  | | August 02, 2013 | | | | | | | Weekly Facts | | | Close | Change | %Change | | BSE Sensex* | 19,164.02 | (584.2) | -2.96% | | Re/US$ | 60.45 | (1.3) | -2.27% | | Gold Rs/10g | 28,270.00 | 765.0 | 2.78% | | Crude ($/barrel) | 108.66 | 0.4 | 0.35% | | FD Rates (1-Yr) | 7.50% - 8.75% | Weekly change as on August 01, 2013
*BSE Sensex as on August 02, 2013 | |
Impact 
Who says minority shareholders have no voice in corporate decision making? Although true to some extent, things are getting better on ground. All retail investors and even HNIs are minority shareholders in large companies whether they invest through mutual funds or invest directly. Mutual funds invest in equity shares of various companies on behalf of unit holders. Protecting their interest is the responsibility of mutual funds. Securities and Exchange Board of India (SEBI) has been persistently insisting mutual funds to cast their voting rights and act as 'guardians for small investors' by endeavouring to protect interest of minority shareholders. SEBI has made it mandatory for mutual funds to make known to public their votes on various issues that require shareholders' approval.
Earlier mutual funds used to refrain from voting against management decisions but now they are actively opposing management moves which are found to be hurting the interest of minority shareholders. In the recent past, many fund houses have opposed some big corporate on numerous issues such as unreasonable salaries of top management, payment or guarantees to promoters and transactions involving group companies. Sun TV, Escorts, Jaiprakash Associates, Jindal Steel, Pantaloons, Ambuja Cement, Gammon India, Shriram EPC and Themis Medicare are some of the companies that have seen opposition from fund houses on aforementioned issues.
PersonalFN is of the view that, active participation of institutional investors such as mutual funds work in two ways. It not only protects investors' interest but also keeps check on companies which are reluctant to address issues of minority shareholders. However, PersonalFN is of the opinion that, those corporate which are repeatedly found favouring only promoters should be assessed carefully by mutual funds before making investments. PersonalFN believes that rational opposition to management decisions may positively affect stock prices and thus work in favour of long term investors. Growing activism of mutual fund houses at shareholders' meetings is a positive change.
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Impact 
In the recent past the volatility in the Indian debt market has sent shivers down the spin of many investors - especially those who perceive investing in debt markets to be safe. While some mutual fund houses are viewing this as an opportunity to increase allocation towards duration funds, even pink papers and business channels by offering diverse views are leaving many investors confused.
But at PersonalFN we believe it is imperative for investors to take count of the situation and then take a prudent investment decision.
You see, in order to contain the languishing Indian rupee, the RBI increased short-term rates and took measures to lap the excess liquidity in the system.
First, in mid-July 2013 (on July 15, 2013) it raised the Marginal Standing Facility (MSF) and Bank Rate by 200 basis points (bps) placing them at 10.25% each. Also it limited LAF borrowing by a bank to 1.0 per cent of the Net Demand and Time Liabilities (NDTL) of the banking system (capping it at Rs 75,000 crore). But recognising that it was exhibiting a limited relief to rupee and to check undue speculation adding to undue volatility, the RBI took the second move (on July 23, 2013) by limiting access to LAF for each individual bank to 0.5% of its own NDTL (thereby capping it as Rs 37,000 crore). Moreover, banks were asked to maintain Cash Reserve Ratio (CRR) of 99% (of 4% i.e. about 3.96%) with effect from July 27, 2013 on daily basis as against the earlier minimum requirement of 70%. So it has turned out to be a double whammy for the banks also impacting the Indian bond markets.
The impact on the Indian rupee
(Data as on July 28, 2013)
(Source: ACE MF, PersonalFN Research)
While the aforesaid move by RBI has brought in some relief (of 1.4%) to the rupee, until what extend it continues yet remains to be seen. It is noteworthy that since beginning this fiscal year, the rupee has fallen 8.1%. On July 8, 2013 it hit a lifetime low of Rs 61.21 against the U.S. dollar forcing the Reserve Bank of India (RBI) to resort to the aforementioned steps.
To read more about this news and the view of PersonalFN over it, please click here.
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Impact
Advertisements offering discounts on imported ritzy watches and smartphones might be raining this session but soon these accessories may soon get expensive. Government may hike import duty on luxury goods.
Rupee weakness has now started hurting the real economy. Government is working on parallel lines with RBI to stabilise domestic currency. While RBI is trying to suck excess liquidity and clamp down speculation, government is figuring out ways to reduce India's import bill. After waging war on gold imports now government is mulling over discouraging imports of luxury goods such as laptops, imported watches, cell phones, air conditions to name a few. Electronic goods, pearls and precious metals made it to the list of top 10 commodities India imported in Financial Year (FY) 2012-13.
PersonalFN is of the view that, as far as contribution of possible hike in import duty would be limited in stabilising rupee. Demand for these articles is relatively inelastic in nature, i.e. change in prices doesn't affect demand to a large extent. However, PersonalFN believes that, no matter how much you earn and rich you are; prudent planning of your expenses is paramount for financial security. Inflation eats in everybody's income. Although everyone craves to have a good lifestyle, it is imperative to keep tabs on your financial health to be able to keep your finances in pink- especially during your golden years of retirement. After you retire, your earning capacity may reduce hence spending wisely is important.
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Impact
The Indian equity markets (i.e. the S&P BSE Sensex) encountered turbulence in the month of July 2013, but ended the month thus far (i.e. as on July 30, 2013) with a diminutive loss of -0.2%.
It is noteworthy that, host of macroeconomic variables traced the movement of the Indian equity markets. The month began on a fretful mood with HSBC's Purchasing Managers' Index (PMI) data for India's manufacturing coming in at 50.3 in June 2013 (data released in July 2013); barely above the 50-month low of 50.1 made in the previous month (i.e. May 2013) and a tad above the mark of 50.0 which separates contraction from expansion. Likewise the HSBC PMI data for services was also quite disappointing, as it fell to 51.7 in June 2013 (data released in July 2013) from three-month high of 53.6 in May 2013. Thus the economic growth slowing down and gripping was rather evident. The Indian rupee also sent shivers down the spine of the Government and the central bank as the rupee fell against the U.S. dollar hitting an all-time low of Rs 61.2 (on July 8, 2013), which in turn forced the Reserve Bank of India (RBI) to step in and take measures to control the movement of the rupee vide a hike in short-term rate and contraction in liquidity. In the intermediate while there were positives as well, such as statement from Federal Reserve Chairman, Mr Ben Bernanke saying that the U.S. central bank might not roll back its stimulus programme earlier than expected, India's trade deficit data for June 2013 falling to U.S. $12.2 billion from U.S. $20.1 billion in May 2013 and moderation in WPI inflation; it did not enthuse the Indian equity markets.
To read more about this news and the view of PersonalFN over it, please click here.
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- If you couldn't file your income tax returns in time, no worries. The government has extended the date of filing income tax returns till August 5, 2013 from the normal deadline of July 31, 2013. The decision has been taken in wake of unusually heavy traffic experienced on e-filing portal on the last day. This year, number of people filing e-returns has gone up by 46.8% as compared to last year till July 30, 2013.
PersonalFN is of the view that, you should file income tax returns in time as it yields some benefits. For instance, filing returns in time makes your loan proposal stronger. Not only this, it also allows you to revise the tax return in future if needed.
- Are you still to apply for a new cheque book and worried that your older cheques would get bounced since they are not as per the new format prescribed by RBI? Don't panic...you may utilise your unused 'old format' cheques till December 2013 now. Earlier RBI had asked banks to stop accepting non-CTS cheques after July 31, 2013.
PersonalFN is of the view that, cheque truncations could speed-up the clearing process and thereby provide better service to customers and reduce the scope of clearing related frauds and also marginalise cost related to collection of cheques. So, one would experience a more efficient, secure and a quicker clearing process under CTS.
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Voting Right: It is the right of a stockholder to vote on matters of corporate policy and who will make up the board of directors. Voting often involves decisions on issuing securities, initiating corporate actions and making substantial changes in the corporation's operations.
Source: Investopedia.com
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Quote : "I'm only rich because I know when I'm wrong...I basically have survived by recognizing my mistakes." - George Soros
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