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Gold prices likely to hold ‘steady to firm’
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Biz talk
Politics, laws weigh on Islamic banking practices in India
Indian bourses perform better than global peers in a tough year
Tax Advice
HDFC Bank first to cut lending rate ahead of RBI quarterly review
Personal finance
Why put off tax planning till the end?
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Gold prices likely to hold ‘steady to firm’
Mumbai, December 30 In the long term, gold looks firm with most central banks pushing liquidity into the markets and increasing their loading of the yellow metal, Kotak Commodity Services analyst Madhavi Mehta said. “The central banks of Brazil and Russia are reportedly planning to increase their gold holding next year. We expect gold to rule at Rs 28,000-33,000 level in the domestic market in 2013. However, stabilizing rupee, which may come to 50 level, and fiscal cliff concerns may act bearish for gold," she said. Expectations of the economy improving and foreign institutional investors providing momentum in equity markets are also likely to support gold, Mehta added. Globally, the yellow metal may rule at US $1,550-1,850 an ounce (31.10 grams) level, she said. Gold prices last week closed at Rs 30,600 per 10 grams in the domestic market, while in the global markets it was at $1,658 an ounce. With a fair bit of correction already taken place in December due to year-end profit booking, Mehta said, in near term gold is likely to rule at Rs 29,800 to Rs 31,500 range. "Amid the US fiscal cliff situation the market is expecting the US government to reach at least a partial deal, which will bring in a positive market sentiment that will be positive for gold. Therefore, we expect gold price to recover in January 2013," Mehta added. Echoing a similar view, Commtrendz Research Director Gnanasekar Thiagarajan said the market is waiting for a very long time for resolution on the US “fiscal cliff” issue. Gold is likely to reach even Rs 33,000-34,000 in the long run in the domestic market, he said. "The movement in gold price will mainly depend on where the fiscal cliff agreement reaches. If the agreement is in line with the market expectations, the price will pick up, but will subsequently come down and if the conclusion is not in line with the expectation, the gold price will fall with other assets," he said. In the short term, the yellow metal may come down to $1,565 and rally up to $1,900 overseas and at Rs 28,500-Rs 31,500 in the domestic markets, he added. Angel Broking associate director Naveen Mathur said gold price in short term would be stable at Rs 30,500-31,000 range as the rupee appreciates against the US dollar. In the international markets, gold is likely to rule at $1,650-1,700 an ounce, he added.
— PTI |
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Micromax aims to become a billion dollar technology leader by 2014
Q: How different has your approach been in India, vis-a-vis the competition? Since the company’s inception, Micromax has always been a consumer driven company. What makes Micromax unique is our ability to know our customers, understand their specific needs and decode their mind. Through our constant market research we understand that India is a unique market with customers having varying tastes and preferences when it comes to mobility devices. Another factor that played a crucial role in Micromax’s success is our micro segmentation strategy. We have created some of the new categories in the mobile space such as long lasting battery phones, music phones, women centric phones. At Micromax, we aim to provide rich user experience to customers along with value for money proposition. Q: How is the Indian market evolving in terms of technology? India is a young country with more than 65% of the population falling in the youth category. These young restless heads demand for technology at their fingertips and share a very personal relationship with their gadgets. Micromax wants to give a better experience to all those people across all screen whether it’s mobile, tablet or television. Q: You recently made a foray into the TV segment, how do you see yourself in India over the next few years? With new product developments from the company, Micromax is poised towards growth. At Micromax, our mission is to provide our customers with a complete experience across all screens. Over the next few years, we want to become the screen partners thus converging the mobile phone experience to the living room. We expect to bring an extensive product portfolio to fulfill the daily needs of individual consumers. Q: How big is the LED segment in India? India is the third largest TV market in the world next only to China and the United States. The television industry is expected to grow by 12.9 per cent cumulatively over 2009-14 (PWC report). Today the market size is approx. 17-18 million per annum for TV and 65% is contributed by CRTs, However, over the next few years the market will be predominantly LED. The LED market is going to grow by 400% over the next few years. The global market for light-emitting diode (LED) TVs will grow 50 times to more than 200 million units in 2014 when eight out of every 10 TVs sold worldwide is expected to be a LED TV. We intend to revolutionize the LED market and be the catalyst to its adoption; which probably is slowest in India. We are confident of replicating our success with revolutionizing the smartphone market in India to our LED product range. Q: How have you developed your marketing and distribution strategy to aid your growth strategy? As of now, we have over 700 micro distribution network with more than 100 super distributors. We have about over 100 Micromax channels of our own, most of them based on franchise model. For our phones, we have a very well knit, organized and evenly distributed retail channels across India. We sell around 1.3 million mobiles handsets every month. We have created strong brand equity through our handheld devices and have added value to our consumers. For the LEDs we plan to introduce our offerings initially in nine key states like Delhi, Haryana, Madhya Pradesh, Punjab, Maharashtra, Rajasthan, Andhra Pradesh, Karnataka and Gujarat. We will deploy a two-tier distribution channel that will help us to reach out to 170 cities and build a strong consumer connect. Q: What are your business targets going forward into the new year? Our clear focus is to become a billion dollar company by 2014. Price point and value seeking are two different aspects we will be focusing on. Other than that we will be putting in more efforts on brand refreshing and re-energizing using cricket and other such platform to connect with the audience. Last year in November, we set up smartphones as a separate division clearly showcasing our focus on enhancing the smartphone product portfolio. Going forward, we aim to become the second largest Android seller. Q: What are your plans to manufacture television sets in India? We have set up a 100,000 square feet manufacturing facility spread over five acres, with a production capacity of 2,000 LED TV units per day at Rudrapur, Uttarakhand. The facility will also double up to manufacture the tablet PC Funbook and mobile accessories, which in the last six months has received a tremendous response.
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Politics, laws weigh on Islamic banking practices in India
Dubai/New Delhi, December 30 An estimated 177 million Muslims in India, the largest Muslim minority population in the world, are unable to use Islamic banks because laws covering the sector require banking to be based on interest, which is forbidden in Islam. This policy has persisted since 2005, when the Reserve Bank of India set up a committee to study Islamic finance. "The Reserve Bank's position has been that the current Banking Regulation Act does not permit Islamic banking because interest rate is an important component of banking in India," RBI governor Duvvuri Subbarao told reporters in October. Last month, the governor added that some Islamic financial services could be delivered through vehicles other than banks — a comment which is encouraging some firms to look at developing sharia-compliant products outside the banking sector. "It can be got around not through banking, but other vehicles," Indian media quoted Subbarao as saying. Shariq Nisar, director of research and operations at Mumbai-based Taqwaa Advisory & Shariah Investment Solutions (TASIS), an advisory firm, said of Subbarao's statement: "This is a good thing —it’s the first time the RBI is saying that Islamic banking is possible through other mechanisms. The message is to try out other things." Because Islamic banks pay depositors based on the returns earned by pooled investment funds, equity and investment related products might to some extent mimic the operations of Islamic banks and fill the gap left by the ban on them, the products' proponents hope. Saif Ahmed, managing partner at Bangalore-based Infinity Consultants, said: "The RBI's comments will enable a more creative approach to developing Islamic finance in the country, by getting people to critically think through ways they can introduce Islamic finance under the present regulations." INNOVATION: The 2006 Sachar Committee report, commissioned by the state to examine the social, economic and educational conditions of India's Muslim communities, recommended steps be taken to improve Muslims' access to credit, which it called inadequate. Muslims across all income categories in India are shunning conventional banks because of Islam's ban on interest, said Ahmed. "Access to sharia-compliant credit is the biggest issue, followed by access to sharia-compliant investment options." The issue of investment options looks easiest to resolve. Some capital market products, regulated by the Securities & Exchange Board of India, are already based on Islamic equity indexes, such as one launched in 2010 by TASIS and the Bombay Stock Exchange; Islamic indexes exclude firms involved in areas forbidden by the religion, such as alcohol and gambling. In May, SEBI introduced guidelines for alternative investment funds (AIF) which allow the pooling of capital from local and foreign investors. "We expect sharia-compliant funds to be registered under the AIF regulations," and to invest in permissible assets such as real estate, said H. Jayesh, founding partner of Mumbai-based law firm Juris Corp. Both Infinity and the Bangalore-based Amana Group have developed savings schemes known as chit funds which they say comply with Islamic finance principles. In chit funds, subscribers pool their money; members can then obtain temporary use of the funds through a bidding process. "Our schemes have been approved by major sharia institutions...along with prominent scholars. This can promote Islamic banking in the country more wisely," said Asifulla Khan, founder and partner at Amana. CREDIT: But providing any form of credit in India under Islamic principles appears much more difficult, and would probably require regulatory changes. A handful of politicians, particularly Muslim leaders such as Vice President Mohammad Hamid Ansari, has been lobbying for years to start Islamic banking in India. Politicians from the southwestern state of Kerala, where there is a large Muslim population, have raised the issue many times in Parliament. They have met strong opposition from bureaucrats in the finance ministry and banking circles. Some politicians, especially from the main opposition BJP, say they fear Islamic banking could be used by militants and might strengthen the hold of clergy over India's Muslim community. Also, the government is struggling to shut down channels for illicit flows of funds from the country, which are used by businessmen, politicians and bureaucrats to evade taxes. For these reasons, India seems unlikely in the foreseeable future to permit any form of Islamic banking.
— Reuters |
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Indian bourses perform better than global peers in a tough year
Globally, the equity turnover fell sharply by 14.7 per cent, while the fall was nearly 8 per cent for the bourses in Asia Pacific region as well. On the other hand, the collective equity trade volume of two Indian bourses, NSE and BSE, fell by 1.57 per cent to 161.74 crore during January-November period of 2012, as per data from the World Federation of Exchanges (WFE). The total number of equity trades on the exchanges across the world was 907 crore for the same period. Indian markets are expected to further improve their tally in 2013, as a new bourse MCX-SX is expected to begin operations as a full-fledged stock exchange. Experts said economic uncertainty across the globe, political deadlock in Europe, fiscal cliff debate in the US, policy logjam in India and lack of trading opportunities were main reasons for fall in equity trading in India and rest of the world. Individually, the National Stock Exchange recorded 129 crore equity trades, showing a marginal improvement of one per cent compared to 2011, and grabbing the mantle as the top bourse among 51 global peers. The NSE was the third largest bourse in the world in 2011. The BSE, ranked seventh globally in equity trades, recorded 32.71 crore trades in the period from January to November. "Indian markets turned out to be better performing markets as compared to other emerging markets and government reforms are also bringing faith back in Indian equities markets resulting in higher interest among the traders and investors," Religare Securities EVP and head of retail research Rajesh Jain said. Experts believe that NSE and BSE stood their ground among the top global bourses largely owing to heavy investment flows from foreign institutional investors. "Our entire policy is pro-FIIs, what ever volumes we have is basically because the global players are investing...the participation of retail investors and domestic investors is negligible," CNI Research CMD Kishore Ostwal said. On the flip side, the experts say there was lack of confidence within the domestic and the retail investors, as Indian investors had lost confidence in 2011 and were seen looking for opportunities to exit during 2012. "2012 saw the equity markets reviving but the retail investors used the rally in 2012 to exit. Equity funds witnessed outflows of Rs 12,702 crore till November this year, the second highest outflows in the category witnessed in the last six years," Jain said. Ostwal also said "the main reason for slow equity trades volume is that even though we have had market touching a new high, the retail investors have not come out and participation by domestic investors is negligible." "The market is all about the confidence of the market participants but if everything goes in opposite direction, say ballooning inflation, shrinking industrial output data, it’s sure to dump the confidence," SMC Global Securities head of research Jagannadham Thunuguntla said. "Moreover, in 2012 the market has moved in a band, there were very low per cent of volatility, say of 3-4% on a monthly basis, which has stolen all the arbitrage opportunities," he added. Experts said retail investors opted to get out of mutual funds as and when they got an opportunity resulting into lower participation and decreased number of trades. On a optimistic note though, the market players said the outlook for the coming year is positive largely owing to expectations of larger inflow from FIIs and India still being a favourable destination for investments. "The coming year appears to be more promising as far as the Indian markets are concerned as fundamentals are expected to improve and we may see an increase in interest in Indian markets from the FIIs as the concerns over the fiscal cliff and growing concerns in Europe may weigh heavily on their minds making India a safer investment option," Jain said. Moreover, the equity trading could also pick up if more measures are taken to boost the markets, including a possible abolition of Security Transaction Tax (STT). "STT alone is a big cost along with other costs like service tax, transaction charges of the NSE, brokerage, etc. A trader has to recover all these charges before he can actually make profit from his trade," Jain said.
— PTI |
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Tax on funds sent abroad
By S.C. Vasudeva Q: My daughter, who is studying abroad, was unable to meet the expenses earlier from the scholarship granted to her. If I send her funds regularly, will there be any liability under the income tax laws or those relating to foreign exchange transactions? — Jyoti
Q: Can a member of a “Hindu undivided family” give a gift to another family member? If yes, is there any tax liability? — Ramesh Marwah A: Any gift by an individual member of a “Hindu undivided family” to another member shall be covered within the provisions of Sec. 64(2) of the IT Act and therefore the income derived from such gifted property shall be deemed to arise to such individual member and not to the family. There is no amendment with regard to such gifts and the provisions as stated above are applicable for FY13.
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HDFC Bank first to cut lending rate ahead of RBI quarterly review
Mumbai, December 30 At the same time, the benchmark prime lending rate (BPLR) of India’s second largest private bank is expected to be slashed by similar margin to 18.20%. The new rates would be effective from Dece 31, sources added. HDFC Bank has become the first bank to cut lending rate ahead of RBI’s quarter review of monetary policy on January 29. RBI has already indicated that it will consider reducing interest rate in the January review. The central bank is closely monitoring the evolving growth-inflation dynamics and would update projections for 2012-13 in the third quarter review, the RBI had said. In its December review the central bank had left the short-term lending (repo) rate and the CRR unchanged at 8% and 4.25%, respectively. The reverse repo, at which RBI absorbs excess liquidity through borrowings from banks, remained static at 7%. HDFC Bank last reduced the benchmark lending rates by 0.2% in June. Meanwhile, the bank also revised fixed deposit rates on select maturities from December 15. Earlier this week, HDFC Bank raised about Rs 1,400 crore from bonds to fund its business growth.
— PTI |
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Markets to see positive trend in 2013
Soumendra Nath Lahiri 2013 will be a year of moderate growth; however, some divergence will be seen among various countries, with some experiencing recession and others growth. Economic policies - monetary and fiscal - could be the catalysts for financial markets
2013 will be a year of moderate growth; however, some divergence will be seen at a country level with some experiencing recession and others growth. Economic policies - monetary and fiscal - could be the catalysts for financial markets. With policy rates in major developed economies already close to zero levels, central banks are expected to remain in an expansionary mode. The US Federal Reserve and several other central banks are targeting reduction in unemployment, in sharp contrast to earlier aim of controlling inflation. In the United States the 'fiscal cliff' remains the focal point and can have implications on growth. Nonetheless, if successfully resolved, the US economy could spring positive surprises. Macroeconomic data releases on the housing front and in some segments have been encouraging. Moreover, exploitation of shale gas reserves could tip United States as the largest manufacturer of oil and gas and lower oil prices.
Despite facing their set of challenges, emerging markets seem to be in a better position than the developed economies. There are many positive catalysts such as ASEAN integration, China's leadership and progress on reforms in India. China's growth is gaining traction in light of policy easing, infrastructure investment and marked rise in consumption. The leadership transition is also out of the way and a series of reforms could boost the economy. Meanwhile, Japan's growth outlook looks weak as the tsunami related reconstruction wanes. The Bank of Japan is under pressure to loosen monetary conditions further and continues to rely on quantitative easing measures. Going into 2013, while the announcements of reforms have been a big positive, the successful execution of these would drive sentiments and markets. A moderation in inflation followed by lower interest rates will impart macroeconomic stability and lower fear of a downgrade. India is now well integrated with the rest of the world and our total balance of payments transactions on the current as well as capital account exceed our GDP. Lower oil prices and reduction in gold imports could augur well for current account deficit and lessen the scope of domestic policy errors. In this context, receding inflationary pressures and lower interest rates may act as the big booster for the Indian economy. Recent inflation data has been positive and have raised hopes of moderation over the course of next year. This may set the necessary background for the Reserve Bank of India to ease rates in a calibrated manner. The combination of cheaper credit coupled with a conducive policy environment is expected to kickstart the domestic investment cycle and this should be well supported by foreign investment flows. Companies have held back capital expenditure in hope of more favourable interest rates and better demand environment. Companies not associated with investment cycle are in good shape in terms of their leverage and working capital. The start of an Investment cycle will benefit the executors of such projects who are starved of orders and working capital. This indeed will provide headroom for cautious optimism in the markets. Consensus expectations suggest that the corporate sector earnings could grow by 12-13% in FY2014, post a modest 8% in FY2013. This will have low contribution of global cyclicals, providing more stability to growth. Expectations are low and earnings upgrades are likely to follow, once global commodity prices see some recovery. India's last 10-year average growth rates have been over 15% plus and earnings are set to reverse to mean. Valuations at PE of 14x are below long-term averages and are attractive, considering that upgrade cycle is yet to begin and interest rates will moderate. Financials will likely do well in 2013 as recovery in the domestic economy coupled with lower interest rates augurs well for loan growth and bad loans. Consumer Discretionary will also benefit as demand recovery will drive volumes higher and valuations are attractive. Capital goods will be contingent on likely recovery in the capex cycle, which should begin in the second half of 2013. It would be interesting to see the performances of export oriented sectors (mainly pharma and IT) since these were boosted by a favourable currency this year. The scope for valuation rerating in consumers looks limited. Midcaps should see a strong performance as economic recovery; lower rates and revival of domestic flows are key catalysts for these stocks. On the whole, 2013 is set to begin on a positive note and investors should look for the year to bet conservatively. We believe fundamental analysis will play a major role and our investment team remains focused on picking individually attractive companies from a long term perspective. In our portfolios, constructive bias will be towards rate sensitive sectors such as financials and consumer discretionary. The author is head of equities at L&T Investment Management. The views expressed in this article are his own
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Why put off tax planning till the end?
Nearly 70% to 80% of the life insurance business happens in the last quarter of the year and this Jan-Feb-March quarter is like a season for insurance professionals. We all know very well that every year we have to invest Rs 1 lakh to claim tax benefits under Sec. 80C, but still we wait till end and end up buying wrong products. It is time to act immediately if you still have not done it. You still have three months to finalize the best product available for tax benefits, which will also be linked to one of your financial goals. Here are some tips for tax planning if you are looking for tax saving instruments.
One also has to plan his/her tax planning this year in such a way that it also matches with the Direct Tax Code, if passed in next budget. According to the DTC draft bill, life insurance premiums will qualify for tax deduction only up to Rs 50,000 as against a deduction of Rs 1 lakh at present. As per the new Section 73 of the DTC, the overall limit of Rs 50,000 includes life insurance and health insurance premiums and tuition fees paid for two children. The following investments will also be not eligible for deduction after the Direct Tax Code bill is passed into law:
Every investment has its own risks and also some charges built in. If you do not give your valuable time today to assess this, you may end up buying a wrong product or products that could lead to monetary loss. So don't wait until the end and plan well in
advance! The author is head of financial planning at Apnapaisa.com. The views expressed in this article are his own |
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With the tag of No.1 Indian tablet computer manufacturer and the world’s 12th largest cellular handset maker, Micromax is reaching out globally with trend-setting products, challenging the popular notion that innovation comes with a price. Micromax has a sales presence across India and offices in Hong Kong, Bangladesh, Nepal, Sri Lanka, Maldives, UAE, Saudi Arabia, Kuwait, Qatar, Oman, Afghanistan and Brazil. Rajesh Agarwal, co-founder and managing director of Micromax Informatics Ltd, talks to
Girja Shankar Kaura about the company’s future plans.
Mumbai, December 30
The Asia Pacific region registered a decline of nearly 8 per cent to 533.4 crore trades in January-November period of 2012. The global data for December is still awaited as one last trading session would take place on Monday.
A:
As your daughter is a “relative” in accordance with the provisions of Sec. 56 of the Income Tax Act, 1961, any funds sent to her will not have any income tax liabilty for either of you. Under the regulations of the Foreign Exchange Management Act, 1999, you can send US $100,000 per year to your relative for his/her maintenance. 
This year has been a roller coaster year for Indian equities as bearishness in the first half gave way to optimism in the second half. After a prolonged period of inaction, concerns of an India ratings downgrade in the light of fiscal slippages prompted the government to unleash a series of reforms. These included FDI in retail, insurance and pension, formation of a National Investment Board, PSU divestment, fuel price hikes, Land Acquisition Bill, direct transfer of cash subsidy, Banking Bill, et al. Yet, many path-breaking reforms await passage and implementation in the winter session of Parliament - bills on insurance and pension sector reforms, key tax reforms (Direct Tax Code and goods & sales tax) and speedy clearance by the cabinet committee on investments.
In Europe, ongoing austerity coupled with tight financial conditions, structural reforms and uncertainty could result in further lower growth. We expect Germany to contribute to the region's growth.
All salaried people will have to submit their investment proofs in a month or two to their employer to claim deduction under Section 80C of the Income Tax Act, 1961. It is a familiar story that most taxpayers plan for this at the end of the financial year and end up buying financial products that may not be in tune with their financial needs. This also applies to businessmen and professionals as well those who wait till the end for tax planning.