  |
| January 18, 2013 |
|
|
|
|
|
| Weekly Facts |
|
Close |
Change |
%Change |
| BSE Sensex* |
20,039.04 |
375.4 |
1.91% |
| Re/US$ |
54.39 |
0.2 |
0.35% |
| Gold Rs/10g |
30,550.00 |
205.0 |
0.68% |
| Crude ($/barrel) |
111.24 |
(0.4) |
-0.38% |
| FD Rates (1-Yr) |
7.50% - 9.00% |
Weekly change as on January 17, 2013
*BSE Sensex as on January 18, 2013
|
|
Impact 
Many of you while placing an order to refill your Liquefied Petroleum Gas (LPG) cylinder may have encountered horrible experiences from your LPG distributor / dealer. But now if you are yet unhappy with the service, you have some recourse.
As a cooking gas consumer you can now change your dealer as the Government has launched LPG portability scheme on the lines of Mobile Number Portability (MNP). However unlike MNP (where subscribers have an option to switch between different mobile phone service provider keeping his mobile number the same), under LPG portability, you as a consumer would have option to change only your distributor / dealer, by paying a small one-time fee while keeping the oil company the same. So say if you are a consumer of HP Gas (from Hindustan Petroleum) you cannot switch to Bharat Gas (from Bharat Petroleum).
In the week gone by, Oil Minister Mr Veerappa Moily launched the LPG portability scheme in Chandigarh and the scheme according to him will be extended to at least 25 more districts in the next fiscal year. He also said, the request for portability can be made electronically on the web portal and will be completed without manual intervention. Also, new connections can be applied online. Mr Moily launched "Lakshya" (in November 2012) a new web initiate enabling consumers to book and track refills online as well on a mobile phone.
An interesting point is, customers can now even rate their LPG distributor on the basis of the service delivered. Thus now each LPG distributor would be rated from 5 stars to no star on a graded scale using transaction data. The distributor who supplies 85% of cylinders booked in less than two days will be rated 5 stars and the distributor who supplies 85% cylinders beyond 10 days will be rated no star. Others will be rated somewhere in between according to their delivery pattern.
We are of the view that, LPG portability could end monopolistic practices and will put pressure on LPG distributors to provide better service and timely delivery. The rating system as described above will also help consumers to select distributors (by doing a prudent comparison with distributors within the area), based on their delivery patterns and other services provided.
|
Impact
Last year when Mr Pranab Mukherjee (erstwhile Finance Minister) announced the General Anti Avoidance Rules (GAAR) provisions, it upset the mood of the Indian capital markets since the provisions intended to check on tax avoidance by overseas investors. Participatory Notes (P-Notes) involvement in the Indian capital markets also dwindled thereafter as investment climate turned to be unfavourable. But with pursuant numerous representations the proposal was deferred until April 2014 providing some respite to the markets and P-Notes.
P-Notes participation inching-up once again!
Note: Includes P-Notes for equity, debt and derivatives
(Source: SEBI, PersonalFN Research)
Recently the present Finance Minister decided to defer GAAR by another two years (i.e. until April 2016) and has also enunciated that P-Notes will be excluded from the purview of GAAR.
We are of the view that, such a move may flush in foreign flow of money into the Indian capital, since the reform measures (by passing vital bills thereto) have been taken by the Government in power recently in the winter session of the parliament. In fact from October 2012 onwards the P-Notes as a percentage of FIIs assets have inched-up once again. But what foreign investors are closely watching now is how the country precludes widening of the Current Account Deficit (which 5.4% of GDP as September 2012 quarter), how it achieves its fiscal deficit target, how rating agencies react to such a move, how budget 2013 will take shape and what stance does the Reserve Bank of India take in this backdrop. If all these problems are prudently addressed to the markets may see an impulse, but until then only intermediate impulse and corrections can be seen. So at least until the budget, the Indian capital markets would tread cautiously and see how the Government walks on the path of fiscal consolidation.
On the flip side, the peril of exempting P-Note (from GAAR) could be that round-tripping may occur with their rise and may infuse long-term problems.
|
Impact
Ahead of Union Budget 2013, top notches from the Insurance industy presented their proposal to the Finance Minstry. They are of the view that the service tax on first year regular premium as well as for single premium policies be reduced, and for social security insurance scheme - such as the "Aam Admi Bima Yojana", it be completed waived off.
It has also been proposed that additional tax breaks be given for pension products, over and above to dedcution limit available at present under section 80C of the Income Tax Act, 1961. Moreover, as a relief for insurance agents it has asked for relaxation in the clause that insurance companies have to deduct tax at source on payment of agent commission above Rs 20,000.
We are of the view that, if the proposal is accepted this would lead to grandfathering of insurance policies and may help in funneling household savings into the insurance industry and thus provide a boost to the sector. We also think this may encourage life insurers to even launch endowment plans; but we believe that while buying an insurance policy one's main objective has to be indemnify risk, and therefore one should buy only a pure term insurance plan, and separate your insurance and investment needs as that helps in reducing your premiums.
If the Government is committed on its path of fiscal consolidation, we doubt whether such recommendations would indeed by implemented by the Finance Ministry.
|
Impact
As many of you may be aware that beginning this year (i.e. from January 01, 2013), the Securities Exchange and Board of India (SEBI) made it mandatory for mutual fund houses to provide direct plans for their existing and new schemes, and directed that a separate NAV thereto should be disclosed. We also wrote how opting for "direct plans" offered by mutual funds could help you enhance your returns. We said that an extra mile covered could earn an extra buck!
But later in the past few weeks some mutual fund houses imposed exit loads for existing investors who wished to move on from their existing plan (i.e. distributor supported) to "direct plans" (which are effective from January 01, 2013); but conversely didn't levy an exit load if one wants to shift from a "direct plan" to an existing / standard plan (which is distributor supported). It is noteworthy that exit loads as high as 3% for exits / switches made within six months are imposed by mutual fund houses for moving to direct plans (from existing / standard plans).
And now further dampening the spirit of investing in "direct plans", the Association of Mutual Funds in India (AMFI) has put in an extra condition (which is restrictive in nature) on its members (who are mutual fund houses). In a recent note, the industry body wrote to its members asking them not to share data feeds of direct plans with mutual fund advisors. To know what this news mean and to read our view over it, please click here.
|
Impact
A little over a month back, in December 2012 SEBI pronounced norms (vide ac circular) for investing in the Rajiv Gandhi Equity Scheme (RGESS). It clarified which securities would be eligible for availing tax benefit under the aforesaid scheme. It is noteworthy that the key features of the RGESS scheme are:
- It is available for only first time investors (who do not have a demat account, or have one but not made any transactions in equities till the date of notification of this scheme i.e. November 23, 2012)
- It is available for to those whose gross annual income is less than or equal to Rs 10 lakh
- Permits maximum investment upto Rs 50,000
- Provides a tax deduction under section 80CCG of the Income Tax Act, 1961 to the tune of 50% of the amount invested from the taxable income of that year
But now ahead of the Union Budget 2013 it seems that market entities aren't happy and thus are trying to persuade the Finance Ministry to make some changes in the said scheme, with an aim to increase participation in RGESS. To know what changes are being seeked and to know our view over it, please click here.
|
FREE Money Simplified Guide
Your Definitive Guide To Retirement Planning!
Download your FREE copy to know how you can indeed build the corpus for your golden days.
Click Here to get this most downloaded E-Guide, Now! |
|
- In an attempt to curb gold imports and channelize investments of retail investors from physical gold to gold-linked instruments, SEBI has proposed to allow gold ETFs to park upto 20% of their gold holdings with commercial banks. The proposal is line with the RBI's recent suggestion to put gold ETF corpus to effective use.
In a draft report on gold imports released on January 2, 2013 the RBI had suggested that gold ETFs be allowed to invest their gold holdings in gold certificates with banks. The proposed mechanism is that, banks are expected to loan the gold received from ETFs to jewellers and pass on a part of their returns from such loans to ETFs as interest income, which in turn will share the profits with their unitholders.
We are of the view that, such a proposal puts the banks as well as unitholders of gold ETFs at risk, because the problem may occur in case their large redemptions and if the bank itself does not have the requisite expertise to deal in large volumes and hedge their risk. Moreover, we think such a proposal may not help in actually curbing gold imports.
- Aviva Life Insurance in the week gone by announced the launch of an online term insurance plan named, "Aviva i-Shield", which offers you a return of premium by providing for a return of 110% of the premium paid.
The said term insurance plans is eligible to those have completed 18 years of age and extends to those upto 55 years of age. However the maximum maturity age under the said plan is set at 65 years of age, while the policy term is from 10 years to 25 years. One has an option to pay the premium either yearly, half-yearly or even monthly.
We are of the view that, such a policy may be a good option for those who are looking for return of premium option while indemnifying risk to life via term insurance plan. However since the policy offers a return of premium option, one should be ready to defray more for premiums.
|
Participatory Notes: Financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. Also referred to as "P-Notes"
Source: Investopedia
|
Quote : "We don't have to be smarter than the rest. We have to be more disciplined than the rest." - Warren Buffett
|
|
|