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India emerges as stronger investment bet at Davos
SEBI to spell out IPP norms soon
In Facebook IPO, bankers seek prestige over fees
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Tax Advice
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India emerges as stronger investment bet at Davos
Davos, Switzerland, Jan 29 A few even foresee the possibility of the country hosting a Davos-level congregation of the world's rich and powerful at some point in the future. The votaries of the Indian growth story include the likes of global rating agency Standard & Poor’s, which not long ago faced the ire of the US administration for downgrade of America's top-notch sovereign creditworthiness rating. S&P president Douglas Peterson said that the agency has an investment grade rating on India, with a stable outlook and the country is more likely to improve further on this. Brushing aside the concerns of slow reforms and the perceived notion of 'policy-paralysis', he said, "In a democracy, the policies are made after a prolonged dialogue and that is indeed a healthy practise." Apparently, impressed with the positive discussions about India, Peterson went on to say that it was quite a refreshing change that the talks have moved away from the European crisis to India at Davos. Still, India on its part reaffirmed its commitment to the economic reform agenda. India’s Commerce & Industry Minister Anand Sharma said reforms would certainly take place and even the much-talked about FDI decision for retail was only on a pause and not a reversal. "And, remember that a pause cannot be for a long time," he added. Senior industrialist and Bharat Forge group chief Baba Kalyani said that India can certainly grow by 8 per cent. — PTI
India needs greater transparency,
better governance to tap FDI: E&Y
India remains a good destination for investments but it needs to strengthen governance and transparency to become more attractive for foreign investors, says an Ernst & Young survey. The survey of over 500 foreign investors by global consultancy E&Y showed that India needs to focus on improving its current state of infrastructure and governance. "More than three-fourth of the respondents surveyed mentioned that improving infrastructure is critical to enhancing attractiveness, while 60% emphasized the need for better governance and transparency," the report said. Nothwithstanding the global economic uncertainties, E&Y said that foreign investors see India as an attractive investment option. |
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SEBI to spell out IPP norms soon
New Delhi, January 29 IPP will allow promoters to sell up to 10% of their capital through auction to institutional investors.Opening of this additional route would facilitate the disinvestment programme of the government in current market conditions. The government is running against time to meet its ambitious disinvestment target of Rs 40,000 crore for the current fiscal. "This method can be used only for the purpose of complying with minimum public shareholding requirements under the Securities Contract Regulation (Rules) or SCRR, either by way of fresh issue of capital or dilution by the promoters through an offer for sale," SEBI had said earlier this month after its board approved a new IPP route. Using this method, public shareholding can be increased by 10 per cent or lesser percentage as is required to comply with the minimum public shareholding requirement, it had said. According to government norms, at least 10% of the shareholding in all listed state-owned companies should be with the public, while in the case of private sector firms, the minimum public shareholding should be 25%. SEBI had said under the IPP mode companies would be required to simultaneously file a red herring prospectus/prospectus with SEBI, the Registrar of Companies and the stock exchanges. Under the new mechanism, the offer would be restricted to qualified institutional buyers, it said. — Agencies
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In Facebook IPO, bankers seek prestige over fees
New York City, January 29 The world's largest online social network is expected to tap public markets for $10 billion in the coming months in an offering that will value the company at up to $100 billion, according to sources familiar with the planned IPO. It will be one of the biggest U.S. market debuts ever, and a prized trophy for the investment bankers seeking to win lead advisory roles. That has set up a fierce competition on Wall Street, particularly between the presumed front-runners Morgan Stanley and Goldman Sachs Group Inc , which may offer their underwriting services for as little as 1 percent of gross proceeds, bankers and industry observers said. That would be far less than the 7 percent fee that smaller deals typically fetch, or the 2 or 3 percent that large deals tend to command. "The Facebook IPO will be iconic," said James Montgomery, chief executive of San Francisco-based investment bank Montgomery & Co, which advises tech companies on mergers, acquisitions and private placements. Facebook can easily negotiate a 1 percent fee for the entire group of investment banks that will peddle its shares, Montgomery said, "much to the chagrin of the underwriters." Such a low fee is practically unheard of for investment banking deals, apart from the offerings of bailed-out companies General Motors Co, American International Group Inc and Ally Financial Inc, which sold shares held by the U.S. government in the aftermath of the financial crisis. But Facebook has several advantages that will allow the company to haggle for a lower fee: it will be an easy sell as hoards of investors are keen to jump on the social media trend, and even a 1 percent fee would reap $100 million in revenue for investment banks, sending a lead advisor to the coveted No. 1 spot on IPO league tables. "There's no other IPO like this," said Lee Simmons, a tech specialist at Dun & Bradstreet. "It's kind of the 800-pound gorilla for the tech sector." The Wall Street Journal reported that Facebook plans to file IPO documents with U.S. securities regulators as early as Wednesday, and is close to picking Morgan Stanley as the lead underwriter. The typical IPO that raises less than $500 million incurs a 7% fee —what's known as "the 7% solution." But as IPOs grow in size, the fee percentage shrinks. Investment banks usually earn fees of 4% to 5% on IPOs of more than $1 billion, but deals from Silicon Valley tend to carry a premium. U.S. tech IPOs of at least $1 billion carried an average fee of 5.8% from 2000 to 2012, on average, according to Thomson Reuters data. In the case of Facebook — whose T-shirt-wearing, 27-year-old chief executive, Mark Zuckerberg, is said to appreciate status updates more than stock brokers — it's unlikely advisors will be able to command the standard rate. — Reuters
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‘Oil may hit $150 a barrel on Iran ban’
Tehran, January 29 Benchmark Brent crude prices rose to around $111.50 a barrel on Friday on expectations Iran's parliament will vote to halt exports to the European Union as early as next week in retaliation for EU plans to stop all Iranian crude imports by July. Escalating tensions between Iran and Western allies over Tehran's nuclear programme, including Iranian threats to close the vital Straits of Hormuz, have helped push up Brent crude prices by about $8 a barrel since mid December. But analysts say the world is likely to have more oil this summer thanks to additional output from Saudi Arabia, Iraq and Libya that will more than make up for any lost from Iran after the EU's ban is imposed on July 1 — and this is likely to be reflected in oil prices. Iran's parliament is due to debate a bill this week that would cut off oil supplies to the EU in a matter of days, in response to a decision last Monday by the 27 EU member states to stop importing crude from Iran as of July. The EU banned imports of oil from Iran on Monday and imposed a number of other economic sanctions, joining the US in a new round of measures aimed at hindering Iran’s nuclear development programme. Qalebani also warned foreign oil firms to either renew their long term contracts with Tehran or face the consequences. — Reuters
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Tax Advice
Q: A proprietorship firm engaged in wholesale trading of cloth has the following turnover/gross receipts for fiscal 2010-11 (accounting year 2011-12): Sales turnover: Rs 25.00 lakh; commission/ subbrokerage received on cloth sale of other parties: (a) in proprietor's name - Rs 0.90 lakh; (b) in firm's name - Rs 0.60 lakh; gross - Rs 1.50 lakh; expenses incurred on conveyance/phone, etc: (a) Rs 6,000 (b) Rs 4,000; general insurance commission in proprietor's name - Rs 0.80 lakh; expenses incurred on conveyance/phone/miscellaneous - Rs 6,000; interest from bank FDRs/savings accounts (a) In proprietor's name - Rs 0.402 lakh) (b) in firm's name - Rs 0.80 lakh; total - Rs 1.2 lakh; exemption under chapter VI-AU/G-80C: Rs 1.00 lakh. The proprietor (not a senior citizen) likes to pay preassumptive tax @ 8%. On which items will 8% be calculated & why, and what will be his total tax liability with detailed calculation?
— S.K. Aggarwal A: (a) You can file your tax return by declaring an income of 8% on Rs 26.50 lakh being the amount of turnover/gross receipts from your business. The insurance commission and interest on bank FDRs will be taxable separately as 'income from other sources'. (b) The provisions of the Income Tax Act with regard to presumptive taxation are applicable to total turnover and gross receipts by a person who is carrying on a business other than that of plying, hiring or leasing of goods carriage and whose turnover and/or gross receipts do not exceed Rs 60 lakh. These provisions are not applicable to income from other sources. (c) Your total income will thus be: Income from business @ 8% of Rs 26.50 lakh - Rs 212,000; income from other sources: insurance commission (net) - Rs 74,000; interest - Rs 100,000: Rs 386,000; deduction under chapter VIA - Rs 100,000: Rs 286,000; tax -Rs 10,600; education cess @ 3% - Rs 318; total tax payable for AY2012-13: Rs 10,918 (d) Once the rate of 8% is adopted for computing income from business, the expenses incurred in connection with such income will have to be ignored. Q: Has the contribution the New Pension Scheme (NPS) for central government employees been covered under the overall limit of Rs 1 lakh, or it is outside the limit? — Puneet Goyal A: A contribution to the central government's New Pension Scheme is allowable as deduction under Section 80CCD of the Income Tax Act. The amount of deduction is however covered within the maximum limit of Rs 100,000 as specified under Section 80C of the Act. |
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Not all pension plans are going to give good returns, owing to high allocation and administration charges in the initial years. Kinnari Raval outlines key factors one should consider while working towards a beneficial retirement plan
So how can you plan for your comfortable retirement without compromising your present? Here are some suggestions. Almost all of us will have to fend for our retirement. But not many of us would be seriously contemplating creating a corpus at our current stage of life. The main reason being we want to fulfill our responsibilities, live our lives and will see whenever retirement happens. Do you know that we need to take out just one day for ourselves to understand our priorities, goals and needs of our life? This would be the first step towards making your retirement plan. After prioritizing our needs and goals, the second step would be to decide the timeframe (the time required to achieve our goals and needs) and the corpus, that is, the amount required for achieving the same. Most of us may have taken the first two steps but may have failed to take the third step, or else may have fumbled along the way. This step is to think and plan towards building the corpus and identifying the best investment instruments. Normally, a pension plan by its name itself appeals to us and it is now a common belief that it is the only instrument available or specially designed for the retirement purposes. Do you know the reason? It is because these plans are presented before us in such a manner by our consultants or insurance agents that we are drawn towards them. But have you ever tried to evaluate what kind of returns you will actually get? Let me tell you, not all pension plans are going to give good returns owing to high allocation and administration charges in the initial years and also because insurance companies need to follow certain regulations. Hence, like all that glitters is not gold - not all plans with the word pension in them are good pension plans. So, what factors should you consider while working towards retirement plan? Your own risk taking capacity, source of income and timeframe are most important factors. By doing this exercise, you will get the clear picture on how you take your first step. This article will discuss various instruments that can help you in building the required corpus. Systematic Investment Plan (SIP)
Investment in a mutual fund through SIP will help you diversify the portfolio well. Aggressive investors can build their corpus via investing into equity diversified mutual funds. Alternately, they can have a blend of balanced mutual funds and equity diversified mutual funds. Selection of mutual funds needs to be done with proper research, which includes analyzing past returns with the respective benchmark returns. National Pension System
Both these accounts are pure retirement savings products with the distinction being that Tier I is a non-withdrawable account while Tier II is a withdrawable account to meet financial contingencies, if any. Both accounts offer two approaches to investment: Active choice - Individual Funds; and auto choice - Lifecycle Fund. Active choice further has three asset class/sections
Auto Choice
In this option the investments will be made in a life cycle fund. Here, the fraction of funds invested across three asset classes will be determined by a predefined portfolio based on the age of the investor. Public Provident Fund (PPF)
Public Provident Fund is a 15-year scheme. However, after completion of 15 years one can keep on extending it for a period of 5 years at a time. This way the same PPF account offers additional liquidity to what is offered during the initial term. In fact, this is where the magic of PPF begins. One need not start a fresh PPF account and continue it for all of 15 years, just extend the old one for five years at a time indefinitely. This way the same PPF account will offer additional liquidity to what is offered during the initial term. Further, one can note that the PPF account can be continued (after the term of 15 years) with or without further subscription. The above were a few different ways to create funds towards retirement corpus. Many more methods are available to build a well diversified portfolio after taking into account - inflation and tenure for the retirement age and the person's risk taking ability. It is never advisable to put all eggs into one basket. So a portfolio diversified into different asset classes is more efficient and a rational way of doing investment. Lastly, would like to say that we just need to open our eyes and look at other methods of achieving our desired things rather than blindly following what our agents / consultants state. Further, it is always advisable to carry out a periodic review of your portfolio and take proper guidance before investing through a certified financial planner who is affiliated with an established organization. After formulating and implementing your retirement plan, I'm sure that on the day of your retirement you will proudly say "I'm retired - goodbye tension, hello pension!" The author is a research analyst at Apnapaisa.com. The views expressed are his own |
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Be ready to see profit booking this week
It has been a great week at the bourses and the Republic Day holiday in no way dampened the upbeat mood. The Bombay Stock Exchange Sensex gained 494.97 points or 2.96% to close at 17,233.98 points. The National Stock Exchange Nifty gained 156.10 points or 3.09% to close at 5,204.70 points. Among the sectoral indices the BSE Capital Goods rose 5.64%, BSE Auto rose 4.29%, BSE IT gained 4.03%, BSE Bankex was up 3.39% and BSE Metal rose 3.38%. The BSE Realty was a marginal loser at 0.28%. In individual stocks Sesa Goa was up 12.28%, Maruti Suzuki rose 9.92%, Tata Motors gained 9.59% and Larsen & Toubro was up 8.48%. Hero Motors was down 6.61%. We had expected some corrections last week but that did not happen and the markets continued its upward trend. The Reserve Bank of India's decision to cut CRR and the relentless buying by FIIs caught us on the wrong foot. The RBI announced a 50 basis point cut in CRR witch propelled the markets and there was yet another huge Tuesday rally. This unexpected cut after the central bank's announcement about the state of economy a day earlier was certainly unexpected and came as a pleasant surprise. This led to some short covering and fresh buying across the board. Foreign institutional Investors have been big buyers in the market and have made fresh purchases of Rs 4,170 crore in the week, while domestic institutions continued selling with sales of Rs 1,690 crore. The rupee continued to strengthen and closed at Rs 49.31 for the week. With two trading sessions for the month of January to end, this is the best performance in many years for the benchmark indices. The BSE Sensex has gained 1,779.06 points or 11.51%, while the NSE Nifty has gained 580.40 points or 12.55%. This is a big gain and needs to hold on to it before we could see further gains. Even if we are able to consolidate around this level and in the next month or so remain around the 16,500 level on the Sensex and 5050-5100 level on the Nifty it would be creditable. Elections to five states begin from next week and all the results would be available only in March and the fiscal 2012-13 budget will be announced only after the poll results, putting pressure on the finance minister because this would be the budget where reforms could be introduced before going into election mode next year. From being the worst performing market last year to the best performing market in a span of a mere one month sure defies logic and can at best be attributed to the US $2 billion foreign inflows and nothing with fundamentals. It therefore becomes imperative that we hold on to the gains made and at least consolidate. There are very few triggers going forward for the week ahead and results would continue to be the key driver. Foreign inflows would be the driver for markets as the sentiment has certainly improved with inflows and markets gaining 11-12% in four weeks. The Sensex has support at 17.140, then at 16,988, then at 16,842, then at 16,659 and finally at 16,360 points. It has resistance at 17,293, then at 17,445, then at 17,658, then at 17,813 and finally at 17,908 points. The Nifty has support at 5,174 points, then at 5,125, then at 5,080, then at 5,011 and finally at 4,954 points. It has resistance at 5,223 points, then at 5,274, then at 5,317, then at 5,360 and finally at 5,399 points. The bourses are expected to be choppy during the week and, unlike the previous week where the trend was in one direction, there would be two-way movement that could be swift in either direction. Play the market for consolidation and use rallies to exit positions. The author is founder of KRIS, an investment advisory firm. The views expressed are his own
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New York City, January 29
The saying "as one makes his bed, so shall one lie" most aptly describe one's retired life. Retirement is the time of rest for one's body and peace for the mind. However, before the expected time of retirement approaches, we all must prepare well in advance to enjoy it.
The broader indices like the BSE 100, BSE 200 and BSE 500 gained 3.27%, 3.35% and 3.32%, respectively. The BSE MidCap and BSE SmallCap gained similarly by 3.39% and 3.42%, respectively.
