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GAAR deferred but new tax rule may deter foreign investors
Muddled leadership leaves India’s economy adrift
Over 50 HPCL outlets in Punjab run out of diesel
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Aviation Notes
personal finance
Market slide set to continue in near term
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GAAR deferred but new tax rule may deter foreign investors
New Delhi, May 20 The proposals, that are a part of the Finance Bill, state that capital gains arising from the transfer of shares or interest in a non-Indian company – in case the share or interest derives directly or indirectly its value substantially from assets located in India – will be taxable in the country. The new rules could force foreign investors to re-examine their structures for investments in India, while impact would be visible also on global mergers and acquisitions involving Indian businesses to take in to account the potential tax risks from the indirect transfer rules. Foreign institutional investors are of the view that their gains from India are as such taxed in the country, and any repatriation of gains to its investors by way of redemption of capital should not come under the offshore transfer provisions. A number of foreign funds, including a European association of the FIIs, may soon approach the finance ministry to seek clarifications and certain changes in the rules, sources said. The previously proposed GAAR, which could have caused foreign investors huge tax liabilities despite investing through so-called tax-friendly jurisdictions, is estimated to have led foreign investors to withdraw or put on hold investments worth over $10 billion within just over a month of being announced. However, the impact could be much higher from the now- cleared ‘retroactive taxation of indirect offshore transfers’, which could lead to many more billions of dollars worth investments getting hit within a short span of time of their implementation in the current form, industry sources said. FIIs are hoping for certain changes and clarifications in the final form of the rules. Else, it is widely believed that they could consider exiting a vast majority their holdings in the country that are worth over Rs 11 trillion (about $200 billion), said a top manager of a leading foreign fund. Asked for his views, consultancy giant PwC India's executive director Suresh V. Swamy told PTI that the government needs to clarify that these rules would not apply to the FIIs, and small investors need to be exempted from any such tax liabilities. “It’s difficult to quantify the impact from these proposals on the FII investments, but such an impact has to be in billions of dollars,” he noted. However, senior officials of various foreign funds with significant India exposure said the new proposals could lead to the exodus of overseas funds. — PTI
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Muddled leadership leaves India’s economy adrift
New Delhi, May 20 Writing in a business daily, the well-respected Malik echoed the exasperation of Indian and foreign business groups pressing for the government to swiftly implement major economic reforms and formulate a coherent strategy to deal with its mounting problems. Another newspaper said India could be heading to a Greek-style crisis. Prime Minister Manmohan Singh's Congress party blames unreliable allies in his coalition government for blocking major reforms aimed at opening up the economy to much-needed foreign investment and tackling obstacles in the way of growth, from creaking infrastructure to endemic corruption. "Political paralysis" has become the favoured shorthand of politicians, journalists and other India watchers. But events since the announcement of the 2012-13 budget in March suggest a deeper dysfunction: a leadership vacuum that has led to empty promises and muddled policy decisions, most notably on tax reform. They also raise questions about the most important economic relationship in government — the one between Singh, who engineered the opening up of India's economy in 1991, and his former boss, Finance Minister Pranab Mukherjee. Foreign companies looking for action are frustrated by the government's determinedly rosy view of the future that appears to ignore a recent raft of negative economic data. The finance ministry pitched for a credit rating upgrade in a meeting with Fitch Ratings on Thursday even though Standard & Poor's Ratings Services cut the country's credit outlook just last month. Self-awareness could avert a "macro-economic train wreck," wrote Ron Somers, president of the US-India Business Council. India's economic growth has slumped to a near three-year low and its current account deficit is the highest since 1980, a gap that is difficult to control when the rupee is at a record low. The government has projected a budget deficit of 5.9% of GDP, which Moody's Investor Service says is credit negative. Inflation is the highest among the so-called BRICS group of major developing countries, and industrial production contracted unexpectedly in March. "We’ve a full-blown crisis on our hands," said Rajiv Kumar, secretary-general of FICCI. WHO’S IN CONTROL? Another leading daily warned on Friday of a Greek-style debt crisis unless the government took firm action to rein in its fiscal and current account deficits. "But increasingly the sense is that the government simply lacks the political capacity to make tough decisions," it said. — Reuters
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Over 50 HPCL outlets in Punjab run out of diesel
Chandigarh, May 20
An HPCL dealer in Sangrur told The Tribune the company had not been able to fulfill his indent for diesel sent four days ago. "We’re told supply is restricted and have been asked to get diesel from Bathinda, which gets the fuel from Bahadurgarh. But with the entire supply chain at Sangrur broken, the Bathinda depot is unable to entertain all indents coming from across the Malwa region," he said. As a result of this shortage in fuel, farmers across the state have pressed the panic button and have started buying diesel from wherever available, and stocking it. HPCL officials here agree the company is facing one of its worst shortfall in diesel supply. "We’re not getting the required supply from IOC’s Panipat refinery to our Sangrur depot (through the pipeline). This has led to a shortfall in product input, which is 10-15% less than what is required. Though we’ve started getting diesel from our recently commissioned refinery at Bathinda, the amount received so far is just 5,000 kilolitres,” said a senior HPCL official.
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Despite revamp plan, AI headed nowhere
By K.R. Wadhwaney MINISTER of state for civil aviation Ajit Singh could muster the courage to concede on May 13 that the merger of the two national carriers, Indian Airlines and Air India, was a failure. Since their amalgamation in August, 2007, the former has virtually been wiped out from the domestic skies, while Air India has accumulated losses to the extent of Rs 7,853 crore and has become virtually bankrupt. Singh, being a seasoned politician, however chose an "escape route" for himself and his predecessor by saying "may be some benefits were foreseen out of the move like synergy and economies of scale, but those didn't happen." According to statistics, Indian Airlines in particular and Air India were making cash profits until 2006 when the merger was forced upon them only to worsen their problems. What was disturbing was that IA received "stepmotherly" treatment from politicians while AI failed to deliver. Wary of a demerger because of certain "technical problems", the minister favoured implementing the Dharmadhikari committee report that, according to aviation analysts, will not bear fruit, keeping in mind the existing complex situation. Regardless of his views, India cannot do without a national carrier and any privatization will lead to more problems for passengers in particular and be counterproductive for the progress of the domestic airline industry. A few days later on May 18, the minister made another "realistic" revelation that the government was gearing up to restore the promised parity between the staff of IA and AI. If this happens it will resolve many problems, but analysts are of the firm belief that would not happen In the midst of a fluid situation, the ministry shocked the civil aviation sector by sending an email to several newspapers and TV stations to depute journalists to accompany him and an entourage of officials to the United States to bring home the new long-range Boeing 787 jet. This jet is the cause for AI pilots' strike as they feel that inviting the IA pilots for training on this aircraft will affect their smooth functioning. Wrong or right, if the entire journalists' team joins the minister, it will cost Air India at least Rs 2 crore, which, according to analysts, is an uncalled for burden on the airline that is bleeding profusely. It is only a measure of seeking "cheap goodwill", which is not a healthy sign.
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Plan for your child’s education expenses
We seldom ask ourselves the question - am I sure of being financially equipped to bear the expenses of my child’s higher education or will I have to resort to a loan to fulfil his dreams? T.R. Ramachandran It is most likely that we come across at least one article on rising prices of basic needs - right from food, housing to petrol - when we switch on any TV news channel or read the daily newspaper. While we see these things happening around and take due cognizance of this, the one aspect that is often overlooked is the exponentially rising cost of education. We seldom ask ourselves the question - am I sure of being financially equipped to bear the expenses of my child's higher education or will I have to resort to a loan to fulfill his/her dreams? Rising cost of education According to Aviva Education Insights, a survey conducted by Aviva Life Insurance and IMRB on the concerns and aspirations of young parents in India, saving for children's education remains the top priority for almost three-fourths (72 per cent) of Indian parents. However, the rising cost of education, which is slated to grow at a rate far higher than inflation and the resulting decrease in the value of money, has become a deep cause of worry for most parents today. It is estimated that the cost of pursuing a degree in medicine abroad, which today is around Rs 93.6 lakh, is expected to rise drastically to over Rs 2.45 crore in 20 years' time. Also, two decades from now, one may have to shell out around Rs 1.27 crore for an overseas MBA degree that costs Rs 48 lakh today. Therefore one needs to calculate what his exact requirements would be, post a certain time frame as what is worth Rs 500,000 today, thanks to inflation, will be worth Rs 1,500,000 after 20 years. What is surprising to see is that while most of the parents are willing to save for their children's education, a whopping 81 per cent of them are totally unaware of the costs they are going to incur for the same in the future. On average, young parents in India save Rs 26,000 per annum which amounts to merely Rs 467,242 over 18 years, reveals our survey. Unfortunately, there is a fair chance that the amount may not be sufficient to fulfill the career aspirations their child may have. Also, considering the tough competition for top colleges and schools in our country today, parents not only need to plan for the school and college expenses but also the tuition and coaching centre costs. In fact this is validated by the survey which reveals that the cost of extra coaching is the next biggest expense for parents after school tuition fees. Parents today also aspire to send their kids abroad for studies. As revealed by the survey one in every ten parents has such aspirations. Needless to say, in this case also one needs to plan for costs beyond the tuition fees like accommodation, cost of living among other things. Additionally, for children, today the education options are not only limited to the conventional ones like management, engineering or medical. An increasing number of students are now choosing offbeat professions like journalism, film production, animation and design that may require specialized training. While parents are willing to let their children choose the career they want to pursue and aspire to provide them with the best possible education for the same, there are a very few who actually go a step ahead and do the required financial planning to meet this need. You may think that you have enough time to save but the fact is that for each year that you procrastinate the planning, you will need to invest a larger amount to reach your goal on time and secure your child's future. Products available As parents, you might often wonder how is it possible for you to estimate a cost that you will incur 15 years hence. However, it is important that you calculate a rough estimate of the money that you would need for your child's higher education, keeping in consideration his/her aspirations, age and of course the inflation. There are some calculation tools available online to help you with these calculations. It is important that you don't get intimidated if these amounts look enormous at first, as the truth is that a systematic financial planning can make it much easier for you to cope up with these future expenses. The good news is that today there are a lot of investment options available in the form of insurance, fixed deposits, national saving certificates, mutual funds etc., which can help you plan finances for your child's education requirements. While you get a bigger basket to choose from, it also leads to confusion. Here, it is prudent to assess your needs and choose a product which best suits your requirements. It is also advisable to do a need-based analysis and take help from a financial planning adviser instead of going by word of mouth. Another thing to keep in mind is that most options work on a premise that you are going to be alive throughout the product term and invest regularly. The child education insurance policies are the only instruments that ensure that the funds a parent plans for the child's future education is available at key milestones whether the parent is around or not. The product construct ensures that in the event of the parent's death, all the future premiums for the policy are paid by the insurance company as a lump-sum into the policy. Also, other major expenses like school fee, etc, are taken care of through a regular stream of income till the child turns 18. This is the critical feature that a child insurance product offers and others don't. The choice of product however, depends on the risk appetite of parents, that is. good balance of risk and safety is of vital importance when it comes to planning for a child's future. There are various plans available in the market, with options like premium waiver which assures that the policy continues even in case of the parent's death, disability or critical illness (if the rider has been opted for), while the life cover is paid out. Also, there are income benefit riders that provide regular income to meet the child's everyday expenses in case of the parent's death. On maturity the nominee gets the fund value. While you may well have secured your own future and your retirement years through a financial plan, it is equally vital for parents to plan judiciously and proactively for their child's future, so that, the resources are accessible for the child's most important career aspirations as, they may surface at a time when it may be difficult to start saving afresh. Start early If you delay paying your mobile phone bill, you are charged a penalty if you delay your credit card payment you pay a certain percentage as interest on the amount due. Similarly, there is a penalty that one has to bear for postponement of planning for you child's future as well. Every year you delay in investing for your child's future education, for accumulating the same corpus you would have to pay a higher premium. Therefore, it is judicious that you start planning and investing as early as possible so that financial reasons do not limit your child's abilities and create a hindrance in his/her choice of career. After all, education is the only insurance for a better future and the best gift you can give your child. So secure it today. The author is CEO & managing director of Aviva Life Insurance. The views expressed are his own
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Market slide set to continue in near term
The choppy and volatile week came to an end with the Bombay Stock Exchange Sensex losing 140.23 points or 0.86%. The National Stock Exchange Nifty lost 37.45 points or 0.76%. The broader indices like the BSE 100, BSE 200 and BSE 500 lost 0.78%, 0.87% and 0.94%, respectively. The BSE MidCap lost 1.41% while the BSE SmallCap lost 2.19%, indicating a substantial across the board fall.
The sectoral gainers included BSE FMCG (up 1.72%) and the BSE IT (up 0.55%). The losers included the BSE Auto (down 5.6%), BSE PSU (down 1.04%) and BSE CapGoods (down 1.03%). In individual stocks Sesa Goa was up 7.85%, IRB Infra was up 7.46%, Sterlite rose 6.35%, SBI was up 4.86% and ITC rose 2.31%. The big losers included Tata Motors (down 12.54%), BHEL (down 8.93%), REC (down 6.95%) and Axis Bank (down 5.19%). The markets were spooked on global cues particularly Greece where fresh elections are to be held in June because no government could be formed. The US exchanges have fallen for 12 out of the last 13 days of trade, an event which has occurred after October 1974. The events overseas did not allow the markets to recover this week and the fall on Wednesday was so severe that even though the markets gained on Tuesday, Thursday and Friday it simply was not enough. It however appears that the positive results from SBI on Friday which beat the street expectations by a great margin has formed some sort of temporary bottom at 15,800 on the Sensex and at 4,790 on the Nifty. These levels are likely to hold ground in the short term and there should be some pullback or relief rally from here. Foreign institutional investors continued to be sellers during the week and sold stock worth Rs 412 crore while domestic institutions were buyers to the extent of Rs 482 crore. The Indian rupee depreciated to Rs 54.42 against the US dollar and has become a major cause of concern. The government must take concrete steps to curtail the fiscal deficit and reduce subsidies in the immediate term. Their failure to do this would bring about greater pressure on the rupee and also ensure that interest rates do not soften. Results from most of the companies have been badly affected by rising interest costs and also brought about a sharp reduction in net margins. MSCI has recast its emerging markets indices and as a consequence lowered the weightage of HDFC. This brought about a fall in the value of HDFC which lost Rs 10.30 on a weekly basis and recovered from the low of Rs 610.70. The loss at the lowest point was Rs 34.30. The week ahead would continue to be volatile and choppy. Volumes have reduced considerably and global cues are not supporting the market. Technical bounce is likely to make the markets recover in the coming week. The BSE Sensex has support at 15,906 points, then at 15,844 points, then at 15,678 points and finally at 15,509 points. There is resistance at 16,302 points, then at 16,425 points, then at 16,699 points and finally at 16,776 points. The NSE Nifty has support at 4,843 points, then at 4,801 points, then at 4,754 points and finally at 4,697 points. The resistance is at 4,936 points, then at 4,974 points, then at 5,056 points and finally at 5,094 points. The author is founder of KRIS, an investment advisory firm. The views expressed are his own market pointers
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The benchmark indices extended losses for the fourth week in a row as nervousness gripped global markets after Greece failed to form a government, setting the stage for a June election that could raise the risk of Athens abandoning the euro and deepening the eurozone debt crisis n
The BSE Sensex declined 140.23 points or 0.86% to close 16,152.75 for the week ended May 18, 2012. Among the 30 shares in the Sensex, 22 declined while the rest gained. Meanwhile, the S&P CNX Nifty fell 37.45 points or 0.75% to settle at 4,891.45 n
In the coming week, the next batch of fourth quarter March 2012 earnings, FII investments and news flow from the eurozone will dictate near term trend on the bourses. Among the major results, Tata Power will announce FY 2012 results on Tuesday. BHEL will announce Q4FY12 results on Wednesday; ITC, Reliance Infrastructure and BPCL will post FY2012 results on Friday. Also, FMCG stocks may extend their gains as the weather department has forecast the 2012 southwest monsoon will arrive in time. FMCG firms derive substantial revenue from rural sales An option gives you the right to buy or sell the underlying asset . A call option gives you right to buy the underlying asset while a put option gives you the right to sell. An option contract specifies the strike price, that is, the price at which you can buy or sell the underlying asset.
In Futures, you buy a contract which will have a specific lot size of shares. When you buy a Futures contract, you don’t pay the entire value of the contract but just the margin. Open interest is the the total number of contracts not closed or delivered on a particular day. |
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It is most likely that we come across at least one article on rising prices of basic needs - right from food, housing to petrol - when we switch on any TV news channel or read the daily newspaper. While we see these things happening around and take due cognizance of this, the one aspect that is often overlooked is the exponentially rising cost of education. We seldom ask ourselves the question - am I sure of being financially equipped to bear the expenses of my child's higher education or will I have to resort to a loan to fulfill his/her dreams?
Over the past 25 days, the diesel supply at HPCL’s fuel outlets has been restricted. Though the oil marketing company has ensured regular supply of diesel to the A sites (located in urban areas), the rural area and semi-urban area petrol pumps are facing a huge shortage since April last week. This shortfall in diesel comes at a time when the demand for this fuel goes up by 30%.
