DSPML Natural Resources and New Energy Fund - Overview

DSPML Natural Resources and New Energy Fund

Invest in Mutual Fund – Transact Online            Invest in Mutual Fund - Offline

DSP Merrill Lynch Natural Resources and New Energy (DSPML - NRNEF) is the new fund offered by the DSPML Fund Managers. This open-ended thematic equity fund will seek to invest predominantly in companies involved in the discovery, production, development or distribution of natural resources and in companies with businesses in conventional as well as alternative energy segments.

The fund will invest at least 65 per cent in Indian securities and not more than 35 per cent overseas through the feeder route. The overseas exposure will be routed through two funds — Merrill Lynch International Investment Fund's World Energy Fund and New Energy Fund. Up to 20 per cent can be invested in debt.

Investment proposition: The fund-house seeks to capitalise on the current boom witnessed in the natural resources space, especially commodities such as metals, minerals and oil. A consumption-driven growth pattern arising in the emerging markets is likely to spur demand for natural resources. Further, the urbanisation and industrialisation process in these economies could drive demand for natural resources that are inputs for building infrastructure/generating power. The fund has highlighted that, historically, natural resources demand tends to surge within few years of GDP per capita (on purchasing power parity basis) touching $3,000. India is said to be at such an inflection point, with GDP per capita of $3,802 in 2006.

On the energy side, while increase in price of oil has impelled exploration and development activity in the oil and gas space, higher environmental awareness and need to look for fuels that have unlimited supply and that are cheaper has led to increasing investments in renewable and alternative fuels such as wind energy, bio-fuels and solar fuel cells. The new fund hopes to capitalise on these areas as well.

Comment: The NRNEF theme holds potential given the current up cycle in commodities. Power as a theme also holds potential in India, given the huge projects planned to meet the power deficit situation in the country. However, in the oil and gas sector, there appear to be limited options at present in the listed space. As Sundaram BNP Paribas and Reliance have already launched funds with a similar positioning, there may arise a risk of too many funds chasing similar ideas/stocks, thus losing out on any 'early find' advantage.

This constraint may be overcome to some extent if the fund chooses to invest in companies that enable oil activities — typically offshore drilling companies, engineering in companies that produce rigs or those that enable transport of oil and gas.

Further, the fund's commodity universe also includes water and agriculture. Technologies that enable better utilisation of water resources and improved production in agriculture may also be investment segments that could open a wider universe to the company compared to peers.

As there are not too many significant companies in the alternative fuel space in India, the fund may be using the feeder route (through the New Energy Fund) to gain exposure to these areas. While this segment, no doubt, has good prospects, internationally non-conventional energy production is now driven more through offers of incentives by governments. For instance, in the US, production tax credits are available until December 2008 for producers of wind energy. Similarly, the European Union is proposing to introduce at least a 10 per cent ethanol blending for transport fuels through granting some sops. While the latter proposal has seen some resistance, an expiry of tax production credit in the US may discourage tapping wind energy as a resource.

While this is not to doubt the potential that alternative resources hold, it remains a fact that this space at present requires a lot of regulatory and monetary support to gain significance.

The benchmarks for the World Energy Fund and New Energy Fund have returned 19 per cent and 11 per cent respectively on a compounded annual rate over five years. This suggests that the theme is not suitable for investors looking for order-of-magnitude returns. The fund can, however, serve as a diversifier into a theme that is still evolving and may be suitable for long-term investors.

The global portfolio will be invested in World Energy Fund and New Energy Fund, managed by the BlackRock Investment Managers. The latter proposes to acquire a 40 per cent stake house in the DSPML fund house in India. The BlackRock Team also invests on behalf of DSPML's World Gold Fund. This fund has returned 63 per cent since its inception in September 2007 as against the benchmark FTSE Gold Mines (CAP) Index of 37 per cent.

The NFO closes on March 27.

Read More

RBI may not cut interest rates: FM

Finance Minister P Chidambaram indicated today that Reserve Bank of India (RBI) may not cut interest rates to boost industrial production because of high inflation.

"As long as there is a threat of inflation, you have to trust RBI to use policy rates to contain inflation and dampen inflationary expectations," Finance Minister P Chidambaram said at an India Today Conclave in response to a query whether there will be rate cuts to give a fillip to sagging industrial growth.

Chidambaram, however, said determination of interest rates is under the domain of the RBI.

He attributed high inflation to rising prices of food and commodity prices in the world saying India is not entirely insulated from the global trends.

Citing examples, he said global crude oil price surged to $110 per barrel yesterday from $37 per barrel when the UPA government came to power. Similarly, global prices of palm oil that India imports rose to $1,270 per metric tonne from $471 per metric tonne.

"We have recognised that there is a slowdown, thanks to the US impending recession. We have applied tax book economic approach to boost consumer demand by putting more money in the hands of tax payers, cutting excise and customs duties and enlarging public expenditure," Chidambaram said.

Read More

Our goal is to wipe out poverty: FM -

Finance Minister P Chidambaram replies to the Budget debate in Parliament.

I am deeply grateful to my good friend, Shri Vijay Kumar Malhotra and 62 other Members, according to my count, who have participated in this debate on the Budget that I presented last Friday. 

As a number of Members have said, the Budget is not a mere statement of receipts and expenditure, though that is what the Constitution says it will be.  Over the years, the Budget and the occasion for making a Budget speech has become a vehicle through which the government  can communicate with the people of India, a report on the state of economy and what the government  will do in the following year to promote economic growth with social justice. 

That is why, the Budget speech has become an event.  From my point of view, it is too much of an event these days, thanks to the media.  Nevertheless, one must adjust one's own feelings and thoughts on the subject in order to meet the requirements of the situation. 

When I heard Shri Malhotra and certain others from the Opposition benches, for whom I have great respect, it occurred to me that they had, perhaps, forgotten that they had also been in office for six years.  I think the habit of sitting in the

Opposition is so ingrained that you have forgotten that for six years, you were in office.  If that is where you would like to sit, let me wish you well.  Continue to sit where you are.  One should, therefore, make a true and correct assessment of what the state of economy was during the six years when the NDA was in office and what the state of economy today is.

It is certainly far from my mind to claim that everything was wrong in the NDA period and everything is right under the UPA government.  That is not the purpose of my statement.  The economic progress worldwide is measured on certain terms.  If you and I speak the same language, we must accept the same grammar.

We cannot claim to speak the same language, if each one follows different grammar. The worldwide economic growth and economic progress are measured in terms of the growth in the GDP, the growth in per capita income, the improvement in human development indicators, the fiscal deficit and the revenue deficit, the external account, particularly the balance of payments and the foreign exchange reserves, the rate of savings and the rate of investment in a country, employment and whether the benefits of growth are shared by a larger and larger number every year.

Poverty has been a major stigma in this country for several thousand years.   Our common goal is to wipe out the stigma of poverty.  The starting point of the journey, where we can claim that one day, not too distant future, poverty as we have known for five thousand years, is wiped out, is growth.

As I have said many times before, and I say it with humility, with growth there is a chance for equity, there is a chance for inclusive growth.  Without growth there is no chance for equity, there is no chance for inclusive growth.  If you will measure what has been achieved in the last four years in terms which are accepted world-wide, you will find that in the six years that the NDA government  was in office, the average GDP growth was 5.9 per cent, in the four years that the UPA government  is in office, the growth is averaged 8.8 per cent.

Now, the difference between 5.9 and 8.8 is not simply a number close to three.  The difference between 5.9 and 8.8 is the difference between modest growth, which will mean that we will take many years to wipe out poverty, and spirited growth, which will help us double the per capita income every decade, wipe out poverty much sooner than we had expected.

Full Text here

Read More

India Taxing Times - Over and above Section 80C

Over and above 80C

Section 80C is the not the only section under which you get tax benefits, there are some other sections as well.

The Income tax Act, 1961 contains several provisions which can serve as tools for saving your tax outgo. While everyone is more focused on meeting the 80C limits, here are a few more options.

Section 10 (35): This section grants exemption on long-term gains from mutual funds (if they are held for more than a year). Interestingly, the government taxes the interest income on our balance in savings banks and fixed deposits according to the income bracket.

The interest income is taxed in such a manner that only two-thirds of the interest earned is left in the hands of the tax payer if he falls in the highest tax bracket of 33.99 per cent (30 per cent + 10 per cent SC + 3 per cent cess), exceeding Rs 10 lakh. Similarly, post office savings bank interest is fully exempt under section 10(11).

Section 10 (38): This section gives benefits to investors in listed equity shares for more than a year. However, it is important to note that there is a distinction between 365 days and 12 months. Any scrip purchased on April 7, 2007 will complete 365 days on April 8, 2008 but not 12 months.

Courts have laid down that 12 clear months will be completed only on May1, 2008. Hence, the capital gain will be long-term, only when sold on or after 1 May 2008. If someone sells the shares after April 8, 2008 but before May 1, 2008, it will be treated as short-term and not eligible for exemption, even though the securities transaction tax(STT) is duly paid.

Section 80D: This section provides tax relief with respect to medical insurance premium. Union Budget 2008-09 has expanded the scope of this section by increasing the limit. Now, a person can get an additional benefit of Rs 15,000 for self, spouse, children and dependent parents.

Thus, a total tax relief of Rs 30,000 is now possible now. Also, if any of the two parents are above the age of 65 years, the deduction goes up to Rs 20,000. It is not necessary that the parents should be dependent on the taxpayer. It is important to remember though that the payments for the policies should be made by cheques and not in cash or by credit card.

Section 54EC: This section grants long-term capital gains exemption on any asset when the gains are invested within the next six months in the bonds of Rural Electrification Corporation or of National Highways Authority of India.

Last year's Budget, with effect from assessment year 2007-2008, (financial year 2006-2007) had put a ceiling of Rs 50 lakh as the amount that could be invested in such instruments by a taxpayer. But closer reading of the restrictions suggests that the ceiling is with reference to investment in a single financial year only.

In other words, if the investments are so made that they fall in two financial years, the ceiling of Rs 50 lakh could be raised to Rs 1 crore.

To illustrate, let us suppose that the long-term capital gain of Rs 1 crore arises on December 7, 2007, then the taxpayer can invest Rs 50 lakh before March 31, 2008 and another Rs 50 lakh after April 1, 2008 but before May 7, 2008, so that the time between gains and investment do not exceed six months from the sale date of December 7, 2007. Source- BS

Read More

Sensex - Get ready for the 15200 mark

Weekly Tech Analysis: Watch the 15,200 mark

The markets ended the week on a negative note amid high volatility. After tumbling at the beginning of the week, the bourses staged a dramatic recovery mid-week only to falter towards the end.

The Sensex, however, ended with a modest loss of 215 points at 15,760 after having swung 1,454 points. The index touched a high of 16,683 and slipped to a low of 15,229 during the week.

Technology stocks were the major losers, with Wipro and Satyam declining by 11 per cent each. TCS and Infosys fell around 5 per cent each.

Maruti, Tata Steel, Hindalco, BHEL, SBI and HDFC were the other major losers among the index stocks. On the other hand, ACC soared 9 per cent. Ranbaxy, NTPC and ONGC were the other major gainers, appreciating by over 5 per cent each.

The Sensex's low of 15,229 was exactly at the yearly S3 (support) level of 15,200 mentioned last week. The 15,200-mark on the downside and the 16,650 point on the upside will be crucial index levels for the rest of the month.

Break of the 15,200 level would see the index slide all the way to 12,100 in the coming days, with some support around the 13,900-level.

Volatility would remain considerably high due to the holiday-shortened week, with markets remaining open only for three days.

The Nifty moved in a range of 439 points. From a high of 5,019, the index slipped to a low of 4,580 and finally ended with a marginal loss of 26 points at 4,746.

The markets continue to remain bearish, with the index languishing below its 200-DMA (daily moving average). The long-term (200-DMA) is 5,077. The short-term (20-DMA) is 5,049 and the mid-term (50-DMA) is 5,331.

The Nifty is likely to find support around 4,580-4,525-4,475 and face resistance around 4,915-4,965-5,020 this week. Source- BS

Read More

High inflation would not allow RBI to cut rates: CEOs

Expressing concern at inflation rate touching a nine-month high of 5.11 per cent, India Inc on Sunday said the price rise would not let RBI slash interest rates even though such a step is required to give a fillip to the slowing industrial growth.

"With the crude oil price touching 110 dollar a barrel and the global equity market giving way to commodities touching new high, the inflationary pressure is likely to continue, disallowing the RBI to opt for cut in interest rates despite signals of a slowdown," said majority of CEOs in a survey by industry chamber Assocham.

The majority of CEOs surveyed by the industry body said the rising inflation has dashed hopes that RBI would cut interest rates to boost the sagging industrial growth.

"Government is confronted with the dilemma of keeping the inflation rate low and prevent further hardening of the interest rates, hence they are left with little elbow room," said Assocham President Venugopal Dhoot.

Also, about 85 per cent of the 130 CEOs surveyed stated, "While the government did announce fiscal measures in the Union Budget, the Indian economy cannot remain insulated from a sharp rise in global commodity prices".

On Saturday, Finance Minister P Chidambaram also indicated that RBI may not go for cut in policy interest rates due to high inflation rate.

In the backdrop of inflation breaching 5 per cent mark, to which RBI wants to limit it in the current fiscal, policymakers would refrain from moderating interest rates, especially in a year when several state assemblies have to go for polls, feel 74 per cent of the CEOs.

The industrial production in the month of January has grown by merely 5.3 per cent as compared to 11.6 per cent in the previous year. The growth in the manufacturing sector has halved to 5.9 per cent in January, compared to 12.3 per cent last year.

Nearly 83 per cent of the CEOs said that the budget proposals like reduction in general cenvat rate from 16 per cent to 14 per cent and in excise duties in auto and pharma sectors would not help contain inflation.

CEOs have also expressed fears of global energy prices rising further.

Read More

Home Loans - UCO Bank may reduce interest rate on home loans by 0.50%

Uco Bank may reduce interest rate on home loans by 0.50% - ET

UCO Bank said on Friday it may cut home loan rates by 50 basis points. The state-owned bank is scheduled to take a final decision on the proposal at a board meeting on March 15. It is not clear whether lower rates will be offered for home loans under Rs 20 lakh. The government had said that it is in favour of lower interest rates for home loans under Rs 20 lakh to meet demand. These loans constitute 80% of the advances classified under priority sector. "We have already cut down home loan rates by 50 basis points and may further cut down the rates by another 50 basis oints," Uco bank chairman and managing director S K Goel said. On raising capital, Mr Goel said the bank would take a view only when market stabilises. If markets do not stabilise till June, the bank would raise about Rs 250 crore through qualified institutional placement, he said. Smaller loans have less risk weight than those above Rs 20 lakh and, therefore, bankers have incentives to lend to these borrowers at lower interest rates. Several banks, including SBI, Canara Bank, Allahabad Bank and HDFC, have reduced lending rates by 25-50 basis points. The largest private bank, ICICI Bank, has said there could be softening of rates in the first quarter of the next fiscal. SBI charges 10%- 11.5% for loans up to Rs 20 lakh. Mr Chidambaram's recent call for softer interest rates could mean further lowering of interest rates in the home loan segment.

Read More

HDFC not to cut rates for now

A DAY after finance minister P Chidambaram pitched for lower interest rates on home loans up to Rs 20 lakh, private sector housing lender HDFC on Friday said it was not possible for now to further slash lending rates. "If you ask if there is any possibility of reducing the interest rate then I will say not right now... because in the month of March, the market becomes tight due to corporate tax payment," HDFC joint managing director Renu Sud Karnad told reporters here. When asked if she saw any scope for reduction in interest rates, Ms Karnad said: "I cannot say on this with certainty... but it is for sure that interest rate will not go up further." Last month, DFC lowered its prime lending rate by 0.25% to 13.25%. HDFC, having 0.92% default rate, is looking at growth of 25-30% during the next fiscal on the back of a boom in housing construction activity in the country. "We will achieve 25-30% growth in the coming fiscal in terms of loans disbursement," she said.

Read More

IPO Watch - Gammon Infrastructure Projects

Company: Gammon Infrastructure Projects

Issue Size: Rs 276-331 crore

Price Band: Rs 167-200

Date: March 10-13, '08

Rating: **1/2

Gammon Infra's IPO is expensive compared to its listed peers. Investors can get the stock cheaper in the secondary market

GAMMON INFRASTRUCTURE Projects (GIPL), one of India's leading infrastructure project developer and promoter, is coming out with an IPO of 16.5 million shares of face value Rs 10 each. The issue is being made via a 100% book-building route and represents 11.45% of the post-issue paid-up equity capital of the company. Retail and high net worth individuals can pay only Rs 50 on application, and the balance can be paid by the due date. GIPL is raising money to invest in upcoming BOT projects and repay its loan to Gammon India (GIL). At its offer price, the stock looks expensive compared to its listed peers, even as it offers good growth prospects in the long term. But considering weak market sentiment, it may be difficult for investors to make listing gains. We advise retail investors to avoid the issue as they may get the stock cheaper in the secondary market.

BUSINESS: Promoted by GIL and incorporated in '01, GIPL undertakes projects on a public private partnership (PPP) basis. Post-issue, GIL's equity stake in GIPL will fall to 73% from over 82% now. All projects are promoted through the respective SPVs and GIPL acts as their holding company. It is currently working on projects in highways, ports, hydroelectric power and biomass power sectors on a PPP basis and plans to bid for projects in urban infrastructure, airports, mass rapid transit systems, power transmission lines and SEZs.

Its current portfolio includes 14 projects, of which, four projects (three in highways sector and one in ports) are already operational. Seven other projects are in development or construction phases. These include the 99.5-km stretch of road on NH-3 connecting Mumbai and Nasik, and construction and development of offshore container berths and container terminal at Mumbai Harbour for Mumbai Port Trust for an initial period of five years. In the first half of FY08, annuity revenues from highways projects accounted for nearly 75% of GIPL's revenues, while 13.6% came from port operations. Toll revenues (2.3%) and operations & maintenance income (9%) constituted a small portion of GIPL's revenues.

FINANCIALS: The first half of FY08 was not too great for GIPL as its revenues and profits were half that in FY07. FY09 may be much better, with expected commissioning of five more projects. By FY11, a total of 11 projects are expected to be operational.

VALUATIONS: At its upper price band, the issue is valued at around 70 times its FY08 estimated EPS, 25-30% higher than the P/E of listed peer, IRB Infra, and nearly double that of umbrella infrastructure developers such as L&T and HCC. Our estimate is based on the assumption that GIPL will continue to grow at the pace shown in H1 FY08 and FY07. Such high valuation minimises the possibility of post-listing gains. But GIPL claims that at the offer price, its m-cap will be only 50% of the gross value of its assets, which will generate consistent cash flows in the long term.  Source - ET

Read More

Union budget : What the Experts Says

Mr. Sivasubramanian KN, Senior Portfolio Manager - Equity, Franklin Templeton

The Union Budget largely maintained policy direction with the focus on agriculture and education sectors. Despite the moderation witnessed in interest-rate sensitive sectors, economic growth projections remain strong and higher tax revenues are pushing up tax-to-GDP ratio and lowering deficit projections. However, the headline expenditure numbers do not reflect off-balance sheet items such as oil bonds & fertilizer subsidies and the waiver of loans to small/marginal farmers. Vews and reactions of Mr Sanjay Labroo, President Automotive Component Manufacturers Association and CEO Asahi India Glass. The reduction in the Cenvat rate from 16% to 14% and the reduction of Excise Duty on Small Cars, Two/Three Wheelers, Buses, Hybrid and Electric Vehicles will promote growth in the automotive industry, Mr. Labroo added. The reduction in the Customs Duty on Steel and Aluminum Scrap from 5% to 0% is a very welcome step as these are critical raw materials for the auto-component sector.

 

Mr. Rajesh Jain, CMD, EMCO

The major announcement in the Budget about Farm Loan waiver of Rs. 60,000 Crores is a clear indication of the Government's preparation for an early election. Some of the positive directions in the Budget for the Power sector are - Announcement of Transmission & Distribution Reform Fund and Setting up of Coal Regulator. Unfortunately, the time frame for both has not been specified. Overall, I would like to give the budget 7 out of 10 and for the power sector initiatives, 6 out of 10.

 

Mr. Jignesh Shah, MD & CEO, MCX

The Commodities markets are global asset class and trade flows to most efficient markets which has least cost of trading. With the addition of Commodities trading tax, Indian market will become unusable for risk management. The budget has added an incidence of 12% service charge and Rs.17 per lakh for commodities trading which will increase the cost by more than 800%. This taxation was introduced in securities market with attendant benefit of long term capital gains and allowing futures income loss to be treated as normal business income loss. The commodities markets have not received these two incentives and have exclusively been burdened with transaction cost which will make our market inefficient compared to similar global markets.

 

Mr. Makarand Padalkar, Chief Financial Officer, i-flex® solutions

Overall the budget is neutral to positive and the finance minister has done a fine job of balancing between a long-term growth perspective and political and social needs. The budget also recognizes the importance of a knowledge society and the necessity of moving India from the analog to the digital world. It also promises a more inclusive digital future and a reduction in the digital divide. The allocation of substantial funds for various education schemes, the opening of new IITs will certainly help the IT industry to get qualified manpower even from Tier 2 and 3 towns. The use of smart cards for disbursement of funds is good for e-governance and should help minimize leakages in disbursements. The IT industry was waiting for was the extension of the STP scheme. Unfortunately, there is no mention of it at all in the budget. We believe that this was one opportunity to strengthen India's competitive position.

 

Mr. Arvind Mathew, President & Managing Director, Ford India

A mixed bag for the Auto Industry : Despite long requesting for the rationalisation of the excise duties on the various segments, but it was disappointing to see that our request on uniform excise tax has been neglected for yet another year. Reducing the excise duty on the small cars alone has actually widened the gap between small and other car segments. The excise duty on the mid-size car now stands at 24%, double that of a small car, which is disappointing for the customers of mid-size and larger cars. Though reduction in corporate taxes and customs duties, which automobile industry were eagerly been awaiting for, is another miss in the budget. But reduction in customs duties for project imports will benefit us and is a welcome step, especially in light of Ford India's recent expansion and growth plans. There have been no significant investments made for improving roads, ports, etc, other than focus on the power sector. This budget primarily focuses on social sectors, health and education. On an overall positive side, the budget offers significant income tax exemptions to the salaried, which will help put more disposable income in the hands of consumers. This will result in the growth of consumer spending, and may benefit the auto sector.

 

Mr. Baba N Kalyani, chairman and managing director, Bharat Forge

This perhaps is the last full Budget of the present Government. In spite of this the Finance Minister has displayed remarkable courage in pursuing economic reforms. There are several notable features in this budget that would contribute to a stable macro economy. However from a manufacturing industry perspective some of the most significant are reduction in Excise duty on small and hybrid cars as well as buses; reduction of CST from 3% to 2%; reduction in customs duty on project imports and critical input material like steel melting and aluminium scrap; reduction in cenvat rate from 16% to 14%; and allocation of Rs.750 crores for upgradation of 300 ITIs. Will this Budget contribute in generating further momentum in the "India Growth Story?" Clearly the answer is in the affirmative.

 

Mr. Bala Reddy, Chairman & Managing Director, ICSA INDIA LTD

The budget for 2008-09 is well crafted keeping the economic growth target and future in mind. A positive budget with emphasis on social (education, health care), agriculture and power sectors foster development and creates opportunities. Increased spending on existing flagship schemes and introduction of new schemes will immensely benefit the social sector. Similarly, benefits to the agriculture sector in the form of loan waiver and re-eligibility will boost the agriculture production and the overall sector's performance. Reduction of excise duties and benefits in personal income taxes will give impetus to manufacturing sector. It is encouraging to know that Rs. 8000 cr have been planned for power reforms, besides APDRP program receiving continued impetus. Additionally, the creation of a national fund exclusively for T&D reforms creates immense opportunities for companies like ICSA whose special focus is into T&D segment of the power industry.

 

Mr. Nirmal Jain, Chairman and Managing Director, India Infoline Ltd.

The Budget is a mix of populist measures and efforts to sustain growth. On the positive side, cut in excise duty rates and lower incidence of personal tax i.e. higher disposable income would give the required impetus to the consumer demand. On the negative side, failure to lower the corporate tax or dividend tax is a missed opportunity. Loan waiver may be a big positive for the PSU banks as possibly farmer loan NPAs get replaced by government debt which has highest security. But it will affect government finances adversely. Stock markets, a bit disappointed on increase in short term capital gain tax and non removal of surcharge on corporate tax, will soon see that fundamentals of the economy remain robust.

 

Mr. Karl Slym, president and managing director, General Motors India

The budget is encouraging due to its focus on agriculture, irrigation, education health care and power. Since it addresses some of the concerns of the industry in general, it should help fuel demand and economic growth going forward. As far as the automotive industry is concerned, however, it did not fully meet expectations. The industry expected a reduction in excise duties for all cars, which has not happened. The automotive industry is one of the growth drivers of the economy. As such, deduction of excise duty for all cars would have generated increased sales, thereby contributing to the exchequer. On the other hand, reductions in Excise Duty of Small Cars from 16% to 12% and for Hybrid Vehicle from 24% to 14% are welcome decisions.

 

Mr. Shravan Gupta, Executive Vice-Chairman & Managing Director, Emaar MGF Land Ltd

The Finance Minister clearly spelt out that the focus for Budget 2008 in his own words "Doing more and doing better". The focus, in our view, continues to be on greater good for equitable growth as well as inclusion and Mr Chidambaram has done a fine balancing act with a favorable bias towards the 'aam aadmi'. The thrust area continues to be addressing concerns of farmers, boost scope for women welfare, health, education and Bharat Nirman.

 

Ms. Mona Chhabra, Associate Director, Ernst & Young

Given the backdrop of rising construction costs and a tempering of selling prices, the hike in excise duty on cement could have some adverse impact on real estate developers. There is however some positive news in the form of the possibility of avoiding the incidence of double dividend distribution tax since a lot of real estate assets are held in subsidiaries.

 

Mr. Saminathan, MD - Pyramid Saimira Group

For entertainment industry this is a neutral budget; but simulation of debt market and harmonization of dividend distribution tax between holding & subsidiary is positive for Pyramid Saimira".

 

Mr. Mukund Choudhary, MD - Spentex Industries Limited

The Budget has provided relief to the agriculture sector and individual tax payer but missed out in providing something substantial to the industry. The textile industry which is already under tremendous pressure due to increasing raw material costs, obsolete machinery, appreciating rupee as well as domestic inflationary pressure has nothing to look forward to in this budget. The textile industry was expecting cuts in the customs duty and certain sops which would have helped the industry to tide over the difficult situation that it is in now. Even, the marginal increase in the allocation for TUF from Rs 911 crore to Rs 1090 crore is too little, it will not even cover the disbursement for the year".

 

Mr. Amar Babu, Managing Director, Lenovo

It is a known fact that our industry has been impacted due to the low abatement rate fixed by the Govt for MRP-based excise duty. We need to see the finer details on this. Uniform CST is welcome and makes the supply chain simpler to operate. The budget has not addressed the special additional duty (SAD) being levied today which is hurting manufacturing units. We are studying the impact of the reduction in excise duty from 16% to 14% for our industry.

 

Mr. R.Sivakumar, Managing Director - Sales and Marketing, South Asia, Intel

We are excited that the budget is focused on building the social infrastructure by increasing broadband connectivity and strengthening the education system across India. These measures are a step forward for transforming India into a knowledge society

 

Mr. Susir Kumar, Chief Executive Officer, Intelenet Global Services

We are happy that the government has decided to increase spending on education by 20% and with the focus on knowledge and skill development. The measures being introduced by the finance minister on skill development of the working class will help build people with the right caliber and this definitely have a positive effect on the BPO industry which is people intensive. However from an industry perspective, we are extremely disappointed as the industry was expecting the FM to extend the 10 year tax holiday under Sec 10A and 10B which is set to expire in March 2009. The BPO industry in India is still a young industry as compared to the IT industry and needs the support of the government till it reaches a phase of growth and maturity.

 

Mr. Nishant Fadia, Chief Financial Officer - Prime Focus Limited

The Hon'ble FM was expected to present a populist budget. But, the 2008 budget has been disappointing for the media and entertainment industry as yet again there was no sops or recognition for our sector. The Indian film and entertainment industry being one of the fastest growing sectors would have liked a tax holiday or special tax concessions. Though the Indian corporate sector is doing quite well, we were also expecting a reduction in corporate taxation, or the surcharge should have been removed.

 

Mr. Manoj Chugh, President, India and SAARC, EMC Corporation

Overall, the budget looks to focus on enhancing long term economic growth through stronger investments in social infrastructure. In this direction, investment in education for not only spread but also improvement of quality is encouraging. The setting up of additional IIT's and a fund for improving employability of our workforce are positive initiatives from the Finance Minister to address the manpower needs of the technology sector. Investments in excess of Rs. 800 crores in the area of building a knowledge infrastructure including broadband, SWAN and data centres will definitely enhance our capabilities and support our belief that information sharing across the country will lead to a more inclusive economic growth. We are also encouraged by the reduction in custom duties for IT hardware components, as it will lead to lower prices and higher consumption in the domestic sector.

Read More

Mutual Fund Identification number - MIN

MIN and bear it: Here's what you need to know

THE mutual fund identification number (MIN) seems like a nasty surprise for many investors going by the immediate implementation of its applicability. Here are  several practical elements that will come in play while an investor is looking to take the number.

Requirement:

The most important component of the entire number process is the requirement for an investor to have this identification number. Currently, a single investment in the various participating mutual funds equal to or more than Rs 50,000 requires a MIN. If a person wants to avoid using the MIN then he has to ensure that single investment should be less than Rs 50,000. For example, an investor wants to make two separate investments of Rs 30,000 each in a scheme within a period of one month. In this case, there is no requirement for MIN. If the investment is Rs 50,000 and Rs 10,000 then a MIN is required. Currently, MIN is required for new investments. Further, even dividend reinvestment will not be subject to the requirements of MIN. According to a financial planner, the problem is that if there is an existing systematic investment plan (SIP) or a systematic transfer plan (STP) and this is for a sum of Rs 50,000 or more, even though the instructions might have been given at an earlier date, it will be considered as a new investment and will require a MIN. Further, the limit of Rs 50,000 is the figure applicable today and this can be changed at any point of time, hence investors need to be careful.

Actual process:

As the actual process of applying for the MIN begins, the troubles also starts. The requirement for MIN does not exclude anybody. There are various holdings and folios where there are two holders or joint holders. In such a case, both the investors need to have a MIN even though the first holder who is also receiving all the benefits is doing the entire investment. The next is the requirement of a photograph to be submitted with the application. The photo has to be with a white background. If you were thinking of giving a single document and completing the entire process then this will not work because a minimum of two documents will be required. The first is a copy of the PAN card. But most investors will say that this has already been submitted to the fund once and also verified. That might be the case, but here another copy of the PAN card is needed. This will also qualify as the proof of identity because there is a photo on the PAN card copy. In addition, an address proof is also required. Now comes the tricky part for the submission of these documents and their copies. Several frequently asked questions issued by funds talk of allotment of MIN on the spot but as many investors will realise this is not the case and the investor will get their MIN after a few days. In the process, the investors have to ensure that their document verification is complete by taking along the original documents at the time of submission, which will be verified and returned. If you are not able to go or send someone personally with the original documents then these have to be certified, which means that they have to be attested or gazetted or notarised by the appropriate authorities. Most investors may find this document part very tricky to complete because several of them would not like to give their original documents to others while submitting the application form and hence would need to get them certified. There is one additional section in the form that has to be filled in which somewhat amounts to an invasion of privacy. The gross income of the individual is required to be given within various brackets that are mentioned on the form. In addition, the occupation and also whether the investors is a civil servant bureaucrat, current or former MP, MLA or MLC, politician or current or former head of state has to be mentioned.

Non compliance:

If the requirements are not complied with and the individual does not have a MIN then the mutual fund will cancel the original investment made and redeem the units less the applicable load and return the money to the investors. This will happen in both existing schemes as well as new fund offers. This can also happen if the MIN application of the investor is rejected and the number is not allotted when a high-value investment is made. So, for all investors who thought that they had completed the administrative process by submitting PAN copies some time earlier, there is more work to do.

Read More

Union Budget (08-09) stimulus is not enough

Budget stimulus is not enough - ET

The government's attempts to stimulate the economy in the face of a coming recession are half-hearted, misdirected and technically flawed. They will at best have very partial success, says Swaminathan S Anklesaria Aiyar.

THIS year's budget is not simply an election budget. It is also an anti-recession budget. It seeks explicitly to stimulate the domestic economy in the face of the coming global slowdown. Yet the exercise will have at best very partial success, for two reasons. First, the finance minister is bound to sacrifice growth for inflation control in an election year. He knows that voters are not notably grateful for an additional 1% of GDP growth, but are notably angered by a 1% increase in prices. Second, current policies are so badly designed that much of the real stimulus will leak out of the economy into imports (especially oil), stimulating OPEC rather than India. What should India do to combat the coming global slowdown? The answer is complicated by the fact that commodity prices have shot up even as world economic growth has slowed. The price of oil has touched a staggering $109/barrel, wheat is up 100% and iron ore 65%. In recessions, commodity prices typically plunge along with economic activity. But maybe not this time. A mild global recession will reduce GDP growth from 10.5% to 9.5% in China, and from 8.5% to may be 7.5% in India. But these rates are still very high, and will consume a lot of commodities. Today developing countries account for the lion's share of world GDP, and are at a commodity-intensive stage of consumption. So, some slowdown in Asian GDP may not slow down commodity prices. For finance minister Chidambaram, this poses an acute problem. The classical way to combat a recession is to stimulate the economy through fiscal policy (cutting taxes, increasing government spending) and monetary policy (lower interest rates to stimulate housing, consumer credit, and industrial investment). Problem: the additional stimulus might translate into higher prices as well as higher growth. The growth stimulus in the budget has taken many forms. The exemption limit for income tax has been raised from Rs 1.1 lakh to Rs 1.5 lakh per year, tax brackets have been widened, Cenvat has been cut from 16% to 14%, additional excise cuts have been decreed for the auto sector, pharma and paper. Customs duty was to be cut to ASEAN levels, but this has been postponed, to boost domestic industry in view of the appreciating rupee and global slowdown. The massive farm loan waiver has been seen mainly as a populist attempt to win the next election. But it also represents a big boost in rural purchasing power, and so is an anti-recession tactic. High government spending boosts purchasing power, and the budget has substantially increased outlays on rural infrastructure (irrigation, roads, power, telecom) and social spending (employment guarantee, education,  health). This represents synergy between the twin aims of winning votes and stimulating the economy. Fiscal deficits are normally increased in a recession to stimulate demand. Chidambaram, however, proposes to cut his fiscal deficit to 2.5%, from 3.1% in 2007-08. Caveat: the Pay Commission award will raise this by may be 0.5% of GDP. Besides, under-recoveries in oil, fertilisers and food represent an implicit fiscal deficit of a whopping 2-3% of GDP. These underrecoveries are only partly covered by oil and fertiliser bonds — huge arrears to the fertilizer and oil industries remain unpaid. SO, THE fiscal deficit is not low and falling, it is high and rising. Every time the world price of oil, fertilisers and wheat rises while Indian prices are held constant, the implicit government subsidy (and hence implicit fiscal deficit) goes up. But while this may shock fiscal fundamentalists, Keynesians will applaud it as an anti-recession stimulus. I am not among those cheering. Keynesian economics was formulated for a closed economy. But India is now substantially an open economy. So, a budget stimulus can stimulate imports rather than domestic production. In India, the biggest stimulus by far is the implicit and rising subsidy for oil, which raises oil import demand. This stimulus leaks out of the Indian economy to

countries from whom we import (notably OPEC countries), and to that extent is wasted. Besides, a budgetary stimulus may stimulate prices as much or more than growth. If the economy has much spare capacity, a stimulus may mean more production. But if there is little spare capacity — which is the case for most commodities — a stimulus will raise mainly prices. India, and indeed the world, is running short of commodities. The farm loan waiver will increase rural demand for food, and that may stoke food inflation. Chidambaram may not raise prices in the public distribution system, but the bulk of the population depends on open market purchases. He can aim at higher supplies by banning all exports of rice, though that might antagonise rice farmers. He could ban exports of maize and dairy products, and increase imports of wheat, to be sold at controlled prices through ration shops. Nevertheless, since world prices are far above Indian prices, inflation will tend to rise. As for monetary policy, the RBI has announced no interest rate cuts, though Chidambaram has obliged government banks to cut their lending rates a bit. India is not following the lead of the US in cutting rates sharply because Chidambaram is scared of inflation. He will slash interest rates only when prices are firmly under control, and that seems unlikely in the immediate future. Many economists will argue that monetary policy can control only core inflation, and not the food or fuel prices, the ones Chidambaram is most worried about. Nevertheless, he is so worried about inflation that he is reluctant to use monetary policy to stimulate the economy. Finally, stock markets have slumped globally with the global economic slowdown. Initial public offerings of topnotch companies like Wockhardt and Emaar have flopped. So, another source of investment has been curtailed. In sum, the government's attempts to stimulate the economy in the face of a coming recession are half-hearted, misdirected and technically flawed. So, they will have only a partial impact. Expect a significant slowing of growth, with serious pain in some sectors.

Read More

Key Economic Indicators - India

India
Key Economic Indicators
Weekly	23-Feb-08	16-Feb-08
WPI Inflation (%)	5.02	4.89
	29-Feb-08	22-Feb-08
Foreign Exchange Reserves ($bn)	301.2	294.6
Fortnightly	15-Feb-08	1-Feb-08
M3 % Growth	21.7	24
Bank Deposit % Growth	24	27.3
Bank Credit % Growth	21.9	22.9
Monthly	8-Jan	7-Dec
Exports (% Growth)	20.5	16
Imports (% Growth)	63.6	18.1
Monthly	8-Jan	7-Dec
IIP % Growth	5.3	7.6
Mining	1.8	3
Manufacturing	5.9	8.4
Electricity	3.3	3.8
Quarterly growth rates (1999 - 00 prices)	2007-08 Q2	2007-08 Q1
GDP	8.9	9.3
Agriculture, forestory and fishing	3.6	3.8
Industry	11.1	10.6
Services	7.8	10.6

 Source - ET

Read More

Global Economy - Keyindicators

Global Economy - Keyindicators
Countries	CPI YoY %	latest date	Real GDP YoY %	latest date
Brazil	4.5	12/31/2007	5.7	9/30/2007
China	6.5	12/31/2007	11.2	12/31/2007
France	2.6	12/31/2007	2.2	9/30/2007
Germany	2.7	1/31/2008	2.5	9/30/2007
India	5.1	12/31/2007	8.9	9/30/2007
Indonesia	7.4	1/31/2008	6.5	9/30/2007
Japan	0.7	12/31/2007	1.9	9/30/2007
Malaysia	2.4	12/31/2007	6.7	9/30/2007
Mexico	3.8	12/31/2007	3.7	9/30/2007
Russia	11	12/31/2007	7.6	9/30/2007
South Korea	3.9	1/31/2008	5.5	12/31/2007
United Kingdom	2.1	12/31/2007	2.9	12/31/2007
United States	4.1	12/31/2007	2.5	12/31/2007

Read More