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| October 22, 2014 |
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| Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 26,787.23 | 678.7 | 2.60% | | Re/US$ | 61.32 | 678.7 | 0.86% | | Gold Rs/10g | 27,700.00 | -225 | -0.81% | | Crude ($/barrel) | 84.28 | 1.16 | 1.40% | | FD Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on on October 21, 2014
*BSE Sensex as on October 22, 2014 |
Impact 
Surrounded by offers – both in online and offline shopping, are you on a shopping spree this Diwali? With exuberance in the market, citizens are sighting 'acche din' and the story of consumerism is gathering steam. But with changing times, shopping preferences of Indian consumers too are changing and rather rapidly. Until a few years back, people were fascinated about shopping at big malls. While footfalls are yet seen at malls, the buzz now is more online.
Online shopping is getting popular among Indians and it is changing their buying preferences too. A few years ago, if you would tell a woman to buy traditional clothing online; she might have said 'No' straight away. Spending money without checking physical attributes of goods personally was undesired. But online shopping has started going down so well with people that, now they are getting comfortable with buying even cloths and jewellery online.
You see, online retailers have come up with very attractive offers and in most cases delivering purchased merchandise on time. Many of them offer "pay on delivery" option. This makes shopping very easy. While all that's good, are you overindulging in such discounts offers? If yes, then you should rethink.
Shopping may give you instant satisfaction but you must ensure it doesn't take toll on your priorities. PersonalFN is of the view that, as much earning good returns on your investments is important for you in the long run, curtailing avoidable expenses too. When you shop more getting attracted by sizable discounts, you probably save less and invest lesser. PersonalFN believes, you should save first and then spend on lifestyle and leisure. If you have not yet charted a financial plan, then it is high time you opt for one and be in control of your finances to facilitate your financial health being in pink. You see, financial planning helps you understand you prioritise your financial goals and gives a roadmap to achieve them, be it buying a dream home, a car, your children's education, their marriage needs and even your own retirement.
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Impact
Corporate communication of late is getting jargonised with often fine mincing of words. But when it comes to walking the talk, companies seem to be shying away.
Indian companies are echoing the cries that high interest rates are making it difficult for them to do business. Higher interest rates are not only increasing their borrowing cost but affecting demand for interest rate sensitive goods such as cars and today even consumer durable items such fridge, TV, refrigerators etc are available on finance.
At various platforms, industry has demanded a low interest rate regime. But sticking to the task of lowering inflation, RBI has not given in and has maintained policy rates high. In the interim phases RBI cut policy rates whenever inflation expectations appeared to have reduced. But as inflation continued its upward journey after pausing momentarily, RBI took tough measures.
Monetary Policy Action...
Data as on September 2014
(Source: RBI, PersonalFN Research)
Now that, wholesale price inflation as well as retail inflation has come in at a multi-year low in September 2014, it is expected that RBI may take a note of it. Some industry experts have already started making a case for a policy rate cut. Internationally commodity prices have been falling. Crude oil has tumbled in the international market. Therefore inflation expectation remains low.
However, RBI is of the view that for monetary policy to be effective, benefits of a rate cuts and impact of rate hikes should be passed on to consumers. While Indian companies expect low interest rates for reviving demand for their products, they are reluctant to pass on the benefit of fall in commodity prices, as noted by RBI. Falling commodity prices have boosted profitability of Indian companies. RBI expects companies to take corrective action, before they seek a rate cut.
PersonalFN is of the view that, RBI has rightly pointed out at a co-ordinated way through which inflationary expectations can be kept under control and which can eventually facilitate policy rate cuts. You see, unless prices of end products are lowered, consumers won't benefit. It has also been observed that, even though prices fall at wholesale markets, retail prices are rarely cut. Such a tough stand taken by RBI may help in cutting retail inflation.
Do you think companies would take corrective actions and start passing on benefits to consumers? Share your views
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Impact 
It is possible that you may not know a person who has made money in stock markets. However, it is rare to find a person who doesn't know people who have earned good deal of money in real estate. Indians believe more in real assets such as gold and real estate. But before you commit money to any asset class; it is imperative for you to understand fundamentals of the asset you are investing in.
Can investment in real estate prove to be risky?
It may come to your surprise but unsold flats (inventory) in Mumbai and Delhi have been rising for a considerable time now. As reported by Financial Express dated October 17, 2014; 1, 67,000 residential flats are unsold in the Delhi NCR region while Mumbai Metropolitan Region has nearly 2,14,000 unsold residential flats.
Reasons for high inventory...
- Unaffordable prices
- High interest rates
- Supply outstripping demand for real estate in many pockets
- Unwillingness of developers to lower prices
Among others, slowing economic growth and high inflation have also affected the sale of residential properties to some extent. This is because when the economy is not doing well, it is rare that, income of households would go up considerably. To worsen the situation, if the rate of inflation is high, as it has been for about past 3-4 years, purchasing power of people declines in real terms.
To read more about this news and PersonalFN's views on it, please click here.
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Monetary transmission mechanism: The monetary transmission mechanism describes how policy-induced changes in the nominal money stock or the short-term nominal interest rate impact on real variables such as aggregate output and employment. Specific channels of monetary transmission operate through the effects that monetary policy has on interest rates, exchange rates, equity and real estate prices, bank lending, and firm balance sheets. Recent research on the transmission mechanism seeks to understand how these channels work in the context of dynamic, stochastic, general equilibrium models.
(Source: dictionaryofeconomics)
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Quote : "In the short term, the market is a popularity contest. In the long term, the market is a weighing machine." - Warren Buffet
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