Technical: Everest Industries, Tata Chemicals, Himachal Futuristic, Mercator Lines, Hexaware, GSK Consumer, TVS Motor:: Business Line

Index Outlook: Hope springs eternal:: Business Line

Zero per cent EMI schemes: Here's the catch!

The zero per cent EMI option helps the bank and the manufacturer more than the consumer. This is what the catch is!

Often, what we perceive as economical has tremendous economics behind it. Otherwise why would the seller be interested in selling something that is fairly cheap to you? The zero per cent interest Equated Monthly Instalments was one of the few attractive schemes which had received strong acceptance, is a case in the point.

Recently, the Reserve Bank of India asked banks to stop the zero per cent interest charging schemes that allowed consumers to buy goods on EMI. Banks used to offer these special schemes to consumers to buy anything and everything from kitchen appliances such as induction cookers to even high-end electronic gadgets such as smart phones, tablets and LED television sets.

In financial parlance, you should never borrow to consume specially so if you are splurging on some electronic gadget just to catch up with peers.

The basic tenets of financial planning suggest that you should not borrow to splurge. It can overburden and may limit any scope to borrow for something essential.

However, things are changing and sometimes people prefer to buy things by borrowing if that increases their efficiency or saves them time.

For example, working women want to own a microwave oven to save on cooking time or a sales executive wants to own a smart phone for better productivity. And banks sensed an opportunity in this.

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

Economy to grow at over 5% in 2013-14: Mayaram

The economy will grow at more than 5 per cent in the current financial year ending in March 2014, Economic Affairs Secretary Arvind Mayaram said on Tuesday.

"It will be more than 5 per cent. It cannot be less than 5 per cent," Mayaram told reporters.

Mayaram also said as of now, a shutdown of the US government is not likely to have a major impact on the Indian economy.

"As of today, I don't see any major impact on the Indian economy on that account."

'India will fully finance CAD'

India will finance its current account deficit fully in the fiscal year ending March without drawing down on its reserves, and will also contain the fiscal deficit at 4.8 per cent of GDP, Economic Affairs Secretary Arvind Mayaram said on Tuesday.

Mayaram added the government would not have to go beyond the finance ministry's planned market borrowing for the year, and would be able to meet its budgeted revenue target.

Economic growth will pick up in the second half of the fiscal year, he said.

India's current account deficit grew less than expected in the June quarter and is tipped to ease in coming months as a pick-up in exports and lower gold imports improve the trade balance, offering relief to the battered rupee.

The current account deficit (CAD) for the three months through June was $21.8 billion, or 4.9 per cent of gross domestic product, driven by sluggish exports and high gold imports in April and May before the government hiked tariffs on the metal to a record 10 per cent.

IIFCL Tranche-1 Issue Period : October 03, 2013 to October 31, 2013

IIFCL Tranche-1 TAX FREE BONDS - SUBSCRIPTION FIGURES
	WITHOUT GREENSHOE OPTION				WITH GREENSHOE OPTION
									Unsubscribed
Category	Bonds Available	Response	Received	Over	Bonds Available	Response	Received	Over	Portion
	For Allocation	Recd	Rs In Crs	Subscription	For Allocation	Recd	Rs In Crs	Subscription	Rs In Crs
Category 1 (QIBs)	750000	200000	20	0.27	3750000	200000	20	0.05	355
Category 2 (NIIs)	1000000	513300	51.33	0.51	5000000	513300	51.33	0.10	448.67
Category 3 (HNIs)	1250000	1318620	131.86	1.05	6250000	1318620	131.86	0.21	493.14
Category 4 (RIIs)	2000000	927139	92.71	0.46	10000000	927139	92.71	0.09	907.29
Total	5000000	2959059	295.9059	0.59	25000000	2959059	295.91	0.12	2204.09

HUDCO Issue Period : September 17, 2013 to October 14, 2013

HUDCO TAX FREE BONDS - SUBSCRIPTION FIGURES
	WITHOUT GREENSHOE  OPTION				WITH GREENSHOE OPTION
									Unsubscribed
Category	Bonds Available	Response	Received	Over	Bonds Available	Response	Received	Over	Portion
	For Allocation	Recd	Rs In Crs	Subscription	For Allocation	Recd	Rs In Crs	Subscription	Rs In Crs
Category 1 (QIBs)	750000	1255000	125.50	1.67	4809200	1255000	125.5	0.26	355.42
Category 2 (NIIs)	1500000	2767974	276.80	1.85	9618400	2767974	276.80	0.29	685.04
Category 3 (HNIs)	2250000	5198367	519.84	2.31	14427600	5198367	519.84	0.36	922.92
Category 4 (RIIs/NRIs)	3000000	10813270	1081.33	3.60	19236800	10813270	1081.33	0.56	842.35
	7500000	20034611	2003.46	2.67	48092000	20034611	2003.46	0.42	2805.74

Tax Free Bonds : NHPC

Dear All, This is to informs you that NHPC Ltd (National Hydropower Corporation Ltd) Tax Free Bond issue is like open in the third week of October, 2013. Issue Size                :         Rs.500 Crores. Green Shoe Option        :        Rs.500 Crores.  Total Size                :        Rs.1000 crores.  Credit Rating                :        ICRA AAA, IND AAA, CARE AAA Listing                        :        NSE and BSE

Thanks & Regards,

Tax Free Bonds : Power Finance Corporation Ltd (PFC)

Dear All, This is to informs you that PFC Ltd (Power Finance Corporation Ltd) Tax Free Bond issue is like open in the third week of October, 2013. Issue Size                :         Rs.3875.90 Crores.  Credit Rating                :        ICRA AAA, CRISIL AAA, CARE AAA Listing                        :        BSE

Why equity investment is necessary for retirees :: Business Line

Last week, we discussed about how you can retire despite shortfall in your retirement portfolio. Several readers expressed their surprise regarding our suggestion that retirees should have equity investments in their portfolio, especially to meet their health-care expenses. After all, equity is risky, and retirees prefer stable investments. So, why invest in equity? In this article, we discuss the reasons why, as a retiree, you should have equity investments in your portfolio, whether or not you buy annuity!

Moderating inflation risk

If you use the bucketing approach that we discussed last week, you will use lifetime annuity to fund your post-retirement living expenses. In such a scenario, you should consider buying equity for two reasons.

The first reason: you should map equity investments to your emergency health-care needs such as major surgeries. Why? For one, as we discussed last week, you or your spouse may not incur large surgery-related expenses during the initial years of your retirement. And equity investments could provide higher returns than bonds during such long time-periods. Moreover, 10 years is reasonable time for you to recover losses that your equity investments may suffer during the initial years of your retirement. For another, health-care inflation is higher than food or other inflation that affects your basic living. So, you need higher return on your investment to compensate for higher health-care inflation.

The second reason: you need equity because annuity at present does not pay inflation-adjusted cash flows. This means that you will receive, say, Rs 50,000 through your lifetime, even if price levels increase by 7-10 per cent every year! So, even if you receive monthly cash flows for life, you may be forced to cut your living expenses because Rs 50,000 ten years hence will buy you lesser groceries than today. Equity investment may help generate higher returns to compensate for the increase in price levels.

Moderating longevity risk?

If you are like most individuals, you may prefer to invest in bank fixed deposits. But, you still require equity in your retirement income portfolio. Why?

When investing in fixed deposits, your interest income will most likely fall short of annual cash flow required to fund your post-retirement lifestyle. Because interest rate on fixed deposits is low, you may have to withdraw some of your investment capital every year to fund your lifestyle expenses. And as you withdraw capital every year, the interest income in the next year will be lower. This, in turn, will force you to withdraw more capital in the subsequent year and so on… till you run out of money. This is because your portfolio should earn minimum return every year to ensure that you do not wipe-out your investment during your lifetime. And fixed deposits typically fall short of the minimum return you require. You need to, therefore, invest in equity; higher returns on equity could reduce the quantum of capital you withdraw every year during your retired life.

But investing in equity creates another problem- you can still run out of money when you withdraw capital in years when the equity market is down! You can moderate this risk by setting aside 12 times your monthly living expenses in emergency fund. You should use this fund during years when your equity investment loses substantial value.

Conclusion

As a retiree, you should invest in equity for two reasons — to help you manage inflation effects on basic living expenses and health-care costs when you use annuity products, or to generate higher return when you use bank fixed deposits as your primary investment. In either case, you may suffer lower-than-desired lifestyle if you chose to avoid equity. This is not to say that equity is not without its associated risks; you can moderate your equity market risk by creating an emergency fund.