  | | 03rd August, 2012 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 17,197.93 | 358.7 | 358.7 | | Re/US$ | 55.84 | (0.3) | -0.58% | | Gold Rs/10g | 29,845.00 | (60.0) | -0.20% | | Crude ($/barrel) | 105.83 | (0.0) | -0.01% | | FD Rates (1-Yr) | 7.25% - 9.25% | Weekly change as on August 02, 2012
*BSE Sensex as on August 03, 2012 | |
Impact 
The gloomy global economic environment has encouraged smart investors to take refuge under the precious yellow metal over the past one year. The chart below reveals that while the Indian mutual fund industry is paining, with fall in AUMs - especially in equity; gold ETF offered by Indian mutual funds are witnessing an ascending trend.
(Source: AMFI, PersonalFN Research)
The Average Assets Under Management (AAUM) of gold Exchange Traded Funds (ETFs) has been on steady increase over the last one year. From Rs 6,119 crore in July 2011, the AAUM of gold ETFs has risen by 64.8% to Rs 10,086 crore in June 2012. Thus the chart above also reveals many investors are increasingly flocking to paper gold or gold exchange-traded funds (ETFs) seemingly being aware of the various benefits of investing in gold ETFs.
We believe that, gold ETFs is the smart way to invest in gold and investors should therefore hold the precious yellow metal in the paperless form. Amid the gloom clouds in the global economy, the developed nations are still finding a concrete solution to their debt crisis, and thus during such economic uncertainties we believe gold would continue to pave its upward path. Moreover, in the long-term it is noteworthy that gold depicts a secular uptrend amid several uncertainties which occur.
Remember to diversify your portfolio by allocating atleast 5% to 10% of your assets to gold ETFs, and invest with a very long-term horizon of 10 years to 20 years.
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Impact
The country's fiscal deficit for the first quarter of fiscal year 2012-13 stood at staggering figure of Rs 190,460 crore as the Government squirmed to curb down the budgeted expenditure. Thus now against the budgeted estimate of Rs 513,590, the fiscal deficit as on end of first quarter of fiscal year stands at 37.1% of the total budget estimate.
The total expenditure stood at 20.9% of the budgeted amount as compared to 20.8% last year, indicating that deficit was largely revenue-driven. It is noteworthy that in the corresponding period of the last financial year, fiscal deficit was 39.4% of the estimates. But eventually, by the end of the fiscal year 2011-12 fiscal deficit narrowed to 5.7% of the GDP, although it still didn't meet the target of 4.6% for the last fiscal year.
In the current financial year, the fiscal deficit is estimated at 5.1% of the GDP. While the Government's Non-Plan expenditure is rising and the disinvestment process is yet to garner any money to the exchequer, the gap between expenditures and revenues which stood at Rs 1.9 trillion is widening. Moreover, non-debt capital receipts stood at Rs 2,402 crore, constituting 5.8% of the budget estimates for entire the year, since disinvestment has so far not raised any revenues of the Rs 30,000 crore pegged so far.
The Reserve Bank of India too, has expressed its concerns (in its first quarter review of monetary policy held on July 31, 2012) over the rising fiscal deficit and current account deficit which pose significant risks to the macroeconomic stability
We are of the view that, with slowdown in the domestic economy along with inaction on the part of the Government on various critical issues like decontrol of fuel prices, reducing subsidies, implementation of important policy reforms, etc. has weighed down heavily on the fiscal deficit of the country. With the slump in the economic activity, tax collection is also likely to be lower which again would have a bearing on attaining the fiscal deficit target of 5.1% set for the present fiscal year. While rate cuts could help in boosting economic activity in the country, and thereby aid in achieving the fiscal deficit target; evident inflationary pressure guided by deficient and uneven monsoon thus far will preclude the central bank from reducing policy rates. As far as Government's disinvestment program is concerned, while it may help in achieving the said fiscal deficit target for the present fiscal year, we ought to wait and watch how it does, indeed pan out in the given domestic environment.
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Impact
In order to give the citizens of India access to another investment avenue to plan for their retirement, the Government launched the New Pension Scheme (NPS) in May 2009. The structure of the NPS included the regulator - Pension Fund Regulatory & Development Authority (PFRDA), a trust set up under the Indian Trusts Act, 1882, 22 Points of Presence (PoP) acting as first point of interaction with the subscribers, NSDL as the central record keeping agency, six fund managers - State Bank of India, UTI, ICICI Prudential, Kotak Mahindra, IDFC and Reliance to choose from, and Bank of India as the trustee bank. On the face of it, the structure of the NPS did appear to be a rewarding one.
But the NPS did not meet with much success in attracting investors into the scheme - mainly due to lack of awareness of the scheme, although the NPS had the lowest fund management charge of 0.0009%. The scheme failed to take off even after 3 years of its existence. To know what steps the PFRDA has taken to revive the fortunes of NPS please click here.
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Impact
Most of you who are salaried individuals are often covered under the group insurance policy - be it life insurance or non-life (health) insurance, provided by your employer, as a consideration towards welfare of the employees.
While undertaking group insurance (life or non-life), the insurers, especially PSU insurers like National Insurance Company , New India Assurance, Oriental Insurance and United India Insurance Company tend to offer a huge discount in order to corner chunk of the market share. And usually the discounts are so high that the PSU insurers tend to suffer losses. It is noteworthy that last financial year (i.e. 2011-12), the total health insurance premium collected by the four PSU companies - National Insurance Company, New India Assurance, Oriental Insurance and United India Insurance Company (which together command more than 60% of the total health insurance segment in India)- was to the tune of Rs 8,145 crore, but on combined net losses by them in the said financial year were to Rs 1,500 crore. This was quite an astonishing since group health insurance accounts for more than 50% of the health insurance business. To know why should own an individual health policy please click here.
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- In a major relief to the insured, the Delhi State Consumer Commission ruled that once an insurance company has issued a policy, it cannot later reject the insured person's claim on the ground that cover was given in violation of terms and conditions. The case involved an insurer refusing to accept the claim of the insured on the grounds of pre-existing disease not disclosed by the insured at the time of getting a medical insurance. However, the insured has clearly stated his medical condition and even medical tests were conducted before issuance of the policy by the insurer. The Delhi State Consumer Disputes Redressal Commission said, "Once the insurance company has accepted the proposal it cannot go behind the same even if the proposal is in violation of the criteria mentioned in the insurance policy."
We believe that, individuals should clearly disclose their complete medical history before enrolling for a health insurance policy. Any concealing of material facts by the insured may prove to be harmful at the time of claim.
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Assets Under Management (AUM): The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked at as a measure of success against the competition and consists of growth/decline due to both capital appreciation/losses and new money inflow/outflow
Source: Investopedia
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Quote : "Plans are only good intentions unless they immediately degenerate into hard work." - Peter Drucker
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