  | | November 22, 2013 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 20,217.39 | (182.0) | -0.89% | | Re/US$ | 62.94 | 0.2 | 0.29% | | Gold Rs/10g | 30,830.00 | (235.0) | -0.76% | | Crude ($/barrel) | 108.32 | 1.4 | 1.31% | | FD Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on November 21, 2013
*BSE Sensex as on November 22, 2013 | |
Impact 
Today, the government faces a problem of mounting fiscal deficit. It has exhausted about 76% of the fiscal deficit target in first 6 months of the current fiscal. As the economy has slowed considerably, raising income has become difficult for the government. Due to volatile markets and inter-ministerial conflicts, disinvestment targets have also not been met.
But keeping forthcoming Lok Sabha election in mind, the cabinet is unlikely to clear the proposal made under Direct Tax Code (DTC) to introduce a new income tax slab for super-rich. Under DTC sent to cabinet in August, there is a provision to tax super-rich at the rate of 35%. This may not be approved by the cabinet. Besides this, the finance ministry may introduce many more changes in the DTC by moving a supplementary note. These changes would include some important ones such as retaining the exemption limit for income tax, continuation of exemption on maturity proceeds of saving instruments which are currently tax free and retention of MAT on book profits basis among others.
PersonalFN is of the view that amending some important provisions of DTC bill, 2010, may make the new tax code less effective as it would have a restricted scope. If the finance ministry issues supplementary note and in deed goes ahead with amendments, narrowing the gap between revenues and expenditure would become increasingly difficult for the government in coming years. The subsidy burden is already up substantially this fiscal. Rising fiscal deficit is a negative for capital markets. PersonalFN believes short-sighted strategies adopted to take political milage may land the economy in trouble over medium to long term. Bond yields may rise if fiscal deficit widens as borrowing becomes dearer for the government.
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Impact
Job of a financial advisor is to give ethical advice. But contrary to this many banks have been found guilty of misguiding customers and violating know-your-customer (KYC) and anti-money laundering norms. It's a well-known fact that banks try to promote products where the commissions are high without bothering about suitability of the products to customers. There have been instances where banks have sold thematic funds to people with moderate to low risk appetite. Similarly, banks have also engaged themselves in provoking people to do unlawful things.
To curb such practices, RBI has taken a regulatory initiative by extending the scope of its 'Treating Customers Fairly' (TCF) policy to distribution of third party products. RBI is expected to release new guidelines soon. It expects banks to follow TCF at every stage be it marketing, advice or after-sale.
PersonalFN is of the view that initiatives such as these taken by the central bank may ensure customer protection. However the success of this effort lies in implementation. As rightly pointed out by the RBI, inspections and scrutinies carried out by banks won't suffice unless the focus is on results. Improvement in quality of advice and strict adherence to policies may help achieving broader objective of increasing participation of retail investors in capital markets and increasing penetration of insurance.
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Released Session 6: Introduction to various asset classes - Equity, Debt, Gold
As an investor you need to be well aware about the investment instruments before investing your hard earned money.
This Money Simplified session talks about three major asset classes Equity, Debt and Gold, which are popular amongst investors & explains the merit and demerits and their suitability for investors.
We strongly recommended you to watch this Video Now. Its Free!
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Impact
Last year, sometime in September, gold became bold scaling a new high and Assets Under Management (AUM) of gold Exchange Traded Funds (ETFs) too soared. But having witnessed a correction in gold price soon thereafter, AUM of gold ETFs after depicting resilience for few months began to witness a fall.
During the six months period from May 2013 to October 2013 while gold prices have once again ascended, AUMs of gold ETFs are diminishing as investors seem to be dumping gold (by redeeming units of gold ETFs).
AUMs of Gold ETFs vs. Gold Prices
Data as on October 31, 2013.
Note: Average gold prices for each respective month have been taken
(Source: AMFI, PersonalFN Research)
As per the data available with the Association of Mutual Funds in India (AMFI), AUMs of gold ETFs have fallen to Rs 9,894 crore in October 2013 from its uttermost level of Rs 12,057 crore in January 2013; resulting in depletion of -17.9%.
Why such a fall in AUMs of gold ETFs?
Well, since gold prices have once again neared their all-time high, investors seems to be wary and therefore seem to be booking profits after having invested in the earlier corrective phase of the precious yellow metal.
So should you be actually selling gold now?
Confirmation from incoming U.S. Federal Reserve chief, Ms Janet Yellen that the central bank's loose monetary policy was here to stay, has signalled that the current pace of stimulus (vide bond-buying worth U.S. $85 billion per month) may not be tapered in the near term. Such a move would be supportive for gold; at least until the current pace of U.S. bond buying programme is maintained, and more so when macroeconomic variables yet look dismal in the U.S.
To read more about this news and the view of PersonalFN over it, please click here.
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Impact
As many of you may be aware the stock markets across the globe are guided by information which set the tone of sentiments for the markets. But many a times, information dissemination does not happen in a systemic way which leads only few benefitting in the stock markets.
But now cracking the whip, the Securities and Exchange Board of India (SEBI) has directed stock exchanges vide a circular, to strengthen their surveillance system to ensure the disclosure standard of listed companies is accurate and adequate. The capital market regulator in its circular has cited that the contents of the disclosures made by such companies are not adequate and accurate due to which, investors are unable to take informed investment decisions based on such disclosures. Thus the regulator is also of the view that, the current monitoring mechanism of stock exchanges to ascertain the adequacy and accuracy of disclosures made in compliance with the 'listing agreement', need to be made more effective.
It is noteworthy that when a company lists its securities with a stock exchange, it signs a listing agreement which it needs to comply. A listing agreement is a contract between a stock exchange and a listed company, and it comprises about 50 clauses - on corporate governance and information based disclosures such as filing of results, shareholding data — which listed firms have to follow.
To read more about this news and the view of PersonalFN over it, please click here.
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- Bharatiya Mahila Bank, India's first 'only-women' commercial bank commenced its operations recently. In the budgetary speech, the finance minister had made the announcement of starting a new 'only-women' bank with initial capital of Rs 1,000 crore. The bank has opened 7 branches so far which are located only in urban areas. The bank aims to empower women by providing them easy and equal access to financial services.
PersonalFN is of the view that starting a new 'only-women' bank is a welcome move. However, the bank would have an intense competition of other public and private sector banks and macro finance companies. The bank may help attain greater financial inclusion provided it caters largely to rural areas where need for such initiatives is higher than that in the urban areas. The profitability of the bank would be crucial for its future growth.
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Corporate Governance: "The system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure."
(Source: Investopedia)
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Quote : "If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring." - George Soros
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