Mumbai, December 9
After smart gains of the past two weeks, the stock market is likely to see some profit-booking this week amid investors tracking crucial data on inflation and industrial production, analysts said. Besides, hopes of interest rate cut by the Reserve Bank will guide investor sentiment, they said.

Following the government's winning vote in Parliament on FDI in multi-brand retail, investors are now expecting further financial reforms.

"After gaining more than 4.5% in the last two weeks, the Sensex is likely to witness some profit-booking," said Rakesh Goyal, Vice President at Bonanza Portfolio. "Buying is seen in almost all sectors which is positive for the coming sessions. However, economic data such as inflation and IIP (Index of Industrial Production) as well as probability of interest rate cuts by RBI this month shall have near term impact on market sentiment," he added.

The RBI is scheduled to announce its mid-quarter monetary policy review on December 18. Several important bills are likely to be taken up by Parliament for clearance during the ongoing winter session including Companies Bill, Competition Bill and FDI in insurance and pension sectors.

"The trigger the Indian markets may look for is the IIP data and inflation," said Alex Mathews, Head Research, Geojit BNP Paribas Financial Services.

Meanwhile, two public offers — by telecom tower company Bharti Infratel and PC Jeweller — will hit the capital market this week.

Bharti Infratel, the tower arm of the country's leading telecom service provider Bharti Airtel, is planning to hit the market on December 11 with an Initial Public Offer to raise around Rs 4,500 crore. Besides, PC Jeweller Ltd will launch its IPO on Dec 10 to raise Rs 609 crore.

On the global front, the market is also waiting for the two-day meeting of the Federal Open Market Committee on interest rates in the US on December 11-12.

Asian markets on Monday will also react to the US jobs data where the country created 146,000 jobs in November, bringing down unemployment rate to 7.7 per cent — the lowest since the global financial crisis of 2008. — PTI

Kochi, December 9
Kris Gopalakrishnan, co-founder of Indian information technology giant Infosys, stares out from a wall-to-wall poster in a modern office building near Kochi.

A caption reads: "We started Infosys in a room about this size; it's your turn now."

His message is directed at aspiring entrepreneurs at Startup Village, a state-of-the-art glass and steel edifice tucked in a green corner of the port city, who dream of creating the next billion-dollar tech giant.

But even three decades after Infosys, India's second-largest software service provider, was founded by middle-class engineers, the country has failed to create an enabling environment for first-generation entrepreneurs.

Startup Village wants to break the logjam by helping engineers develop 1,000 Internet and mobile companies in the next 10 years. It provides its members with office space, guidance and a chance to hobnob with the stars of the tech industry, including Gopalakrishnan, the project's chief mentor.

But critics say this may not even be the beginning of a game-changer unless India deals with a host of other impediments — from red tape to a lack of innovation and a dearth of investors — that are blocking entrepreneurship in Asia's third-largest economy.

India ranks 74th out of 79 nations in the Global Entrepreneurship and Development Index, making it one of the worst places in the world to start a business.

A World Bank report says it is easier to start a business in violence-afflicted Pakistan or poverty-stricken Nepal than in their giant neighbour, where everything from getting electricity to credit is time-consuming and fraught with paperwork.

"Take Apple or take Google. If exactly the same company had been started in India, its prospects would have been very different," said Erkko Autio, chair in technology venturing and entrepreneurship at Imperial College, London. "Basically, it would have not reached the potential it has as a startup."

Indian-born entrepreneurs have been enormously successful in the US, where they have the highest number of tech startups by any immigrant group. But India has not been able to build itself a community like Silicon Valley where there is easy access to equity, a pool of creative talent and first-world infrastructure.

"We were alone. We had no idea how to make a company, how to sell it ... We tried, failed, tried, failed," said Kallidil Kalidasan, a 23-year-old member who started a mobile app venture in Kerala two years ago and could not find a single investor.

He is now one of the entrepreneurs at Startup Village, and is working on a product that could help the government detect illegal abortions in a country plagued by female foeticide.

BARE NECESSITIES: The seven-month-old Startup Village provides would-be entrepreneurs with workspace at rents about a tenth of anywhere else in Kochi, computers, a high-speed Internet connection, legal and intellectual property services and access to high-profile investors.

The village is still to be completed, but 68 people, would-be entrepreneurs and their teams, have already taken up two buildings at the site. Spread over 100,000 square feet (9,250 sq metres) — equivalent to 20 basketball courts - Startup Village will be completed in 2014. — Reuters

Voltas is among the top ten companies in the Tata group. In an interview to Sanjeev Sharma, Pradeep Bakshi, chief operating officer, unitary products business group of Voltas, talks about the company’s growth in an environment of economic gloom and low consumer sentiment, its penetration strategy in the smaller cities and retail footprint.

Q: How is the airconditioner segment growing in India and what is the penetration?

A: The AC category this year has been witnessing challenging times on the back of economic gloom and weak consumer sentiment. Input cost pressures and conservative spending by consumers have contributed to postponement of purchase decision. However despite the lull, Voltas as a brand remains buoyant and continues to remain in the green. At 3.8% penetration, the segment has marginally inched up and is a promising category in times to come as consumers upgrade and move in to newer dwellings.

Q: What has been the Voltas market share?

A: Voltas enjoys the no. 1 position with a market share of 19% on a pan India basis and an enviable leadership position in Punjab for years. In certain markets of Punjab, the brand has seen peak market shares touching 48% in certain categories with a combined market share of 32% during the year.

Q: What is the Voltas footprint in the north?

A: In the last few years Voltas has emphasised on retail expansion and has extensively mapped the market in order to increase footprint. The brand today commands an enviable 3000 touchpoints across the north zone, which includes the vital service network.

Q: With saturation in the metros, what is the growth strategy for smaller cities?

A: In line with Voltas' concerted efforts at market expansion, despite holding a single product portfolio of split and window air conditioners, the brand has been a preferred choice amongst intermediate customers and channel partners. Thanks to significant emphasis on re-energising the brand, which has donned various positioning planks in line with changing category dynamics and consumer preferences, bringing relevance and variety to the table. Consumers today seek convenience, choice and cost benefits. All of these are being addressed by emphasising on spatial access and opening up distribution networks catering to the tier 2 and 3 towns. Consumers have been pampered with options with an extensive product mix that includes offerings at various price points. These include an efficient line up of star rated, energy efficient models that save on recurring costs, thereby helping keep cost of ownership under check. With the latest all weather enabled airconditioners, which promise round the year utility and an aesthetically superior lineup, the brand has been competitively positioned in the smaller cities to remain the number one player.

Q: Has inflation affected consumption of durables or is the consumer more aspirational and doesn’t mind?

A: Inflation and input cost pressures have pushed air conditioners back to being a luxury item. However, the brand’s strong salience and spread across touch points have ensured recall and most importantly conversions despite the underlying gloom affecting most consumer durable categories. In a category witness to de-growth during the year, Voltas continues to grow at a healthy 20% in volumes. Consumers seek value and are willing to pay a premium in case of the right product offering; this has been amply proven in case of Voltas, which maintains a healthy top and bottomline.

Despite the weak consumer sentiment, Voltas as a brand remains buoyant and continues to remain in the green. At 3.8 per cent penetration, the airconditioner segment has marginally inched up and is a promising category in times to come as consumers upgrade and move in to newer dwellings.


— Pradeep Bakshi, COO, unitary products, Voltas

Q: After the expiry of a Public Provident Fund account holder, what formalities need to be completed by the nominee — his grandson, who is a minor? The name of the person appointed by the account holder on behalf of the minor is his father.
— Sukhman

A: According to clause 12(6) of the Public Provident Fund Scheme, 1968, the nominee has to make an application in Form G, or as near thereto as possible, to the accounts office along with the proof of death of the subscriber and on receipt of such application all amounts standing to the credit of the subscriber after making adjustment, if any, in respect of interest on loans taken by the subscriber shall be repaid by the accounts office itself to the nominee or the nominees. In view thereof, the person appointed by the account holder to receive the amount due under the account in the event of the death of the subscriber during the minority of the nominee should make an application in the aforesaid Form on behalf of the nominee along with the proof of death so as to claim the outstanding amount in the Public Provident Fund account of the deceased.

Q: After I retired from government service I received Rs 30 lakh from my general Provident Fund, DCRG and leave encashment. I gifted Rs 5 lakh to my husband by cheque who deposited it in a bank fixed deposit at 9% interest p.a. He earned Rs 45,000 in June 2012 as interest and has no other source of income. What is his tax liability?If I also gift Rs 5 lakh to each of my adult children, what will be their tax liability?
— Romesh Rani

A: The interest of Rs 45,000 earned on the amount gifted to your husband would be taxable as your income in view of the provisions of Section 64 of the Income Tax Act, 1961. According to the provisions of the said section income from amount transferred to a spouse without consideration is deemed to be income of the transferor. Therefore the amount of Rs 45,000 will be added to your total income for computation of your tax liability.

You can gift Rs 500,000 each to your major children. There would be no tax liability as far as you are concerned. However, both of them will have to pay tax in respect of the income arising on the amount gifted to them.

New Delhi/Chicago, December 9
Wal-Mart Stores Inc prepared its entry into India's supermarket sector in 2010 with a $100 million investment into a consultancy with no employees, no profits and a scant $14,000 in revenue.

The company, called Cedar Support Services, might have been a more obvious selection four months earlier: it began its corporate life as Bharti Retail Holdings Ltd, according to documents filed with the Registrar of Companies.

The Cedar investment is now the focus of an investigation by India's financial crimes watchdog into whether Wal-Mart broke foreign direct investment rules by putting money into a retailer before the government threw open the sector to global players.

Wal-Mart said it was in compliance with India's foreign direct investment guidelines, and had followed all procedures. It said the central government had sought "information and clarification", which Wal-Mart has provided.

However, several lawyers said the transaction appeared to violate at least the spirit of India's long-standing ban on foreign investment in supermarkets, which it only lifted in September 2012. When Wal-Mart made the investment in 2010, it was legal for foreigners to own consultants but not retailers, so the shift in Cedar's business description raised eyebrows.

"This is a complete camouflage," said Hitesh Jain, a senior partner at ALMT Legal in Mumbai who advises retailers but is not involved with Wal-Mart. "It can be looked at as a violation of FDI rules because Cedar also operates supermarkets, which was a restricted sector back then."

The law, however, is murky.

Others stressed that the way Wal-Mart structured the transaction might make it legal. According to the documents filed with India's registrar, the investment was in the form of debt that was convertible into equity. That clouds the issue of whether Wal-Mart took a stake in Cedar or provided financing.

Bharti and Wal-Mart both declined to provide additional details on how the transaction was structured.

Senior government officials told Reuters that the RBI had asked the Enforcement Directorate, which investigates financial crimes, to look into whether Wal-Mart violated the law by investing in a supermarket retailer before foreign investment rules were relaxed.

If Wal-Mart did break the law, it could face a penalty of up to three times its initial $100 million investment, they said.

That would not only be a setback for Wal-Mart, it would also weaken consensus-building efforts by India's minority government, led by the Congress party. The party is desperate for more support from across the political spectrum after its decision to let foreign players into India's retail market came under fire from the opposition and even some of its own allies.

Wal-Mart and other retailers lobbied for years to gain access to India's market, lured by the promise of a middle class that will one day rival China's. But local opposition has been fierce because of concern that Wal-Mart and its peers will knock millions of mom-and-pop stores out of business.

COMPLEX WEB: Reuters pieced together details of Wal-Mart's investment in Cedar by examining records from India's Registrar of Companies and through interviews with government officials involved with the matter, as well as several lawyers who work with retailers.

The documents reveal a web of companies set up under the Bharti umbrella, which runs India's largest telecom operator, Bharti Airtel. The group, which also has retail interests, signed a joint venture with Wal-Mart to run wholesale stores in 2007, shortly after India allowed full foreign ownership of wholesale retail operations.

That same year, the Bharti group formed Bharti Retail Holdings Ltd, which in turn owned a subsidiary called Bharti Retail Ltd which operated supermarkets and hypermarkets.

In December 2009, Bharti Retail Holdings changed its business description to consulting services from retail, the documents filed with India's Registrar show. A month later, the company changed its name to Cedar.

The timing of the change in name and business is significant because when Wal-Mart invested in Cedar in March 2010, foreign companies could legally own 100 percent of an Indian consulting firm but not a supermarket retailer.

Cedar issued "compulsorily convertible debentures" to Wal-Mart Mauritius Holdings Co Ltd, which would be exchanged for 49 per cent equity 18 months after the issue date. The conversion date has since been pushed back twice, to September 2013, which would be after India's relaxation of rules on retail investment.

Cedar's cash flow statement for 2010 shows that the funds raised from the debentures were used to finance activities and an attached schedule to the balance sheet shows a transfer of Rs 1.75 billion to its retail unit, raising questions over whether Wal-Mart's money went into the retail business.

M.P. Achuthan, a communist member of India's parliament, has accused Wal-Mart of breaking the foreign direct investment law and said he wanted the company to be penalised. Achuthan also wants India to scrap its foreign retail investment policy.

"I’m surprised and shocked that the government didn't see this. This kind of an investment could not have happened without the government's knowledge," Achuthan said. "It is impossible."

Wal-Mart's Indian partner, Bharti Enterprises, said it had followed the rules but did not address specific questions emailed by Reuters.

"We’re in complete compliance of all regulations. All details have been shared with the relevant authorities," a Bharti Enterprises spokesman said.

Two senior government officials said there had been an initial round of communication between the Reserve Bank of India and the Enforcement Directorate. The RBI asked the law enforcement agency to conduct the investigation. — Reuters

Nowadays people have started seeking professional advice to have roadmap of their financial future. They prefer to pay professional fee for the preparation of their financial plan to reach their financial goals in future. At the start of the exercise of financial planning, clients provide all necessary details required for preparing the financial plan and do not hesitate much while disclosing the facts. When the plan is presented to them, they are satisfied with the plan prepared and presented to them. But we as financial planners have noticed that they are reluctant to implement the recommendations of the financial plan. Sometimes they are just not ready for that.

So what stops them from implementation?

Emotional attachment

There are several instances and situations where some clients have been recommended to sell their second house / property to repay existing home loan of their new house due to shortfall of funds for other major financial goal. The clients are not ready to sell that second house due to emotional attachment if it is their first house, which is well understood, but sometimes we need to keep our emotions aside and think practically that it is better to sell the second home and pre-repay the existing home loan; and use the savings made in EMIs for building a better corpus for to meet some other major financial goal.

Loss aversion

Clients tend to be more risk averse when faced with potential losses and less risk averse when faced with potential gains. They dislike losses more than they like gains of equal amount. For example, an investor likes a gain of Rs 50,000 in a certain investment, but dislikes a loss of Rs 50,000 more than the gain. So, if recommended a loss making investment to sell, the client is loss averse and is unwilling to sell the investment and bear the loss. They are willing to realize gains but are unwilling to realize loss.

The same applies when recommended to surrender a traditional or unit-linked insurance policy. They are not ready to surrender policies, whose surrender value is less than the total premiums paid till date. They continue paying premiums, and do not realize that the same premium invested in some other instrument will earn more returns than their loss incurring insurance policy.

Speculation

Clients speculate interest rates changes and equity market movement; so much so that they try to time the market. When they are recommended to sell equity shares or equity mutual funds, they expect the market to be bullish and hold on the securities and wait for the market to rise and earn higher gains. Few clients also stop their SIPs when the equity markets are falling as they find their returns in negative in their mutual fund portfolio statement. Even after educating and explaining them that it is the best time to accumulate units when markets are falling and hence they should continue with their SIPs.

Such kind of investor behavior and psychology do not allow them to implement the recommendations. Clients should not think emotionally all the time while taking financial decisions and should consider the recommendations of the financial planner, which are given in for their (clients) benefit.

The author is research analyst at ApnaPaisa.com, an online marketplace for loans and investments. The views expressed in this article are his own