its m-cap dip by Rs 8,322 crore to Rs 157,227 crore and power utility NTPC's market valuation slipped by Rs 8,987 crore to Rs 134,236 crore. Last week, SBI's m-cap skidded by Rs 4,581 crore to Rs 1,09,569 crore and HDFC Bank lost Rs 1,461 crore in market value to Rs 1,06,992 crore. — PTI
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Death gratuity for govt employees tax-free
by SC Vasudeva Q: I'm an employee of a state-owned bank. My wife was working in a government-run school. Am I eligible for standard tax deduction of Rs 15,000? Another question is: My two sons and I got death gratuity of Rs 350,000 divided in equal proportion, that is, Rs 116,666.66 in 2007. Both of my sons were majors at the time of payment. Now in 2011 we got a death gratuity of Rs 279,900 due to pay revision in equal proportion, i.e., Rs 93,300 each. Also, is death gratuity is fully exempted from tax or will each of us be eligible for exemption of Rs 350,000? — Ravi Dutt Sharma A: You will be entitled to claim tax deduction under section 57 of the Income Tax Act to the extent of one-third of the family pension or Rs 15,000, whichever of the two is less. Death cum retirement gratuity in case of a state government employee is exempt from tax in entirety under section 10(i) of the Income Tax Act Act. Q: I head a HUF ("Hindu undivided family") of which I'm a karta, for which I hold a PAN card. The HUF was formed with a case gift of Rs 25,000 given by my father, who now wants to give Rs 1 lakh as gift to the "Hindu undivided family". Can I accept this gift and how will the income from interest after taking a fixed seposit be assessed, that is, whether as individual or "Hindu undivided family"? Can I, as a karta of the family, open a Public Provident Fund account? — Sandeep A: You can accept the gift of Rs 1 lakh on behalf of your "Hindu undivided family" as its karta. The amount of interest earned on a fixed deposit with a bank would be taxable in the hands of the "Hindu undivided family" in case funds of the latter are invested in such a fixed deposit. The provisions in section 56 of the Income Tax Act with regard to the taxability of gift in excess of Rs 50,000 should not apply in such a case as the gift has been received by a "Hindu undivided family" from a karta's relative. Presently the Public Provident Fund scheme does not permit opening an account in the name of a "Hindu undivided family." Q: I'm 33 years old and my monthly salary is Rs 30,000. I can invest one-half of my salary, that is, Rs 15,000, for ten to 15 years. Is it safe to invest in equities and gold? How does one invest in them through a bank or other financial institution? — Rigzin A: Most banks have a department that handles investments on behalf of their clients. For example, ICICI Bank has a department that handles purchase/sale of securities on behalf of its clients. You may therefore get in touch with your banker who should be able to help you in making investment in equity shares. It would be advisable to buy gold bonds instead of physical gold. These bonds are being issued by a few reputed mutual funds. The bank with which you will deal for purchase/sale of securities should be able to guide you in this respect also.
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Personal Finance
he investable potential of gold as an asset has been a function of jewellery and industrial demand, inflation outlook, strength of the dominant currency, geopolitical stability and the gold supply variable. Given the historical and contemporary pervasiveness of gold as a store of value and, to a certain extent, medium of exchange, gold has adopted a tendency of behaving like a natural currency. Therefore, the investment demand for gold tends to rise in the case of adverse economic conditions, rising inflation, a weakening dollar or general sociopolitical instability.
However, despite the recovery in the global economic environment teetering, the optimistic outlook on gold remains unchanged. And here's the reason why. Today's geopolitical climate has become increasingly volatile. This has spiked uncertainty in the region, which in-turn has provided significant buoyancy for gold prices. However, it is the extensive hardship surrounding the sovereign debt solvency in the PIIGS nations (Portugal, Italy, Greece and Spain) that has caused increasing jitters in the financial markets (and has spiked the performance of gold). Moreover, the likelihood of a renewed slowdown in the US economy as well as the prevalence of high unemployment continues to drive up gold demand. The credit ratings downgrade by Standard & Poor's of the US and Italy has only been the latest of the series of reasons to further enhance this view point. It is also believed that, were the troubled economies to resort to monetary expansion to wriggle their way out of their debt problems, the resultant erosion in money-value may further spike up gold prices. Thus, the resultant investor wariness and the decline in the global risk-appetite, in conjunction, is expected to fuel the institutional and retail demand for gold in the coming months. Also, traditionally, demand for gold has a seasonal flavour to it. The autumnal festivities and the onset of the wedding season in India all come along during this phase of the financial calendar. The interplay of these factors provides a potent case for investment in gold. However, from a retail investor point of view, the physical investment in gold has a minor side effect. Gold ETFs
Buying physical gold involves the risk of theft, misplacement and potential wrong pricing. Additionally, when an investor needs to sell his physical gold, again at that point the investor has to go through the inconvenient route of valuation, bargaining, transaction and delivery. All these angles involve risk, skill, and time - making the whole process inconvenient. But thankfully an alternative method to investing in gold exists and that too without the inconvenience of the physical transaction. This is the Gold Exchange Traded Fund (GETF). Gold ETF is nothing but gold traded online through a medium of exchange. Normally, each unit of gold ETF is worth approximately 1 gram of gold. GETF allows the investor to invest in gold without bothering for the purity, the security or the liquidity of gold investment that is attendant with gold hoarding. Also GETF's online tradability and transaction ability is exactly like any other stock, making buying and selling very convenient. In other words, what GETF does is that it gives you an ability to buy, sell, or hold gold at convenience. This idea, though relatively new in India, has caught on in a big way elsewhere in the world. In India too, with rising awareness Gold ETFs are gaining ground. Gold Fund of Fund
However, for an investor to invest and trade in gold through GETF it is near mandatory to hold and manage a demat account. This necessity excludes a large segment of Indian investors from benefiting from the growth potential of gold. To do away with that, mutual funds have devised a mechanism through which the investor can invest into gold like any regular mutual fund scheme. It would also enable the investor to do an SIP (systematic investment plan) in gold. We call it the Gold Fund of Fund (FoF). In simple terms, a Gold FoF collects the corpus from the regular investors and invests the same into a Gold ETF. In lieu of the same, the investors of a Gold FoF are provided a commensurate value of units in the folio. This mechanism ensures investors obtain a stake in gold without the necessity of the demat account. Given this facility, the investors can plan a long-term investment in gold at economical cost.\ The author is head of products, Kotak Mutual Fund. The views expressed are her own Gold investment demand set to surge
Global economic uncertainty will fuel the current surge in investment demand for gold, even as record prices force a slump in the jewellery market, the World Gold Council (WGC) said last week. Global demand for gold was 1,054 tonnes in the three months to September, up 6.0% year-on-year -- equal to a record high of $57.7 billion in value terms, the WGC said in a report. The increase was driven by a 33% rise in investment demand, with gold offering a safe haven after a US sovereign debt downgrade, plunging global equity markets and the escalating eurozone crisis. The investment surge offset a 10% drop in jewellery demand during the quarter as gold prices hit a record $1,920 per ounce in September. "Investors across the globe sought to protect their wealth, diversify their risk and benefit from gold's strong returns," the WGC said in a report. "Given gold's proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating," Marcus Grubb, WGC's investment managing director said. "Gold's long-term fundamentals remain strong with a diverse and growing demand base, coupled with constrained supply-side activity," Grubb added. The yellow metal, whose key drivers are investment and jewellery, is widely seen as a safe haven for cash in times of uncertain economic conditions and high inflation. — AFP
Markets likely to see short-term
rally this week
The markets were extremely weak and lost ground on all five trading days of the week. The weekly loss on the Bombay Stock Exchange Sensex was a staggering 821.31 points or 4.78%. The closing level was 16,371.51 points. On the National Stock Exchange Nifty the fall was more with a loss of 263.05 points or 5.09% and the close at 4,905.80 points.
The broader markets fell more than the benchmark indices with the BSE 100, BSE 200 and BSE 500 losing 5.34%, 5.54% and 5.65%, respectively. The BSE Midcap and BSE SmallCap were the real big losers with losses of 7.24% and 8.61%, respectively. The BSE Realty lost 11.19% while the BSE Metal lost 7.43%. In individual stocks the big losers were Maruti Udyog that lost 11.14%, Sesa Goa (down 10.87%), Reliance Industries (down 8.60%) and Coal India (down 8.58%). market pointers
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Market sentiment affected on concerns over the eurozone debt crisis and weak Q2 earnings n The BSE Sensex fell 821.31 points or 4.78% to 16,371.51 for the week ended Nov 18. The 50-share S&P CNX Nifty dropped 263 points or 5.09% to 4,905.80. Meanwhile, the BSE Midcap index fell 7.24% while the BSE SmallCap index dipped by 8.61%. Both these indices underperformed the Sensex n The BSE Sensex has lost 1,333.50 points or 7.5% this month so far. In the current calendar year the Sensex has slumped by 4,137.58 points or 20.17% till date n The combined net profit of a total of 3,729 companies fell 35.9% to Rs 67,529 crore on 20.6% growth in revenues to Rs 11,35,564 crore in the July-Sept quarter of 2011 In other stocks Pipavav Defence was down a whopping 34.44% for the week and was locked at the down circuit. SKS Microfinance lost 22.53% and has been at the lower circuit on all five days of the week. The stock closed at Rs 122.40 - just about 8% of its record high in October 2010. The world markets have been nervous and jittery and have all fallen with the degree varying. It looked like all the concerns were in Europe and the United States. It appears India too has its fair share of concerns that appear to be getting highlighted now. The Indian rupee continued its slide and closed the week at Rs 51.33. Foreign institutional investors sold stocks valued at Rs 1,643 crore while domestic institutions bought shares worth Rs 1,226 crore. The volatility has again increased and the extent of the fall was virtually across the board. Even stocks that are part of the Sensex and the Nifty made their yearly low during the week and some examples are Maruti Suzuki, SBI and ICICI Bank. One should not talk of the same in the midcap and smallcap space as the statistics there would be scary. The week ahead would see the November series expiring on Thursday, November 24 and the markets are currently quite down compared to the previous month's expiry of 17,250 on the Sensex and 5,200 on the Nifty.
It appears that looking at the intraday recovery on Friday from the lows of the day, some more may happen on Monday or the earlier part of the week but thereafter fresh selling is likely and we would see the market going lower than the weekly close. It makes sense to allow the markets to at least absorb the selling pressure and find its own level before making any fresh attempts at bottom fishing. There are no economic indicators suggesting the worst is over and it appears we could see some more signs of slowdown and hard times ahead. The BSE Sensex has support in the coming week at 16,225, then at 16,084, then at 15,993, then at 15,892 and finally at 15,751 points. This incidentally is the low of the year. The resistance is at 16,457, then at 16,688, then at 16,991, then at 17,120 and finally at 17,391 points. The NSE Nifty has support at 4,857, then at 4,779, then at 4,752, then at 4,719 and finally at 4,654 points. The low of the year was 4,720 points. It has resistance at 4,935, then at 5,013, then at 5,143, then at 5,177 and finally at 5,228 points. The week ahead should see a stocks rallying at the start before profit taking and selling brings them down. Use any recovery to exit long positions and also build shorts. The author is founder of KRIS, an investment advisory firm. The views expressed are his own
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A bank employee counting rupee currency notes in Mumbai. The Indian rupee — Asia's worst performing currency this year the third worst in the world— could be bound for "uncharted waters," — analysts say, as fears about the eurozone debt crisis and a slowing economy pump demand for the US dollar. Reasons like the global crisis are common to all currencies and it affects the rupee as well. Investors are wary about the comparatively riskier emerging market currencies. The falling rupee has hurt India's import bill. It has increased the cost of imports which in turn has increased the current account deficit. — AFP
The 17.56% CAGR (compound annual growth rate) runup in gold prices since 2000 has largely been attributable to the surfeit liquidity in the early part of the decade, while in the latter half the turbulent economic conditions post the subprime crisis continued to contribute to the gold rally. 
