The New Indian Express : 2019-02-11

PERSONAL FINANCE : 15 : 15

PERSONAL FINANCE

A5,300 cr was infused by FPIs in Indian equity markets in the last six trading sessions, mainly on expectations of higher economic growth. 15 11z02z2019 MONDAY CHENNAI WHEN MARKETS ARE CHURNING, GOLD GLINTS MARKET WATCH This may be time for gold to make a comeback. Gold has always had a safe haven status when other asset classes turn volatile have moderated a bit, and experts expect some more volatility ahead on account of global trade, economic concerns as well as upcoming national elections. This may be the time cautious investors could shift back to gold, for the yellow metal has always had a safe haven status when other asset classes turn volatile. From hovering around `30,000/10g for months, prices of gold on MCX moved up, making a steady climb to `33,000/10g. Earlier this week, in the retail market, it jumped above `34,400/10g, not far from a record high of `35,074 hit in August 2013. Local prices have jumped more than 13 per cent in last six months. Experts said that a multitude of factors ranging from demand for jewellery to geopolitical reasons impact demand for gold in India. WGC expects jewellery demand in India to pick up this year with more auspicious days mentioned in the calendar. Whenever there is uncertainty and macroeconomic concerns such as a tariff-driven trade war, people tend to gather gold. As per a recent report by ARSHAD KHAN Karvy Consultants, this year is foreseen as a mixed one for the commodities and currencies market. “Forecast of two interest rate hikes in the year 2019 by the US Federal Reserve will lead to increased investment in the bullion,” the report said. Ramesh Varakhedkar, CEO, Commodities & Currencies, said, “Given the global economic uncertainties that could prevail, 2019 is expected to be the year of bullion where gold and silver are likely to be outperformers.” Further, the ability of gold to hedge the volatilities increases its demand. Gold and equity are negatively correlated to each other. When equity markets are under stress, gold prices tend to be high. But with gold prices nearing an all-time high, is it a good time to invest in it? Experts say the current prices are too high and the returns can be meagre at these points. A recent report, quoting a Mumbai-based dealer, said that the rally has, however, been prompting many retail consumers to postpone purchases and has encouraged selling. “Some retail consumers are selling gold instead of buying. They are cashing in on higher prices,” the dealer said. @ New Delhi L28K-29K ndian investors have shown marked preference for financial investments in the last two years (forced in part by demonetisation), pushing mutual fund Assets Under Management to an alltime high last September. Physical assets took a back seat, including gold. India’s demand for gold jewellery weakened marginally on year to 598 tonnes from 601.9 tonnes. The bar and coin market too saw annual demand fall 4 per cent to 106.2 tonnes in 2018, according to the World Gold Council report. “The weakness of the Indian rupee pushed the gold price to `31,900/10g during October, its highest level since June 2012. And India’s leading stock market — the SENSEX — continued to hit new highs, grabbing the attention of many urban investors. Finally, the government’s continued clamp down on illicit money has removed an element of demand from the market,” WGC said. Since September, the equity markets have turned highly volatile, mutual fund flows L34,400 PTI ithout getting into a debate on whether the Interim Budget was a ‘Statement of Economic Intent’ or an ‘Announcement with Electoral Intent’, let us focus instead on how it and the newfound dovish stance of the RBI could impact investments across traditional asset classes. To start with, there is a proposed rebate on gross total income up to `5 lakh (not above), hike in Standard Deduction for the salaried persons from `40,000 to `50,000, and a hike in TDS threshold on interest on bank and post office deposits from `10,000 to `40,000. Will these announcements boost investments in equities? Methinks not, the rebate up to `5 lakh income has limited benefit from an investment angle as the remaining income tax slabs stand unchanged. The uptick in Standard Deduction, which itself was in lieu of medical and travel allowances and hence more or less neutralised last year, is again marginal and unlikely to motivate small investors to rush to invest it. Finally, regarding the increase in TDS limit on deposits, while it is certainly convenient, especially for senior citizens, it does not reduce one’s tax liability and enhance savings. So, that too is unlikely to translate into fresh investment. To conclude, equities should fare as well or as badly as they would have, notwithstanding the Budget. However, the dovish RBI policy could provide at least a near-term boost to this of the Income Tax Act to two properties up to a maximum value of `2 crore is convenient and will probably help in family settlements, but will it really boost the realty segment? Unlikely, as realty is not an asset class of choice right now. This is primarily because supply far exceeds demand in most geographies and the quantum of unsold inventories piling up suggests that notwithstanding the tax sops on offer, the prospects of deriving any significant returns from an investment in this asset class are limited. Even the likelihood of a lower borrowing rate post the RBI’s change in stance may not be adequate incentive. There is nothing in the Interim Budget that might significantly enhance investments in the debt asset class too, though the extension of the TDS limit on bank deposits and post office savings might actually attract some additional inflows, purely based on its convenience. However, the change in RBI’s outlook might affect fixed deposit investors adversely though it could boost inflows into certain categories of debt mutual funds. In the commodity asset class space, it is usually the precious metal, gold, that occupies pride of place among non-hardcore commodity market investors. There is nothing in the Interim Budget or the RBI policy that does it any harm or good, and so it will continue the way it has — a hedge for better informed equity and consumption for the rest. heads LKW-INDIA, a wealth management firm, and blogs at www.cricinvest.blogspot.com SURYODAY Small Finance Bank (SSFB), which got banking license in January 2017, recently forayed into the north Indian market by opening two branches in New Delhi. In an interview, asset class, though its longer term impact will largely depend on whether the flagging credit offtake improves. Again, the proposed removal of taxation on notional rent on a second home and the extension of the benefit of Section 54 How are you able to offer higher interest rates than larger banks on FDs and savings accounts? R Baskar Babu, MD & CEO, SSFB, spoke about the bank’s journey, IPO plans, offering higher interest rates and more. Excerpts: We offer exactly 125 basis points above the regular banks. Our cost of operations at the branch level is probably one-fifth of that of a regular bank branch, as we don’t spend much on rent and advertisement. The reduced cost of operations get passed on in the form of high interest rate to consumers. It will continue from our side. What are your plans for north Indian market? On Friday, we entered the north Indian market with the launch of two branches in Delhi, where we want to be a major player in the next fivesix years. Next month, we will open more branches in Noida. We want to make a significant presence in Delhi-NCR before venturing into other markets such as Punjab. Besides this, we are also opening in Varanasi this month, which will cater to the microfinance institutes we have in eastern Uttar Pradesh. PTI ill you be my valentine? What’s a valentine proposal doing in a financial column? Well, I should have asked “will you be my financial valentine!” In this era of boys and girls earning equal amounts, both of them have equal responsibility in managing the money too. Obviously, nothing in our education system teaches them this basic skill. And this leads to fights, and sometimes, divorce. So, this February 14, after all your valentine talks, also decide to talk finances. Boring, did you say? Most people start off in earnest, but then slacken off. Creating wealth for the long run does involve short-term sacrifices. Like a `6 lakh CNG car instead of the `13 lakh sedan that a friend ‘earning less’ drives. Or a vacation to Mahabaleshwar instead of Switzerland, which your sister-inlaw went, with a little help from HDFC Bank and ICICI Bank credit cards. Oh, you are not yet married? Well, then ask him what he does with the `54,456 take home pay? Does he spend on food? Does his brother ask him for a loan every five months? Or, do his friends take away a portion for their fun and frolic? If you are a guy, ask her if financial vows once more. If one of you has splurged on some item, do not wait for the next fight to scream it out. Financial secrets are difficult to keep and in this day and age of shared passwords, it will just take one visit to the bank page to know of your `12,000 indiscretion. Talk about money to be sent to parents, parents’ medical insurance, who will take leave in case of a medical emergency, kids, cost of bringing up kids (Surprise! Surprise! The cost is now in eight digits), buying a house… do not wait for an explosion to happen. Nice to have many of these things in writing — the investment philosophy statement, reasons for each asset class, goals written and tagged to each SIP or asset, WILL, investment register with the reasons for making them. In fact, if your kids are more than 10 years old, do involve them too. They do understand all this. Decide when to seek the help of a financial planner (Frankly, I do think your case is too simple at an age of 27 years!). If you do get one, will you treat him like a sounding board or like a coach? In case you find it embarrassing to ask these questions, just tag this to his FB page. Even better, tag your brother-in-law and ask him to tag your guy! I hope more women read this. As a banking unit, you recently completed two years. How has been the journey? L90,000 L53,741 writes at and has authored the best seller The journey has been exciting. Our loan book has grown closer to 80 per cent to `2,500 crore, while deposit books have grown close to 100 per cent to `1,250 crore. We continue to remain profitable and expect to end this fiscal with `90 crore profit. When we started, the skepticism was that how new small finance banks will be able to garner deposits. But overall, as a sector, we all have done extremely well. In the first year, we did not focus much on current and savings accounts as we wanted to ensure that the system is in place, but now, we have started focusing on the existing customers for small ticket savings. Will the recent cut in repo rate provide relief to consumers? she invests her money. Do you buy a `12,000 jeans while she buys a `499 jeans in a sale? Does all your income go towards an EMI, where your mother is the nominee? Will she have financial independence after she marries? Hey sorry, but what is your exact CTC and take-home pay? Will we have separate bank accounts? When will we merge our financial lives? (Boys and girls, there is no great hurry, but do it over a 4-5 month period.) Will you change the nominees of your financial assets to me or do you want it to be your mother? So, both of you need tremendous conviction that the course charted will help you reach that magical ‘retirement at 52’. The small sacrifices are IMPOSSIBLE to make unless BOTH of you have a full buy-in to the long-term plan. So, rethink your long-term plan and rework if necessary. Take your It will help us to a point of reducing our deposit cost marginally and pass it onto customers in terms of reduced rate on loans. It is also sending a positive signal that credit growth will continue to be robust in the economy. What are your IPO and fundraising plans? MARICO We plan to go public with an Initial Public Offering (IPO) in October-December quarter next year. We may also look to raise capital to the tune of `175-200 crore this year, to fund business growth. The fund would be raised through share sale on a private placement basis to the existing and new investors. Current Price A365 Target Price A470 Disclaimer: The New Indian Express.

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