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16th March, 2012

In this issue


Weekly Facts
  Close Change %Change
BSE Sensex* 17,466.20 (37.0) -0.21%
Re/US$ 49.91 0.4 0.76%
Gold Rs/10g 27,370.00 (310.0) -1.12%
Crude ($/barrel) 126.30 2.2 1.76%
FD Rates (1-Yr) 7.25% - 9.25%
Weekly change as on March 15, 2012,
*BSE Sensex as on March 16, 2012.
Impact

The headline inflation as measured by the Wholesale Price Index (WPI) stood at 6.95% for the month of February 2012 as against 6.55% in January 2012. Moreover, the WPI inflation for the month of December 2012 has been revised upwards to 7.74% instead of 7.47% estimated earlier.


(Source: Office of the Economic Advisor, PersonalFN Research)


Taking cues from the above inflation figures, the Reserve Bank of India (RBI) maintained its status quo on the policy rates (i.e. on repo rate, reverse repo rate and CRR). Moreover the RBI at its 4th quarter mid-review of monetary policy clearly indicated that that no further tightening is required and that future actions will be towards lowering policy rates. However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions.

To read a complete coverage on the RBI’s 4th quarter mid-review of monetary policy please click here.


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Impact

This time of the financial year is rather crucial for all classes of people - be it the aam aadmi or even politicians for the matter. While the aam aadmi looks for tax sops, the political leaders look for a blend of fiscal prudence, reforms, policy changes and some populist measures as well.

Although it is going to be a tight rope for the Government in power to manage fiscal consolidation and stride investments, many individuals are eager to know whether in what form tax sops would be extended to them. The present appraisal season for instance, is elevating the curiosity levels of salaried individuals, since along with an increment their expectations of an increase in exemption limits is also on a high.

And indeed all those who are thinking on those lines, can expect some good news. Let's find out how...


quamc_comic_guide


Impact

This special edition may not be of interest to many, as the India’s Census 2001 states that out of over 100 crore of population only 7.5% constitutes Senior citizens (age group of 60 years and above). But think again, you may be young and vibrant now but old age is a harsh fact of life. No one can escape it. Yet we totally disregard it many a times. May it be wealth wise or health wise we ignore to the extent we can. So please give due attention to this stage of your life cycle and plan your finances accordingly. But for doing so, it is essential that you are aware of the tax laws - especially the Income Tax laws affecting you, along with the amendments thereto. And since the Budget 2012 is round the corner, there have been certain recommendations put forth by the standing committee of the parliament which are worth a mention. Read more on this...


This Week's Poll !!!

Do you think, the hike in railway fare is justified?

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In an interview with Economic Times, Mr Benjamin Yeo - Head of Research, Economics and Strategy at Barclays Wealth Asia shared his views on the Indian economy, Europe economy and the U.S. economy.

The rally in the Indian equity markets, according to Mr Yeo can be seen in the context of a healthy bounce-back from the correction that the Indian market experienced in late 2011. He believes that the recent gain is also a testament to the fact that the Indian growth story remains intact and the global gloomy backdrop is looking up. However, Mr Yeo cautions that any global risk will impact Indian markets, as well as others in the region. He thinks that if domestically, should inflation turn up unsuspectingly again, it will crimp any hope of monetary easing to some extent, at the same time high oil prices will also be seen as a negative for India. Elaborating further on the crude oil prices, he said, "Oil prices have been rather restless of late. While overall demand for oil should be easing with the potential of a negative growth impact from Eurozone on the global economy, the recent pick up in oil price has been driven primarily by heightened geopolitical risks in the Middle East. "We expect oil prices to be around $115 per barrel for 2012, but the Middle East situation could drive prices higher. After all, Iran is a significant oil producer and is situated near the strategic oil shipping lane of the Strait of Hormuz. Markets may pay attention to potentially disruptive political development in other sizable oil producers such as Nigeria and Venezuela. If oil prices sustain themselves at high levels, India's perennial budget deficit could get worse due to subsidies."

Mr Yeo thinks that the approved bailout package for Greece comes with a lengthy checklist of tough reforms in order to qualify for it. "The fact of the matter is that there will be bumps and bouts of nervousness. Although recent data announcements suggest that the impact is far less negative than originally thought, the region, as a whole, may struggle to avoid a recessionary situation," he said.

Speaking about the U.S. economy, Mr Yeo is of the opinion that it is showing encouraging signs of recovery with the unemployment rates have been on the decline over the past few months even through many people are still jobless. He also said "US companies have actually been fairly resilient through the cycle, with significant cash build-up. As part of their cost rationalising, outsourcing is logically still probably one of the pursued strategies."



  • In order to curtail price manipulation in share prices of Indian companies, the Securities and Exchange Board of India (SEBI) is planning to bring all kinds of research analysts under its regulatory ambit.

    At present the research analysts attached with brokerage firms, fund houses, investment banks and other market intermediaries are currently governed by SEBI regulations, but there are no comprehensive rules that could also cover third-party or independent analysts.

    We believe that bringing in the independent analysts under the regulatory ambit may go a long way in curbing manipulation in share prices as many a times, the research reports are biased and are floated to the general public in order to make a quick buck. Also responsible reporting and analysis drawn therein can be expected.

  • In order to manage its overall exposure to Greece debt, the International Monetary Fund (IMF) intends to scale back its contribution to $23.6 billion in the second round of bailout ($130 billion). Earlier, the IMF accounted for 27% or $30 billion of Greece's initial $110 billion bailout in May 2010.

  • The BSE Brokers Forum, a body of members registered with BSE, has been lobbying with the Government to bring in certain market-related measures like abolition of Securities Transaction Tax (STT) and stamp duty on transactions of securities, doing away with TDS requirement for stock and commodity exchanges and setting up the objective for determining short-term gains.

  • The Bombay High Court has quashed the Income-Tax Department's demand for tax from mutual funds on income from investment in securitised instruments - mainly pass through certificates (PTCs). The ruling was in response to petitions filed by UTI Mutual Fund. Terming the move as "hasty", the division bench comprising Justices D.Y. Chandrachud and M.K. Sanklencha barred the revenue department from attempting 'any coercive measure' till the time all pleas of concerned mutual funds are disposed of. The bench also directed the I-T department to vacate all attachments on fund houses, saying that revenue collection cannot come at the expense of existing rules.

  • The service tax collection from April 2011 to January 2012 has been over Rs 70,000 crore which is 36.7% more over the same period last fiscal. The objective of the Union Government has been substantially achieved as there has been exponential growth in the service tax revenues over the years.

  • Schroders, a U.K. based Asset Management Company which manages assets worth $291 billion is planning to acquire nearly 30% stake in Axis Asset Management Company. The transaction will help Schroders revive its India presence and end Axis Asset Management Company’s search for a strategic partner in the mutual fund business.

  • IDFC Mutual Fund has filed the offer document for Infrastructure Debt Fund (IDFs) with the SEBI, India’s first infrastructure debt fund through MF route and has filed an offer document with SEBI.

    IDFC infrastructure debt fund shall have a minimum tenor of five years and not greater than 15 years from the date of allotment of units. The investment objective of the scheme is to seek to generate income and capital appreciation by investing primarily in a portfolio of infrastructure debt instruments. The corpus under the IDF will be invested in debt securities, bank loan and securitized debt instruments.



Bailout: A situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business's downfall. Bailouts can take the form of loans, bonds, stocks or cash. They may or may not require reimbursement.
(Source: Investopedia)

QUOTE OF THE WEEK

"The budget evolved from a management tool into an obstacle to management."       - Frank Carlucci

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