25 January 2014

ICICI Pru Tax Plan: INVEST :: Business Line


Rs 500 notes can be freely swapped at banks, says RBI

As the gullible common man went on speculating frantically on what to do with banknotes printed before 2005, Reserve Bank of India on Friday tried to calm the nerves by saying that public may initiate the process of exchanging notes at bank branches at their convenience.

RBI said its move to withdraw currency notes printed before 2005 is to check counterfeit notes and these notes will continue to be legal tender even after the July deadline.

It said that after July 1, 2014, public can exchange any number of these old series notes from the bank branches where they have their accounts. Non-customers of a bank will have to furnish proof of identity and residence to the bank branch in which they want to exchange more than 10 pieces of Rs 500 and Rs 1,000 notes.

The RBI clarified that the rationale behind its move to withdraw banknotes printed prior to 2005 is to remove these banknotes from the market because they have fewer security features compared to banknotes printed after 2005. "It is standard international practice to withdraw old series notes," it said on Friday responding to queries raised by several quarters.

RBI has issued the advisory on withdrawal of banknotes on January 22. It said it has already been withdrawing these bank notes from the market in a routine manner through banks.

"The volume of the banknotes printed prior to 2005 still in circulation, is not significant enough to impact the general public in a large way," it said.

The RBI has promised to monitor and review the process of withdrawal of old series notes so that the public is not inconvenienced in any manner. "This is not an attempt to demonetise," RBI governor Raghuram Rajan said on Thursday.

"It is an attempt to replace less effective notes with more effective notes. I understand people are making different interpretations. Unfortunately that should not be the interpretation."

Smarter Retirement Planning with Long Term Investments in Mutual Funds: ET


Out living your investments and not being able to maintain the desired lifestyle is a concern for every retiring investor. The key to this problem is to start investing early. Retirement planning helps you determine how much you need to save today to enjoy a stress-free retirement.

While creating a retirement plan, you evaluate several potential asset classes. Some of the popular choices are Pension Funds, Endowment Policies, investments in fixed assets like Real Estate, and Fixed Deposits.
While it is good to know the various options in the market, it is also important to know the characteristics of an ideal retirement plan that will help you make the most of these options.

A good retirement plan takes into consideration various factors like:

1. No. of years to retirement and the no. of years in retirement
2. Your current risk profile
3. Your financial goals and objectives post-retirement
4. Achieves a healthy diversification across asset classes

How can mutual funds help?

· Long term capital appreciation: 

Equity-based mutual funds have the potential to provide healthy long term capital appreciation. In addition, some funds offer tax benefits based on the investment horizon.

· Various Schemes

Mutual funds offer various schemes depending on your risk appetite and financial goals. There are equity schemes that provide you with capital appreciation and debt schemes that give you a regular income. Then there are Hybrid schemes that let you reap the benefits of both debt and equity and also Sectoral and Global funds that give you the opportunity to leverage specific macro and micro developments, even at a global level.

· Systematic Investment Plan (SIP)

Mutual Funds allow you to start with a small corpus and also give you the flexibility to invest regularly through SIPs. This is an ideal mode to build your retirement corpus. Most of us tend to underestimate the power of these small regular investments. A SIP helps you get organized and disciplined. The sooner you start investing, the more time your money will have to compound.

· Ability to Switch

As a young investor, you might be able to take higher risks for higher returns. Hence you might invest in an equity-based portfolio. However, as you near your retirement age, it is advisable to gradually shift your investments into safer avenues, which can offer a steady return with lesser risks. Once you retire, your risk appetite is nil and your funds should move into 100% safe asset classes that also offer liquidity.
A mutual fund offers you the facility to switch between funds of the same fund house. A Systematic Transfer Plan (STP) allows you to systematically move specific amounts from one scheme to another, in this case from equity towards debt.

· Income through Systematic Withdrawal Plan (SWP)

Systematic Withdrawal Plan (SWP) is an option under mutual funds that allows you to automatically withdraw specific amounts (or units) on a monthly/quarterly/half yearly/ yearly basis. It provides you with a regular income while the balance amount fetches you modest returns for lesser risk.

· Flexibility to Redeem lump sum amounts

Mutual funds also offer you the flexibility to redeem lump sum amounts as and when required (except in case of those having fixed tenure). This feature allows you to use mutual funds for planning for lump sum expenses after retirement - a world tour, a retirement villa or a recreational get-a-way perhaps!

Pitfalls:

Since mutual funds invest in equities, they are subject to market risks. Also, you need the services of an experienced financial advisor who can keep you abreast with the latest developments and assist you in making informed investment decisions.

How to get the best rate on auto loans :Rediff

In an online chat with Get Ahead readers, Harshala Chandorkar, senior vice president, CIBIL, answered their queries on auto loans.
Unedited transcript:
Zeel Kappor: How is the final amount payoff determined?
Harshala C: The 'payoff amount' is generally the current loan balance, plus interest due from the last received payment/EMI from you
zubeda-pawaskar: How will I be charged to any damages to my vehicle?
Harshala C: The bank will not charge you for any damages to the vehicle. You would have taken insurance and if the damanges are covered you may get them recovered from the insurance company.
jinny: Can I return the vehicle prior to its scheduled termination date?
Harshala C: Can you please elaborate on what do you mean by the scheduled termination date and to whom would you return the vehicle
sumeet salgaonkar: What is the cumulative interest payout?
Harshala C: The sum of all interest payments made on a loan over a certain time period is the cummulative interest.
ulfat: I have home equity line of credit and interest rates are currently low should I consider this to buy my next car?
Harshala C: Yes, if the terms and conditions of the home quity line of credit permit you to do so, you may use this to buy your car. Do have a word with the bank and check with them as well.
sheetal: How do I access my auto loan account online?
Harshala C: Your bank would have given you a User login and password. You may use that to access your account online
Venkatesh: Why is it that I got offered a different rate than my neighbor did for the exact same car from the exact same dealership?
Harshala C: There could be various reasons why your neighbour got offered a different rate of interest than you. - Your neighbour may have had an existing relation with that bank. - Banks check borrowers CIBIL Report and Score before sanctioning a loan. It is possible that your neighbour had a higher score and was hence offered a better rate.
Amit srivastav: Is there a balloon payment required at the end of this loan?
Harshala C: There are varied repayment options that banks offer - step up scheme - increase in EMI after 3.6. we months, low EMI and Balloon scheme - low EMI and balloon payment at the end, Advance EMI, etc. So it depends on what time of repayment option you choose for your loan.
debajyoti roychoudhury: Should one go for fixed rate or floating rate of interest. SBI charges floating rate of interest unlike private sector banks which charge on fixed rate of interest
Harshala C: Yes, most of the private sector banks charge fixed rate of interest for auto loans. If in your judgement the rate of interest is likely to go down during the tenure of the loan you should opt for a floating rate of interest else go for a fixed rate. But also keep in mind that the car loan is typically a 3 year loan and you should consider interest fluctuations for a period of 3 years
chandekar muley: Can I get 100% financing for my car?
Harshala C: Generally banks sanction upto 90% of the value. Howvere there could be banks who may offer 100% financing and it depends on the car that you plan to buy. Do your own research before finalising which bank you should approach for a loan.
Amol Dhurve: What are the charges I have to pay to change the mode of repayment/ account for my loan?
Harshala C: There are no charges for chaning the mode of repayment for your loan. However please confirm the same with your bank as each bank has differents terms and conditions for the loans sanctioned
Jaykar Kajale: What is the minimum and maximum tenure of car/auto loan?
Harshala C: Typically car loans are for 3-5 years
Firoz Khan: I have a home equity line of credit, and the interest rates are currently low. Should I consider using this to buy my next car? It would mean a lot less money on a monthly basis out of my budget
Harshala C: Yes, if the terams and conditions of the home quity line of credit permit you to do so, you may use this to buy your car. Do have a word with the bank and check with them as well.
umar khan: Do I need to pledge anything or give collateral to get a car loan?
Harshala C: Yes, the car will need to hypotheticated to the bank as a security.
Rajan sha: What will be done with the post-dated cheques if I request to change the mode of repayment/ account for my loan?
Harshala C: The bank will return the Post Dated Cheques back to you of you change the mode of repayment.
Satish Pulli: What documents do I need to submit after the loan amount is disbursed?
Harshala C: Typically the documents that you will need to submit are:• Proof of Identity: Passport copy, PAN Card, Voters Id card, driving licence• Income Proof: Latest salary slip with form 16.• Address Proof: Ration card/Driving licence/Voters card/passport copy/telephone bill/ electricity bill/Life insurance policy PAN Card.• Bank Statement: Last 6 months
Harshala C: Post the loan is disbursed the RC book would need to be submitted to the bank.

Financial Planning- 25 Jan :: Business Line





Fast-tracking investments:: Business Line

Focusing on awarding and implementing infrastructure projects can revive the economy.
Revival of the investment cycle will require a concentrated effort from the new Central Government. High fiscal deficit has reduced the Government’s ability to provide incentives or contribute towards investments. Under the circumstances, removing hurdles faced by projects will help.
Poor capacity utilisations in industries, such as capital goods, cement and automobiles, have led to slowdown in new investments. Oil and gas has been hit by policy uncertainty. No fresh investments are happening in refining, petrochemicals and pipelines.
Most sectors, except infrastructure, currently have overcapacity which is reflected in the inflation of manufactured products that show a complete collapse of pricing power.
As such the revival cycle has to be led by renewed consumer and investor sentiment as well as investments in infrastructure projects.
The first step

Huge delays in approvals make projects unviable. The first step towards reviving investments is to clear projects at a rapid pace where the onus should move on to the approving authority.
The land acquisition Bill is another major impediment for investments, not in terms of cost as actual land prices in most areas are already much higher than collector rates. However, the rules are onerous.
The steel and aluminium sector, in which India is competitive in terms of cost of production and hold potential to attract huge investments, has been hit by the ban on iron ore mining, Coalgate, land acquisition and environment clearance issues.
Private power producers need relief in terms of tariff relaxations. The demand by IPPs/UMPPs for Rs 0.5-0.75 relief a unit in most cases is miniscule when compared to the peak domestic power rates of Rs 8-10 per unit.
Relaxed environmental norms

Environment clearances need to have a deadline. We have moved towards one of the most stringent norms even at a low level of development.
As they say, Heavens will not fall if we relax environmental regulations for a fixed period till time-bound norms are finalised.
Subsidies

The next Government will need to implement market-driven fertiliser and fuel pricing. Though inflationary in the short run it will create a huge investment cycle by making these projects viable. It will free up resources and reduce the fiscal deficit by 1.5 per cent of GDP.
This will reduce domestic interest rates and attract foreign capital into the country. Sovereign rating will, in all probability, be upgraded and start a virtuous cycle
Road projects

Road projects are hugely positive for the economy as they generate large employment; require lot of inputs and machinery. Last year, National Highways Authority of India could award just 1,322 km against a target of 9,500 km. Easier exit norms, post-completion of projects combined with proper evaluation of bids, can help attract private equity.
An award of 8,000-9,000 km of projects a year will lead to an investment cycle of Rs 1,00,000 .
Agriculture 

Supply constraints need to be addressed, especially in agricultural produce where an estimated 33 per cent of the perishable produce worth Rs 2,00,000 crore gets destroyed.
APMC needs to be made optional and a the network of middlemen needs to be curtailed. There is need to set up food processing units, modern cold storages and transportation networks. The total storage capacity in the country currently is just 30 tonnes. Estimates indicate a requirement of another 37 tonnes requiring an investment of $20 billion. Urban infra projects
Projects, such as metros, overhead road/rail networks, water and waste water units are easier to execute as they do not have land acquisition issues. An initial focus on these could contribute strongly to investment revival. For example, metro projects in 20 cities would involve a layout of Rs 2,00,000 crore.
Investment in coal mines is the easiest to revive as monetary investments are low. This sector has been the worst hit due to the Coalgate and environmental activism.
Mining

Coal imports currently exceed $10 billion and can easily be replaced with domestic production. It will go a long way in reducing power costs and reviving the economy. Coal India’s monopoly needs to be revoked at the earliest. Coal prices can be benchmarked to global levels and mines opened up to private companies. Similarly, iron ore mining can restart in a big way from 2014 onwards.
Except for the fuel and fertiliser subsidy, none of the other steps is politically unpalatable. We need a revival in investor confidence and a focused approach on awarding and implementing projects. The economy can revive rapidly; it’s only a question of confidence.
A stable external situation and improving fiscal situation should take growth back to the 7-8 per cent range in the next two years.

NSE top-ranked globally for equity trades for 2nd year in 2013



This file photograph shows brokers trading on their computer terminals at a stock brokerage firm in Mumbai.
The National Stock Exchange retained its position as the world's largest bourse in terms of number of equity trades for the second consecutive year in 2013, while China's Shenzhen Exchange overtook the NYSE as the second largest.
NSE recorded almost 145 crore (1.45 billion) equity trades on its platform last year, a gain of 3 per cent from 2012, making it the biggest among 51 global peers, according to data with the World Federation of Exchanges.
Rival exchange BSE slipped one place to eighth position.
Although it has more than 4,000 listed companies, the BSE recorded 34.46 crore trades last year, a drop of 3 per cent compared to 2012.

This file photograph shows stock broker looking at a terminal while trading at a stock brokerage firm in Mumbai.
China's Shenzhen Stock Exchange recorded 129 crore (1.29 billion) trades, climbing three places to become the second-largest bourse in the world.
Trades on the Shenzhen SE, which pushed NYSE Euronext to third place, rose 38 per cent from 2012.   
Another Chinese bourse, the Shanghai Stock Exchange, moved up to fourth place from sixth in 2012, while the Nasdaq dropped two places to fifth.
Others in the top 10 include Korea Exchange (6th), Japan Exchange Group -- Tokyo (7th), Canada's TMX Group (9th) and London SE Group (10th).
The combined equity trade volume of NSE and BSE rose by almost 2 per cent to 179.4 crore in 2013.

A woman lights up lamps in a flower decoration during Diwali mahurat special trading on the occasion of Diwali.
Globally, the number of equity trades rose 6.6 per cent to 1,045 crore (10.45 billion).
The Asia Pacific region witnessed a gain of 13.7 per cent to 660.6 crore (6.6 billion).
According to experts, the positive trend in equity trades was bolstered by steps taken by the government and the Reserve Bank of India as well as sustained foreign institutional investment besides the global economic recovery.
"No doubt, the year 2013 will be remembered as the renaissance of equities as the financial crisis ended, while the year 2014 should see the end of the economic crisis bringing more opportunities for the market participants," SMC Global Securities Associate Analyst Kamla Devi said.

A man holds currency notes near a cash counter after withdrawing them inside a bank.
"Despite Fed's decision to taper its bond buying programme by $10 billion, the buying rally continued in the market," she added.
Echoing the view, CNI Research CMD Kishor Ostwal said: "The rise in equity. . . is for three reasons -- one, global rally; two, expectation of policy decisions post-general election of 2014, and three, the rate cycle is peaking and very soon can start reversing."
About 60 crore (600 million) trades were recorded on the Japan Exchange Group -- Tokyo, 71.4 per cent more than in 2012.
"The Japanese economy has seen a remarkable turnaround on the back of Abenomics, Prime Minister Shinzo Abe's three-pronged strategy for Japan's economy.
"Driven by a renewed inflow of foreign capital on the prospects of Abe's economic policies, the equity markets surged with the remarkable gains," Devi said.

A woman checks the rupee-dollar exchange rate at a foreign exchange bureau.
"China's Shenzhen Stock Exchange also has performed well on the back of the government announcement for far-reaching economic and social reforms," she noted.
Experts believe that 2014 would further stimulate the bulls in the stock market as better economic conditions are likely to prevail.
". . . the gap between mid cap, small cap and large cap has increased to a level which suggests huge action in mid cap and small cap stocks, going forward," Ostwal said.
"The general election results, which so far is in favour of Bharatiya Janata Party, too is driving investors," he added.
According to Devi, with "improving market conditions and investor confidence coming into place, trading volumes at the bourses are expected to see a decent rise, improving the depth and breadth of the market."



© Copyright 2013 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.

Old currency recall to curb black money: RBI deputy governor in ET

RBI deputy governor K C Chakrabarty said withdrawing pre-2005 currency notes would weed out counterfeits, curb black money and act as a disincentive for cash hoarders.

He was speaking on the sidelines of a panel discussion titled - 'Mobilize and monetize gold for the benefit of the Indian economy' at the Indian Institute of Management, Bangalore (IIMB) on Friday.

The apex bank has decided to withdraw all currency notes issued prior to 2005. From April 1 onwards, people will have to approach banks to exchange old notes.


Macro continues to dampen recruitment business - Info Edge:: Centrum

Macro continues to dampen recruitment business
We maintain Hold rating on Info Edge due to the challenging macro environment
impacting recruitment business as seen in Q3FY14 results where revenue growth
was 10.8% (collection growth 9-10%). Despite 99acres posting marginal operating
profit in the quarter, we believe the company will continue to invest in the vertical
to maintain market share in the highly competitive category. With 66% rally in the
stock price in the past 3 months on the back of expectations of quick recovery in
the recruitment business, investment in Zomato and strong profitable growth in
99acres, we believe there is no room for earnings upside and hence maintain Hold
rating on the stock
Q3FY14 results in-line with expectations: Revenue growth of 15.9% for the
company was in-line with expectations at Rs1234mn (estimate of Rs1234mn) on the
back of 10.8% YoY growth in recruitment business and 33.5% YoY growth in the nonrecruitment businesses. Operating profit was up 18.6% YoY on the back of 76bps
expansion in operating margins as admin & other expenses grew by mere 9% YoY.
Lower other income (down 12.8% YoY) coupled with higher tax rate (31.8% vs 29.6%)
resulted in PAT growing by mere 4.6% (4.2% below expectations).
Recruitment business posts double digit growth: Recruitment business posted
10.8% YoY revenue growth (~9-10% collection growth) on the back of healthy
growth in IT sector during the quarter and gain in market share from competitors.
Recruitment margin was up by 208bps on the back of lower ad spends in the
quarter. The company also launched an android app and a career site manager in
the period. Management expects future growth to depend on GDP growth rate.
99acres posts marginal profits: Though non-recruitment business posted an
operating loss of Rs32mn, 99acres posted operating profit of Rs4mn on the back of
39% YoY revenue growth coupled with lower A&P spends. Management expects to
invest in this business on new product development (android app, map search and
listing verification service), expanding in cities and brand building. Revenue growth
in jeevansaathi was mere 13% YoY with losses at Rs17mn. We believe losses in nonrecruitment businesses will continue in FY15
Valuation & Risks: We have marginally lowered our sales and operating profit on the
back of lower traction in recruitment business. We maintain Hold rating with a revised
target price of Rs525 on our SoTP valuations given the uncertainty in the recruitment
business on the back of sub 5% GDP growth rate, continued losses in nonrecruitment vertical and 66% increase in stock price in the past 3 months. Key upsides
could be faster than expected recovery in recruitment business and turnaround in
non-recruitment businesses

Revising to Hold on expensive valuations - eClerx :: Centrum

Revising to Hold on expensive valuations
eClerx delivered revenue growth slightly ahead of our expectations with strong
growth across both non-top-5 and top-5 clients. Though EBITDA margins at 40.5%
were 342bps below our expectations, investments in Selling & Distribution were
responsible for 206bps margin decline while G&A increase took away another
53bps. We think only better than expected traction can provide upside to our
estimates and given the sharp run-up since we initiated coverage, we urge new
investors to wait for a better entry point. We revise our rating downward to Hold,
but maintain our 1-year target price of Rs1,260.
Revenue ahead of expectations with some pull-in of projects from 4QFY14:
Though revenue growth was slightly ahead of expectations, this was the effect of a
budget-flush like situation with some clients, where planned activity for 4QFY14
was moved up to 3QFY14. Management suggested that almost 25% of the growth
this quarter could be due to this reason. We note that top-5 and non-top-5 growth
was strong with incremental revenue from both categories at USD0.8Mn (third
successive quarter where incremental revenue from non-top-5 has met or exceeded
top-5 contribution) thereby lowering top-5 client concentration further to 74%.
Investing more in Sales and Marketing to drive non-top-5 growth: Sales and
distribution (S&D) costs jumped 18.1% QoQ due to both addition in headcount as
well as provisioning for bonuses. Even excluding the reclassification of some
employees deputed from India as part of onsite sales, there has been an uptick in
sales headcount. We hope that sales investments to mine the non-top-5 financial
services clients will improve the non-top-5 growth even further.
Growth trajectory to remain unchanged despite client budget uptick for IT:
Since eClerx’s services mostly cater to operations, they do not expect a material
improvement to their growth trajectory even in the event of improved client
spending on IT. We think that there is potentially more work for eClerx as increased
spending on new systems creates more short-term projects such as data cleansing.
However, we think that these services may already be a significant portion of the
portfolio in the top-5 clients and improving traction might need closer alignment to
clients outside the non-top-5 and await results of the new sales strategy.
Downgrading to Hold given expensive valuation after recent sharp run up: We
retain our revenue estimates (awaiting clear signs of an improved growth trajectory
from sales investments) and reduce our margin estimates on account of sharp
increases in S&D costs. eClerx is currently trading at 12.2x 1-Year forward EPS. Given
concerns on client concentration and long-term scalability, we retain our target
multiple of 11x (and note that our target multiple for HCL Tech and Wipro is only
14x) and maintain our 1-Year TP of Rs1,260. Key upside risk to our call is from better
than expected revenue traction (which will mean EPS estimate upgrades) while the
key downside risk comes from significant rupee appreciation.

Tata Sponge - Deep value play, reiterate Buy :: Centrum

Deep value play, reiterate Buy
We see deep value in Tata Sponge (TSL) with cash at ~90% of current mcap and
core sponge iron business generating positive free cash flow along with robust
return ratios on account of high utilization, superior quality product and captive
waste heat power. We see valuations at 0.8x FY14E EV/EBITDA as unduly
overstating concerns on core business profitability and usage of free cash on
books. Even our highly stressed bear case throws a fair value of Rs380 for the
stock, an upside of ~20%. We reiterate Buy on the stock with a TP of Rs490, an
upside of ~55% (based on 60:40 probabilities for our base and bear cases).
Higher sponge iron price drives strong earnings show in Q3 despite one-offs:
During Q3FY14, TSL’s sponge iron realizations went up by ~10% QoQ and coupled
with lower iron ore costs resulted in strong EBITDA of Rs403mn (up ~84% QoQ),
margin of 20.3%. TSL incurred one-off expense of ~Rs140mn (Rs80mn in interest
costs and Rs60mn in other expenses) related to inter-state tax demand from income
tax department during the quarter and posted PAT of Rs243mn (up 33% QoQ).
Coal block faces de-allocation threat; to remove market concern on cash use:
TSL’s coal block (Radhikapur East) is faced with a real threat of de-allocation post
recent developments which indicate that blocks without any major clearances
could be de-allocated by the Supreme Court. TSL has spent ~Rs1.9bn for coal block
development (Rs1.7bn paid as advance to state government for land acquisition)
but does not have any major clearance yet. We believe that possible de-allocation
of coal block will help in removing investor concerns on usage of high cash on
books (~Rs4.3bn) to a large extent. Management expects return of advance paid in
some form in the event of de-allocation which will increase its cash pile further.
Return ratios adjusted for coal block investment robust: Return ratios for the
company (refer exhibit 2) remain strong (after adjusting for ~Rs1.7bn of advances
paid for the coal block) despite the very large cash pile (~Rs290/share as on Dec’13).
TSL’s core business of sponge iron manufacture is very robust in our view (no
PAT/EBITDA loss in the past 15 years across steel down cycles). Strength in import
landed scrap prices augurs well for sponge iron business of TSL which is expected
to continue generating positive free cash flows and earnings.
Valuations and risks: The stock trades at extremely low valuation of 0.8x FY14E
EV/EBITDA and 5.9x FY14E P/E. The core business has sound fundamentals and
generates positive free cash flows. Current cash at ~90% of mcap along with
dividend yield of ~3% are added positives. We reiterate Buy with a target price of
Rs490 and view Tata Sponge as an ideal investment for long term value investors.
Key risks include higher iron ore costs and drop in sponge iron prices.