Friday, October 30, 2009
Tuesday, April 21, 2009
RBI Credit Policy
The Reserve Bank of India (RBI) has cut repo rate and reverse repo rate by 25 basis points. RBI left the cash reserve ratio (CRR) unchanged.
Key Highlights
The LAF Repo changed from 5.00% to 4.75% with immediate effect.
LAF Reverse Repo changed to 3.50% and 3.25% with immediate effect.
The Cash Reserve Ratio maintained at 5.00%.
The Bank Rate too left unchanged at 6.00%.
Real GDP growth target in 2008-09 revised downwards to 6.5-6.7%. FY10 GDP expected at 6%.
Year-end inflation target for FY10 revised to 4.00%
Money supply growth for FY10 revised downwards from FY09 to 17.0%.
Aggregate deposits growth and non-food credit growth down for FY10 compared to last fiscal.
Strong moral suasion for banks to lower lending rate.
Bottomline:
RBI maintains a dovish stance with a significantly low GDP estimate for FY10. This token rate cut of 25 bps is definitely not the last of the rate cut and we expect further rate cuts in coming months as and when required.
RBI strongly feels that ‘there is scope for overall interest rate structure to move down’. The present rate cut is taken to reinforce this process. So, expect both deposit & lending rates to come down. Even though RBI wants to expand flow of credit to productive sectors to boost growth, it also cautions banks on monitoring loan portfolios to maintain asset quality.
RBI is committed to conduct large govt borrowings in a smooth manner through tenure management, OMO and MSS unwinding. For 1H FY10, the OMO purchases and MSS unwinding will add primary liquidity of about Rs.1,20,000 cr that is equivalent to a CRR cut of 3.0%. We expect RBI to assume bigger role. A positive for bond market.
Various new market initiatives (like, STRIPS, Separate Trading for Registered Interest and Principal of Securities, to be launched during the current financial year, new multi-modal settlement mechanism through commercial banks only available for MFs will be extended to insurance companies, pension funds and co-operative banks) will be welcomed by the market.
Friday, April 3, 2009
Sunday, March 29, 2009
Tata AIG Life InvestAssure Apex --- Get Highest NAV Even If Market Comes Down
Key Benefits:
o Guaranteed returns based on Highest NAV (recorded on 100 reset dates)
o Payment term of 3 years and life cover for 10 years
o Flexibility to reduce premiums from 2nd year onwards*
o Choose your coverage amount between 5 times and 60 times the annualized premium.
o Avail tax benefits under section 80 C for premiums paid and under section 10(10D) for maturity
* Subject to minimum premium annualized of Rs. 90,000; from second year onwards
o Guaranteed returns based on Highest NAV (recorded on 100 reset dates)
o Payment term of 3 years and life cover for 10 years
o Flexibility to reduce premiums from 2nd year onwards*
o Choose your coverage amount between 5 times and 60 times the annualized premium.
o Avail tax benefits under section 80 C for premiums paid and under section 10(10D) for maturity
* Subject to minimum premium annualized of Rs. 90,000; from second year onwards
| Age at entry | 18 years to 70 years |
| Maturity Age | 80 years |
| Sum Assured | Between 5 times and 60 times the Annualized premiums |
| Policy term/ Premium Payment Term | 10 years/ 3 years respectively (Annual Premium mode only) |
| Guaranteed Benefits | Highest Net Asset Value (NAV)** recorded upon 100 resets dates |
| Death Payout | Fund Value or Sum Assured net of all deductible*** partial withdrawals, whichever is higher |
| Maturity Benefit | Higher of fund value (at current unit prices) OR Guaranteed Maturity Unit price multiplied by the number of units in the Apex Return Lock in fund. |
| Riders | Tata AIG Life Critical illness (Lumpsum Benefit) rider (UIN: 110C012V01) Tata AIG Life Accidental Death Benefit Rider (UIN: 110C003V01) Tata AIG Life Accidental Death & Dismemberment Benefit (long Scale) Rider (UIN: 110C004V01) |
| Partial Withdrawals | Allowed after 3 years from the date of issuance of policy and until policy is revived in case of lapsed policy. |
| Features | How it works | Benefits |
|---|---|---|
| Guaranteed Maturity Unit Price | On maturity, the highest unit price in the Apex Return Lock-in fund recorded over 100 reset dates# is guaranteed | Gives you the highest possible returns on your investments and stabilizes growth in case of market volatility. |
| Limited Premium Payment Term | The premium payment term is 3 years while the policy provides coverage for a period of 10 years. | Achieve your dreams by paying just for 3 years. |
| Flexible premium payment options | You can choose to decrease the premiums paid in subsequent years, subject to a minimum annualized premium of Rs. 90,000. | Helps in keeping the policy going during contingencies.. |
| Access to your investment | Partial withdrawals are allowed after completion of 3 policy years from the date of issuance of policy or until the policy is revived in case of lapsed policies.. | You have the flexibility to access your investment if you urgently need money.. |
| Name of Fund | Apex Investment Fund | Apex Return Lock-in Fund |
|---|---|---|
| Structure | Can invest in money market & cash instruments (0-100%) and debt instrument (0-100%) | Can invest in money market & cash instruments (0-100%), debt instrument (0-100%) & equity and equity related securities (0-100%). |
| Fund Objective | To provide capital protection with a high level of safety and liquidity through judicious investment in high quality short-term debt. To generate better returns with low level of risk through investment is fixed interest securities having short term maturity profile.. | To use the participation in an actively managed well diversified equity portfolio of large cap companies to generate capital appreciation and use high credit quality debt instruments to lock-in that capital appreciation.. |
| Fund Management Charge | 0.9% (may increase up to 1.5%) per annum. | 1.45% % (may increase up to 2%) per annum.. |
| Net Asset Value (NAV) per unit or Unit Price | As specified in the Fund Valuation provisions.. |
Monday, February 16, 2009
Key Features of Interim Budget 2009-2010
INTRODUCTION
The Gross Domestic Product increased by 7.5 per cent, 9.5 per cent, 9.7 percent
and 9 per cent in the first four years from fiscal year 2004-05 to 2007-08 recording
a sustained growth of over 9 per cent for three consecutive years for the first time.
The growth drivers for the period were agriculture, services, manufacturing along
with trade and construction.
Fiscal deficit down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and
Revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08.
The domestic investment rate as a proportion of GDP increased from 27.6 per cent
in 2003-04 to 39 per cent in 2007-08. Gross Domestic savings rate shot up from
29.8 per cent to 37.7 per cent during this period.
The Gross capital formation in agriculture as a proportion of agriculture GDP
increased from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08
The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in
2007-08.
Annual growth rate of agriculture rose to 3.7 per cent during 2003-04 to 2007-08.
The foodgrain production recorded an increase of 10 million tonnes each year during
this period and touched an all time high of 230 million tonnes in 2007-08.
While manufacturing sector recorded growth of 9.5 per cent per annum in the
period 2004-05 to 2007-08, communication and construction sectors grew at the
rate of 26 per cent and 13.5 per cent per annum respectively.
Exports grew at an annual average growth rate of 26.4 per cent in US dollar terms
in the period 2004-05 to 2007-08. Foreign trade increased from 23.7 per cent of
GDP in 2003-04 to 35.5 per cent in 2007-08.
OUTLOOK FOR THE YEAR 2008-09
Despite the global financial crisis which began in 2007 impacting most emerging
market economies, 7.1 per cent rate of GDP growth in the current year makes India
the second fastest growing economy in the world.
Fallout of global slowdown on Indian economy were countered with fiscal stimulus
packages announced on December 7, 2008 and January 2, 2009 providing tax relief
to boost demand and increasing expenditure on public projects.
Government accorded approval to 37 infrastructure projects worth Rs.70,000 crore
from August, 2008 to January, 2009 alone.
Under PPP mode, 54 Central Sector infrastructure projects with a project cost of
Rs.67,700 crore given in-principal or final approval and 23 projects amounting to
Rs.27,900 crore approved for viability gap funding in 2008-09.
India Infrastructure Finance Company Ltd. (IIFCL) to refinance upto 60 per cent
of commercial bank loans for PPP projects involving total investment of Rs.1,00,000
crore in infrastructure over the next eighteen months.
In addition to RBI taking number of monetary easing and liquidity enhancing
measures such as reduction in cash reserve ratio, statutory liquidity ratio and key
policy rates, Government has taken specific measures which include extension of
export credit for labour intensive exports, improving pre and post shipment credit
availability, additional allocations for refund of Terminal Excise Duty/CST and
export incentive schemes besides removal of export duty and export ban on certain
items. A Committee of Secretaries set up to address procedural problems faced by
exporters.
Record US$ 32.4 billion FDI received in 2007-08 and notwithstanding financial
uncertainty and slowdown, FDI inflows during April-November, 2008 were US$
23.3 billion recording a growth of 45 per cent over the same period in 2007.
FRBM targets for the current year and for fiscal 2009-10 relaxed to provide
much needed demand boost. However, medium term objective is to revert to
fiscal consolidation at the earliest.
INITIATIVES AND ACHIEVEMENT
Agriculture
Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09.
Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000
crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.
Agriculture credit disbursement increased three times from Rs.87,000 crore in
2003-04 to about Rs.2,50,000 crore in 2007-08.
To strengthen short-term cooperative credit structure, revival package in 25 states
involving financial assistance of about Rs.13,500 crore is being implemented.
Interest subvention to be continued in 2009-10 to ensure that farmers get short
term crop loans upto Rs.3 lakh at 7 per cent per annum.
The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by
June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore
covers 3.6 crore farmers.
Despite higher procurement cost and higher international prices during the last 5
years, the central issue prices under Targeted Public Distribution System (TPDS)
maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya
Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line
(APL) category.
Minimum Support Price (MSP) for common variety of paddy increased from Rs.550
per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of
wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for
the year 2009.
Rural Development
The corpus of Rural Infrastructure Development Fund (RIDF) increased from
Rs.5,500 crore in 2003-04 to Rs.14,000 crore for the year 2008-09. A separate
window for rural roads created with a corpus of Rs.4,000 crore for each of the last
three years.
As against 60 lakh houses to be constructed under Indira Awaas Yojana by
2008-09, 60 lakh twelve thousand houses constructed between 2005-06 to
December, 2008.
Panchayat Empowerment and Accountability Scheme (PEAIS) proposed to be
expanded.
‘Project Arrow’ to provide new technology enabled services through post offices
to common man and support effective implementation of social sector schemes
like NREGS, while promoting financial inclusion.
Education
Major initiatives including a new Centrally Sponsored Scheme launched to
universalize education at secondary stage in the year 2008-09.
Outlay on Higher Education increased 9 fold in the Eleventh Five Year Plan. Ordinance promulgated for establishing 15 Central Universities. In addition to 6 new Indian Institutes of Technology (IITs) in Bihar, Andhra Pradesh, Rajasthan, Orissa, Punjab and Gujrat which started functioning in 2008-09, two more IITs in Madhya Pradesh and Himachal Pradesh are expected to commence their academic session in
2009-10. 5 Indian Institute of Science Education and Research (IISER) announced
earlier have become functional. 2 new schools of Planning and Architecture at
Vijayawada and Bhopal have started functioning. Teaching is expected to commence
from academic year 2009-10 in four out of six new Indian Institute of Management
proposed for the Eleventh Plan in Haryana, Rajasthan, Jharkhand and Tamil Nadu.
Due to revision in Educational Loan Scheme by the Government number of
beneficiaries increased from 3.19 lakh to 14.09 lakh and amount of loan outstanding
increased from Rs.4,500 crore as on March, 31, 2004 to Rs.24,260 crore as on
September 30, 2008.
500 ITIs upgraded into centers of excellence. National Skill Development
Corporation created in July, 2008 with initial corpus of Rs. 1,000 crore.
Social Sector
Authorised capital of National Safai Karamchari Finance and Development
Corporation (NSKFDC) is being raised from Rs.200 crore to Rs.300 crore.
Scope of the pre-metric scholarship for children of those engaged in unclean
occupations expanded and rates of scholarship doubled in 2008-09. Annual
ad-hoc grant increased by about 50 per cent as compared to earlier rates.
Rashtriya Mahila Kosh to be strengthened by enhancing its authorized capital.
‘Priyadarsini Project’ a rural women’s employment and livelihood programme
will be implemented as pilot in the district of Madhubani and Sitamarhi in Bihar
and Shravasti, Bahraich, Rai Bareli and Sultanpur in Uttar Pradesh.
146 lakh persons benefited under Indira Gandhi National Old Age Pension Scheme
in the current financial year.
Two new schemes – ‘Indira Gandhi National Widow Pension Scheme’ to provide
pension of Rs.200 to widows between age groups of 40-64 years and ‘Indira Gandhi
National Disability Pension Scheme’ to provide pension for severely disabled
persons.
Widows in the age group of 18-40 years to be given priority in admission to ITIs,
Women ITIs and National/Regional ITIs for women. Government to bear cost of
their training and provide stipend of Rs.500 per month.
22 States and Union Territories initiated process to implement Rashtriya Swasthya
Bima Yojana for BPL familities in the unorganised sector and 60 lakh thirty two thousand persons covered for death and disability under ‘Aam Admni’ Bima Yojana (AABY). Public Sector Enterprises
Turnover of Central Public Sector Enterprises increased from Rs.5,87,000 crore in
2003-04 to Rs.10,81,000 crore in 2007-08 and profits grew from Rs.53,000 crore
to Rs.91,000 crore. While number of loss making enterprises came down from 73
in 2003-04 to 55 in 2007-08, number of profit making enterprises has gone up
from 143 to 158 during the same period..
Government approved implementation of Guidelines on Corporate Governance in
Central Public Sector Enterprises (CPSEs) in June, 2007.
Corpus of National Investment Fund created out of disinvestment proceeds from
Central PSUs stood at Rs.1,815 crore as on December 31, 2008.
Financial Sector Reforms
NPAs of Public Sector Banks declined from 7.8 per cent on March 31, 2004 to 2.3
per cent on March 31, 2008.
As a result of initiating process of amalgamation and recapitalization of Regional
Rural Banks (RRBs) with negative net worth, 196 RRBs merged into 85 RRBs. The
Government has contributed Rs.652 crore for capitalization of RRBs upto December
31, 2008.
Number of reforms undertaken in the last four years to deepen and widen the
securities markets and strengthen the regulatory mechanisms for these markets.
The Companies Bill, 2008, undertaking comprehensive revision of Companies Act,
1956 to enable adoption of internationally accepted best practices, has been
introduced in the Parliament.
Tax Effort
Comprehensive reforms of tax system both direct and the indirect tax system have
enabled the tax administration to enhance its functional efficiency and provide
better tax payer services leading to increased compliance. Rates of Union Excise
Duties and Service Tax rationalized for eventual shift to the Goods and Service
Tax on 1st April, 2010.
109 marine vessels sanctioned for the Customs Department to prevent movements
of contraband goods across the country’s sea borders.
Administrative Reforms
The enactment of the Right to Information Act at the Centre and in many States
ushering in greater accountability of the public servants.
Recommendations of the Sixth Central Pay Commission approved by the
Government has benefited over 45 lakh Central Government employees including
Defence Forces and Para-Military forces and over 38 lakh pensioners.
REVISED ESTIMATES
The total expenditure at Rs.7,50,884 crore in B.E. 2008-09 revised to Rs.9,00,953
crore in R.E. 2008-09 showing an increase of Rs.1,50,069 crore.
Plan Expenditure gone up from Rs.2,43,386 crore in B.E. 2008-09 to Rs.2,82,957
crore in R.E. 2008-09.
Non-Plan expenditure increased by Rs.1,10,498 crore in R.E. 2008-09 over B.E.
2008-09.
Revised Estimate 2008-09 for Non-Tax Revenues increased from Rs.95,785 crore
in Budget Estimate 2008-09 to Rs.96,203 crore.
Revised Estimates of gross tax collection projected at Rs.6,27,949 crore as against
B.E. 2008-09 of Rs.6,87,715 crore, primarily due to pro-active fiscal measures
initiated to counter the impact of global slowdown on the Indian economy.
Revised Revenue deficit to be at Rs.2,41,273 crore (4.4 per cent of GDP) as against
budgeted figure of Rs.55,184 crore (1 per cent of GDP).
Fiscal deficit to go up from Rs.1,33,287 crore (2.5 per cent of GDP) in B.E.
2008-09 to Rs.3,26,515 crore (6 per cent of GDP).
BUDGET ESTIMATES
Total expenditure for fiscal 2009-10 estimated at Rs.9,53,231 crore. Plan
expenditure estimated at Rs.2,85,149 crore and Non-Plan expenditure at Rs.6,68,082
crore.
Budgetary support in Plan B.E. 2009-10 in comparison to B.E. 2008-09 increased
for Department of Rural Development, Department of Road Transport & Highways,
Railways, Ministry of Power, Department of Industrial Policy and Promotion and
Department of Information Technology to meet the requirements of rural and
infrastructure development along with higher allocation for Ministry of Youth Affairs
& Sports and Ministry of Culture to ensure adequate resources for hosting of the
Commonwealth Games. Allocations to flagship programme which directly impact
‘Aam Aadmi’ fully protected.
Rs.30,100 crore allocated for National Rural Employment Guarantee Scheme for
the year 2009-10. In 2008-09 employment of 138.76 crore person days covering
3.51 crore household already generated.
About 98 per cent habitations covered by primary schools under Sarva Shiksha
Abhiyan. Allocation for this programme increased by 571 per cent between
2003-04 and 2008-09. Allocation of Rs.13,100 crore proposed for 2009-10.
Rs.8,000 crore allocated for Mid-day Meals Scheme for the year 2009-10.
Allocation of Rs.6,705 crore proposed for Integrated Child Development Scheme
(ICDS) for the year 2009-10. New WHO child growth standards adopted for
monitoring growth of children under ICDS.
386 projects amounting to Rs.39,000 crore sanctioned till December 31, 2008 under
Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Allocation of
Rs.11,842 crore proposed for the year 2009-10.
Rs.7,400 crore allocated for Rajiv Gandhi Rural Drinking Water Mission, Rs.1,200
crore for Rural Sanitation Programme, Rs.12,070 crore for National Rural Health
Mission, Rs.40,900 crore allocated for Bharat Nirman for the year 2009-10.
A provision of Rs.100 crore in the Annual Plan 2009-10 made for Unique
Identification Authority of India.
RIDF-XV proposed with a corpus of Rs.14,000 crore. Separate window for rural
roads to continue with a corpus of Rs.4,000 crore.
Interest subvention of 2 per cent on pre and post shipment credit for certain
employment oriented sectors i.e. Textiles (including handlooms & handicrafts),
Carpets, Leather, Gem & Jewellery, Marine products and SMEs extended beyond
March 31, 2009 till September 30, 2009 involving an additional financial outgo of
Rs.500 crore.
Government to recapitalize the public sector banks over the next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent.
Allocation for Defence increased to Rs.1,41,703 crore which includes Rs.54,824
for Capital Expenditure.
Major subsidies including food, fertilizer and petroleum estimated at Rs.95,579
crore.
For the fiscal 2009-10, with Centre’s net tax revenue estimated at Rs.5,00,096
crore and Revenue expenditure at Rs.8,48,085 crore, revenue deficit is estimated
at 4 per cent of GDP and fiscal deficit at 5.5 per cent of GDP.
The Gross Domestic Product increased by 7.5 per cent, 9.5 per cent, 9.7 percent
and 9 per cent in the first four years from fiscal year 2004-05 to 2007-08 recording
a sustained growth of over 9 per cent for three consecutive years for the first time.
The growth drivers for the period were agriculture, services, manufacturing along
with trade and construction.
Fiscal deficit down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and
Revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08.
The domestic investment rate as a proportion of GDP increased from 27.6 per cent
in 2003-04 to 39 per cent in 2007-08. Gross Domestic savings rate shot up from
29.8 per cent to 37.7 per cent during this period.
The Gross capital formation in agriculture as a proportion of agriculture GDP
increased from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08
The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in
2007-08.
Annual growth rate of agriculture rose to 3.7 per cent during 2003-04 to 2007-08.
The foodgrain production recorded an increase of 10 million tonnes each year during
this period and touched an all time high of 230 million tonnes in 2007-08.
While manufacturing sector recorded growth of 9.5 per cent per annum in the
period 2004-05 to 2007-08, communication and construction sectors grew at the
rate of 26 per cent and 13.5 per cent per annum respectively.
Exports grew at an annual average growth rate of 26.4 per cent in US dollar terms
in the period 2004-05 to 2007-08. Foreign trade increased from 23.7 per cent of
GDP in 2003-04 to 35.5 per cent in 2007-08.
OUTLOOK FOR THE YEAR 2008-09
Despite the global financial crisis which began in 2007 impacting most emerging
market economies, 7.1 per cent rate of GDP growth in the current year makes India
the second fastest growing economy in the world.
Fallout of global slowdown on Indian economy were countered with fiscal stimulus
packages announced on December 7, 2008 and January 2, 2009 providing tax relief
to boost demand and increasing expenditure on public projects.
Government accorded approval to 37 infrastructure projects worth Rs.70,000 crore
from August, 2008 to January, 2009 alone.
Under PPP mode, 54 Central Sector infrastructure projects with a project cost of
Rs.67,700 crore given in-principal or final approval and 23 projects amounting to
Rs.27,900 crore approved for viability gap funding in 2008-09.
India Infrastructure Finance Company Ltd. (IIFCL) to refinance upto 60 per cent
of commercial bank loans for PPP projects involving total investment of Rs.1,00,000
crore in infrastructure over the next eighteen months.
In addition to RBI taking number of monetary easing and liquidity enhancing
measures such as reduction in cash reserve ratio, statutory liquidity ratio and key
policy rates, Government has taken specific measures which include extension of
export credit for labour intensive exports, improving pre and post shipment credit
availability, additional allocations for refund of Terminal Excise Duty/CST and
export incentive schemes besides removal of export duty and export ban on certain
items. A Committee of Secretaries set up to address procedural problems faced by
exporters.
Record US$ 32.4 billion FDI received in 2007-08 and notwithstanding financial
uncertainty and slowdown, FDI inflows during April-November, 2008 were US$
23.3 billion recording a growth of 45 per cent over the same period in 2007.
FRBM targets for the current year and for fiscal 2009-10 relaxed to provide
much needed demand boost. However, medium term objective is to revert to
fiscal consolidation at the earliest.
INITIATIVES AND ACHIEVEMENT
Agriculture
Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09.
Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000
crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.
Agriculture credit disbursement increased three times from Rs.87,000 crore in
2003-04 to about Rs.2,50,000 crore in 2007-08.
To strengthen short-term cooperative credit structure, revival package in 25 states
involving financial assistance of about Rs.13,500 crore is being implemented.
Interest subvention to be continued in 2009-10 to ensure that farmers get short
term crop loans upto Rs.3 lakh at 7 per cent per annum.
The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by
June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore
covers 3.6 crore farmers.
Despite higher procurement cost and higher international prices during the last 5
years, the central issue prices under Targeted Public Distribution System (TPDS)
maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya
Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line
(APL) category.
Minimum Support Price (MSP) for common variety of paddy increased from Rs.550
per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of
wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for
the year 2009.
Rural Development
The corpus of Rural Infrastructure Development Fund (RIDF) increased from
Rs.5,500 crore in 2003-04 to Rs.14,000 crore for the year 2008-09. A separate
window for rural roads created with a corpus of Rs.4,000 crore for each of the last
three years.
As against 60 lakh houses to be constructed under Indira Awaas Yojana by
2008-09, 60 lakh twelve thousand houses constructed between 2005-06 to
December, 2008.
Panchayat Empowerment and Accountability Scheme (PEAIS) proposed to be
expanded.
‘Project Arrow’ to provide new technology enabled services through post offices
to common man and support effective implementation of social sector schemes
like NREGS, while promoting financial inclusion.
Education
Major initiatives including a new Centrally Sponsored Scheme launched to
universalize education at secondary stage in the year 2008-09.
Outlay on Higher Education increased 9 fold in the Eleventh Five Year Plan. Ordinance promulgated for establishing 15 Central Universities. In addition to 6 new Indian Institutes of Technology (IITs) in Bihar, Andhra Pradesh, Rajasthan, Orissa, Punjab and Gujrat which started functioning in 2008-09, two more IITs in Madhya Pradesh and Himachal Pradesh are expected to commence their academic session in
2009-10. 5 Indian Institute of Science Education and Research (IISER) announced
earlier have become functional. 2 new schools of Planning and Architecture at
Vijayawada and Bhopal have started functioning. Teaching is expected to commence
from academic year 2009-10 in four out of six new Indian Institute of Management
proposed for the Eleventh Plan in Haryana, Rajasthan, Jharkhand and Tamil Nadu.
Due to revision in Educational Loan Scheme by the Government number of
beneficiaries increased from 3.19 lakh to 14.09 lakh and amount of loan outstanding
increased from Rs.4,500 crore as on March, 31, 2004 to Rs.24,260 crore as on
September 30, 2008.
500 ITIs upgraded into centers of excellence. National Skill Development
Corporation created in July, 2008 with initial corpus of Rs. 1,000 crore.
Social Sector
Authorised capital of National Safai Karamchari Finance and Development
Corporation (NSKFDC) is being raised from Rs.200 crore to Rs.300 crore.
Scope of the pre-metric scholarship for children of those engaged in unclean
occupations expanded and rates of scholarship doubled in 2008-09. Annual
ad-hoc grant increased by about 50 per cent as compared to earlier rates.
Rashtriya Mahila Kosh to be strengthened by enhancing its authorized capital.
‘Priyadarsini Project’ a rural women’s employment and livelihood programme
will be implemented as pilot in the district of Madhubani and Sitamarhi in Bihar
and Shravasti, Bahraich, Rai Bareli and Sultanpur in Uttar Pradesh.
146 lakh persons benefited under Indira Gandhi National Old Age Pension Scheme
in the current financial year.
Two new schemes – ‘Indira Gandhi National Widow Pension Scheme’ to provide
pension of Rs.200 to widows between age groups of 40-64 years and ‘Indira Gandhi
National Disability Pension Scheme’ to provide pension for severely disabled
persons.
Widows in the age group of 18-40 years to be given priority in admission to ITIs,
Women ITIs and National/Regional ITIs for women. Government to bear cost of
their training and provide stipend of Rs.500 per month.
22 States and Union Territories initiated process to implement Rashtriya Swasthya
Bima Yojana for BPL familities in the unorganised sector and 60 lakh thirty two thousand persons covered for death and disability under ‘Aam Admni’ Bima Yojana (AABY). Public Sector Enterprises
Turnover of Central Public Sector Enterprises increased from Rs.5,87,000 crore in
2003-04 to Rs.10,81,000 crore in 2007-08 and profits grew from Rs.53,000 crore
to Rs.91,000 crore. While number of loss making enterprises came down from 73
in 2003-04 to 55 in 2007-08, number of profit making enterprises has gone up
from 143 to 158 during the same period..
Government approved implementation of Guidelines on Corporate Governance in
Central Public Sector Enterprises (CPSEs) in June, 2007.
Corpus of National Investment Fund created out of disinvestment proceeds from
Central PSUs stood at Rs.1,815 crore as on December 31, 2008.
Financial Sector Reforms
NPAs of Public Sector Banks declined from 7.8 per cent on March 31, 2004 to 2.3
per cent on March 31, 2008.
As a result of initiating process of amalgamation and recapitalization of Regional
Rural Banks (RRBs) with negative net worth, 196 RRBs merged into 85 RRBs. The
Government has contributed Rs.652 crore for capitalization of RRBs upto December
31, 2008.
Number of reforms undertaken in the last four years to deepen and widen the
securities markets and strengthen the regulatory mechanisms for these markets.
The Companies Bill, 2008, undertaking comprehensive revision of Companies Act,
1956 to enable adoption of internationally accepted best practices, has been
introduced in the Parliament.
Tax Effort
Comprehensive reforms of tax system both direct and the indirect tax system have
enabled the tax administration to enhance its functional efficiency and provide
better tax payer services leading to increased compliance. Rates of Union Excise
Duties and Service Tax rationalized for eventual shift to the Goods and Service
Tax on 1st April, 2010.
109 marine vessels sanctioned for the Customs Department to prevent movements
of contraband goods across the country’s sea borders.
Administrative Reforms
The enactment of the Right to Information Act at the Centre and in many States
ushering in greater accountability of the public servants.
Recommendations of the Sixth Central Pay Commission approved by the
Government has benefited over 45 lakh Central Government employees including
Defence Forces and Para-Military forces and over 38 lakh pensioners.
REVISED ESTIMATES
The total expenditure at Rs.7,50,884 crore in B.E. 2008-09 revised to Rs.9,00,953
crore in R.E. 2008-09 showing an increase of Rs.1,50,069 crore.
Plan Expenditure gone up from Rs.2,43,386 crore in B.E. 2008-09 to Rs.2,82,957
crore in R.E. 2008-09.
Non-Plan expenditure increased by Rs.1,10,498 crore in R.E. 2008-09 over B.E.
2008-09.
Revised Estimate 2008-09 for Non-Tax Revenues increased from Rs.95,785 crore
in Budget Estimate 2008-09 to Rs.96,203 crore.
Revised Estimates of gross tax collection projected at Rs.6,27,949 crore as against
B.E. 2008-09 of Rs.6,87,715 crore, primarily due to pro-active fiscal measures
initiated to counter the impact of global slowdown on the Indian economy.
Revised Revenue deficit to be at Rs.2,41,273 crore (4.4 per cent of GDP) as against
budgeted figure of Rs.55,184 crore (1 per cent of GDP).
Fiscal deficit to go up from Rs.1,33,287 crore (2.5 per cent of GDP) in B.E.
2008-09 to Rs.3,26,515 crore (6 per cent of GDP).
BUDGET ESTIMATES
Total expenditure for fiscal 2009-10 estimated at Rs.9,53,231 crore. Plan
expenditure estimated at Rs.2,85,149 crore and Non-Plan expenditure at Rs.6,68,082
crore.
Budgetary support in Plan B.E. 2009-10 in comparison to B.E. 2008-09 increased
for Department of Rural Development, Department of Road Transport & Highways,
Railways, Ministry of Power, Department of Industrial Policy and Promotion and
Department of Information Technology to meet the requirements of rural and
infrastructure development along with higher allocation for Ministry of Youth Affairs
& Sports and Ministry of Culture to ensure adequate resources for hosting of the
Commonwealth Games. Allocations to flagship programme which directly impact
‘Aam Aadmi’ fully protected.
Rs.30,100 crore allocated for National Rural Employment Guarantee Scheme for
the year 2009-10. In 2008-09 employment of 138.76 crore person days covering
3.51 crore household already generated.
About 98 per cent habitations covered by primary schools under Sarva Shiksha
Abhiyan. Allocation for this programme increased by 571 per cent between
2003-04 and 2008-09. Allocation of Rs.13,100 crore proposed for 2009-10.
Rs.8,000 crore allocated for Mid-day Meals Scheme for the year 2009-10.
Allocation of Rs.6,705 crore proposed for Integrated Child Development Scheme
(ICDS) for the year 2009-10. New WHO child growth standards adopted for
monitoring growth of children under ICDS.
386 projects amounting to Rs.39,000 crore sanctioned till December 31, 2008 under
Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Allocation of
Rs.11,842 crore proposed for the year 2009-10.
Rs.7,400 crore allocated for Rajiv Gandhi Rural Drinking Water Mission, Rs.1,200
crore for Rural Sanitation Programme, Rs.12,070 crore for National Rural Health
Mission, Rs.40,900 crore allocated for Bharat Nirman for the year 2009-10.
A provision of Rs.100 crore in the Annual Plan 2009-10 made for Unique
Identification Authority of India.
RIDF-XV proposed with a corpus of Rs.14,000 crore. Separate window for rural
roads to continue with a corpus of Rs.4,000 crore.
Interest subvention of 2 per cent on pre and post shipment credit for certain
employment oriented sectors i.e. Textiles (including handlooms & handicrafts),
Carpets, Leather, Gem & Jewellery, Marine products and SMEs extended beyond
March 31, 2009 till September 30, 2009 involving an additional financial outgo of
Rs.500 crore.
Government to recapitalize the public sector banks over the next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent.
Allocation for Defence increased to Rs.1,41,703 crore which includes Rs.54,824
for Capital Expenditure.
Major subsidies including food, fertilizer and petroleum estimated at Rs.95,579
crore.
For the fiscal 2009-10, with Centre’s net tax revenue estimated at Rs.5,00,096
crore and Revenue expenditure at Rs.8,48,085 crore, revenue deficit is estimated
at 4 per cent of GDP and fiscal deficit at 5.5 per cent of GDP.
Monday, February 9, 2009
CSO Advance Estimate: GDP to grow at 7.1% for FY2009
CSO released the advance estimate of GDP today for FY2009. GDP is expected to growth at 7.1% higher than market expectation of 6.8%.
Historically it is observed that the preliminary estimates can be revised but usually adjustments are modest.
GDP grew at 7.9% and 7.6% in first 2 quarters resulting in GDP growth of 7.8% for 1H FY2009.
With 7.1% growth for FY2009, GDP is expected to grow at 6.4% in 2H FY2009 (see table below). Note that industry growth is assumed at 3.1% in 2H FY2009 while the actual output for Oct-Nov 2008 was only 1%. It is a possibility that GDP will be revised downward in May as incoming data in Jan, Feb show continuous decline
GDP by activity: Slowdown is broad-based across the three main sectors:
Agriculture output growth is estimated to have fallen to 2.6% yoy in FY09 from 4.9% in FY08, the weakest since FY2005. The sector now only accounts for 17% of GDP, although more than 50% of people still rely on it. Excluding agriculture, GDP growth rose a respectable 8.1% in 2008/09, down from 9.9% in 2007/08.
Industry to grow at 4.8% from 8.1%. Within the industry, manufacturing and construction to decelerate significantly to 3% and 2.4% in 2HFY09 from 5.3% and 10.5% in 1HFY09. The growth in electricity, gas and water supply, however, is expected to pick up.
Services to grow at 9.6% from 10.9% driven by double-digit increase in "trade, hotels, transport and communication" as well as a pick up in "community, social and personal services" to 9.3% from 6.8%. The community services will be the strongest since 1999/00 and points to the various fiscal stimulus spending by the government.
Bottomline:
Overall, while the economy is slowing but it is certainly not hard landing like most other Asian economies. We expect slowdown in investment and private consumption, while government consumption will stay strong.
The cyclical low will be reached in the 1Q FY2010. We expect a modest recovery thereafter driven by Govt’s fiscal measures, sharp fall in commodity prices, India’s oil and gas production coming on stream, trade recovery and some impact of earlier monetary easing.
RBI will continue to use its monetary tools to boost the economy.
Historically it is observed that the preliminary estimates can be revised but usually adjustments are modest.
GDP grew at 7.9% and 7.6% in first 2 quarters resulting in GDP growth of 7.8% for 1H FY2009.
With 7.1% growth for FY2009, GDP is expected to grow at 6.4% in 2H FY2009 (see table below). Note that industry growth is assumed at 3.1% in 2H FY2009 while the actual output for Oct-Nov 2008 was only 1%. It is a possibility that GDP will be revised downward in May as incoming data in Jan, Feb show continuous decline
GDP by activity: Slowdown is broad-based across the three main sectors:
Agriculture output growth is estimated to have fallen to 2.6% yoy in FY09 from 4.9% in FY08, the weakest since FY2005. The sector now only accounts for 17% of GDP, although more than 50% of people still rely on it. Excluding agriculture, GDP growth rose a respectable 8.1% in 2008/09, down from 9.9% in 2007/08.
Industry to grow at 4.8% from 8.1%. Within the industry, manufacturing and construction to decelerate significantly to 3% and 2.4% in 2HFY09 from 5.3% and 10.5% in 1HFY09. The growth in electricity, gas and water supply, however, is expected to pick up.
Services to grow at 9.6% from 10.9% driven by double-digit increase in "trade, hotels, transport and communication" as well as a pick up in "community, social and personal services" to 9.3% from 6.8%. The community services will be the strongest since 1999/00 and points to the various fiscal stimulus spending by the government.
Bottomline:
Overall, while the economy is slowing but it is certainly not hard landing like most other Asian economies. We expect slowdown in investment and private consumption, while government consumption will stay strong.
The cyclical low will be reached in the 1Q FY2010. We expect a modest recovery thereafter driven by Govt’s fiscal measures, sharp fall in commodity prices, India’s oil and gas production coming on stream, trade recovery and some impact of earlier monetary easing.
RBI will continue to use its monetary tools to boost the economy.
Saturday, February 7, 2009
Tata Capital —12%p.a NCD offer: Invest
Business Line
M. V. S. Santosh Kumar
The five-year secured non-convertible debentures (NCDs) offered by Tata Capital, a non-banking finance subsidiary of Tata Sons Ltd., may be a good investment option. The NCDs, with interest rates of 11-12 per cent under four options, offer superior returns compared to bank fixed deposits, though they are riskier. Interest rates on five-year bank deposits now range between 8.25 per cent and 10.25 per cent.
Investors should evaluate the NCDs in the light of the fact that they allow locking into an attractive yield of 12 per cent for a five-year period (assuming the put/call options are not exercised), even as returns on most other fixed-income options are set to decline sharply.
The risks linked with the offer stem from the challenges associated with the NBFC business and the relatively short track record of Tata Capital. However, this credit risk is partly mitigated by the security offered (fixed assets and future receivables) and the proposal to create a debenture redemption reserve towards maturity. The offer is rated LAA+ by ICRA, which is among the higher investment grade ratings.
Options: Those who wish to invest in these debentures will have four options to choose from based on the periodicity of payments and the minimum amount they can invest.
Of all the options, the cumulative option appears most attractive, as it allows investors to reinvest the interest proceeds at high coupon rates of 12 per cent. This instrument is shielded from the interest rate and re-investment risks. For Rs 10,000 invested today, a cumulative amount of Rs 17623 pre-tax can be earned at the end of five years.
Investors who expect monthly, quarterly or yearly returns are advised to look at other options.
However, yields will be lower depending on where investors re-invest their interest receipts. Assuming an investor re-invests his interest receipts at 6 per cent (the prevailing risk-free rate), the yields will work out to 10.39 per cent, 10.53 per cent and 10.88 per cent respectively on monthly, quarterly and annual payout options.
Liquidity: Though the cumulative scheme is a lock-in scheme, investors have a put option at the end of 36 months to redeem their investments, without any interest rate penalty.
The NCDs are also proposed to be listed and traded on the NSE and investors may have the option of cashing out earlier, if the bonds witness frequent trading in sufficient volumes. Tax deduction on the NCDs will be on the interest paid and based on the income slab investor is in.
TCL intends 100 per cent allotment for investors who put in less than Rs 1 lakh. Even if the issue gets oversubscribed, preference will be given to the retail investors over other non-institutional investors (HNIs), institutions and QIPs
Business
TCL is a non-deposit-taking NBFC. Along with its subsidiaries (few subsidiaries are yet to start operations), it offers various financial services including infrastructure lending, SME lending, factoring, bill discounting, auto financing, home financing, advisory, broking, investment banking , private equity and wealth management.
As of September 30, 2008, TCL had an advance book size of Rs 6,827 crore. Eighty one per cent of the loans are secured in nature. The advances book is divided into a retail book (40 per cent), small and medium enterprises (30 per cent) and infrastructure financing (30 per cent). In the recent past, much of the growth in advances was contributed by the retail advances.
Though concerns have been raised about the possibility of higher retail delinquencies, Tata Capital’s relatively recent foray into lending may have shielded it from such risks. Its net NPA as a proportion of advances was at 0.5 per cent by September 2008. Though Tata Capital managed a marginal net profit in the first six months ended September 2008, it reported a pre-tax loss of about Rs 18 crore for the nine months ended December, 2008. But with the businesses in a nascent stage, it is too early to comment on the business as most of the costs are start-up costs.
The capital adequacy of the NBFC is 26 per cent (against the stipulated 10 per cent right now and 12 per cent after March 31, 2009) and the debt-equity ratio pre-issue is at a comfortable 2.6 (3.3 post issue if the entire NCD offer of Rs 1500 crore is subscribed). High capital adequacy and low debt-equity leave more room for leveraging
Risks
The company is a relatively new one, set up in May 8, 2007. As the company is a late entrant in the financial sector space and is venturing into various businesses at the same time, it has a limited track record by which to judge its success.
While all the businesses the company has entered into face a slow down, the government’s stimulus package for infrastructure companies and SMEs and the special financing facilities offered to NBFCs may partially benefit the business in the coming quarters. As far as lending is concerned, Tata Capital’s plans to tap into the Tata group’s vendors and distributors (not group companies), may offer a ready client base.
Offer Details
Tata Capital expects to raise a minimum amount of Rs 500 crore under this offer, with the option of retaining an additional Rs 1,000 crore. The issue is already open (was launched on February 02, 2009) and closes on February 24.
However, the issue may be closed earlier if the company manages to raise the maximum amount. Proceeds from this issue will be used for activities such as financing, investments, growth of the operations and to partly retire high-cost funds raised earlier.
The issue will be in de-materialised mode and listed in the NSE corporate bond market. NCD holders can even trade in these debentures in the secondary market; there is liquidity risk for premature encashment as the bond market is relatively illiquid.
TO SUBCRIBE CONTACT VINODKUMAR CFP 9842292339
Wednesday, February 4, 2009
Reliance Money launches online magazine - Money Advisor
Bureau
Reliance Money, part of the Reliance Anil Dhirubhai Ambani Group, today announced the launch of its online Mutual Fund Magazine – Money Advisor that deals with equity as well as debt funds as a part of its investor education drive.
The announcement was made by Mr. Sudip Bandyopadhyay, Director and CEO, Reliance Money here today.
Commenting on the launch, Mr. Bandyopadhyay said, “Reliance Money endeavors to change the way people choose and use financial services in this country. Investor education forms an important ingredient in this endeavor and we are happy to launch Money Advisor – our monthly magazine on the Mutual Fund Industry in India. While most research reports are complex to understand, we have tried to make Money Advisor easy to understand for the retail investor while focusing on both equity and debt funds so far neglected in most research.’
The magazine will provide a synopsis on the Mutual Fund industry and include the latest trends in AUMs, overview and recommendations on equity and debt funds, performance snapshot, interest rate scenario and fixed income update, economic review apart from sector updates.
It will also have views shared by various Fund Managers/ CIOs and an investor education series.
Money Advisor will be mailed to all Reliance Money customers and distributors. At present, Reliance Money has over three million customers and more than 10,000 outlets across 5,165 cities and towns.
Reliance Money, part of the Reliance Anil Dhirubhai Ambani Group, today announced the launch of its online Mutual Fund Magazine – Money Advisor that deals with equity as well as debt funds as a part of its investor education drive.
The announcement was made by Mr. Sudip Bandyopadhyay, Director and CEO, Reliance Money here today.
Commenting on the launch, Mr. Bandyopadhyay said, “Reliance Money endeavors to change the way people choose and use financial services in this country. Investor education forms an important ingredient in this endeavor and we are happy to launch Money Advisor – our monthly magazine on the Mutual Fund Industry in India. While most research reports are complex to understand, we have tried to make Money Advisor easy to understand for the retail investor while focusing on both equity and debt funds so far neglected in most research.’
The magazine will provide a synopsis on the Mutual Fund industry and include the latest trends in AUMs, overview and recommendations on equity and debt funds, performance snapshot, interest rate scenario and fixed income update, economic review apart from sector updates.
It will also have views shared by various Fund Managers/ CIOs and an investor education series.
Money Advisor will be mailed to all Reliance Money customers and distributors. At present, Reliance Money has over three million customers and more than 10,000 outlets across 5,165 cities and towns.
Tuesday, January 27, 2009
Third Quarter Review of Monetary Policy for 2008-09
Monetary Measures
• CRR - unchanged at 5.00%
• Reverse Repo rate - unchanged at 4.0%
• Repo Rate - unchanged at 5.5%
• Bank Rate - unchanged at 6.0%
Other Highlights
• GDP growth projection for FY09 revised to 7.0 % with a downward bias.
• M3 growth raised to 19.0% during FY09 from 16.5-17% in 2008.
• Aggregate Deposits projected to rise by around 19.0 per cent during 2008-09.
Stance of the Monetary Policy
3rd Quarter Monetary Review (Current)
1)To Provision comfortable liquidity to meet the required credit growth consistent with the overall projection of economic growth.
2)To respond swiftly and effectively with all possible measures as warranted by the evolving global and domestic situation impinging on growth and financial stability
3)To ensure a monetary and interest rate environment consistent with price stability, well-anchored inflation expectations and orderly conditions in financial markets.
The 3rd quarter monetary policy was seen as a status quo with RBI leaving all its major policy rates unchanged. Albeit! The rising RBI wariness regarding moderation in GDP growth and the declining credit flow in the commercial sector gives rise to studied speculation that RBI may further reduce the bank’s liquidity-premium. This can come by way of further reduction in reverse-repo rate or by placing ceiling/limitation on the investible sum through reverse-repo window.
The policy statement also reveals that RBI is of the opinion that the continued liquidity easing since Sept 08 has created ample room for the banks to respond proactively to market cues (and follow-through the rate decline to commercial borrowers).
However, the central banker also realizes that the drying-up of the external avenues of borrowing has had a limiting effect on the Indian commercial sector. In FY09, the aggregate financial resource inflow in the Indian commercial sector declined by nearly 3% over previous year. This is despite the higher credit offtake by the commercial sector in the present year. Consequently, a perception regarding the lack of credit availability has developed, which amongst other things, is contributing towards a high credit interest rate regime notwithstanding the liquidity relaxation in the money market
Outlook:-In this backdrop, we believe that the RBI policy has largely been neutral with a slightly dovish undertone. The RBI imperativeness on enhancing and augmenting the liquidity requirement to smoothen the credit off take gives reason to believe that central banker may resort to further rate cuts. The declining WPI based inflation provides additional headroom for RBI to act in this regard. Nonetheless, it is possible that some debt market participants may have build up their positions largely in view of a more accommodative policy - And therefore may unwind the resultant portfolio positions built on such view. In consequence, the 10-year Gsec is expected to remain in the 5.50-6% range in the near term.
Additionally, supply concerns because of increased borrowing from the centre could also exert pressure in the immediate. However, given the broad economic fundamentals & a declining inflation trend, we believe that interest rates would continue to display downward bias going forward.
********************************************************************************
• CRR - unchanged at 5.00%
• Reverse Repo rate - unchanged at 4.0%
• Repo Rate - unchanged at 5.5%
• Bank Rate - unchanged at 6.0%
Other Highlights
• GDP growth projection for FY09 revised to 7.0 % with a downward bias.
• M3 growth raised to 19.0% during FY09 from 16.5-17% in 2008.
• Aggregate Deposits projected to rise by around 19.0 per cent during 2008-09.
Stance of the Monetary Policy
3rd Quarter Monetary Review (Current)
1)To Provision comfortable liquidity to meet the required credit growth consistent with the overall projection of economic growth.
2)To respond swiftly and effectively with all possible measures as warranted by the evolving global and domestic situation impinging on growth and financial stability
3)To ensure a monetary and interest rate environment consistent with price stability, well-anchored inflation expectations and orderly conditions in financial markets.
The 3rd quarter monetary policy was seen as a status quo with RBI leaving all its major policy rates unchanged. Albeit! The rising RBI wariness regarding moderation in GDP growth and the declining credit flow in the commercial sector gives rise to studied speculation that RBI may further reduce the bank’s liquidity-premium. This can come by way of further reduction in reverse-repo rate or by placing ceiling/limitation on the investible sum through reverse-repo window.
The policy statement also reveals that RBI is of the opinion that the continued liquidity easing since Sept 08 has created ample room for the banks to respond proactively to market cues (and follow-through the rate decline to commercial borrowers).
However, the central banker also realizes that the drying-up of the external avenues of borrowing has had a limiting effect on the Indian commercial sector. In FY09, the aggregate financial resource inflow in the Indian commercial sector declined by nearly 3% over previous year. This is despite the higher credit offtake by the commercial sector in the present year. Consequently, a perception regarding the lack of credit availability has developed, which amongst other things, is contributing towards a high credit interest rate regime notwithstanding the liquidity relaxation in the money market
Outlook:-In this backdrop, we believe that the RBI policy has largely been neutral with a slightly dovish undertone. The RBI imperativeness on enhancing and augmenting the liquidity requirement to smoothen the credit off take gives reason to believe that central banker may resort to further rate cuts. The declining WPI based inflation provides additional headroom for RBI to act in this regard. Nonetheless, it is possible that some debt market participants may have build up their positions largely in view of a more accommodative policy - And therefore may unwind the resultant portfolio positions built on such view. In consequence, the 10-year Gsec is expected to remain in the 5.50-6% range in the near term.
Additionally, supply concerns because of increased borrowing from the centre could also exert pressure in the immediate. However, given the broad economic fundamentals & a declining inflation trend, we believe that interest rates would continue to display downward bias going forward.
********************************************************************************
Thursday, January 15, 2009
Presenting the HSBC Tax Saver Equity Fund with FREE Critical Illness Cover
Why Equity Funds?
All of us aspire for enough wealth to be able to finance at least some of our dreams. Giving our family the very best, educating our children, indulging in a hobby - things that can make our lives more rewarding. One of the best chances of doing so is by investing wisely and regularly today. When one is investing for the long-term, one has to look at generating a return that is greater than inflation. For example, if you get a return of 10% from your investment and inflation is 8% then the real return you have made is 2%. Studies show that equity and equity linked instruments tend to outperform all other forms of investments in the long run. Hence you should look at investing some portion of your money in equity markets with an aim to meet future goals comfortably.
Presenting the HSBC Tax Saver Equity Fund with FREE Critical Illness Cover
HSBC Tax Saver Equity Fund (HTSF) is an Equity Linked Savings Scheme (ELSS) that offers an opportunity for tax saving by providing Sec 80C benefits. Moreover, it seeks to provide capital appreciation by investing in a diversified portfolio of equity and equity-related instruments of companies across various sectors and industries. With the Indian economy possessing strong fundamentals and corporate earnings showing great growth potential, equity as an asset class looks set to provide remarkable returns.
FREE Critical Illness Cover
Now with every HSBC Tax Saver Fund investment you get a FREE Critical Illness Cover (ICICI Lombard) for a minimum lump sum investment of Rs. 10,000. The Critical Illness Cover will insure you against six illnesses (on diagnosis) or in case of accidental death or accidental permanent total disability, the sum insured is paid. For investments below Rs. 10,000, normal HTSF is also available.
The scope of the cover is as follows:
Critical Illnesses
Cancer
End stage renal failure
Major organ transplant
Stroke
Heart valve replacement
Bypass surgery
Accidental death
Accidental permanent total disability
Important:
Applicable only for a minimum of
Lump sum investment of Rs 10,000 or
SIP of Rs 2,000 for 36 months**
Insurance tenure
3 years for lump sum
3, 4 or 5 years for SIP Plus, depending upon SIP tenure
Sum insured
In case of lump sum investment, equal to the value of investment
In case of HSBC SIP Plus it will be worth the total SIP investment amount for the SIP period. For example, if you decide to invest Rs 15,000 p.m. in HSBC SIP Plus for a period of 5 years you will get a Critical Illness Cover of Rs 900,000 for the said period.
Maximum sum insured is Rs 10,00,000 per person,irrespective of multiple investments. Not available to Non Resident Indians
Age limit is 20 years to 50 years of age completed
HSBC Tax Saver Equity Fund (HTSF) is an Equity Linked Savings Scheme (ELSS) that offers an opportunity for tax saving by providing Sec 80C benefits. Moreover, it seeks to provide capital appreciation by investing in a diversified portfolio of equity and equity-related instruments of companies across various sectors and industries. With the Indian economy possessing strong fundamentals and corporate earnings showing great growth potential, equity as an asset class looks set to provide remarkable returns.
FREE Critical Illness Cover
Now with every HSBC Tax Saver Fund investment you get a FREE Critical Illness Cover (ICICI Lombard) for a minimum lump sum investment of Rs. 10,000. The Critical Illness Cover will insure you against six illnesses (on diagnosis) or in case of accidental death or accidental permanent total disability, the sum insured is paid. For investments below Rs. 10,000, normal HTSF is also available.
The scope of the cover is as follows:
Critical Illnesses
Cancer
End stage renal failure
Major organ transplant
Stroke
Heart valve replacement
Bypass surgery
Accidental death
Accidental permanent total disability
Important:
Applicable only for a minimum of
Lump sum investment of Rs 10,000 or
SIP of Rs 2,000 for 36 months**
Insurance tenure
3 years for lump sum
3, 4 or 5 years for SIP Plus, depending upon SIP tenure
Sum insured
In case of lump sum investment, equal to the value of investment
In case of HSBC SIP Plus it will be worth the total SIP investment amount for the SIP period. For example, if you decide to invest Rs 15,000 p.m. in HSBC SIP Plus for a period of 5 years you will get a Critical Illness Cover of Rs 900,000 for the said period.
Maximum sum insured is Rs 10,00,000 per person,irrespective of multiple investments. Not available to Non Resident Indians
Age limit is 20 years to 50 years of age completed
** Investments of lower amounts can be made through regular HTSF and HSBC SIP
Saturday, January 10, 2009
LIST OF COMPANIES AUDITED BY SATYAM COMPUTER AUDITOR-PRICE WATER COOPERS
LIST OF COMPANIES AUDITED BY PRICE WATER COOPERS(PWC)
Apar Inds. Price Waterhouse 200803 1,698 85
Apeejay Tea Price Waterhouse 200703 93 1
APW President Price Waterhouse 200803 137 9
Arshiya Intl Pricewaterhouse 200803 202 12
Assam Carbon Pr Price Waterhouse 200803 30 -4
Automotive Stamp Price Waterhouse 200803 301 4
Bayer CropScien Price Waterhouse 200803 1,163 49
Beeyu Overseas Price Waterhouse 200803 20 -2
Bimetal Bearings Price Waterhouse 200803 100 9
Blue Dart Exp. Price Waterhouse 200712 809 70
Bosch Price Waterhouse & Co 200712 4,269 609
Bosch Rexroth Price Waterhouse & Co 200712 265 25
California Soft. Price Waterhouse 200803 71 7
Century Enka Price Waterhouse 200803 1,186 13
Chemplast Sanmar Price Waterhouse & Co 200803 640 7
Colgate Palmoliv Price Waterhouse 200803 1,475 232
Coromandel Fert Price Waterhouse 200803 3,795 210
Cummins India Price Waterhouse 200803 2,351 281
D P S C Price Waterhouse & Co 200803 320 1
Denso India Price Waterhouse 200803 466 28
Dynamatic Tech. Price Waterhouse & Co 200803 273 19
Elpro Intl. Price Waterhouse 200803 27 -17
English Ind.Clay Price Waterhouse 200703 240 18
Entertainment Nt Price Waterhouse & Co 200803 225 16
Gabriel India Price Waterhouse & Co 200803 467 8
Gateway Distpark Price Waterhouse 200803 165 75
Gillanders Arbut Price Waterhouse 200803 399 15
GIS Price Waterhouse 200403 80 0
Glaxosmit Pharma Price Waterhouse & Co 200712 1,570 538
GlaxoSmith C H L Price Waterhouse 200712 1,273 163
Glenmark Pharma Pricewaterhouse 200803 1,371 389
GMR Inds. Price Waterhouse & Co 200803 153 7
GMR Infra. Price Waterhouse 200803 103 63
Goodyear India Price Waterhouse 200712 890 40
Graphite India Price Waterhouse 200803 1,064 134
Great Eastern En Price Waterhouse 200803 0 -11
Guj Gas Company Price Waterhouse 200712 1,188 159
Harr. Malayalam Price Waterhouse 200803 202 6
HCL Infosystems Price Waterhouse 200806 12,411 305
HCL Technologies Price Waterhouse 200806 4,615 781
Hikal Pricewaterhouse 200803 301 50
Hind.Powerplus Price Waterhouse 200503 216 6
Hinduja Ventures Price Waterhouse 200803 12 42
Honeywell Auto Price Waterhouse & Co 200712 866 65
Hooghly Flour Price Waterhouse 199603 0 0
HTMT Global Price Waterhouse 200803 358 59
IFGL Refractor Price Waterhouse 200803 171 17
Ineos ABS (India Price Waterhouse 200712 557 35
Info Edge (India Price Waterhouse 200803 245 55
Infotech Enterpr Price Waterhouse 200803 435 59
Ingersoll-Rand Price Waterhouse 200803 487 281
Insilco Price Waterhouse 200803 69 -3
Jagran Prakashan Price Waterhouse 200803 750 98
Kanumanek Trad. Price Waterhouse 200803 0 0
Karamch.Thapar Price Waterhouse 200803 0 0
Kennametal India Price Waterhouse 200806 388 54
Kesoram Inds. Price Waterhouse 200803 2,986 383
Lanco Infratech Price Waterhouse 200803 1,575 200
Marico Price Waterhouse 200803 1,569 143
Maruti Suzuki Price Waterhouse 200803 17,892 1,731
Mastek Price Waterhouse 200806 583 99
Max India Price Waterhouse 200803 282 62
Mcleod Russel Price Waterhouse 200803 653 47
Millennium Beer Price Waterhouse 200803 188 -4
Morganite Crucib Price Waterhouse & Co 200803 19 1
Moser Baer (I) Price Waterhouse 200803 1,900 -79
Motherson Sumi Price Waterhouse 200803 1,303 128
NDTV Price Waterhouse 200803 363 4
Nicco Parks Price Waterhouse 200709 19 1
NIIT Price Waterhouse 200803 467 33
NIIT Tech. Price Waterhouse 200803 445 143
Northgate Techno Price Waterhouse 200803 62 41
Novartis India Price Water house 200803 553 97
Orissa Extrusion Price Waterhouse 199912 13 -8
Parry Agro Inds Price Waterhouse 200803 82 8
Perfect Circle I Price Waterhouse & Co 200803 77 -2
Phillips Carbon Price Waterhouse 200803 1,033 89
Piramal Health Price Waterhouse 200803 1,914 301
Piramal Life Price Waterhouse & Co 200803 0 -92
PVP Ventures Price Waterhouse 200803 0 -2
Rain Calcining Price Waterhouse 200703 696 70
Rain Commodities Price Waterhouse 200712 462 25
Rane (Madras) Price Waterhouse & Co 200803 350 37
Rane Brake Lin Price Waterhouse & Co 200803 181 9
Religare Enter Price Waterhouse 200803 32 23
Religare Global Price Waterhouse 200803 22 4
S.N. Sunderson Price Waterhouse 199903 10 -1
Saint-Gob. Sekur Price Waterhouse & Co 200712 67 0
Samtel Color Price Waterhouse 200806 777 -71
Sanderson Inds. Price Waterhouse 199403 13 1
Saregama India Price Waterhouse 200803 137 8
Satyam Computer Price Waterhouse 200803 8,137 1,716
Schrader Duncan Price Waterhouse & Co 200803 56 2
Simplex Infra Price Waterhouse 200803 2,808 90
South Asian Fin. Price Waterhouse 199803 5 -10
Sparsh BPO Price Waterhouse 200803 161 0
Spentex Inds. Price waterhouse 200803 736 -35
Stewarts & Lloyd Price Waterhouse 200803 111 4
Subhkam Capital Price Waterhouse 200803 50 -2
Sulzer India Price Waterhouse & Co 200712 125 15
Swaraj Mazda Price Waterhouse 200803 665 25
Swojas Energy Price Waterhouse & Co 199812 7 -6
T.V. Today Price Waterhouse 200803 231 44
TIL Price Waterhouse 200803 692 32
Tinplate Co. Price Waterhouse 200803 391 4
Trigyn Techno. Price Waterhouse 200803 14 4
Tudor India Price Waterhouse 200803 129 8
United Breweries Price Waterhouse 200803 1,367 62
United Spirits Price Waterhouse 200803 3,137 311
Usha Martin Price Waterhouse 200803 1,639 145
UT Price Waterhouse 200803 104 -7
UTV Software Price Waterhouse & Co 200803 286 4
Vijay Inds. Price Waterhouse 200409 63 -27
Warren Tea Price Waterhouse 200803 133 2
Welspun India Price Waterhouse & Co 200803 1,175 26
Wyeth Price Waterhouse 200803 330 81
Zensar Technolgs Price Waterhouse 200803 336 45
Apar Inds. Price Waterhouse 200803 1,698 85
Apeejay Tea Price Waterhouse 200703 93 1
APW President Price Waterhouse 200803 137 9
Arshiya Intl Pricewaterhouse 200803 202 12
Assam Carbon Pr Price Waterhouse 200803 30 -4
Automotive Stamp Price Waterhouse 200803 301 4
Bayer CropScien Price Waterhouse 200803 1,163 49
Beeyu Overseas Price Waterhouse 200803 20 -2
Bimetal Bearings Price Waterhouse 200803 100 9
Blue Dart Exp. Price Waterhouse 200712 809 70
Bosch Price Waterhouse & Co 200712 4,269 609
Bosch Rexroth Price Waterhouse & Co 200712 265 25
California Soft. Price Waterhouse 200803 71 7
Century Enka Price Waterhouse 200803 1,186 13
Chemplast Sanmar Price Waterhouse & Co 200803 640 7
Colgate Palmoliv Price Waterhouse 200803 1,475 232
Coromandel Fert Price Waterhouse 200803 3,795 210
Cummins India Price Waterhouse 200803 2,351 281
D P S C Price Waterhouse & Co 200803 320 1
Denso India Price Waterhouse 200803 466 28
Dynamatic Tech. Price Waterhouse & Co 200803 273 19
Elpro Intl. Price Waterhouse 200803 27 -17
English Ind.Clay Price Waterhouse 200703 240 18
Entertainment Nt Price Waterhouse & Co 200803 225 16
Gabriel India Price Waterhouse & Co 200803 467 8
Gateway Distpark Price Waterhouse 200803 165 75
Gillanders Arbut Price Waterhouse 200803 399 15
GIS Price Waterhouse 200403 80 0
Glaxosmit Pharma Price Waterhouse & Co 200712 1,570 538
GlaxoSmith C H L Price Waterhouse 200712 1,273 163
Glenmark Pharma Pricewaterhouse 200803 1,371 389
GMR Inds. Price Waterhouse & Co 200803 153 7
GMR Infra. Price Waterhouse 200803 103 63
Goodyear India Price Waterhouse 200712 890 40
Graphite India Price Waterhouse 200803 1,064 134
Great Eastern En Price Waterhouse 200803 0 -11
Guj Gas Company Price Waterhouse 200712 1,188 159
Harr. Malayalam Price Waterhouse 200803 202 6
HCL Infosystems Price Waterhouse 200806 12,411 305
HCL Technologies Price Waterhouse 200806 4,615 781
Hikal Pricewaterhouse 200803 301 50
Hind.Powerplus Price Waterhouse 200503 216 6
Hinduja Ventures Price Waterhouse 200803 12 42
Honeywell Auto Price Waterhouse & Co 200712 866 65
Hooghly Flour Price Waterhouse 199603 0 0
HTMT Global Price Waterhouse 200803 358 59
IFGL Refractor Price Waterhouse 200803 171 17
Ineos ABS (India Price Waterhouse 200712 557 35
Info Edge (India Price Waterhouse 200803 245 55
Infotech Enterpr Price Waterhouse 200803 435 59
Ingersoll-Rand Price Waterhouse 200803 487 281
Insilco Price Waterhouse 200803 69 -3
Jagran Prakashan Price Waterhouse 200803 750 98
Kanumanek Trad. Price Waterhouse 200803 0 0
Karamch.Thapar Price Waterhouse 200803 0 0
Kennametal India Price Waterhouse 200806 388 54
Kesoram Inds. Price Waterhouse 200803 2,986 383
Lanco Infratech Price Waterhouse 200803 1,575 200
Marico Price Waterhouse 200803 1,569 143
Maruti Suzuki Price Waterhouse 200803 17,892 1,731
Mastek Price Waterhouse 200806 583 99
Max India Price Waterhouse 200803 282 62
Mcleod Russel Price Waterhouse 200803 653 47
Millennium Beer Price Waterhouse 200803 188 -4
Morganite Crucib Price Waterhouse & Co 200803 19 1
Moser Baer (I) Price Waterhouse 200803 1,900 -79
Motherson Sumi Price Waterhouse 200803 1,303 128
NDTV Price Waterhouse 200803 363 4
Nicco Parks Price Waterhouse 200709 19 1
NIIT Price Waterhouse 200803 467 33
NIIT Tech. Price Waterhouse 200803 445 143
Northgate Techno Price Waterhouse 200803 62 41
Novartis India Price Water house 200803 553 97
Orissa Extrusion Price Waterhouse 199912 13 -8
Parry Agro Inds Price Waterhouse 200803 82 8
Perfect Circle I Price Waterhouse & Co 200803 77 -2
Phillips Carbon Price Waterhouse 200803 1,033 89
Piramal Health Price Waterhouse 200803 1,914 301
Piramal Life Price Waterhouse & Co 200803 0 -92
PVP Ventures Price Waterhouse 200803 0 -2
Rain Calcining Price Waterhouse 200703 696 70
Rain Commodities Price Waterhouse 200712 462 25
Rane (Madras) Price Waterhouse & Co 200803 350 37
Rane Brake Lin Price Waterhouse & Co 200803 181 9
Religare Enter Price Waterhouse 200803 32 23
Religare Global Price Waterhouse 200803 22 4
S.N. Sunderson Price Waterhouse 199903 10 -1
Saint-Gob. Sekur Price Waterhouse & Co 200712 67 0
Samtel Color Price Waterhouse 200806 777 -71
Sanderson Inds. Price Waterhouse 199403 13 1
Saregama India Price Waterhouse 200803 137 8
Satyam Computer Price Waterhouse 200803 8,137 1,716
Schrader Duncan Price Waterhouse & Co 200803 56 2
Simplex Infra Price Waterhouse 200803 2,808 90
South Asian Fin. Price Waterhouse 199803 5 -10
Sparsh BPO Price Waterhouse 200803 161 0
Spentex Inds. Price waterhouse 200803 736 -35
Stewarts & Lloyd Price Waterhouse 200803 111 4
Subhkam Capital Price Waterhouse 200803 50 -2
Sulzer India Price Waterhouse & Co 200712 125 15
Swaraj Mazda Price Waterhouse 200803 665 25
Swojas Energy Price Waterhouse & Co 199812 7 -6
T.V. Today Price Waterhouse 200803 231 44
TIL Price Waterhouse 200803 692 32
Tinplate Co. Price Waterhouse 200803 391 4
Trigyn Techno. Price Waterhouse 200803 14 4
Tudor India Price Waterhouse 200803 129 8
United Breweries Price Waterhouse 200803 1,367 62
United Spirits Price Waterhouse 200803 3,137 311
Usha Martin Price Waterhouse 200803 1,639 145
UT Price Waterhouse 200803 104 -7
UTV Software Price Waterhouse & Co 200803 286 4
Vijay Inds. Price Waterhouse 200409 63 -27
Warren Tea Price Waterhouse 200803 133 2
Welspun India Price Waterhouse & Co 200803 1,175 26
Wyeth Price Waterhouse 200803 330 81
Zensar Technolgs Price Waterhouse 200803 336 45
Wednesday, January 7, 2009
Debt Markets– An Opportunity
Global Scenario
Risk aversions due to banking crisis is resulting in withdrawal of money from equities and other risk assets across the globe
Central Banks are pumping up liquidity and cutting interest rates, but not achieving desired results because of extreme risk aversion
Central Banks may have to cut interest rates to zero or near zero level to induce risk taking
Globally Declining Rates
US, Japan, U.K, Euro Zone are all cutting rates and
pumping liquidity to keep their economy from sinking
Indian Context
Inflation has started declining rapidly
RBI is keeping adequate liquidity
RBI is cutting interest rates
Election bound government will follow loose monetary policy to support growth
Further policy action in line with global markets and local conditions will be most probably on the softer side
All Components of WPI are also falling
CRR is being Cut
Repo rate is cut
Growth is softening
RBI have revised downwards Real GDP Growth target for FY 09 from 8 % plus to 7.5-8 %
CMIE have revised downwards Real GDP Growth target for FY 09 from 9.5 % to 8.2 %
Citigroup , Morgan Stanley and other analysts are now estimating FY 09 Real GDP growth between 6-7 % vs earlier estimate of 8-9 %.
The RBI will be now biased towards supporting growth
Gilt Yields have declined rapidly
But Corporate and PSU Bond Yields have not followed
10 year Bond Spread is at high level
Spread Contraction can happen
We expect Policy stance to be biased towards Pro Growth and on the softer side
PF Trusts post SDS interest payment in Jan 09 will invest in PSU Bonds
Low leverage of Indian Corporates Keep default risk under check
Borrowing rate needs to be reduced for revival of corporate sector and GDP growth in India like in other parts of the world
Summary
We expect Interest rates to decline globally
We expect Interest rates to decline in India
We expect Higher Rated PSU Bonds and Corporate Bond spreads to decline
Income Funds provide an excellent opportunity to capture this trend
Saturday, January 3, 2009
New Year Bonanza from Govt and RBI
Fiscal Stimulus
Govt announced 2nd stimulus package today. The current measures together with earlier package constitute a
substantial counter-cyclical stimulus in the current year.
Some of the measures announced in 2nd fiscal stimulus include:
• External Commercial Borrowing (ECB)
– Ceilings on ECB borrowing removed under the approval route of RBI
– ECB can be used for the ‘development of integrated townships’
– NBFCs, dealing exclusively with infrastructure financing, would be allowed to access ECB.
• FII investment in Corporate bonds
– FII investment limit in rupee denominated corporate bonds in India would be increased from $ 6 bn to
$ 15 bn.
• Improvement in credit flow– An special purpose vehicle to provide liquidity (Rs.25,000 cr) support against investment grade paper
to Non Banking Finance Companies (NBFCs).
– PSU banks to provide a line of credit to NBFCs specifically for purchase of commercial vehicles.
– Credit targets of PSU banks are revised upward.
• Small and micro enterprise
– Increase the guarantee cover for micro-enterprises extended by Credit Guarantee Fund Trust to 85%
for credit facility upto Rs.5 lakh. This will benefit about 84% of total number of accounts.
• Borrowings– To meet expenditures, states will be allowed to raise in the current financial year additional market
borrowings of 0.5% of their GDP, amounting to about Rs 30,000 cr, for capital expenditures.
– India Infrastructure Finance Company (IIFCL) will be allowed to access in tranches an additional
Rs.30,000 cr by way of tax free bonds after utilization of Rs.10,000 cr. announced earlier for
refinancing bank lending to PPP infrastructure projects.
• Export Sector
– Duty drawback benefits on certain items including knitted fabrics, bicycles, agricultural hand tools
and specified categories of yarn are being enhanced.
– RBI to offer EXIM Bank a line of credit of Rs.5,000 cr and will provide pre-shipment and postshipment
credit, in rupees or dollars, to Indian exporters at competitive rates.
• Other measures
– As inflation is declining significantly, exemptions from CVD on TMT bars and structurals, and from
CVD and Special CVD on cement are being withdrawn. Full exemption from basic customs duty on
zinc and ferro alloys is also withdrawn.
– Accelerated depreciation of 50% will be provided for commercial vehicles to be purchased on or after
1.1.2009 upto 31.03.09.
• Recapitalization of banks
– The Plan for the next year will include proposals for recapitalization of the public sector banks. The
recapitalization is expected to be of the order of Rs.20000 crore over the next two years. This will
help to ensure that the banking system will not suffer from capital adequacy constraints in order to
provide credit growth needed to sustain the economic momentum in 2009-10
Monetary stimulus by RBI
Repo Rate
•Repo rate cut by 100 basis points from 6.5% to 5.5% with immediate effect.
Reverse Repo Rate
•Reverse repo rate cut by 100 basis points from 5.0% to 4.0% with immediate effect.
Cash Reserve Ratio
•Cash reserve ratio (CRR) of scheduled banks cut by 50bps from 5.5% to 5.0% from the fortnight
beginning January 17, 2009.
Bottomline:• Reduction of reverse repo to 4% will prompt banks to increase lending and not park money with RBI.
Also Repo rate cut is a clear signal to bring down lending rate. Both deposit and lending rates are
expected to come down.
• Three pronged action to unfreeze the credit market: 1) infuse liquidity Rs. 20,000 cr by CRR cut, 2) lower
cost of fund by slashing the policy rate, 3) increase credit target of PSU banks as well as recapitalization
of these banks.
• Funds to flow into infrastructure sector. The question here is how much money can be raised in current
global condition. Also whether developers will come up with bankable projects on which these funds can
be deployed.
• A positive for bond market. Increase in FII investment limit in corporate bonds will develop this market.
Rupee may be under pressure but positive long term impact.
• We expect monetary policy to do much of the heavy lifting in coming months as this was the last fiscal
stimulus announced by the Govt. Overall, very encouraging move. But, as Montek Singh Ahluwalia said
“Key is implementation of these projects”. Going by past records, our project implementation record
leaves a huge slip between cup and the lip.
Govt announced 2nd stimulus package today. The current measures together with earlier package constitute a
substantial counter-cyclical stimulus in the current year.
Some of the measures announced in 2nd fiscal stimulus include:
• External Commercial Borrowing (ECB)
– Ceilings on ECB borrowing removed under the approval route of RBI
– ECB can be used for the ‘development of integrated townships’
– NBFCs, dealing exclusively with infrastructure financing, would be allowed to access ECB.
• FII investment in Corporate bonds
– FII investment limit in rupee denominated corporate bonds in India would be increased from $ 6 bn to
$ 15 bn.
• Improvement in credit flow– An special purpose vehicle to provide liquidity (Rs.25,000 cr) support against investment grade paper
to Non Banking Finance Companies (NBFCs).
– PSU banks to provide a line of credit to NBFCs specifically for purchase of commercial vehicles.
– Credit targets of PSU banks are revised upward.
• Small and micro enterprise
– Increase the guarantee cover for micro-enterprises extended by Credit Guarantee Fund Trust to 85%
for credit facility upto Rs.5 lakh. This will benefit about 84% of total number of accounts.
• Borrowings– To meet expenditures, states will be allowed to raise in the current financial year additional market
borrowings of 0.5% of their GDP, amounting to about Rs 30,000 cr, for capital expenditures.
– India Infrastructure Finance Company (IIFCL) will be allowed to access in tranches an additional
Rs.30,000 cr by way of tax free bonds after utilization of Rs.10,000 cr. announced earlier for
refinancing bank lending to PPP infrastructure projects.
• Export Sector
– Duty drawback benefits on certain items including knitted fabrics, bicycles, agricultural hand tools
and specified categories of yarn are being enhanced.
– RBI to offer EXIM Bank a line of credit of Rs.5,000 cr and will provide pre-shipment and postshipment
credit, in rupees or dollars, to Indian exporters at competitive rates.
• Other measures
– As inflation is declining significantly, exemptions from CVD on TMT bars and structurals, and from
CVD and Special CVD on cement are being withdrawn. Full exemption from basic customs duty on
zinc and ferro alloys is also withdrawn.
– Accelerated depreciation of 50% will be provided for commercial vehicles to be purchased on or after
1.1.2009 upto 31.03.09.
• Recapitalization of banks
– The Plan for the next year will include proposals for recapitalization of the public sector banks. The
recapitalization is expected to be of the order of Rs.20000 crore over the next two years. This will
help to ensure that the banking system will not suffer from capital adequacy constraints in order to
provide credit growth needed to sustain the economic momentum in 2009-10
Monetary stimulus by RBI
Repo Rate
•Repo rate cut by 100 basis points from 6.5% to 5.5% with immediate effect.
Reverse Repo Rate
•Reverse repo rate cut by 100 basis points from 5.0% to 4.0% with immediate effect.
Cash Reserve Ratio
•Cash reserve ratio (CRR) of scheduled banks cut by 50bps from 5.5% to 5.0% from the fortnight
beginning January 17, 2009.
Bottomline:• Reduction of reverse repo to 4% will prompt banks to increase lending and not park money with RBI.
Also Repo rate cut is a clear signal to bring down lending rate. Both deposit and lending rates are
expected to come down.
• Three pronged action to unfreeze the credit market: 1) infuse liquidity Rs. 20,000 cr by CRR cut, 2) lower
cost of fund by slashing the policy rate, 3) increase credit target of PSU banks as well as recapitalization
of these banks.
• Funds to flow into infrastructure sector. The question here is how much money can be raised in current
global condition. Also whether developers will come up with bankable projects on which these funds can
be deployed.
• A positive for bond market. Increase in FII investment limit in corporate bonds will develop this market.
Rupee may be under pressure but positive long term impact.
• We expect monetary policy to do much of the heavy lifting in coming months as this was the last fiscal
stimulus announced by the Govt. Overall, very encouraging move. But, as Montek Singh Ahluwalia said
“Key is implementation of these projects”. Going by past records, our project implementation record
leaves a huge slip between cup and the lip.
Thursday, January 1, 2009
NIFTY FUTURES OUTLOOK IN 2009
OUTLOOK: As it is clearly visible that trendline starting from bottom of 9th oct 2007clearly acts as a major support and resistance of nifty futures.So as of now if nifty futures can move with good volumes it can make a good rally otherwise it can't sustain in the higher levels
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