Asuddenly resurgent stock market, after over six weeks of declines, may face challenges this week as investors may hold back from aggressive purchases ahead of the Union Budget next week. Investors, who dumped shares recently on concerns that economic issues have taken a back seat in the wake of corruption scandals, look for clarity from the government in the budget announcement on February 28 on its plans to solve the stubbornly-high inflation and slowing growth.
“Stock markets would be weighed down by the existing political gridlock,” said Saurabh Mukherjea, head of equities, Ambit Capital. “A large number of investors are worried that India’s earlier focus on economic development is shifting. Credible steps to undo this perception will be the biggest trigger for the market in the short term,” he said. The Nifty rose 2.8% last week, but is still 13.5% off its record registered in the first week of November. Foreign institutions have withdrawn $1.5 billion from Indian equities so far in 2011 after buying shares worth $29 billion last year.
Analysts said the finance minister may cut import duties in the Budget to contain inflation, but is unlikely to aggressively push economic reforms such as linking diesel prices to the market and foreign direct investment in select sectors.
Wholesale price inflation declined to 8.2% in January from 8.4% last month, but analysts said the drop is far from soothing for the Reserve Bank to stop raising interest rates further.
It is too early to buy back into India and China, but once inflation in both peaks — perhaps in Q2 — they should see a strong rally, said Garry Evans, a strategist with HSBC.
Analysts said investors are wary about the risk of companies’ earnings downgrade because of higher input costs and rising interest rates. “We believe there could be further downside risks to earnings estimates,” said Dipojjal Saha of Edelweiss Securities in a client note. “Rising input costs continue to contribute to a tricky macro environment and in our view, the 18% yearon-year (YoY) growth rate for FY13E will be severely tested as margins become more susceptible to cost pressures,” he said.
Ambit Capital’s Saurabh Mukherjea and Ritika Mankar, in a client note, do not rule out the possibility of a further fall in the market. “Comparing the shape of the current correction with the correction in January-August 2008 (for its arguable similarities in terms of high inflation, tightening monetary policy and falling equities) suggests that Indian equities are yet to bottom out,” they said.
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Sunday, February 20, 2011
How to Marry your Finances Faye D'Souza and Riju Mehta list the mistakes newly-weds should avoid to prevent their marriage from slipping into a financ
One of the most critical changes you encounter after getting married is the financial reality. Single income can convert to double, but so can the debts; buying assets may become easier, but insurance liability could increase; your spending or saving habits could be a disastrous mismatch, but your long-term goals may be the same. While it’s not easy to find a snug financial match, it’s not impossible to home in on feasible solutions either. You not only need to harmonise the different financial ideologies and habits that you bring into a new relationship, but also streamline your individual finances in a way that you can work towards the combined goals. To help you find a firm foothold in the new financial paradigm, we present a primer that will help avert any faux pas and provide ready resolutions to fiscal irritants.
Reveal your cards
Talk. Discuss. Debate. Confer. Communicate. There aren’t enough synonyms in the thesaurus to emphasise the importance of talking about your finances. Preferably even before you get married. So be it your income or expenses, savings or debts, liabilities or assets, proclivities or aversions, habits or cravings, lay them all on the table. List out your outstanding debts like car loans or credit card bills and assets like jewellery, real estate or stock investments.
These inputs will act as building blocks for your new financial equation and make it easier to formulate goals and stick to a plan to achieve these. Mumbai-based Raj and Rahmath Tapal, both 32, know about the importance of talking. They've been married for only a month, but have known each other for several years. “We talked about our savings and spending and knew that we wanted a house. So we started saving 50,000 each every month to buy it,” says Raj. Talking not only helps meet your goals, but also irons out misunderstandings and differences. Besides, it keeps both the partners in the loop and in the absence of one, the other is not left in the lurch.
Frame a budget, fix the goals
If, after the revelations and discussions, you have not already set your goals, it would be the next logical step. Frame your shortand long-term goals in accordance with your priorities and earning capacities. So whether you plan to buy furniture, car or a house, establish a time frame. You should also discuss the financial implications of having a child, savings required for his/her education and marriage, vacations and, of course, your retirement. It's never too early to start planning and saving for such goals because the compounding effect of investments works in your favour.
To ensure the fulfilment of these objectives, it is critical that you make a budget. Start with bigger expenses like loan EMIs, house rent or insurance premiums and go on to smaller ones such as utility, grocery or credit card bills. Then move to discretionary expenses like those on clothes, cosmetics or outings. “A budget, which includes tracking your spending, is the only way to really know where your money is going,” says Kshitij Gupta, a Mumbai-based financial planner. So you could resort to remedial measures like cutting down on dinners or vacations.
Work out the plan dynamics
This is perhaps the most critical aspect of financial management for newly-weds. The plan is ready. The execution should be easy, right? Wrong. This is a pitfall that brings on most of marital confrontations. Should you merge your finances? Should the debts of both spouses be settled jointly? Who will ensure the budget is on track? “There is no blueprint for the way a couple should handle finances,” says Gupta. “Merging finances is one of the first big decision married couples make-and often the most difficult,” he adds.
A simple solution is to have both. While you can retain your individual accounts for paying your credit card bills and other personal expenses, you can have a joint account for household payments, including utility or grocery bills. The latter allows flexibility to operate it in each other's absence. “You could also decide contributions towards different household baskets, depending on the income ratio, and make allocations from separate accounts. This will give room to both for indulging in discrenationary spending and maintaining independence,” says Surya Bhatia, a Delhibased financial Planner.
Another fragile decision to be made is how to build assets and settle debts. If you build assets jointly, keep in mind that there can be legal problems in case of a split. As for debts, you could do it by pooling in resources and trying to pay off the one with the highest interest, or continue to do it as you were before marriage. What's important is to take a joint decision so that both are comfortable about managing finances.
Buy more insurance
Before marriage and without dependants, you can make do with small insurance. After being hitched and if you are the sole earning member, you will need to upgrade it; more so when you have kids. “Now you have to cover the risk of dying young and leaving a dependant(s). So a term life insurance is critical,” says Ajay Bagga, GM of wealth management at Duestche Bank. Your cover should be enough to pay your outstanding loans and there should be enough left for the spouse to live off it. Ideally, you should have at least 10 times your annual income as life cover. Another important cover to consider is health and disability insurance. Chances are you are insured by your employer, but it's advisable to buy a separate policy. “On an average, a combined cover of 5 lakh for a couple should be adequate, especially in a big city,” says Jayant Pai, vice-president of Parag Parikh Financial Advisory Services.
Know about taxation benefits
You can't be blamed for a mild aversion to the taxman, but after tying the knot, you'll find a few reasons to toast him. As a married couple, you will be eligible for a higher home loan and both can claim tax deduction on repayment. A joint home loan offers a benefit of 1 lakh each under Section 80C of the Income Tax Act (for repaying the principal) and an additional 1.5 lakh each on the interest repayment under Section 26. This takes your total deduction as a couple up to 5 lakh a year. If you are planning to get married soon, remember that a wedding is one of the few occasions when cash gifts are not taxed, but the recipient will have to prove it was a gift. So be more amenable to cheque or demand draft gifts.
Take care of documentation
To snuff out irritants if you go in for a name change after marriage, ensure you indulge in the necessary paperwork. This will involve name and address changes in PAN card, passport, KYC, bank account, etc. “It’s the man’s duty to appoint her as a nominee in his investments and policies. He should include her as a secondary holder for ease of administration in his absence,” says Kartik Jhaveri, a Mumbaibased financial planner.
Till divorce do us part
It might be criminal to think of a split when you are just married, but it’s a possibility one should not negate. You could face problems in claiming your contribution towards joint assets like a house. If the property or asset is mortgaged with the bank, both parties can continue to be co-borrowers and co-applicants and service the EMIs. To bypass legal and tax hassles, it is necessary to open accounts and investments in your own name and make the spouse a nominee or secondary holder. But if you make joint investments collect all receipts for any payment towards these in your name.
Reveal your cards
Talk. Discuss. Debate. Confer. Communicate. There aren’t enough synonyms in the thesaurus to emphasise the importance of talking about your finances. Preferably even before you get married. So be it your income or expenses, savings or debts, liabilities or assets, proclivities or aversions, habits or cravings, lay them all on the table. List out your outstanding debts like car loans or credit card bills and assets like jewellery, real estate or stock investments.
These inputs will act as building blocks for your new financial equation and make it easier to formulate goals and stick to a plan to achieve these. Mumbai-based Raj and Rahmath Tapal, both 32, know about the importance of talking. They've been married for only a month, but have known each other for several years. “We talked about our savings and spending and knew that we wanted a house. So we started saving 50,000 each every month to buy it,” says Raj. Talking not only helps meet your goals, but also irons out misunderstandings and differences. Besides, it keeps both the partners in the loop and in the absence of one, the other is not left in the lurch.
Frame a budget, fix the goals
If, after the revelations and discussions, you have not already set your goals, it would be the next logical step. Frame your shortand long-term goals in accordance with your priorities and earning capacities. So whether you plan to buy furniture, car or a house, establish a time frame. You should also discuss the financial implications of having a child, savings required for his/her education and marriage, vacations and, of course, your retirement. It's never too early to start planning and saving for such goals because the compounding effect of investments works in your favour.
To ensure the fulfilment of these objectives, it is critical that you make a budget. Start with bigger expenses like loan EMIs, house rent or insurance premiums and go on to smaller ones such as utility, grocery or credit card bills. Then move to discretionary expenses like those on clothes, cosmetics or outings. “A budget, which includes tracking your spending, is the only way to really know where your money is going,” says Kshitij Gupta, a Mumbai-based financial planner. So you could resort to remedial measures like cutting down on dinners or vacations.
Work out the plan dynamics
This is perhaps the most critical aspect of financial management for newly-weds. The plan is ready. The execution should be easy, right? Wrong. This is a pitfall that brings on most of marital confrontations. Should you merge your finances? Should the debts of both spouses be settled jointly? Who will ensure the budget is on track? “There is no blueprint for the way a couple should handle finances,” says Gupta. “Merging finances is one of the first big decision married couples make-and often the most difficult,” he adds.
A simple solution is to have both. While you can retain your individual accounts for paying your credit card bills and other personal expenses, you can have a joint account for household payments, including utility or grocery bills. The latter allows flexibility to operate it in each other's absence. “You could also decide contributions towards different household baskets, depending on the income ratio, and make allocations from separate accounts. This will give room to both for indulging in discrenationary spending and maintaining independence,” says Surya Bhatia, a Delhibased financial Planner.
Another fragile decision to be made is how to build assets and settle debts. If you build assets jointly, keep in mind that there can be legal problems in case of a split. As for debts, you could do it by pooling in resources and trying to pay off the one with the highest interest, or continue to do it as you were before marriage. What's important is to take a joint decision so that both are comfortable about managing finances.
Buy more insurance
Before marriage and without dependants, you can make do with small insurance. After being hitched and if you are the sole earning member, you will need to upgrade it; more so when you have kids. “Now you have to cover the risk of dying young and leaving a dependant(s). So a term life insurance is critical,” says Ajay Bagga, GM of wealth management at Duestche Bank. Your cover should be enough to pay your outstanding loans and there should be enough left for the spouse to live off it. Ideally, you should have at least 10 times your annual income as life cover. Another important cover to consider is health and disability insurance. Chances are you are insured by your employer, but it's advisable to buy a separate policy. “On an average, a combined cover of 5 lakh for a couple should be adequate, especially in a big city,” says Jayant Pai, vice-president of Parag Parikh Financial Advisory Services.
Know about taxation benefits
You can't be blamed for a mild aversion to the taxman, but after tying the knot, you'll find a few reasons to toast him. As a married couple, you will be eligible for a higher home loan and both can claim tax deduction on repayment. A joint home loan offers a benefit of 1 lakh each under Section 80C of the Income Tax Act (for repaying the principal) and an additional 1.5 lakh each on the interest repayment under Section 26. This takes your total deduction as a couple up to 5 lakh a year. If you are planning to get married soon, remember that a wedding is one of the few occasions when cash gifts are not taxed, but the recipient will have to prove it was a gift. So be more amenable to cheque or demand draft gifts.
Take care of documentation
To snuff out irritants if you go in for a name change after marriage, ensure you indulge in the necessary paperwork. This will involve name and address changes in PAN card, passport, KYC, bank account, etc. “It’s the man’s duty to appoint her as a nominee in his investments and policies. He should include her as a secondary holder for ease of administration in his absence,” says Kartik Jhaveri, a Mumbaibased financial planner.
Till divorce do us part
It might be criminal to think of a split when you are just married, but it’s a possibility one should not negate. You could face problems in claiming your contribution towards joint assets like a house. If the property or asset is mortgaged with the bank, both parties can continue to be co-borrowers and co-applicants and service the EMIs. To bypass legal and tax hassles, it is necessary to open accounts and investments in your own name and make the spouse a nominee or secondary holder. But if you make joint investments collect all receipts for any payment towards these in your name.
Banks tap 2-month funds at 10% High Certificates Of Deposit Rates Point To Interest Rates Firming Up
New Delhi:In what may set the stage for further increase in lending and deposit rates, banks are accessing two-month funds though certificates of deposit by paying almost 10%. Some banks like ING Vysya Bank have paid over 10% to raise a slightly higher amount for a little more than three months.
While bankers are unwilling to admit publicly, following the increase in deposit rates since mid-December, the flow of funds is not as high as they had anticipated. This has prompted them to raise more resources from the market by issuing instruments such as certificates of deposit (CDs), which are short-term papers subscribed to by other banks and mutual funds.
“What we have seen is that depositors are renewing their deposits and opting for maturity baskets that earn them the maximum interest rate,” said an SBI executive. As a result, many depositors have moved from a one-or-two-year fixed deposit to, say, SBI’s 555-day deposit that is earning 9.25% (and 9.75% if you are a senior citizen). So unlike the post-credit crisis days in 2008 when the 1,000-day blockbuster helped the bank rake in Rs 1,000 crore a day by way of deposits, the special tenures this time are fetching Rs 200-300 crore a day.
Union Bank of India CMD M V Nair said of the Rs 10,000 crore mobilized by the bank over the last two-and-a-half months, around 25% has been reinvested in special buckets such as those that mature in 500 or 700 days. RBI data showed that for the year up to January 14, 2011, bank deposits grew 16% though during the last fortnight banks mopped up over Rs 37,000 crore, the highest fortnightly mobilization since November. With banks unable to step up deposit mobilization at the same pace as credit flow several are in a situation where they are lending more than Rs 100 for every Rs 100 raised by way of deposits. As a result, bankers are raising every paisa they can even if it means paying a higher cost.
“This year-end phenomenon (of spike in rates) has been accentuated by 3G-related borrowings, tight policy conditions and slower pace of government spending,” said a bank chairman who does not wish to be named. The SBI executive said credit demand apart, the high commitments some of the public sector bank chiefs have made under the annual statement of intent is adding to the pressure. Nair and Punjab National Bank CMD K R Kamath said the tight conditions were expected to continue at least till March-end. “If liquidity does not improve, banks will then have no option but to hike rates,” said UCO Bank chairman Arun Kaul. Since July, when base rate was introduced as the new benchmark, banks have raised it by around 150 basis points and the consensus is that more is in store.
While bankers are unwilling to admit publicly, following the increase in deposit rates since mid-December, the flow of funds is not as high as they had anticipated. This has prompted them to raise more resources from the market by issuing instruments such as certificates of deposit (CDs), which are short-term papers subscribed to by other banks and mutual funds.
“What we have seen is that depositors are renewing their deposits and opting for maturity baskets that earn them the maximum interest rate,” said an SBI executive. As a result, many depositors have moved from a one-or-two-year fixed deposit to, say, SBI’s 555-day deposit that is earning 9.25% (and 9.75% if you are a senior citizen). So unlike the post-credit crisis days in 2008 when the 1,000-day blockbuster helped the bank rake in Rs 1,000 crore a day by way of deposits, the special tenures this time are fetching Rs 200-300 crore a day.
Union Bank of India CMD M V Nair said of the Rs 10,000 crore mobilized by the bank over the last two-and-a-half months, around 25% has been reinvested in special buckets such as those that mature in 500 or 700 days. RBI data showed that for the year up to January 14, 2011, bank deposits grew 16% though during the last fortnight banks mopped up over Rs 37,000 crore, the highest fortnightly mobilization since November. With banks unable to step up deposit mobilization at the same pace as credit flow several are in a situation where they are lending more than Rs 100 for every Rs 100 raised by way of deposits. As a result, bankers are raising every paisa they can even if it means paying a higher cost.
“This year-end phenomenon (of spike in rates) has been accentuated by 3G-related borrowings, tight policy conditions and slower pace of government spending,” said a bank chairman who does not wish to be named. The SBI executive said credit demand apart, the high commitments some of the public sector bank chiefs have made under the annual statement of intent is adding to the pressure. Nair and Punjab National Bank CMD K R Kamath said the tight conditions were expected to continue at least till March-end. “If liquidity does not improve, banks will then have no option but to hike rates,” said UCO Bank chairman Arun Kaul. Since July, when base rate was introduced as the new benchmark, banks have raised it by around 150 basis points and the consensus is that more is in store.
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