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| November 27, 2015 |
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Impact 
Those who drive extensively may understand how a Rs 5 difference per liter in petrol/diesel prices can make a dent in your budget. As many of you know, India imports nearly 80% of the crude oil that it consumes every year. This means India’s oil bill is vastly affected by international crude oil prices. So imagine how much India saves when crude oil prices drop even by a dollar per barrel? A massive Rs 3,500 crore, given the latest assumptions and estimates. Mind-boggling, isn’t it?
PersonalFN strives to help you identify areas and means to lower your expenses without compromising much on your desired lifestyle. Creating wealth isn’t only about being able to save more and earning high returns on your investments; it is about rationalising expenses. If you share this view, here’s some good news. Fuel prices are likely to go down further now that the Indian Government has decontrolled petrol and diesel prices. This could affect the prices of everyday things including your fuel bill; all of it is affected by the price changes in crude oil.
Crude Oil Nosedives...
 | | Date: November 16, 2015
(Source:U.S. Energy Information Administration, PersonalFN Research) |
Factors that may help India (and you) lower the fuel bill
- Possibility of Organization of the Petroleum Exporting Countries (OPEC) announcing no production cuts in December 04 meeting; Iraq and Iran are pumping more oil.
The situation of over-supply in the crude oil market (keeps prices depressed) is unlikely to change in a foreseeable future. OPEC nations are challenging non-OPEC nations for market share. Moreover, members of OPEC nations are aggressively trying to raise their own share.
- Higher chances of the Federal Reserve (Fed) hiking interest rates in December which may drive the US$ higher and lower dollar-denominated commodities including crude oil.
- Indian Rupee is much more cushioned and is unlikely to take a major hit even if the US$ shoots up after the rate hike in the U.S.
- India is likely to save 35% on its oil import bill in Financial Year (FY) 2015-16; which will eventually help strengthen the Current Account position of the country. The Indian Rupee benefits when trade deficit and current account deficit is contained.
PersonalFN is of the view that whenever there is a drop in fuel prices, it is an opportunity for you to save money. Many people still undermine the value of saving a rupee on every kilometre. At the end of the day, everyone wants more money in their pockets today than they had yesterday. After all, that’s what we aim for with our personal finances, right? Those who value making conscious efforts to building long- term wealth or satisfying long-term goals systematically might find PersonalFN’s financial planning services extremely helpful.
Do you think crude oil prices are to stay lower for long? Share your views here
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Impact
Interest rates in India have been on the downward spiral but the borrowing cost of many companies has shot up like never before. Banks have slowed down loan disbursals as they have crumbled under pressure of rising bad loans. Therefore, companies are increasingly accessing the corporate bond market to raise funds. Until now, the mood in the market was blissful and investors were a little careless. Such market conditions helped companies in a sorry state of affairs to raise funds at comparatively lower interest rates.
Now that the high tide has receded, all of a sudden these companies have started finding themselves exposed.
What has changed?
The Amtek Auto episode was the speed-breaker to this trend of investing in low-rated bonds. Thousands of years ago Chanakya, a shrewd royal advisor and a visionary economist famously quoted, “Learn from the mistakes of others… you can’t live long enough to make them all yourselves!” Now, investors are learning from the mistakes of other investors, especially the victims of debt defaults. As per Mint dated October 26, 2015, companies with ‘A+’ or lower ratings mopped up Rs 3,670 crore in March 2015. From these record levels, issuance of low-rated bonds dipped a whopping 97% in October, which saw corporations raising only about Rs 110 crore. The highest coupon rate for ‘sub-AAA’ bonds jumped from 15% to 17% about 3 months back to 20% to 22%. Jet Airways recently issued Non-Convertible Debentures (NCDs) at 20.64%, as quoted by Financial Express dated November 23, 2015. Imagine the condition of nonstandard companies.
Considering that interest rates are being lowered, such spike in coupons suggests that investors are asking for more bucks for sticking their neck out. Lower issuance also suggests that many companies with poor finances are finding it unaffordable to borrow. Higher the risk of default or poorer the quality of governance, higher the rate of interest will be. So needless to say, you shouldn’t get carried away by high coupons. Often, eye-popping investment avenues leave nothing in offing.
Mutual funds are still in love with low-rated debt. Many of them are chasing high yields. Are they compromising on the risk involved? PersonalFN believes, they are. Out of nearly 1/3rd of 121 income funds (short term and long term clubbed together) analysed, about 36 have exposure to ‘A+’ or lower rated instruments. Before the case of Amtek Auto came to light; exposure of income funds to ‘A+’ or lower rated papers was more or less the same. Keep in mind to stay away from such funds. The brighter side is about 85 funds have no exposure to ‘sub-AAA’ instruments. Best invest only in funds that hold a quality portfolio and have a record of consistent performance. In case you have no time to do this research on your own, you may avail of PersonalFN’s Research Services.
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Impact
If you are an extremely rich ‘businessman’, with international links and multiple channels of making moolah, without a boy-scout’s conscience for clean accounts and tax-paying, then this article isn’t for you. Simply put, black-money holders are parasites. Not only do they deprive a country of tax revenues but they also keep utilizing the social benefits meant for all citizens of a country, without any contribution. Black-money holders have been outsmarting tax authorities for years; using law against law, exploiting loopholes, and evading taxes. They are nourishing their pockets at the expense of the good people, the taxpayers of the nation.
The problem of these economic parasites has turned into an epidemic in India. It’s tough to believe but approximately 3.5 crore Indians pay income tax, and the ones within the Rs 1 crore income group and above amount to less than 50,000 taxpayers. This is where the Government needs to step in and reward those who pay taxes on time and punish those who evade them. Stole your words, right? PersonalFN has always suggested its readers to pay taxes regularly and file returns in time.
Revelations of the vice-chairman of Special Investigation Team (SIT) Arijit Pasayat are telling. While speaking to media recently he said, “The volume of black money stashed in India is now much more than there is in other foreign countries.” Although it’s an open secret, his admission carries a lot more weightage.
To know more about this and PersonalFN’s views over it, please click here.
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Impact
Alinging with the Government’s goal to stymie black money and illegal transactions in the country, SEBI has recently issued new guidelines for documented disclosures required when investing in mutual funds. Taking into account SEBI’s guidelines, AMFI has mandated all mutual fund houses to seek information under the following categories:
- Information/declaration relating to US Foreign Account Tax Compliance Act (FATCA), which is an agreement India has signed to implement;
- Information/declaration under the Common Reporting Standard (CRS) developed by G20 and OCED nations for greater tax co-operation between countries;
- Additional KYC Information, and Ultimate Beneficiary Ownership (UBO) declaration from Non-Individuals.
This comes after the Finance minister, Arun Jaitley, addressed the Annual Commonwealth Finance Ministers Meeting at Lima, Peru; where he pressed for the implementation of Common Reporting Standards on Automatic Exchange of Information globally on a reciprocal basis, in order to tackle the international flow of black money. These new KYC disclosure requirements can be seen as a progressive step in the Government’s efforts
To read more about this and our views, please click here.
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Filing tax returns in four steps :
Step one: Sit with your Chartered Accountant / Tax Consultant
Step two: Discuss your Profit and Loss Account
Step three: Calculate the tax you have already paid
Step four: Walk out of his office with a challan that tells you how much more you need to pay
Perhaps most of you may subscribe to this practice, which usually occurs towards the end of your tax-returns filing deadline. But soon you may not require any expert advice on tax matters. Unbelievable? Read this…
The Revenue Department has appointed a committee to further simplify the tax-return form. The committee may give recommendations on how to shorten it and make it more taxpayer friendly. The idea is to empower tax payers to file returns on their own, without they seeking help from experts.
PersonalFN : advocates it’s a good initiative from the government to promote active participation in filing tax returns. PersonalFN encourages you, dear reader, to pay taxes on time and file tax returns on time.
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Coupon Rate: The yield paid by a fixed income security. A fixed income security's coupon rate is simply just the annual coupon payments paid by the issuer relative to the bond's face or par value. The coupon rate is the yield the bond paid on its issue date. This yield, however, will change as the value of the bond changes, thus giving the bond's yield to maturity.
(Source: Investopedia)
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Quote : "Prosperity last long for one who acts after proper consideration."
-Chanakya
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