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CCL reported a net profit of Rs. 30 crore.
Business - July 7, 2022

Gist of Government Securities their operation and Yields.

Gist of Government Securities their operation and Yields.

 Government Securities are government financial instruments and securities issued to collect a loan from the public. The goal is to collect government securities to fund massive programs and budget deficits. Majority of the G-sec issued by the RBI on behalf of the Indian Government are interest-bearing dated instruments. These government securities come with a fixed maturity period with a half-year interest on such fixed coupon securities. Full G-Sec is issued in de-materialized form but can be issued physically upon request. Physical Government Securities may be issued on the basis of multiple or denominations of ten thousand rupees, and their tenor may be extended for a term of 30 years.

Rewards of trading in G-Sec:

G-Sec offer lower volatility and greater stability than corporate bonds. These securities do not receive a TDS on interest payment. Due to the involvement of NSDL / CSGL, they provide straightforward transactions and streamlined settlement procedures. These investments give investors greater diversification opportunities. Investors are given greater leverage for government securities borrowing.

Risk floating with G-sec:

The interest rate change will affect the value in the secondary market of government securities and it is inversely proportionate to the changes in the interest rate on the bond. G-sec price declines with interest rates rising and price increases as the interest rate falls. Default risk refers to default on due interest and payment of principal amounts. Government securities are backed by a sovereign guarantee and are free of default risk. Nevertheless, since government securities are less uncertain than corporate bonds, they have lower rates of interest than corporate bonds.

Types of G-sec:

Some of the popular G-sec are Treasury Bills, Cash Management bills, Dated Government Securities and State Development Loans which are as follows:

Treasury bills are short-term debt with less than one year tenure. Treasury bills or bonds are given in three separate categories with 91 days, 182 days and 364-days maturity. These instruments are not obliged of any kind of interest payment to Investors. The disparity between the face value and the discounted price of the instrument acts as the investor’s benefit or losses.

Cash management bills are short legal government securities, typically less than 91 days. These are extremely versatile financial vehicles and their tenure relies on the government’s cash requirements. Cash management bills are similar to treasury bills and do not fetch any interest to investors. The disparity between the face value and the discounted price of the instrument acts as the investor’s benefit or losses.

Dated G-sec are securities and bonds issued on behalf of the government by the Reserve Bank of India, which have a predetermined or fixed maturity date. The Reserve Bank of India sells those by means of auction. These bonds may be issued as bonds with fixed and floating rate bond, zero coupon bond or even with call or put options.

In order to meet budget deficits and financial conditions, the State Government offers development loans. Such bonds are released with the aid of the negotiated trading arrangement with the Reserve Bank of India. The interest rate of these loans is higher than dated Government Securities bonds.

How G-sec market is operated?

In India, the government securities market is small and inactive, unlike other nations. These are not so common among general investors are not usually owned by them. The RBI and the financial institutions are the largest G-sec holders. The Indian G-sec market has no adverse impact on the capital market and provides full support to them. The funds it receives is primarily used to reduce operating expenses and expected economic goals. The Reserve Bank of India has hired government securities so that they can establish consistent yield levels and a sound maturity allocation strategy. Reserve Bank was always deemed secure to buy securities before maturity to maintain stability.

The Reserve Bank of India has used free-market operations to provide cheap government funding and has managed to preserve funds to maintain stability in the future. The Reserve Bank of India has always used preserving the reserve ratio, SLR, and moral suasion strategies. This has been achieved to control bank liquidity and meet debt management objectives.

G-Sec – Prices & Yields:

Government securities rates remain steady, even though the bank rate is increasing. In India, the banking rate normally affects security rates in the opposite direction. Nevertheless, the RBI has sought to control government bond rates. Therefore, it is able to do so by refraining from adjusting the buying and sellng prices of various loans on the list. It has also tried to manipulate the sales rate of government bills. The RBI has consistently reduced the surplus funds by rising the selling rate of the Treasury Bills. This is an indicator that the Reserve Bank of India was concerned with the term loan rate and wished to stay stable.

The return on G-sec will be calculated if the investor consistently retains the securities. This will help the investor to observe yearly changes in coupon rate, interest, and the final redemption return. In India, government securities are usually priced well below the face value. This indicates that the redemption return is much higher than the actual rate, this is because the redemption return is similar to the face while at the time of procurements.

Returns put these bonds in an unappealing zone:

In India, government securities have steadily increased their return rate. There has also been no ceiling on G-sec. G-sec displays the returns which are approved by the government even with the continued growth of interest over the years with price stability but they are far below what the investor would hope to earn if he invested his funds in industrial securities. Therefore, G-sec is not an attractive form of investment. G-sec is an essential part of monetary management and fiscal policy in India. It also played an important role in maintaining SLR with the national commercial banks. As previously pointed out, government securities did not build a demand for themselves. These funds are for the country’s intended goals like monetary snags, fiscal problems, and debt management.

 

 

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Real estate equity waterfall
Business, Equities - July 7, 2022

How do stocks work?

How do stocks work?

 

Being mindful about stocks and how they function is essential for strong returns on investment. This will provide substantial financial benefits. Wisely spending your capital is extremely necessary to achieve monetary prosperity and financial goals. It is possible that if you are working on an investment strategy, it will probably include some form of stocks. The stock markets historical success makes this type of investment so common. The S&P 500 index recorded an average return of 9.7% between 1930 and 2013. Although, this includes years and exceptional years which are extremely tough. This high average return on investments in stocks provides a strong basis for buying them.

Stock market investment can look like a scary task. However, as soon as concepts are learned and the right strategies are implemented, the benefits are significant. While there are many vehicles for stock exposure such as mutual funds and ETFs which do not actually require investors to pick up their stocks from the market. However, it remains necessary to understand what stocks are and what they work to achieve when investing.

 

Straightforward meaning of equity stocks:

Stocks are equity investments that constitute a company’s ownership. If you buy the stock of a particular company, it includes certain rights. 

Companies sell shares to collect substantial capital amounts. This capital is then used to fund various projects. This  ultimately leads to the growth of business and generate a return for investors and revenue for the company. When a company wants to go public, it must also choose 1-4 separate letters for the distinctive identification called stock ticker symbols. Companies can sometimes even become creative when choosing their ticker symbols.

The stock price of a public company is simply a determination of the value of the company by the market. This value depends among other things, on its assets, current profits, and expected future profits. While raising capital, stock offerings is a great way for a business to grow quickly and expand rapidly. However, there are also disadvantages. In addition to the high charges paid for exchange listing, public firms have to disclose their financial reports as per the rules and regulations.

 

Categories of stocks viz. Common and Preferred:

Common stock offers you a part and voting rights of the company. With common stock, you aim for capital gains together with dividend collection. However, companies are not obligated to pay dividend to common shareholders. A dividend is a distribution of some amount from total revenue to shareholders or a kind of investment reward.

However, the preferred stock works somewhat differently. The preferential stock does not give you any voting rights. The preferred stock guarantees you more return as compared to common stock. For example, if a corporation pays a dividend, it must first pay its preferred shareholders. Dividends are first paid to preferred shareholders and then to common shareholders. Unless the company cannot pay the dividend in one year on preferred stock, it will proceed to pay it in the future years. They have a right to claim on firms assets in any uncertainty if the firm comes in a position of bankruptcy. Preferred share owners have more significance than common shareholders.

Common stocks are more riskier than preferred stocks. Portfolio must include a perfect blend of both common and preferential share.

Taxation on stocks:

After 1st September 2004, any buying and selling of securities will include the Security Transaction Tax (STT) applied to them. STT is payable on stock trading in India. Inventory income sold within 1 year from the date of acquisition is considered to be STCG. STCG is obliged to taxes and is taxed at 10%. If short-term capital losses are incurred, then it can be compensated for short-term gains in the same financial year. Benefit from stocks sold after 1 year comes in LTCG. Since 1st September 2004, long-term capital gains have been exempt from tax. Long term capital loss is considered to be a loss on inventories sold after one year from the date of purchase. Long term capital losses cannot be substituted with long term capital gains.

"How

 

Adani Wilmar enters the coveted large-cap category by AMFI

 

 

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UGRO Capital Acquires Profectus Capital in Ambitious ₹1,400 Crore Deal
Banking, Economy - July 5, 2022

Role of nationalized banks in promoting the Indian economy.

Role of nationalized banks in promoting the Indian economy.

 

Nationalization refers to the transfer from the State or Central Government of public sector assets to be operated or owned. The banks previously functioning under the private sector in India were transferred by an act of nationalization to the public sector. Therefore nationalized banks were established.

 

Following is the role of nationalized banks in promoting the Indian economy:

 

1. It helps in eradicating the shortage of capital formation:

Economic development is not possible in any economy unless an adequate level of capital formation exists. Banks remove the serious capital shortfall in developing countries. A sound banking system mobilizes small community savings and makes them available for productive company investment. Banks mobilize deposits through attractive interest rates and convert savings into active capital. If not, the funds will remain idle in the bank account. Banks distribute such savings through loans to productive companies that help build nations. It facilitates the optimal use of the financial resources in the economy.

 

2. To generate employment:

Banks help provide industries with financial resources and help generate employment opportunities automatically. Income and job generation are two very important contributions that successfully keep a strong lending line to both the industry and the economy. Nationalized banks will generate more jobs with the opening of more branches and having a reach in the deepest rural regions. In addition, the bank can also create more opportunities for employment by encouraging self-employment. It can provide loans to various projects that can promote employment opportunities directly and indirectly.

 

3. To keep a check on the enormous resources and give priority to a particular sector:

The takeover of commercial banks will allow the government to control huge resources from which large-scale factories can be established. It can also redirect funds to various main industries under the prevailing conditions in the world. Private sector banks did not give economic importance to industries such as the agriculture industry, small industries, cottage industries, and rural industries. The nationalization of the commercial banks could effectively enable the priority sector, in particular agriculture and small-scale industry, and encourage them to expand their businesses.

 

4. To develop the backward areas:

Banks from the private sector neglected rural and backward areas, and they focused on urban areas only. The nationalization of these banks and the opening of their branches in rural and retroactive areas will change this pattern. It would also allow banks to provide more credit for start-up industries in rural and backward regions. The above factors could also reduce the problem of regional disparities. People in poor and low-income underdeveloped countries do not have enough financial resources to buy sustainable consumer goods. Commercial banks provide loans to consumers to buy items such as houses, furniture, and refrigerators. They also help to improve the living conditions of people in developing countries by providing loan facilities for meeting their consumption needs.

 

5. To help in the implementation of monetary policy:

Nationalized banks contribute to a country’s economic growth by enforcing RBI’s monetary policy. RBI relies on Nationalised banks to ensure the effectiveness of its money management strategy, which is compatible with the needs of a developing economy.

 

6. To improve the efficiency in the banking sector:

The modernization and productivity of banks may be increased with more banks in the public sector. A better recruitment policy can be adopted that employs efficient men and women. Effective operations will improve and benefit banking services and consequently, it will benefit the economy.

 

7. To improve profits:

With the banking industry under government regulation, higher revenues will be generated. The government will reap all the income received by those banks. 

 

8. To have uniformity in banking rules and regulations:

Banking operations could be uniform across the country. The interest rates in banks will also be the same. This will create unbiased competition in the banking sector. Banks will grant loans based on the borrower’s productivity rather than the borrower’s security. This will help to finance the ventures and industries effectively with the same norms and a standardized lending policy.

 

9. For better mobilization of Savings and money lenders prevention:

In the absence of a proper banking network, private financiers use the market to deliver competitive interest rates. In addition, interest earned from these banks is to some extent exempt from income tax. Banks may also promote various types of deposits for various sectors of the population.

 

10. To make aware of baking habits:

The Bank attracts depositors with competitive deposit plans and higher interest rates. Banks provide their customers with various forms of deposit schemes. With rising literacy in rural areas, rural people should realize the value of banking practice. This means that banks, like schools and hospitals, will also be a part of everyday life in rural areas. When maximum people adopt banking habits, there are more money transactions in the country. The need for capital or hard cash is diminishing gradually. The use of electronic media will easily move funds from one location to another. Economic development in the country will intensify. As a result, the government’s income will also increase.

 

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Why do commodities Exchange Exist?

 

 

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Microfinance sector recorded surge in NPAs to Rs. 50000 crore
Business, Editorials - July 5, 2022

What is an umbrella insurance policy?

What is an umbrella insurance policy?

 

Highlights:

• A policy that provides insurance cover beyond the primary insurance policies covering automobile, home, or watercraft.

• In order to own an umbrella insurance policy, you should first own standard homeowners, automobile insurance. When the insurance covers gets used up this policy opens like an umbrella.

• Individuals eligible for umbrella protection includes one who have significant resources or conceivably risky things, or who is involved in projects that could enhance their danger of being sued.

 

Umbrella insurance policy:

This policy provides insurance cover beyond the limits of the insured’s family members. It provides extra liability insurance coverage. This policy provides an added layer of safety for those who are at risk of getting sued for damages to other’s property, or injury caused in accident.
It additionally secures against criticism, vandalism and defamation.

 

How does this policy work?

The additional inclusion given by an umbrella policy is generally valuable to high net worth individuals who owns various properties or extravagant resources and are at huge danger of being sued. Private ventures also utilize this policy approach to safe guard themselves in case of potential money related cases or legal actions. The premium for an umbrella protection strategy might be affordable, if the same is brought from the same insurer that insured the primary automobile, home, or watercraft policy.

Varying from company to company, the policyholder who wishes to add an umbrella policy is required to have a primary insurance of nearly 250,000 USD for automobile coverage and of around 300,000 USD with respect to homeowners insurance. Umbrella policy in general connotation is known as additional coverage insurance policy. In case an umbrella policy holder gets sued for damages that exceeds the limit of car insurance or home or others. This policy enables them to pay what you owe. This implies when the primary coverage limit gets exhausted. The policy will open like an umbrella and protect the insured. The holder will be tension free as he will not need to plunge into investment funds and different resources.

Individuals who have purchased to jump a signal accelerates and bumps into a car. In this situation, there might be several riders who may have got injured. Now supposing the car repairs amounted to 45,000 USD and the treatment of injuries tallied to 400,000 USD. In this case, the driver may be held liable for damages that may far exceed the limits of insurance cover. Hence, this is the moment when the policy provides additional cover over the primary car insurance.

 

 

Important points to consider, while making a will

 

What are MIPs and Balanced funds

 

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Equity Right
Banking, Business, Editorials - June 30, 2022

What Happens when Businesses go Bankrupt.

What Happens when Businesses go Bankrupt.

 

How India handles Bankruptcies:

In recent years, India has changed the way it handled bankruptcy. From a bad bankruptcy system to one where simple laws and regulations are in a position to assist promoters, company owners, businessmen, and other stakeholders to deal with bankruptcy in an organized manner. For example, the new Insolvency and Bankruptcy Act specifically outlines how bankruptcies can be managed and how companies can be liquidated to benefit all stakeholders in the process of bankruptcy rather than tackling losses. The law was enforced due to huge pressure from small companies. Since the government had a perception of the very relaxed process towards large promoters and well-known industrialists.

 

What is the process of Bankruptcy:

Towns Insolvency Act of 1909 will be the rule if you live in Chennai, Mumbai, or Kolkata. However, the Provincial Insolvency Act of 1920 applies to other places in India. You can apply for insolvency under Provincial Insolvency Act if you don’t repay the debt of more than ₹500. You need to fill out an application. The court may approve or reject the request after evaluating the criteria for filing. A temporary recipient will take possession of the debtor’s property until any decision. The court is entitled to stay in legal proceedings against the debtor’s property or assets if the application is accepted. In other words, creditors may order you to be against further recovery efforts.

Once your request is accepted, the property will be handed, to the receiver’s designation by the court. The representative will then distribute the assets to creditors. The debtor will be released from bankruptcy after the process is completed by the courts. There will be no restrictions to establish and live with no concern for previous creditors. One can ask for a minimum maintenance charge for your survival as a result of the ongoing court proceedings. However, several restrictions apply to you until released from the case. The unreleased insolvent under existing law cannot act as a director, public servant, elected or sit or cast a vote as a representative of any local authority. However, you are not completely free if you have government debt or involvement in any fraudulent activity.

 

Righteousness to all the stakeholders:

Although, there is no reason to worry when companies go bankrupt. However, bankruptcy does not give a good experience for promoters, employees, or shareholders. The employees are dismissed immediately after fraud. While the shareholders risk losing their money. The rules around the world often fail to protect shareholders. As per corporate law, shareholders are paid only, if money is left after the payment of the creditors.

The debtholders are assisted to recover their money and the legislation focuses to ensures that the assets are disposed to the new owner. Moreover, there are no explicit guarantees in the legislation specifically to protect employees. Although, provisions exist for the fair disposal of the assets and the payment of dues to the employees. Hence, it is always important that shareholders and employees must exercise their proper research before investing or joining the companies.

 

Cases of the bankruptcies in the Aviation sector:

After reviewing the Indian aviation industry, which can show how bankruptcies can become messy and trigger pleasant turnarounds. For instance, Kingfisher is an example of how bankruptcies can turn the company if not managed. For the last decade, the case has dragged on, without an end to the afflicted creditors or the former staff. The former promoter lives abroad. The case of Spice Jet is, on the other hand, an example of how to deal with severe financial distress well. To turn the companies around somewhere is the main objective of Jet Airways, which seems to be trying to move towards some kind of resolution after a prolonged fight to tide the crisis. In a nutshell, all stakeholders should make sure that they do not rest when companies go bankrupt and focus instead on discovering their feet again.

 

Analysing the law on Airline Insolvency in India

 

 

Easy Steps to File a Bankruptcy Petition in India

Stamp duty and registration laws for rentals in Maharashtra

How this pandemic will change the Auto Industry?

How co-working spaces can restart post lock down

 

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Waaree Energies Surges Over 11% on FTSE Index Inclusion Buzz
Real Estate, Real Estate News - June 28, 2022

Investing in Real estate.

Ways to Invest in Real estate.

 

The very first thing that immediately springs to mind as you talk of investing in real estate is your house. However, when it comes to property, real estate owners have plenty of other choices because they are not just tangible assets. Property investment can improve an investor’s overall portfolio investment-and-return profile, providing better risk-adjusted returns. The real estate sector typically has low volatility, particularly as contrasted with equities and bonds. Real estate is therefore valuable in contrast with more conventional income streams. Investing in real estate provides diversification, passive income, and tax benefits. Following are the ways to invest in real estate.

 

1. Ownership:

Ownership of property is one of the most famous ways to invest in real estate. People with expertise in decorating and construction, have the experience to handle residents. It takes substantial resources to fund initial operating expenses and to support empty months.
Pros: Rental properties generates regular income. There is a good appreciation of real estate.
Cons: Managing tenants can be tedious. The tenants can also damage the property.

 

2. Real Estate Investment Groups:

Individuals that already own rental immovable property without wanting to run it invest in real estate investment groups. It necessitates capital and funding. A business owns or builds a series of apartment blocks or condos in a traditional real estate investment scheme. It also enables buyers to acquire them through the firm, thereby completing the market. The business takes a proportion of the monthly rent in return for fulfilling certain administrative activities. A typical investment community lease for the property market is in the interest of the owner. All units share a part of the lease to protect against rare vacancies.
Pros: It is a much more realistic alternative to property that also generates revenue and respect.
Cons: For real estate investment companies, there is a vacancy chance, whether it is distributed through the company or if it is unique to the investor.

 

3. House Flipping:

House flipping is for individuals with extensive real estate research and marketing knowledge. It requires resources and the capacity and the ability to do, or oversee, repairs as needed. Real Estate traders frequently look for under-priced properties. And later sell them at profit in less than 6 months. Pure real estate flippers sometimes do not engage in property development. Hence, the investment will either have the inherent interest required to make a profit with no changes, or they will remove the properties from consideration. Yet another type of flipper helps make money by purchasing affordable properties and creating wealth through renovation.
Pros: Flipping has a smaller period in which money and energy are bound together in a house. Yet, there will be large gains, sometimes over shorter periods, depending on the business conditions.
Cons: Trading in real estate needs a greater understanding of the business combined with a chance. Uncertainty in the market can leave traders with short-term losses.

 

4. Real Estate Investment Trusts (REITs):

Investors may like access to real estate assets without a conventional land sale. It requires Investment capital. A REIT is generated when a company utilizes capital from creditors to purchase and manage rental assets. REITs are purchased and sold at big exchanges. Like traditional dividend-paying securities, REITs are a good commitment to buyers on the capital exchange who want monthly income. Taxes such as the capital gains tax are not favourable to gaining significant amounts of creditors. This is one of the indirect ways of investing in real estate without actually buying a property.
Pros: REITs are dividend-paying securities. Its main assets comprise commercial real estate property with long-term, cash-generating contracts.
Cons: REITs are simply reserves, which ensures that the risk correlated with conventional rental assets does not occur.

 

5. Real Estate Limited Partnerships:

It is an organization formed to purchase and hold a diversified portfolio, or even sometimes only one. RELPs only operate for a limited number of years. An accomplished real estate consultant or construction company serves as the general contractor. International buyers are then found to provide funding for the real estate scheme, in return for an equity stake as limited partners. The partners will obtain annual dividends from the income produced by the property of the RELP. But the real payout arrives when the assets are sold.

 

6. ETFs:

An exchange-traded fund is a portfolio of securities or bonds of mutual investment. ETFs are comparable to mutual funds and index funds that offer with same large diversification and small total costs. When you are gearing up to invest in property but also want to widen, it may be a wise decision to participate in a real estate ETF.

 

7. Real Estate Mutual Funds:

Real estate mutual funds invest mainly in REITs and property development companies. Firstly, they provide the opportunity to achieve diversified access to comparatively low sums of capital. Secondly, depending on their approach and diversifying goals, they provide creditors with a far larger range of assets that can be accomplished when purchasing individual REITs. These funds are liquid. Moreover, the institutional investors get the strategic and analysis knowledge offered by the company. This can provide specifics on the properties obtained and the management viewpoint on the feasibility and success of particular real estate transactions as well as on the type of assets.

Investing in real estate
Real Estate

 

 

What RERA timeline extension means for developers, homebuyers?

 

 

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Avantel Soars 6% with ₹25 Crore DRDO Deal!
Commodities, Markets - June 28, 2022

Why do commodities Exchange Exist?

What are commodities Exchange?

The Commodities exchange allows traders to buy and sell goods. It includes both simple goods and manufacturing goods. The function of Commodity exchange is to provide a centralized marketplace where commodity producers and commercials can directly sell to those who want them for consumption or manufacturing. Commodity future exchange connects buyers and sellers easily. It helps businesses to enhance while there is a buyer for every seller. It makes the economy much more efficient with standardized prices for a commodity. Commodities are into two broad categories: hard and soft. Hard commodities consist of natural resources that must be mined or extracted, whereas soft commodities are agricultural products such as grain, meat, dairy, and livestock. Investors use these commodities to diversify their portfolios. Commodities are considered a risky investment class.
It is affected by many uncertainties and risks, such as epidemics, natural calamities, or other unpredictable circumstances. Individuals can invest in commodities through futures, options, exchange-traded funds, and contracts. There are six major commodity trading exchanges in India:

1. Multi Commodity Exchange (MCX)
2. National Commodity and Derivatives Exchange (NCDEX)
3. National Multi Commodity Exchange (NMCE)
4. Indian Commodity Exchange (ICEX)
5. Ace Derivatives Exchange (ACE)
6. The Universal Commodity Exchange (UCX)

Types of commodities:

1. Metals Commodities – This includes the trading of precious metals such as gold, silver, copper, and platinum. Gold is traded by investors as it is the safest way to diversify their portfolios against any uncertainties like inflation or currency devaluation.

2. Energy – This includes commodities like gasoline, natural gas, heating oil, and crude oil. Normally, oil price fluctuates due to the increasing demand for energy commodities. However, individuals entering energy commodities should be aware of economic reforms, a shift in production by OPEC, and new advances in technology.

3. Agriculture commodities – Commodities such as soya, rice, wheat, coffee, corn, cocoa, sugar, and cotton come under agriculture commodities. These commodities are bought by the wholesaler or a firm that uses them as a raw material. 

4. Meat and livestock – This includes commodities like feeder cattle, pork bellies, lean hogs, and live cattle. The trading of livestock is not popular in India. It is mostly done in the US, UK, China, etc.

 

Ways to Invest:

A derivative Contract (Financial Instrument) is a contract between two parties for deriving value from any underlying assets. As the Price of underlying assets changes, the value of underlying assets also fluctuates.

 

The types of Derivative Contracts:

Options – Options are contracts where the buyer has a right to buy or sell a particular security at a predefined price. It is commonly known as a strike price. However, they don’t have obligation to buy or execute the option. One who executes the contract is known as the option writer.
Forwards – It has an obligation in the contract, which is unstandardized and not traded on stock exchanges. Forwards are available over the counter only and cannot de traded directly on market. However, forwards can be customized according to the parties involved. Forwards contract has third party risk. There are chances that the other party defaults in the payment or delivery of the product are not done as there is no regulatory party involved.  
Futures – This is the same as forwards, but futures are standardized and allow holders to sell or buy security at a specified price and date. Futures can directly be traded on market.
Swaps – It involves swapping of obligations between the two parties depending on cash flows which are depended on the rate of interest and agreed upon at the period while entering into the contract. Here, one cash flow is fixed and the other depends on the market interest rate and usually, these rates are swapped.

The best way to trade in commodities is through futures contracts. An agreement to buy or sell a commodity in the future agreed on a date at a pre-determined price.

 

Role of commodity market:

1. Food security – Farmers can use the future market more effectively by selling at a future price by fixing the price. This will ensure that they are not susceptible to future fluctuation in price. Hence, food security can be achieved using the commodity market. Many times commodity markets help farmers in hedging the commodity which is prone to uncertainties and risk. 
2. Agricultural ecosystem – Substantial amount of food grains are lost in the transmission process. The commodity market helps farmers, brokers, middlemen, and customers. If the food gains are not stored properly they get attacked by rats and pests.  
3. Aggregation – Currently, the middleman acts as an aggregator which is not a transparent mechanism. So, commodity exchange provides an organized and guaranteed mechanism for all the essential commodities.
4. Hedging and risk – One important role and function of the commodity market is to hedge and distribute the risk in the market.
5. Speculative excess – The commodity market absorbs speculative excess risk in the market, especially in the spot market. It helps various retail investors to participate in the new asset class.

 

What are Gold funds and what are the benefits?

 

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India Readies Rs 25,000 cr boost for its electronics components industry
Automobile News, Autos, Business, Economy - June 27, 2022

How this pandemic will change the Auto Industry?

How this pandemic will change the Auto Industry?

 

Most car manufacturers are appearing brave even when some manufacturing facilities are shut down due to pandemic. The pressure to move to Bharat Norm 6 is escalating. People have reduced the travel when they’ve realized how much they can do it from home.

The automobile sector was bracing for a harsh year even before Corona virus wreaked havoc with their best laid plans.

The sector is set to reshape in ways that will have a significant effect on the eight million workers around the world who work for auto companies.

 

The effect due to COVID-19:

For the first time in history, the Indian automobile sector reported almost Nil monthly sales. Car producers disclose nil performance numbers on account of the closing of manufacturing plants in April 2020. This is because of a national lock down in the battle against the corona virus pandemic. Changes in consumer behavior and the effects of COVID-19 is expected to affect car sales. COVID-19 has resulted in disruptions in the supply chain and its effect on employment, wages, and so far most showrooms have seen few visitors. When sales tend to drop, closing down underutilized plants can be a concern of survival. According to Peter Wells, founder of the Center for Automotive Industry Research, several of the major plants in Europe are still going to struggle.

This will be challenging for companies that manufacture smaller cars that appear to be less competitive, such as Volkswagen, Renault, and Fiat. Nissan intends to slash about 300 billion Yen in annual operating expenses and book investment charges while the COVID-19 pandemic further disturbs the automotive industry’s revenues. According to Toyota Motor Corp, the terrible economic effect of the COVID-19 pandemic was almost over, vehicle sales can be recovered in its largest markets by the end of the year. Toyota has cash stockpiles of $74.4 billion, the result of a decade-long effort to cut costs. According to Frank Witter, Chief Financial Officer of Volkswagen AG, nobody has a clear understanding of the period and intensity of the crisis. Some auto manufacturers are collecting cash and slashing expenses to ensure that they will withstand a protracted downturn.

 

BS-VI:

The move to BS-VI standards is to put pressure on the auto sector. Besides, the effects of BS-VI emission regulations and job losses will affect sales. The problems of the automobile industry are growing. For the Indian car industry, FY20 has been a difficult year. After facing market crunch due to GST and the upcoming BS-VI standards, the corona virus desperately hampers vehicle production in all categories. Combined with the market restriction arising from BS-VI standards, this has generated a cascade impact for the sector that is unlikely to bounce back soon.

 

Electric vehicles:

Electric vehicle sales have been remarkably robust though, lock-down sales of petrol and diesel-driven automobiles have slowed. As much of Europe closed in March, auto sales in the continent dropped by more than half. However, the registration of Electric vehicles grew by 23 percent. Sales of electric vehicles fell 31 percent in April. This is nothing compared to the overall European automotive industry, which dropped by 80 percent. Auto producers may not be as inspired to market hybrid vehicles over the coming months. Alternatively, they will be forced to drive SUVs that yield much greater revenues and are cheaper to market now that fuel costs have collapsed. Everything is going to rely on policy opportunities and regulations.

China and Europe are more encouraging than the United States to embrace electric vehicles. Electric Vehicles are also much more costly than petrol and diesel-driven. In this crisis, few customers will be able to buy it without subsidies. The government will create a scrapping program to promote battery-driven cars with tax cuts to subsidies. The emphasis needs to be on investing in regional manufacturing around the supply chain, upgrading skills, and building up EV Infrastructure throughout the nation.

 

About the stock:

The Nifty auto index has under-performed the market since January as it is not hopeful of any near term improvement in the sector prospects. Mahindra & Mahindra has a Market cap of Rs.47,402.93 crore. Its 52 weeks low is Rs.245.40 and its 52 weeks high is Rs.683. M&M’s closing price was Rs.381.30 and was 4.78 percent low. Maruti Suzuki’s 52 weeks low is Rs.4,001.10 and its 52 weeks high is Rs.7,758.70 having a market cap of Rs.1,54,032.08. Maruti Suzuki’s closing price was Rs.5100.40 and was 0.27 percent low.

 

 

Auto sector seeks special package to save industry from Covid-19 crisis

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Economy, Market News, Markets - November 10, 2020

How to invest in Insurance sector with tax planning.

How to invest in Insurance sector with tax planning.

 

Investment in insurance tools is a major part of everyone’s investment planning exercise. Although, it is important for people to be covered by certain risks, it is equally important that they buy insurance in which they accomplish their long term financial goals and helps them in tax planning. In recent years, the insurance sector has been at the forefront since the government opened it for private companies. Private insurers launched many new products and a healthy competition. This is good for investors because they have more options and a range of investments, but on the other hand it’s just as bad as it creates more uncertainty and the possibility of losing money occasionally.

 

All insurance products have their own pros and cons, so before making an investment decision investors should carefully understand all the aspects of the policy. Diversification and the development of a multi-product portfolio is one way to fix this challenging situation. Investors need to have knowledge of the various insurance products offered in the market and the positive or negative implications of these products. A stable insurance basket should contain Life Insurance cover, Medical Insurance cover, and Retirement/ Pension plans.

 

Life insurance:

The policy is available in 3 broad categories viz. endowment plans, life insurance plans, i.e. term plans and ULIPs. Endowment policies provide insurance and have some maturity returns. In this plan, maximum of the funds are invested in corporate bonds, Government securities, and various instruments from the money market. They deliver a healthy and stable return from 5% to 8%.

 

Term insurance is basically an insurance scheme. The premium covers the risk factor (mortality charges), revenue, and operating expenses in this package. This is why the premium paid for insurance policies is low as compared to the endowment plans. The premium charged in term insurance has no savings element and therefore no maturity benefits are paid to the individual.

 

Funds in the ULIPs scheme are mostly invested in the stock market and corporate bonds. The main distinction between ULIPs and standard insurance policies is the allocation of funds in stocks. These schemes pledge better maturity benefits, as stock markets have historically produced better returns over the long term. Nevertheless, investments in stocks are likely to lose money to a certain degree. Investors should opt for life insurance policies as soon as possible as age is one of the key determinants of the risk premium decision. As the income of an individual rises, they should increase their cover. It is normally said that the cover must be approximately 4 to 5 times of the annual income. An individual must fusion all three plans to limit the cash outflow and also to get the balance returns and reduce the risk.

 

 

Medical Insurance cover:

Medical compensation plans cover the massive medical expenses that occur in the care of an illness. As daily medical treatment is expensive, every person must have a medical insurance policy. Until accepting a policy, most health insurance plans do not cover chronic illnesses. It is therefore necessary to comprehend your medical policy in depth and invest early to offset the policy’s full grievances.

 

 

Future Provisions with Pension and retirement plans:

Insurance pension schemes offer life insurance to the investors when they are in the earning stage and monthly retirement benefits once they retire. ULPP is a type of pension plan where the funds are invested in market instruments. Investors can invest in ULPPs early, say at the age of 20, because they can afford to lose equity funds. Later, they can transfer their funds slowly into capital security schemes.

 

 

Tax planning:

While the majority think of tax planning as a process which reduces their tax liabilities, investing in the right instruments at the right time is also important in order to reach your financial goals as per your maturity period i.e. short, medium, and long. Basically, four different forms of tax planning exist.

 

 

Tax planning under Short Range:

It is a term used for tax preparation, which is used and conducted at the end of the financial year. Investors use this strategy to find ways to shrink their tax payments officially at the end of the financial year. Suppose if you decide at the end of the financial year that your taxes are high relative to the previous year, you might want to diminish it. Assessments can be done to get benefits under Section 88. Short-term tax planning does not require long-term obligations, though substantial tax savings can also be promoted.

 

Tax planning under Long Range:

The long range tax strategy is one that the taxpayer implements over the year. This policy does not provide immediate tax relief benefits as short-term plans do, but maybe beneficial in the long term. Typically you will begin investing at the start of the new financial year and continue to invest for a period of more than one year.

 

Tax planning under Permissive Measures:

Permissive tax planning means managing investments under different terms of India’s taxation legislation. There are various legal provisions in India that include exemptions, deductions, and benefits. Like Section 80C provides various types of exemption on tax savings investments.

 

Tax planning under Purposive Measures:

Purposive tax planning states planning of your investments for specific purposes thus ensuring that you can make the most of your investments. This includes the correct selection of investment instruments, the creation of an appropriate plan to substitute (if necessary), and Revenue and business assets diversification depending on your residential status.

In a nutshell, spending on Income tax is a moral and financial obligation which we all bear as citizens of India. The taxes we pay are used for our country’s growth. In a way, the taxes we pay are used for our benefit. According to the different income slabs, we each pay a different percentage of taxes, but all Indian people are entitled for the benefits equally.

 

 

 

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Real Estate - November 10, 2020

What RERA timeline extension means for developers, homebuyers?

What RERA timeline extension means for developers, homebuyers?

 

The Finance Minister, Nirmala Sitharaman announced that due to the effect of COVID-19 pandemic, the time limit for the completion of real estate projects will be extended by up to six months. The Center is advising both states and union territories to treat the Pandemic as an ‘act of God’ and increase the project completion dates. Although, this will offer help for real estate developers in the execution of projects because no lawsuits may be filed against them, nor will they be liable to pay any fines. Homebuyers are not likely to receive any specific relief in the form of interest / EMI exemptions to buyers. The law safeguards their confidence in seeing their homes completed within a few months. With that directive, if and when provided by the particular states, all projects in those states will be extended. 

Effect on sector:

The lock down, placed on 25 March to curb the spread of corona virus, has a significant effect on the real real estate and building firms. Huge number of employees coming from villages in other states have relocated back when the lockout started. It will provide some extra space to ventures when they slowly resume activities after the lock down constraints have been relaxed. 

What are the penalties:

In real estate regulations, investors are subject to a penalty if they refuse to follow the building completion deadlines. They will have to pay a fee equivalent to 10% of the expense of the project if they do not report their current projects with the Real Estate Regulatory Authority (RERA). Likewise, homebuyers are often liable for not paying any payments owed to the builder. Regulators may be asked to extend the deadline given by real estate developers to complete the project so that they will not default on incurring fines. Likewise, homebuyers may even be given an option to compensate whatever balance is owed to the builder.

 
Extension:

According to Sitharaman, these steps would de-stress real estate developers and enable the execution of ventures such that homebuyers can receive booked houses with new deadlines. Developers asked for an extension of the RERA time limits and for Covid-19 to be included in the force majeure provision. The housing authority in Maharashtra has already given an extension of three months. The Government has declared liquidity support to non-bank borrowers by offering partial or absolute guarantees value of Rs 75.000 crore on investment in debt securities issued by these companies to enable them to generate capital. Non-banking finance companies, the major borrowers in the real estate market, have seen bad loans grow and are unable to collect money. Regulatory bodies in states including Maharashtra, Gujarat, Tamil Nadu, and Uttar Pradesh have provided both builders and customers an extension. Madhya Pradesh also extended the deadline by six months for the completion of listed projects to be finished after March 15. 

 

Benefits to builders:

These benefits will allow six months for the project registration and execution of projects. Due to lack of immediate regulatory corrective action under the RERA Act 2016, there is also a risk that certain real estate developments may be delayed leading to litigation, etc. This growth eventually contributes to the delays in the delivery of apartments to homebuyers who have spent their entire savings in their new home. A notable change is the acceptance by the developer community of expanding project execution targets and other regulatory compliances under RERA by six months. They will be able to deliver homes to the home buyers within the new time frame. 

 

Benefits to buyers:

The Government has declared that the extension of deadlines will safeguard the interest of customers when they get the house. Although, delayed by six months. Delay of only a few months is better than not having the home at all. Homebuyers will have to face further six months delay in delivery of the property. The consumer will have to face the extra burden of charging the rent for six months. Construction is related to the payment package for most customers. If there is no on-site construction activity for 3 months, there will be no claim for payment from the developer to the customer for that duration. Indirectly, the customer will get relaxation. Furthermore, the support given to the builders is just for the timetables of the project and not on the financial side. They will have to start meeting their borrowers financial commitments.

 

 

Weekly market update (11th May – 15th May)

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