 |
| April 10, 2015 |
| |
| Weekly Facts | | | Close | Change | %Change | | S&P BSE Sensex* | 28,879.38 | 619.24 | 2.19% | | Re/US $ | 62.25 | 0.25 | 0.40% | | Gold Rs/10g | 26,750.00 | 250.00 | 0.94% | | Crude ($/barrel) | 55.27 | 1.93 | 3.62% | | F.D. Rates (1-Yr) | 7.25% - 8.75% | Weekly changes as on April 09, 2015
*BSE Sensex as on April 10, 2015 |
Impact 
Real estate is one of the most preferred asset classes in India but, unfortunately, a good deal of black money is channelised in this asset class. Big land deals or even smaller deals of house properties are often not transparent. Many of you may have experienced this. You have little bargaining power with property developers. They can take you for a ride once you confirm the booking and pay initial instalment. If you delay any instalment of payment, a builder will charge you penalty but it is very rare to see that he pays you compensation for delay in project completion. This is going to change soon. Here's why…
Recently, Union Cabinet okayed the amendments to the Real Estate (Regulation and Development) Bill, 2013. Let's quickly understand what the bill is aimed at. The real estate bill has some important objectives to fulfil that include,
- Protecting the interest of real estate buyers
- Encouraging fair play in real estate transactions
- Ensuring timely execution of projects
What makes the amended bill more powerful than its earlier version?
- Along with residential properties, now commercial properties would also be covered under this bill
- Developers would need to secure the consent from atleast 2/3rd allottees for altering plans, structural designs and specifications of the plot, apartment or building. Moreover, builders would have to rectify structural defects within two years
- Buyers can now ask for stage wise completion schedule from the builder and claim possession on the day declared by the builder. If he fails to deliver on time; buyers are entitled to receive compensation with interest
- Real estate agents too would now come under the purview of the regulator. They would be required to maintain books of accounts, records and all related documents
- More powers have been accorded to consumers. Now they can approach consumer courts along with approaching the regulator. Moreover, regulator needs to clear the matters pending with it within 60 days
- Those who fail to register projects, may be jailed or fined
However, some earlier provisions have been diluted too.
- The initial bill required builders and developers to transfer 70% of the amount paid by the buyer to a special escrow account which should be utilised solely for the project. The amended version requires builders to maintain only 50% of the amount received in a separate escrow account. The major justification given for such a change has been that, land accounts for nearly 50% of the total project cost and it is paid by the developer even before a consumer pays to him.
PersonalFN is of the view that, overall, amended bill gives more powers to buyers than it takes away. Therefore, the new version of bill may prove to be more effective in protecting your interest. Above all, the new bill may bring much needed transparency to real estate dealings.
PersonalFN believes that, it is important for you and other real estate buyers to be completely aware about your rights. PersonalFN has played a key role in spreading awareness among investors from time to time.
Do you think amended real estate bill would provide better protection to buyers? Share your views here.
|
Impact
In March, several top Asset Management Companies (AMCs) wrote advance cheques of large amounts to brokerage houses selling mutual funds. These payments were not rewards for aggressively pushing their schemes; the cheques were advance payments aimed at sidestepping new service tax rules applicable in the new financial year. The finance minister revealed in the budget speech that mutual fund distributors would no longer be exempt from paying service tax.
According to Economic Times dated April 06, 2015, at least six leading mutual fund houses are said to have given lumpsum amounts worth more than Rs 200 crore to these brokers in March. The sops given to distributers are aimed to serve as a panacea from the new detriments in the industry, in order to get their commitment to sell their schemes in advance.
While Government expects to collect nearly Rs 800 crore of revenue from levy of service tax on mutual fund distributors, industry may suffer. It is believed that if income of distributors takes a hit, they might lose interest in promoting mutual funds and even servicing their clients.
Prior to this Association of Mutual Funds in India (AMFI) also proposed a cap on distributer commissions at 1%. AMCs are divided on this matter, with some avoiding them and others accepting them. The efficacy of the AMFI proposal was to help reduce unhealthy churning of investors' portfolio. As experienced in the past, distributors often make people invest in funds that fetch them good commissions and indulged in advocating portfolio churning to earn more upfront commissions without bothering about consequences of such shuffles on the portfolio of their clients.
AMFI's move to get mutual funds to agree on a limit on upfront fee payout to distributors came after SEBI criticised fund houses for paying distributors steep commissions to sell close-ended schemes. Mutual funds were aggressively pushing close-ended NFOs in 2014 by paying commissions as high as 6-8% to distributors, sparking concern over heightened mis-selling.
A crackdown by the government and AMFI on these unethical practises by distributers could pose a nadir for the industry, antithetical to intentions of promoting it. PersonalFN believes capping upfront commissions may not be a long term solution to curb mis-selling as nothing stops mutual fund distributors from making people churn their investment portfolios. PersonalFN is of the view that, on the contrary, AMFI should discourage mutual funds from launching New Fund Offers (NFOs) that are near to being identical to some of the existing offerings.
|
Impact
Keeping no surprise element in the policy review, RBI held repo rate unchanged in its 1st bi-monthly monetary policy for the Financial Year (FY) 2015-16. The Government has also preferred to maintain status quo on Cash Reserve Ratio (CRR) as well. On back of unseasonal rain damaging Rabi crop and fruits and vegetables, the upside threat to food inflation has increased. Taking a note of that, RBI took a precautionary step of taking a pause in its endevour of making monetary policy accommodative. Moreover, despite of poor credit growth, banks have not opted to pass on the benefits of previous rate cuts to borrowers so far. RBI also considered this as a reason for not lowering the policy rates this time.
After the recent policy review; key rates stand as given below;
- Repo Rate (i.e. policy rate) 7.50%
- Reverse Repo rate 6.50%
- Cash Reserve Ratio (CRR) 4.00%
- Bank Rate 8.50%
Background to policy action
RBI had reduced policy rate by 0.25% ( outside policy review) on March 05, 2015 in response to declining inflation and valuable structural changes initiated by the Government in the budget that are expected to help curbing inflation going forward.
Since 6th bi-monthly monetary policy statement released in February 2015, global recovery turned out to be moderate and uneven largely due to unprecedented fluctuations in currencies and commodity prices. The speculation of Federal Reserve (Fed) hiking interest rates in the U.S. sooner than expected, had made markets anxious. Such speculations waned subsequently, boosting the global markets. The sentiment of investors globally, largely affects India's currency as well. Currency and commodity fluctuations impact inflation and inflation expectation in India.
Back home, as per RBI assessment, the industrial sector, and in particular, manufacturing appears to be regaining momentum, with the growth of production in positive territory for three consecutive months till January. Mainly led by falling international crude oil prices; inflation moderated until recently. However, steady rise in food price inflation has been pushing the retail inflation up since November 2014. However, at 5.37% in February 2015, it still remains well below the upper limit of 6.0% set by RBI to be achieved by January 2016. RBI appears to be confident of achieving its target of keeping retail inflation below 6%.
Is fall in Inflation over?
Note: The data points above are from the Consumer Price Index
(Source: MOSPI, PersonalFN Research)
Although policy stance of RBI still remains accommodative; it has taken a pause considering some risks to its projections of inflation expectations. As stated by RBI, “there are upside risks to the central projection emanating from possible intensification of El Nino conditions leading to a less than normal monsoon; large deviations in vegetable and fruit prices from their regular seasonal patterns, given unseasonal rains; larger than anticipated administered price revisions; faster closing of the output gap; geo-political developments leading to hardening of global commodity prices; and spillover from external developments through exchange rate and asset price channels." The central bank also believes business confidence and the consumer confidence have been increasing; which enhances the possibility of achieving higher growth.
To read more about this news and PersonalFN's views on it, please click here.
|
Impact 
India's heaven, Kashmir, has been facing nature's wrath again this year. As you may be aware, life is affected to a great extent there. The other parts of the country too aren't spared. The unseasonal rainfall across the central and western parts of the country have inflicted havoc on farmlands and also left the weatherman puzzled. In March this year, 62.5 millimetres of rainfall were recorded, almost 100% more than normal (32.1 millimetres) and the highest in the past 100 years (in 1915, it was 78 millimetres). The data sourced from private weather forecasting agency Skymet show between February-end and March-end, excess rains were recorded in four of the five weeks.
What unseasonal rain means to you?
Well, with the unseasonal rainfall you may have to shell out more on food articles. In fact over the last few weeks prices of fruits and vegetable have gone up on account of the impact on agricultural produce. Green and leafy vegetables have become dearer. Likewise with damage to crops such as wheat, chana, soybean, jeera, grapes and mango crops; hereto there's an escalation is seen. Wheat production is likely to go down by 10% to 20% this year - which is a negative for agro-dependent economy like India.
To know more about this story and to read our views, please click here
|
- As buying mutual funds has got easier, transacting in mutual funds on stock exchanges has more than doubled over the year whetted by an increased appetite for equities. Both trading platforms — BSE Star MF and NSE MFSS — have also seen a steady monthly rise in number of orders last year. While the total orders on the BSE platform have jumped 172% from 5,84,453 in FY14 to 15,91,571 in FY15, the NSE platform has seen a 60% jump in orders to 3,75,330 from 2,34,935 according to The Economic Times dated April 06, 2015.
These platforms are easy and convenient to use and do not require KYC compliance for multiple funds. An investor is only required to complete KYC procedures once while registering their folio number and once allotted their folio number they can transact on the exchange platform. Investors can transact in any fund seamlessly, without even holding the funds in a demat account.
|
Escrow Account: "An escrow account is a temporary pass through account held by a third party during the process of a transaction between two parties. This is a temporary account as it operates until the completion of a transaction process, which is implemented after all the conditions between the buyer and the seller are settled."
(Source: Investopedia)
|
Quote : "Cash is a fact, profit is an opinion." - Alfred Rappaport
|
| |
| © Quantum Information Services Pvt. Ltd. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of PersonalFN is strictly prohibited and shall be deemed to be copyright infringement.
Disclaimer: Quantum Information Services Pvt. Limited (PersonalFN) is not providing any investment advice through this service and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. All content and information is provided on an 'As Is' basis by PersonalFN. Information herein is believed to be reliable but PersonalFN does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. PersonalFN and its subsidiaries / affiliates / sponsors or employees, personnel, directors will not be responsible for any direct / indirect loss or liability incurred by the user as a consequence of him or any other person on his behalf taking any investment decisions based on the contents and information provided herein. This is not a specific advisory service to meet the requirements of a specific client. Use of this information is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This is for your personal use and you shall not resell, copy, or redistribute this newsletter or any part of it, or use it for any commercial purpose. The performance data quoted represents past performance and does not guarantee future results. As a condition to accessing PersonalFN's content and website, you agree to our Terms and Conditions of Use, available here.
Quantum Information Services Pvt. Ltd. 101, Raheja Chambers, 213, Nariman Point, Mumbai - 400021. Tel: +91 22 6136 1200
Website : www.personalfn.com CIN: U65990MH1989PTC054667 |