EXPLAINED: A weakening rupee, its causes & implications

EXPLAINED: A weakening rupee, its causes & implications

The Indian rupee has been sharply depreciating against the US dollar clocking its nine-month low yesterday. The Indian currency has plunged by about by 2.91 percent since Donald Trump's victory in the US Presidential polls earlier this month. What are its causes and implications. A primer.

The Indian rupee has been sharply depreciating against the dollar clocking its nine-month low against the US currency yesterday. The Indian currency has plunged by about by 2.91 percent since Donald Trump's victory in the US Presidential polls earlier this month on account of capital outflows after rising US bond yields and a strong dollar. Here is a primer on a weaker rupee and its implications for the country.

Why is the rupee weakening?

It is a combination of factors. Speculation that the US Federal Reserve may hike interest rates next month has strengthened the dollar. Yields on US government bonds have risen, prompting many global investors to shift a part of their investments into US bonds.

Are there any domestic factors?

The demonetization move announced earlier this month is expected to hurt economic growth this quarter, and maybe even the next. Exporters have been hit badly and they are struggling to meet order deadlines. This could impact the flow of dollar earnings. Also, interest rates are expected to fall. This could lead to foreign institutional investors reducing their exposure to government securities.

What about the redemption of NRI deposits raised in 2013 during the rupee crisis?

Yes. That too will add to the pressure. Till last month, the RBI had said that it would be able to meet the redemptions – roughly USD 24 billion -- without too much impact on the rupee. But the scenario has changed over the last few weeks because of demonetization and an increased probability of a rate hike in the US.

How does a weak rupee affect equities?

A weak rupee shrinks the value of a foreign investor’s portfolio. That is because he will now get fewer dollars when he wants to take his money back home. Usually when the rupee weakens, FIIs start pulling out money from equities as a pre-emptive move, fearing that the value of their portfolio will reduce further.

Does FII selling have an impact on the rupee value?

Yes. If too many FIIs decide to take their money out, it will lead to an increased demand for dollar, strengthening it further. Conversely, this means a weaker rupee.

But does not a weaker rupee mean that FIIs can buy more equities for the same amount of dollars?

In theory yes. But a weak rupee more often than not signals problems in the economy, and by extension, weak corporate earnings.

Do FIIs sell at the first signs of weakness in the rupee?

Not necessarily. FIIs factor in a certain margin of volatility in the rupee when investing in India. If the rupee falls beyond their comfort level, FIIs start selling equities.

Happy Investing

Source:Moneycontrol.com

How attractive is housing as an investment today?

How attractive is housing as an investment today?

As an investment class, housing had certainly taken a nosedive until recent developments transpired to revive sentiment.

As we can read in most news stories about the Indian residential property sector, housing has become increasingly end-user driven over the last 2-3 years. This effectively means that it is mostly people who actually intend to use homes for self-occupation who are buying them today. In other words, the pride and security vested in home ownership have not waned one bit in India. However, as an investment class, housing had certainly taken a nosedive until recent developments transpired to revive sentiment.

The return of the property investor

One factor that helped on this front was the series of property price decreases which were witnessed in almost all tier 1 cities of India. These corrections were driven by market realities - housing in cities like Mumbai, Delhi, Bangalore, Hyderabad and even to some extent in Pune was simply not selling at the quoted prices, and developers had no choice but moderate their price tags. Sensing the market bottom, residential property investors once again began making calculated plays in the sector. 

In India, investor demand is driven squarely by end-user demand. In other words, investors will only pick up residential properties if they perceive that there are actual buying and renting end-users on the market. This is in sharp contrast to speculator demand, which is usually not driven by market realities at all but purely by vaguely formulated opinions of a future demand scenario. Needless to say, Indian property speculators had burnt their fingers severely in the last 4-5 years and have entirely vanished as a breed. 

Not surprisingly, the segment of residential real estate that has seen the most decisive return of investor interest is affordable housing - which has indeed become as affordable as it can get in most Indian cities. It is not only price cuts which have boosted affordability - in cities where even price moderations have proved insufficient to incite demand, many developers are offering genuinely value-adding schemes and incentives which have made purchase decisions a lot more attractive to end-users. And unlike in previous years, these offers will continue well past the festive season this year.

What kind of homes makes the most investment sense? 

To identify the best residential investment opportunities today, one must understand two things - one, where the bulk of the existing end user demand is coming from and two, what kind of homes this demand is for. Affordability decisively drives demand, but cheap, featureless flats in far-flung emerging locations are finding no takers. This fact was first evinced in Delhi NCR, where entire districts have turned into veritable ghost towns because of their lack of infrastructure. In other cases and in many cities, we are seeing even completed buildings standing empty because of faulty land titles, lack of water and electricity supply and absence of decent connectivity to workplace hubs. 

The inherent value of location, developer's brand and availability of decent amenities has come to the forefront of most purchase decisions today. The most active buyer segment today is that comprised of young working couples and professional individuals who are looking for well-located smaller homes in projects which they can afford, and which offer them a good lifestyle. For this reason, 'bare shell' flats are rapidly becoming the least favored category, as such buyers have neither the interest or bandwidth for starting from scratch on a new home. 

Fully-furnished flats with all the trimmings in projects which have advanced lifestyle features are now in vogue. Such offerings are in immediate demand both as purchase and rental options, making them the immediate focus area for today's residential property investors.

Simultaneously, buyers are giving equal weightage to location, reputation of the developer and the affordability of the quoted price. Hidden costs are out, all- inclusive rates which leave nothing to the imagination are in. Inferior project in non-performing locations are out, regardless of how attractive the price tags are, and well-connected suburban locations are in.

End-users looking at first-home purchases are obviously focusing on the cities they currently reside in or are relocating to for work. Investors, however, have a much wider playing field. The highest investor inquiries are currently emanating from cities like Navi Mumbai, Chennai, Bangalore and Pune. All these cities have a very good saturation of demand drivers, and are generating the highest number of employment opportunities.

Happy Investing

Source:moneycontrol>com

5 Financial Planning Lessons From ​Demonetization ​We Should All Learn

5 Financial Planning Lessons From ​Demonetization ​We Should All Learn



When was the last time you roamed around with Rs 300-400 in your pocket with nothing else to fall back upon? Most of us are going through such a situation now. Addressing unexpected financial situations should be part of everyone's financial plan but the question is how does one deal with such a situation. Here are some crucial aspects that one needs to incorporate in one's financial plan to tide over unforeseen circumstances.

1. Have a contingency plan

To have a contingency plan is the first step in planning ones finances. We have often seen people not planning for their liquidity requirements. This happens because most of the investments done do not take into consideration one's own requirement and it is done in a sporadic manner. We suggest that an individual maintain funds equivalent of cash flow requirements for at least six months in investments that are easily accessible in a day's notice and also yields better returns compared to a savings bank account. We suggest people could look at fixed deposit or liquid funds of mutual funds after taking into consideration the tax implications of both.

2. Live within your means

Demonetisation surely taught us how one could live life curbing expenses and be able to save money in such situations. If this could be practiced in one's everyday life and the savings could be properly channelised into good investment options then achieving financial freedom would no longer be a farfetched dream.

3. Have a health insurance

We have time and again seen cases where people do not receive timely medical attention due to paucity of funds. Hence it is always important that one has sufficient health insurance cover for himself and also his family which could help him with facilities like cashless payments and uninterrupted medical facilities


4. Focus on tax planning, never on tax evasion

The old proverb 'Truth always prevails in the end' is now validated. Once we pay our taxes we are free to invest our money in instruments which would give us the best risk-adjusted return. It is always crucial to understand that it is important to plan your taxes well and invest the post tax income into instruments which help achieve your financial goals over a period of time. But never try to evade taxes.

5. Invest in Mixed Asset Class

Every portfolio has to have a good mix of physical and financial assets. This helps one tide over unforeseen circumstances and still yield good returns. However, it is seen that people tend to invest heavily in physical assets like real estate which are relatively liquid in nature. This could turn out to be an expensive decision, especially during situations currently we are going through.

Having a contingency plan to tide over unforeseen financial events should be part of everyone's financial plan. Unforeseen financial events could either be personal or even regulatory in nature. It is crucial that one is ready for such situations at all points of time through effectively planning his finances. Like it is rightly said that you cannot direct the wind but you can certainly adjust your sails.

Happy Investing

Source:TimesofIndia.com

3 top measures that can boost transparency and confidence in the property market

3 top measures that can boost transparency and confidence in the property market

When it comes to tackling black money, three measures introduced by the government, are expected to make the real estate sector more transparent and bring in long term confidence in the market. These measures are: the Real Estate Regulation Act (RERA), the Benami Transaction Act, 2016 and the demonetisation of Rs 500 and Rs 1,000 currency notes.

Impact of the Real Estate Regulation Act (RERA) “For long, real estate transactions were perceived to be lopsided and heavily favouring the developers. With the RERA and the government’s model code, the transaction between the seller and the buyer of real estate will be more equitable and fair, especially in the primary market.

“Hopefully, the states will not dilute the powers in the act, when they introduce their respective state’s regulations,” point out Amit Oberoi, national director – knowledge systems, Colliers International India.

Benami Transactions (Prohibition) Amendment Act 2016 The Benami Transactions Act, is intended to crack down on property ownerships, where the source of income is not known. The Benami Transactions (Prohibition) Amendment Act, 2016, is an effort by the government to strengthen the earlier Benami Transactions (Prohibition) Act, 1988. The act prohibits benami transactions and allows for heavy penalties on such benamidars, including confiscation of the affected property.

If properly implemented, it will go a long way in creating trust in the minds of end-users, feels Rajesh Krishnan, MD and CEO, Brick Eagle Capital Group.

“The advantages can be huge, especially for the affordable housing sector. In any project, the developer runs the risk of selling only to speculative investors (some of which may be benami transactions), which then reduces the project to a ghost project. The real success for an affordable housing developer, is when customers shift into the completed project,” maintains Krishnan.

Demonetising of Rs 500 and Rs 1,000 currency notes The real estate fraternity has unanimously welcomed the government’s move, to demonetise 500 and 1,000 rupee notes.

Nevertheless, this will cause a major slowdown in the market for the first few months, due to reduced liquidity in the market. Land transactions, secondary sales of homes and the commercial segment, are likely to witness a significant negative impact.

However, over the medium and long run, demonetisation will positively impact high-value transactions in the real estate sector, eliminating black money. The affordable housing segment, where the value of homes is largely in the range of Rs 10 lakhs to Rs 20 lakhs, is not expected to be impacted.

“In the long run, all the three measures, will bring about much needed corporate governance to our industry. Greater transparency, will help to weed out unscrupulous market participants. There will be more interest from international investors and developers and a greater role for Indian developers with a good track record. Interest rates may also fall in the medium term and sales will eventually pick up, in the long term,” adds Oberoi.

Experts, however, conclude that more work is needed from the government, in terms of digitisation of land records, simpler and faster process of obtaining approvals which will also improve the ease of doing business, faster changes in circle rates that reflect ground realities and an overall improvement in the economy.



“The drop in property prices will be higher, in markets where the black money dealing was higher and less in markets dominated by the working population”- Amit Oberoi, national director – knowledge systems, Colliers International India. “You have RERA on one hand and a clean-up of unaccounted cash on the other. Some of the smaller developers may find it difficult to cope with RERA. For others, this may be the beginning of a great innings”

Happy Investing

Source:Moneycontrol.com

Top 10 reasons why you should buy critical illness insurance?

Top 10 reasons why you should buy critical illness insurance?

We cannot control our future so insurance is the best way to be protected from any circumstance that might pop up in front of us. If it is a critical illness then it is all the more important that we prepare for the worst. An insurance cover can be of help.

Top 10 reasons to buy critical illness insurance

10# The best time is now 

One thing should be always remembered that the cost of critical illness policies would never decline. The cost will only go only increasing day by day due to the increasing cost for treatment. Hence it is rightly said that purchasing the insurance now is only the best time to do it. So it is recommended that one should not hesitate in buying critical illness insurance right away without wasting any more time.

9# Receive Cash Back 

Nowadays there are various critical illness plans that enable the purchaser to receive a portion of the premiums paid. This purchaser only becomes eligible to receive this cash back after some stipulated time period as mentioned in the insurance documents. This actually means that if a client does not need to make a claim and feels that the claim would not be required, they can cancel the policy and receive the repayment based on the agreed percentage of the premium paid as per the policy documents but all the while having coverage. This is highly beneficial since one can get back some percentage of the money that one has already paid.

8# Purchase while you are healthy 

It should be always remembered that critical illness insurance policies could only be purchased while one is healthy. Once an illness has been diagnosed, one is not eligible to purchase the critical illness insurance policies. So it is rightly said that better late than never. If one has not purchased critical illness insurance still now, one should simply go ahead and purchase it without any more delay. Otherwise it might be too late and then one has to just sit back and repent since no more options would be available.

7# Tax benefit 

Tax benefit is one of the great advantages of insurance policies. When the premium is paid for a particular policy, it saves tax. Now when a claim is made with personal critical illness coverage, the insurance company pays out a lump sum amount to the insured person. Most importantly this amount paid to the person insured is tax-free once again.

6# One less Worry 

Once a critical illness insurance policy is purchased one worry from the life gets reduced. Personal critical illness plan allows the insured person to take the time that is necessary to recover without worrying even for a bit as to how the day to day expenses or the additional medical services would be covered. All this is covered by the policy, which is not the case as in the traditional health insurance policies. Actually in these critical illness plans there is no prearranged allocated amount for the payment hence all of the payout goes to the insured person.

5# Additional Coverage 

One can also purchase critical illness coverage on a mortgage; however these types of plans cover only three types of critical illnesses namely cancer, heart attack and stroke. Alternatively, personal critical illness policies cover these three illnesses as well as twenty-two others that we come to hear almost daily. So it is very much recommended to go for critical illness insurance owing to its numerous benefits.

4# Not Included in Most Employers Plan 

It is noticed that in most employee benefit group plans, critical illness is not always offered. In the rare cases where it is included in a group policy it is actually nowhere near the recommended coverage amount. Thus it becomes very essential to purchase a critical illness insurance plan and get the benefits out of it.

3# Best Doctors 

The personal critical illness insurance coverage allows the insured person to get access to the best doctors. They are actually experts in specific areas of medicine. Once a claim is made, the patient’s file is put before a panel of best doctors to make a complete review and determine whether the diagnosis is correct and the course of treatment specified is appropriate for the diagnosis or not. This is a prime advantage that one can get if one buys a critical illness insurance policy.

2# Coverage for Children 

Critical illness plans can be purchased to insure people, right from newborns and up to the age of sixty-five years. Some insurance companies allow insuring children for up to five critical illnesses where as adults can be covered for up to twenty-five critical illnesses. This shows that the range of ages covered by the policies is quite large and so it is extremely beneficial.



1# Peace of Mind 

Critical illness insurance policies are underwritten at the time of application process. This means that one will come to know one is covered up front and not left to chance at the time of the claim. This proves that the policy rules are very much transparent and everything is made absolutely clear at the time of purchasing the policy. So we can be just sure that we will not have to face any kind of problem or harassment at the time of claim. So one can just sit back and relax in peace.

Happy investing

Source:Moneycontrol.com

India can take historic decisions ... Demonetisation

An Economic Revolution We have shown to the world That India can take historic decisions 

Short term effect - Negative 

. Time Was Too Short To Implement 

. Slow Down Of Consumer Spending 

. Major Disruption – Real Estate , Branded Items, Textiles , Gems and Jewellery, Entertainment and Luxury 

. GDP Growth Will Be Affected In Next Two Quarters 

RBI Stands To Make A Windfall Gain

Out of 14 Lakh Crores of 500/1000 Notes, it is estimated that notes worth 5 Lakh Crores will not be deposited / exchanged in the bank, reducing the liability of RBI by whopping 5 Lakh Crores


Tax Revenue To Go Up Substantially

Money transferred to bank Rs. 7 Lakh Crores ----> Rs. 7 Lakh Crores comes into circulation ---->
Majority of this funds will be utilized for business purpose which will come into tax net ---->
Tax collection to go up substantially


Massive Deposits With The Banks

Money transferred to bank Rs. 7 Lakh Crores ----> Cash Money circulation to reduce substantially lowering the inflation ----> Banks will have space to reduce the interest rate remarkably ---->
Corporate India and individual borrowers will stand to gain meaningfully affecting the bottom line positively


Biggest Economic Stimulus!


7 Lakh Crores transferred from unproductive use to productive use ----> More people will fall in productive channel automatically ----> Organized sector of all segments of economy will stand
to gain ----> More tax collection, lower interest rate, lower inflation = strong currency


Impact On Asset Classes – Equity The Biggest Gainer In Long Term


Bonds - Interest Rate to fall 1.5 – 2 % . Fall in Govt. Deficit & Inflation

Real Estate – 20 – 30 % Drop – No cash component - will evaporate values

Gold – Neutral to negative - Lower Black money to Depress Demand

Equity– Biggest beneficiary with fall in investment in physical assets


Thanks …

Happy investing

Demonetisation drive may infuse Rs 50,000 cr into mutual funds

Demonetisation drive may infuse Rs 50,000 cr into mutual funds

MFs could get an incremental Rs 50,000 crore in the next two months by way of investments from banks, which are flush with liquidity, Business Standard reported on Tuesday.

The move to withdraw high-denomination bank notes may prove beneficial for mutual funds as it could open the floodgates for temporary inflows into the Rs 16 lakh-crore MF industry. According to estimates, MFs could get an incremental Rs 50,000 crore in the next two months by way of investments from banks, which are flush with liquidity, Business Standard reported on Tuesday.

Demonetisation is expected to improve the government's fiscal situation and ease inflation, interest rates may decline over the next one year. This would lead to investors looking at investment avenues such as mutual funds.

“People are not going to keep their money in banks at 4 percent savings interest rate. So it is definitely going to move to mutual funds, said Mahendra Jajoo, Head-Fixed Income at Mirae Asset Mutual Fund told Moneycontrol.

“With this (demonetization) move there is significant increase in the expectation that inflation will come down and therefore interest rates will also come down in due course because of the improved fiscal situation of the government. Bank will put in liquid funds and buy bond funds as they will know interest rate will come down,” Jajoo added.

According to the estimates, the total value of currencies in the Rs 500 and Rs 1,000 denominations at the end of March 2016 was about Rs 14.3 lakh crore.
Depending on the quantum of black money, anywhere between Rs 8-12 lakh could come into the banking system in the next few weeks. Of which, a small portion, estimated at about Rs 50,000 crore could flow into the bond funds and liquid schemes of mutual funds over the next two months, mutual fund officials said.

However, banks are allowed to invest up to 10 percent of their net worth in to liquid schemes so impact on flows in mutual funds will be limited.

Liquid funds invest in securities with a residual maturity of up to 91 days, primarily in money market instruments like certificate of deposits, treasury bills, and commercial papers.

Banks and companies are the major investors in liquid funds, contributing over 90 percent to the assets of these schemes. In 2011, the Reserve Bank of India (RBI) had instructed banks to limit their investments in liquid schemes to up to 10 percent of their net worth. As of October 31, liquid funds contributed Rs 2.7 lakh crore of the Rs 16 lakh crore AUM of the MF sector.

"Mutual funds will be able to garner some money from the banking system, temporarily. But the impact will be limited as banks cannot invest more than 10 percent of their net worth in liquid funds. Secondly, it remains to be seen how much of this money will come into short-term debt funds as they are slightly long-term in nature," said Dwijendra Srivastava, CIO-debt, Sundaram Mutual Fund told Business Standard.

Happy Investing

Source:Moneycontrol.com

Gear up, the age of India has arrived.

Gear up, the age of India has arrived.

Currency demonetisation: Recession at gate or GDP at 9 percent

There is a view propelled by gang of astrologers masquerading as economists that demonetisation is going to hit hard economy as cash will be sucked out of system and trade will stop.

Demonetisation has happened. Rs 500 and Rs 1000 notes are banned. There are serpentine queues outside banks/ATMs and experts are busy. There are high pitched videos, columns, tweets and Facebook posts by every expert about how poor are hurt and how this will kill trade. Roll back demands are being made from every arm chair economist, citizens dining in five star hotels but extremely concerned about poor, many chief ministers. Overall, air of the nation is thick with not only smog but also with pro poor and small business friendly experts and politicians.

There is a view propelled by gang of astrologers masquerading as economists that demonetisation is going to hit hard economy as cash will be sucked out of system and trade will stop. This hypothesis does ring true if one notices the plugging sales at e-commerce ventures, lack of crowd in markets and drop in foot falls at malls. No wonder all ‘Captain Obvious’ are at top of lungs on the incoming slowdown hitting Indian economy due to this demonetisation.

History tells us that events rarely follow obvious path and are shaped by unforeseen and unpredicted. Demonetisation is such an event. It is not going to slow down the economy but going to put this economy in high pedestal of growth. A jump by 2 to 3 percent in GDP, if not more by demonetisation is very much possible and for the first time in the world, we will see trickle up-effect in the economy than usual trickle down.

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The first foremost and obvious effect of demonetisation is elimination of cash economy and shift towards banking system. Lot of people even without illegal money were not using banks and were saving in cash at home for variety of reasons. Now, all this money will go in formal banking channels and will find its way to formal earning mediums like mutual funds, fixed deposits, saving accounts etc. This will create a push and boom as the cash lying idle at home will be at work and will create contagion effect. Those dormant ‘Jan Dhan’ accounts will now be kicking with life and in big way.

Even if 10 percent cash lying idle at household level, translates into Rs 1.4 lakh crore (USD 21 billion). Now this, USD 21 billion will be available in banking system and hence available to government/industry to kick start new projects/ build infrastructure. To get a relative perspective, FDI inflow in India in FY2015-16 was USD 40 billion while in FY 2014-15, it was USD 30 billion so the amount coming from dormant accounts to banking system alone is 53% of this year FDI and almost 70 percent of FY14-15 FDI.

The second kicker to the economy will come from fall in real estate prices. As per exerts and general perception, real estate prices are going to fall by 20 to 30 percent in general (black component of a deal). In India, in FY 2015-16, if one just take top 8 cities, USD 14 billion worth (Rs 90,000 crore) was invested in real housing  (3 lakh houses in 8 cities at a 30 lakh average price though in reality numbers are much higher).

As per experts, real estate prices are expected to crash by 20 to 25 percent. This drop in prices even if we take 50 percent drop in number of transactions will leave more than 9,000 crore (USD 1.3 billion) money at the hand of these end users in just 8 cities and this amount will be 10x more higher if one account for whole country. This extra cash available with the consumer will go in other discretionary consumption and will either build the saving rates or drive consumption of services as well as consumable goods.

The third and not so obvious kicker will come from attempt of all back money hoarders trying to convert it in white. As per data released by RBI, India has Rs 14 lakh crore (USD 210 billion) in circulation in Rs 500, Rs 1000 bank note denominator. For a moment, if we assume on a very aggressive basis that 50 percent of it is white and declared income (fully tax paid), still there is Rs 7 lakh crore (USD 105 billion) in black money. Now, these cash hoarders will try to use people with low income to transfer Rs 2.5 lakh in account. As per financial ministry data, India has opened 25 crore (250 million) ‘Jan Dhan’ account for poor people as on today. If black money hoarders were able to use 50 percent of these accounts (12.5 crore) to deposit cash, one just needs to deposit Rs 70,000 in each account. So apparently all this cash will flow back in system in next 50 days without any collateral damage to these money bags. However, the cost of organising this deposit program will range anywhere from 20 to 40 percent (as per figures being circulated in media/social media). Even if we take a nominal cost of this transaction at 10 percent being paid to these accounts (against 30 percent), it will be a commission of Rs 70,000 crore (USD 11 billion) or Rs 8,000 per ‘Jan Dhan’ account.

This 8,000 will immediately find its way to consumption as this is massive cash for these account holders and even if just 50 percent is spent, Indian economy will see pumping of USD 6 billion (Rs 40,000 crore) being spent in next 3-5 months. This class will binge on clothes, consumer goods and will create massive multiplier effect. However, for the first time multiplier will not trickle down but will trickle up as rural or low cost goods will drive the industry. So in a way, PM Modi has imposed huge wealth tax on the rich people and accomplished direct cash transfer to poor people.

Foreign investors pumped USD 10 billion in 20 months in Indian startups which put India on world map as third best country for startups and changed the whole mood of nation while creating many multi-billion enterprises. Payout of USD 6 billion in arrears to government employees in 2008 as per sixth pay commission, triggered consumption boom in India and insulated it from economic crisis which impacted every country. Hence, this total amount of USD 40 billion hitting the banking and consumption sector in next 3-6 months is not just going to finish black economy but going to put India on an autobahn of economic growth.

PM Modi in his usual total out of box thinking, has just put India on growth orbit of a different level where a minimum jump in GDP by 2 to 4 percent is not ruled out.

Gear up, the age of India has arrived.

Happy Investing

Source:Moneycontrol.com

A Republican Congress may Augur well for Indian Equities

Economic Agenda Trump’s stated policies appear to be aggressive, as compared to Clinton’s, which does not necessarily mean that they may be bad. Taxation • Has proposed a comprehensive tax reform for US Citizens that would reduce the top personal income tax rate from its current 39.6% to 25% • Reduce corporate and other business income tax rates to 15% and eliminate the estate tax. • Focused on introducing tax amnesty deal with corporate America to encourage the repatriation of the estimated US$2.4 trillion currently held by American companies offshore, by offering one-time tax rate of 10%. Infrastructure Spending • Has proposed US $2 trillion in infrastructure spending over the next decade (an average of 0.9% of GDP per year). Healthcare • Has proposed a complete repeal of the Obama Healthcare Act which has had a negative impact on US discretionary consumption by significantly increasing the share of healthcare spending in the overall consumption basket. End of Gridlock • A republican Congress (House + Senate) implies that Trump will be able to likely move ahead with a number of his stated pro-growth reforms. Renegotiate trade deals • Being a practical businessman, Trump understands the importance of trade and economic agenda and it is therefore likely that Trump will focus on renegotiating trade deals as opposed to abolishing them.

Demonetisation Of High Value currencies .... India

In yet another major reform, the Indian Government has scrapped the legal tender status of Rs. 500/- & Rs. 1000/- denomination notes. Though this unprecedented move may impact economic activities in some pockets in the near term, it will result in huge benefits for the economy and the capital markets over the medium to long term through lower corruption and improved ease of doing business.

	What it does?
	•	Stops terror financing, fake currency circulation and controls corruption
	How?
	•	87% of the cash in circulation is in the form of Rs. 500 & Rs. 1000 notes.
	•	Large part generated through corruption, economic transactions not reported to tax authorities
	•	The scrappage of high-value notes renders the unaccounted cash or black money worthless
	The Short Term pain
	•	Property and gold would be adversely affected by this move, as these are usually considered the store of unaccounted wealth.
	•	Some parts of the economy could witness slowdown in activities due to reduced money supply.
	•	The near term corporate performance and GDP growth could be weak.
	The Long Term gain
	•	Less corruption improves ease of doing business as India ranks 76th among 168 countries.
	•	Banks would benefit with higher deposit growth creating opportunities for lending rate cuts and investment activities to pick-up.
	•	Sucking out liquidity (in this case, black money and fake currency) should help strengthen the Rupee.
	•	The resultant asset price deflation can lead to overall moderation in inflation, which will be positive for the fixed income markets.
	•	Along with GST, this measure will help improve tax / GDP ratio and should ideally help reduce tax rates in the long run or offer greater ammunition to the Government to work on social schemes.
		The key to successful investing lies in taking Fundamental Investment calls, while making the best of Tactical Opportunities. Should you like to leverage this opportunity, we would like to present to you two of our funds.

How To Plan Your Child's Education

Suzlon posts Rs 237 cr profit in July-September quarter

Renewable energy firm Suzlon Energy posted a consolidated net profit of Rs 237.62 crore for the second quarter of 2016-17 mainly due to higher sales.

Renewable energy firm Suzlon Energy posted a consolidated net profit of Rs 237.62 crore for the second quarter of 2016-17 mainly due to higher sales.

The company had reported a consolidated net loss of Rs 201.66 crore in the quarter ended on September 30, 2015, Suzlon Energy Ltd said in a BSE filing.

Total income from operations increased to Rs 2,752.12 crore in second quarter this fiscal from Rs 1,749.04 crore in the year ago period, it said.

The revenue from wind turbine generator segment increased to Rs 2,235.32 crore in the quarter compared to Rs 1,290.92 crore in year ago period.

Commenting on the result, Suzlon Group CEO J P Chalasani said, "We have achieved sustainable turnaround and profitable growth as evidenced in our second quarter performance..Recent policy impetus such as revised RPO trajectory, approval on repowering policy and 1 GW under Inter-state transmission scheme (ISTS) across various states will further bolster incremental demand for renewable energy in India." Suzlon Group Chief Financial Officer (CFO) Kirti Vagadia, said, "Strong volume growth, controlled costs and resultant operating leverage enabled strong financial performance in this quarter. We continue to monitor our long term debt which has helped keep our finance cost in control." The company said that its consolidated net term debt (excluding FCCB) was at Rs 6,646 crore, which was further reduced by Rs 230 crore quarter on quarter.

It said that the new order intake was of 449 MW in the first half of this fiscal including key orders in the second quarter from Oil India Ltd (52.50 MW) and 111.30 MW from corporates and small and medium enterprises (SMEs).
The company's order book stands at 1,136 MW valued at Rs 7,165 crore. It said that the wind energy in India delivered highest installation of over 3,400 MW in last fiscal and is expected to grow by more than 30 per cent in the current financial year.

 

Happy Investing

Source:Moneycontrol.com

Real estate “Modi-fied” – Best time to buy a property is NOW

Real estate “Modi-fied” – Best time to buy a property is NOW

Real estate “Modi-fied” – Best time to buy a property is NOW

India’s fight against black money, corruption and terrorism just got very real. In what many consider to be a rather bold move, Prime Minister Narendra Modi on November 8th announced that the INR 500 and INR 1000 notes will no longer be legal tenders. Modi has said that these notes will be replaced with newly minted INR 500 and INR 2000 notes. This move has far reaching implications for many sectors including real estate which has been going through a somewhat uninspiring phase in the recent times.

It is expected that the segments of the property market which have a high proportion of cash transactions will be hit hard- viz the secondary property market, luxury home sales and land transactions. The range of cash component used in these segments is anywhere between 15-40%. One can expect to see a price correction triggered by stagnation of sales as the stock of unaccounted money which lubricates these markets has been sucked out.

Even though many are predicting negative market sentiments for the realty sector there is a silver lining for buyers who are financing their property purchase via means of accounted money and home loans. Here are the top 5 reasons why salaried property seekers should invest in a property today:

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1) It is a buyers’ market for the next three to four months: Till the market stabilises many builders would be in need of cash flow and buyers would definitely have an upper hand in negotiating the best deals in the primary property market.

2) Higher costs due to RERA : With the implementation of RERA (Real Estate Regulatory Act) the property prices are likely to see an upward spiral. The RERA requires developers to be transparent about the source and use of funds for a project, and the higher cost of complying with the regulation is unlikely to be absorbed by the builder. So the next few months will be the ideal buying window for buyers.

3) Impact of GST : Post the implementation of the Goods and Services Tax (GST) most of the input items for real estate construction like cement would fall in the 18% bracket which is much lower than the current 30 40% tax bracket. So the overall construction cost for a developer is likely to fall. But, looking at the current scenario with the decrease in profit margins for developers due to RERA and the expected construction delays due to demonetisation many developers might not pass on this benefit to buyers.

4) Buyers would be spoilt for choice in the secondary market: Until last week, most sellers of resale properties had an incentive to seek out buyers who were willing to transact with unaccounted money. So much so that there was a preference for such buyers, effectively eliminating most of the resale properties from the reach of salaried buyers who finance their purchase via their savings and home loans. Given the demonetisation, the incentive to sell through cash dominant transactions is less which opens up a whole new supply of bargain deals in the resale market. In addition to the wider choice, it gives an upper hand to property buyers to crack the best deal.

5) Interest rates are set to go down further: Demonetisation brings with it a deflationary effect on the economy, and you can expect interest rates to go down further in the short run. The banks will have more liquidity at their disposal due to higher deposits coming into the banking channel. Both are likely to trigger a push into home loan lending via cheaper loans and better credit terms.

If you are looking to buy a home, and are looking to finance your purchase through a loan, there can’t be a better time than now!

Happy Investing

Source:Moneycontrol.com

How to pick a tax-saving fund

How to pick a tax-saving fund

  

This article is part of a series on tax planning. Also read: Be holistic in your tax planning and How to position PPF in your portfolio.

In this article, we will specifically look at equity linked savings schemes, or ELSS, which are diversified equity funds that offer a tax benefit under Section 80C. All tax saving products have a lock-in period and this one is no exception. However, it is a meagre three years, which is perfectly acceptable considering that investments in the stock market must anyway have a long time frame.

Here's what to keep in mind when scouting for an ELSS:

• Keep performance in perspective
  As with any fund investment, when narrowing down on a pick, an error investors are prone to make is opting for the most recent chart topper. Despite the bold disclaimers about past performance not necessarily being sustained in the future, investors have a hard time resisting that lure. And when that is employed as a sole parameter, it’s not uncommon for disillusionment to set in rapidly.
  Let’s say in 2008 investors rushed to invest in Taurus Tax Shield. The reason being the fund was the best performer in its category in 2007 with a return of 112%, way ahead of the average 57%. Had investors done their homework, they would have noticed the fund’s abysmal performance in 2006. And, unfortunately, the fund has not put up an impressive performance since.
  Or take Principal Tax Savings. It was the best fund in its category in 2012. But a smart investor would have checked past performance to realise that it underperformed the category average over the prior four calendar years.
  When looking at performance, don’t get swayed by a sporadic burst in numbers. Check for consistency matters. To cite an example, Axis Long Term Equity has been fairly consistent in its performance. Over the past six years, even if it has not always been the best performer (which is an impossible feat), it has always beaten the category average and landed in the top quartile.
  Some investors may find that consistency does not really  matter and they are willing to ride it rough. Reliance Tax Saver is an example. The fund was the second best in its category in 2012, leaving the category average way behind. The very next year it slipped down and underperformed the category average only to again bounce back to the No. 2 slot in 2014. But again it slumped and delivered -4.34% in 2015 when the category average was 3.20%. However, the 5-year annualized returns of 14.57% has ensured that investors are well rewarded.
  Look under the hood
  Once you get past performance, take a good look at the fund's portfolio.
  Do remember, these are actively managed diversified equity funds with a tax break. That gives the fund manager complete leeway on what must comprise his portfolio. One fund’s mandate will not be the same as the other. Mirae Asset Tax Saver has around 72% of its portfolio in large caps, HSBC Tax Saver has around 34% in mid and small caps, and Edelweiss ELSS has 44% of its portfolio in mid and small caps. You need to figure out the kind of exposure you are looking for.
  If you are looking for a mid-cap fund, then search for a tax-saving fund which has such exposure to smaller fare. If you prefer playing it safe with large caps, then search for such portfolios accordingly.
  On similar lines, check whether the fund manager takes big bets or prefers going with a diversified portfolio, and see where your comfort level lies.
  For example, the top 10 stocks in JM Tax Gain corner over 51% of the portfolio. The portfolio is completely invested in around 30 stocks. Edelweiss ELSS has just around 32% of its portfolio in the top 10 stocks but sports a portfolio of around 64 stocks.
  You also need to look at other aspects. For instance, DSP BlackRock Tax Saver was managed by Apoorva Shah. Last year, he relinquished his role as fund manager. So if investors were investing in that fund based on him being at the helm, they might want to revisit their fund preference.
  When Morningstar analysts rate a fund, they follow the 5Ps guidelines: People (caliber and experience of the fund managers and the backing of a research team), Process (does the fund manager stick to his stated mandate and declared investment process), Parent (quality of the AMC and does it keep investors' interest in mind), Performance (long term returns and consistency through market cycles), and Price (expense ratio). You too could keep these factors in mind when scouting for a fund.
  When finally investing....
  Like any actively managed diversified equity fund, we suggest that the best way to invest in a tax saving fund is via a systematic investment plan, or SIP. This way, you consistently enter the market in an organized fashion irrespective of the state of the market. Unfortunately, if you have delayed your tax planning, then you have no choice but to invest it all in one go now.
  As with any equity investment, don’t look at a short-term horizon, specially if you have invested a lumpsum. Agreed, you have a time horizon of three years which is forced upon you. But if the market is down at that time, hold on and don’t be too eager to sell. Exit only when the market picks up.

Happy Investing

Source:Morningstar.in