Gold investment remains high in the midst of subdued gold jewellery demand

Commodities, Economy, Market News, Markets - May 1, 2020

Gold set for best month in 4 years

Gold set for best month in 4 years

On 30th April, the gold prices had a surge, en routing to its best month in the last 4 years. This is because of the increase in expectations about the monetary ease provided by the central banks and the continuous stress over the global recession which increased the demand. Spot gold showed a surge of 0.2% at $1,713.75 per ounce by. The US gold futures showed an increase of 1.1% to $1,732.10 per ounce.

How the gold prices surged?

Eugen Weinberg, the Commerzbank analyst stated the immense monetary support received at the movement is helping gold. Regardless of the increasing risk appetite, the gold prices stayed above $1700 ounce even though it has faced pressure from the equity markets. Carlo Alberto De Casa, Kashif analyst of Activtrades said to the media that the investors will remain confident about quick solutions for the coronavirus. The central banks will be forced to print a large amount of money leading to hyperinflation in such economic turmoil.

Interest rates:

United States Federal Reserve preserved the interest rates and it should be left unchanged for sometime. The unexpected monetary influence provided by both the European Central Bank and the Federal Reserve will probably increase the demand for gold in the future.

Over the last six weeks, the European Central Bank left the interest rates unchanged after revealing various stimulus measures including a plan to buy 1.1 trillion euros worth of debt this year. The Federal Reserve kept the interest rates near zero on April 29. They also promised to extend the emergency series of measures needed to help the battered and bruised economy.

In the first quarter, the US economy contracted at its shortest pace since the Great Recession. In the second quarter, it is likely to show a more sharper contraction. The Bullion showed an increase of more than 9% in the last month. It is boosted by several stimulus measures from the central banks to handle damage caused from the corona virus outbreak. The unchanged lower interest rates will reduce the alternative cost of holding non yielding gold. It is always considered as a risk against inflation and canker currency.

Amazon Pay Later introduced in India

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India's Fintech Journey: Progress and Future Ahead

Business, Market News, Markets - May 1, 2020

Amazon Pay Later introduced in India

Amazon Pay Later introduced in India

In the era of digitalization, consumers prefer to use the finest services provided by various e-commerce platforms. In this chase, all major e-commerce platforms try to offer preeminent services to their customers, which helps them to establish their brand name in this competitive market. On 26th March 2020, Amazon launched their new service “Amazon Pay Later” with some remarkable features. It will ease the buying pattern of customers.

What is “Amazon Pay Later”?

Amazon Pay Later is a credit providing mechanism, which ensures that customers can buy the products now and pay the price in future within a stipulated time period. Purpose of launching this service is to provide the customer a hassle free mode to get instant credit without submitting countless documents which an usual credit giver demands.

Products can be purchased using Amazon Pay Later?

Customers can purchase daily essentials, home appliances, electronic gadgets, groceries and many more. Besides that, they can pay all the bills, recharge and top up their Dth and other services too. Amazon Pay Later prohibits some items which includes jewelry, bullion i.e. Gold and silver and Amazon pay gift card. Customers can only purchase the products provided by Amazon in their country. Products by overseas merchants are prohibited.

How to register?

The registration process is an easy-going task which hardly takes 2 minutes. They provid two options to the customers. They can go with existing KYC or OTP (One-Time Password) based e-KYC. In both the methods customer just need to follow the steps and registration will be completed within minutes.

Features of Amazon Pay Later:

If a customer buys a product and chooses a tenure of 1 month, the product price range should be in between ₹1 – ₹10,000. They can buy the product and pay the price in the succeeding month. If a customer purchases a product and chooses a tenure of 3 months, the product price range should be in between ₹3,000 – ₹30,000, They can also choose a tenure of 6 months. For this, the product price range should be in between ₹6,000 – ₹60,000. They can buy the product and pay the EMI in succeeding 3 and 6 months, respectively.

If a customer wishes to choose a tenure of 9 and 12 months, the minimum and maximum amount should be ₹9,000. They can buy the product and pay the EMI in succeeding 9 & 12 months. The rate of interest is very nominal ranging from 1.5% to 2% in all scenarios excluding the tenure of 1 month which is absolutely free.

Reliability and loopholes:

Amazon has tied up with reputed NBFC, CapFloat Financial Services Private Limited (Capital float) for ensuring smooth conduct of business. Although with all these amazing features, Amazon Pay Later has some drawbacks. As per the RBI norms, credit up to ₹60,000 p.a can be granted to any individual with eKYC. The major drawback is, if a customer purchased any product and later cancelled or returned it, the amount of the product will be considered while calculating the limit i.e. ₹60,000 irrespective of procurement of the product by customer.

Microsoft completes 5 year deal with Coca-Cola

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Business, Market News, Markets - May 1, 2020

Microsoft completes 5 year deal with Coca-Cola

Microsoft completes 5 year deal with Coca-Cola

The Washington based tech giant, Microsoft Corporation cracks a five year deal with Atlanta based beverage giant Coca-Cola Company. Microsoft Corp will supply business software to the former company. Apart from this, Microsoft Corporation will also provide tools for customer service agents and its Teams chat app to Coca-Cola Co. Describing their agreement as a strategic partnership, the size of the deal is kept unknown by the companies. But the said deal shall be inclusive of the suit of Microsoft Tools which is Dynamics 365. To enhance your knowledge, Microsoft’s Dynamics 365 is the tool which directly competes with the Salesforce.com Incorporation.

Microsoft’s technology:

Business operations of Coca-Cola Co. will be conducted on cloud platform of Microsoft. The name of the cloud platform that Microsoft will extend to Coca Cola Co. is “Azure”. In the past, Coca-Cola Company has availed Amazon and Salesforce’s cloud technology and business software. Now they are building a new relation with Microsoft for the similar services. As the lock-down prevails and majority of Coke’s workforce is working from home, they are using Microsoft 365 Live Events for large-scale video presentations.

Microsoft has a solid grip in general-purpose business software. General purpose business software includes E-mails and word processing applications. These are widely used by the employees working in Customer service and Sales. The VP of Microsoft’s business applications group, James Phillips gave an interview. He informed Reuters that they shall be providing Coca-Cola Company with Microsoft’s technology. It will enable their smooth working. Their technology shall empower Coca-Cola Company to get answers to their unanswered queries. By use of Artificial intelligence (AI), Coca-Cola Company will be able to fetch relevant data for the same.

How Microsoft will help Coca-Cola?

During the first half of his interview, Phillips mentions that Coke is willing to have a systematic internal programme in place for the employees. A programme that will enable the employees of their company to get one stop quick answers at a glance. Coke wants to eliminate the time consuming process that employees undergo every time they want to get answers to repetitive questions. For example, to know how and where to go to apply for vacation time, where they should go to have a look at their last payroll slip, which educational programme they can pursue to enhance their skills and many such questions.

In a statement, Senior VP of Coca-Cola Mr. Barry Simpson said that Microsoft Corporation will help Coke to get rid of some of its redundant and fragmented Systems. Lastly, Microsoft’s Phillips added, Coke plans its customer service department to be equipped with a system in hand which will aid them in providing quick solutions to the questions raised at the customer end. Its beverage maker’s customers majorly include grocers and big retailers. It is expected of Microsoft to have an increase in its post revenue of $33.9 billion for the quarter, from $30.6 billion last year, and its earnings per share (EPS) climbing up to 1.28 from 1.14 which was a year back.

Mutual fund industry in crisis due to pandemic

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India's Insurance Sector Booms Amid Rising Demand

Economy, Market News, Markets - April 30, 2020

Mutual fund industry in crisis due to pandemic

Mutual fund industry in crisis due to pandemic

The COVID-19 pandemic has hit nearly all sectors of businesses, people, economy, trade and the financial system worldwide. Mutual fund industry has been adversely affected due to corona virus. All mutual fund investors have incurred huge losses in NAVs, specially those investing into categories of equity related mutual fund schemes.

Nearly 20 categories of mutual funds viz. energy funds, International funds, banking funds, large cap funds, mid cap funds, dividend yield funds, PSU funds, infrastructure funds, etc. are some of the mutual fund schemes that have faced losses tremendously in the last month. The energy sector saw a downfall of 20.08% in the last month. It was followed by the International funds category which dipped to 20.07%. The banking sector funds also had a downfall not only because of the corona virus threat but also because of the non performing assets crisis. The gold funds category is the only sector which has given positive returns in the last month.

Winding of 6 mutual fund schemes by Franklin Templeton:

Franklin Templeton, the leading global investment management company announced the winding up of 6 mutual fund schemes on 23rd April, 2020.

Fear of Investors:

All these issues have led to fear in the minds of investors making them pull out Rs. 9,000 crores out of the credit risk mutual fund schemes. As per the data collected by Pulse Labs, the asset under management of these mutual funds have dropped by 19%.

A lot of tension can be seen in the credit risk fund category because of the redemption and unavailability of liquid underlying assets. The HDFC credit risk fund has the highest loss in comparison with other credit risk funds. The asset under management of the credit risk funds show the tremendous depth in comparison to the last month.

Lakshmi Iyer, chief investment officer of debt, Kotak Mutual Funds said to the media that without even considering the quality of the portfolio, investors have started redeeming the money from the funds. One of the ICICI Prudential spokesperson said to the media that the company assures the portfolio is well differentiated on the asset side and liability side.

RBI’s help:

RBI has recently announced rupees 50,000 crore special liquidity funds for Mutual Funds. This was announced after the winding up of 6 mutual fund schemes by Franklin Templeton. It is a measure taken by RBI to calm down the investors and reduce their panic by providing a guarantee of having adequate liquidity to meet the redemption. These funds can be borrowed by the companies from banks at a repo rate of 4.4% for 90 days. The Targeted Long Term Repo Operations is to help several financial services companies to manage their cash flow problems amid COVID-19 outbreak.

Industry bodies urge government to create funds for startups

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Business, Economy - April 30, 2020

Industry bodies urge government to create fund for startups

Industry bodies urge government to create fund for startups

In January 2016, Start-Up India initiative was launched by the government of India to encourage young entrepreneurs in the country. The main objective of this initiative is to transform India into a Start-up nation. India is a highly diverse country with 28 states and 8 union territories. This diversity has the aid to build opportunities to cross learn from each other. Now, there are more than 14,600 start-ups in the country with 231 angel investors and 8 angel networks. India is now the 3rd largest unicorn community and has 16 high valued start-up companies. This community has an overall valuation of $58 billion. They have raised more than $17.27 billion funds.

Government measures:

Various measures are taken to encourage the entrepreneurs like reduction in patent registration fees, improved bankruptcy code to ensure 90 day exit window, freedom from inspection and tax for first 3 years, schemes to provide IPR protection to start-ups.

Start-up association of India:

Start-up association of India asked the government to create 25,000 crore funds and keep the start-up India fund as a priority as liquidity crisis may arise due to the COVID-19 pandemic. This start-up industry was founded in 2017 altogether by the entrepreneurs to help start-ups in India in all the sectors and stages of maturity. This association connect start-up to the policy makers and investors so that broad network is created. Due to the COVID-19 pandemic, start-ups play a vital role especially tech start-ups. Since digital platforms are used for all purposes they play an important role.

The association includes top entrepreneurs of India Mart, Make My Trip, Info Edge and Venture Gurukool. They collectively suggested that funds can be registered as an Alternative Investment category-II Fund, with the National Investment and Infrastructure Fund, managed by professional fund managers. They also said that 10,000 crore funds which is under SIDBI, can be allocated for the start-ups.

Why fund is required?

Recently because of the COVID-19 breakdown, whole country has been affected socially and economically. This breakdown has directly affected the start-ups too as start-up companies are most vulnerable. Other reasons like sudden decline in productivity, supply chain breakdown, closing down the premises have also affected the performance of start-ups. On the other side, government is also taking measures to help start-ups such as extending the period for paying taxes, allocating the funds for labourers and workers. Not just the government but private companies have also taken initiative.

Facebook announced to offer $100 million in cash as well as credit to small businesses where Facebook operates. Citibank has offered assistance to the small businesses by waiving their fees and penalties. Many tech companies are also playing a major role as due to the lock down, digital platform are the ultimate saviors for the country. Tech companies like Microsoft, Google, Zoom and Cisco have offered their services for free to businesses conducting meeting, conferences online.

Just dial announces buyback of shares

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Banking, Economy - April 30, 2020

RBI introduces Operation Twist

RBI bond introduces Operation Twist

The Reserve Bank of India (RBI) came up with a bond-swapping programme and coined it as Operation Twist. RBI had announced that it would conduct a synchronous buying and selling option under the Open market operations (OMO). So, an OMO of ₹10,000 Crores each was held on 27 April, 2020. The RBI mentioned that the 10,000 Crores amount will be made up of purchase of long term securities having tenure of 6 to10 years.

The sale amount of 10,000 Crores will be made up by selling short term securities having maturity dates like June 2020, October 2020 and April 2021. Short term further having two categories of cash management bills, one of 77 days and another of 84 days and two treasury bills of 182 and 364 days respectively. These short term bills are being put on sale by the RBI keeping in mind the interim cash mismatches the government is facing recently due to economic difficulties the pandemic has produced.

Auction result reveals that the cut-off yields on which the RBI bought securities was much higher than secondary market.

To illustrate:

1) 7.26% Government security (G-sec) 2029 which had secondary market return of 6.38% was bought at 6.4%.

2) 7.59% G-sec 2026 was bought at 5.9% versus the secondary market that gave 5.8%.

Under this programme, the aggregate amount of Face Value (FV) notified by RBI was 10,000 crores, against which the participants offered a total amount of 64,746 crores . RBI received bids that were six times more than the FV of the bonds. On the other hand, bids received for the sale of securities were nearly five times than the offer, which amounted to nearly ₹50,260 Crores. The near term paper was giving lower yield than normal. The Operation Twist further aggravated the same.

When and why does the Central Bank conduct an OMO?

Generally, the OMO sales are undertaken when the RBI wants to take out excess liquidity from the system. Whereas, OMO purchases are done to infuse instant money into the market. Recently, RBI was seen carrying out these operations to balance the sovereign yield curve. Particularly, ensuring lower returns at the shorter end of the curve.

Referring to the auction results, Naveen Singh, senior VP, ICICI Securities Primary Dealership says since RBI could buy securities at higher percentages, this believably implies that the banks are interested to book profit on the stock.

The Stocks which were held previously for maturity were made available for sale. Inversely, the cut-off rates on the sale of near-term paper was lower than prevailing market rates. For example, the 364-day T- bill was auctioned at 3.9%, when the market rate stood 4.074%. Distinctly, the RBI is desirous to lower the interest rates at the shorter end. This move is taken to enable an economic comeback against the upset which the pandemic has produced.

MSME seek fiscal aid amid crisis

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Business, Economy - April 30, 2020

MSME seek fiscal aid amid crisis

MSME seek fiscal aid amid crisis

The COVID-19 pandemic has affected nearly all areas and sectors of businesses, people, economy, trade and the financial system worldwide. The finance minister Nirmala Sitharaman announced $ 22.3 billion funds to help the poor people striving for all the necessities during this lock-down period. The biggest effect of covid-19 pandemic is on the Micro Small and Medium Enterprises (MSMEs) exporters. This is because this sector constitutes nearly 45% of the total outbound shipments. It also contributes nearly 25% to the GDP of the country.

MSME’s problems:

The CEO of one of the MSME, Anntech Offshore Engineering Pvt. Ltd. Ashokan Puthenpurackal said to the media that the major clients are refusing to make payments to the company. Thus impacting the cash flow of the company. All the small mid-sized and large companies are trying to borrow credit from banks and other financial institutions, calls for tax deferrals to ensure a continuous flow of operations and to maintain stability in the economy. The decreasing cash flow with no financial support will lead the company to lay off of its employees.

The government is trying to provide incentives to the most affected sectors like hospitality, tourism, etc. and is also planning for tax deferral payments. The other countries are trying to help the companies by providing Bank guarantees and fiscal support of at least 30% of the GDP. In India, it is less than 1% of the GDP. Experts say that the government should provide support of at least $8 trillion.

RBI’s support:

The RBI has headed to provide support for the economy but the governor Shaktikanta Das explained the significance of fiscal measures during this pandemic situation. The condition will continue to be unstable and there will be an increase in the NPAs, insolvencies, unemployment problems, etc. The Indian Government has not announced any special packages for the MSME sector but is now concerned mainly for the people of the country and to control the number of COVID patients.

Any chaotic and constant measures announced will lead to increase in the fiscal debt. Before taking any measure/decision, the government has to look into all the aspects and their impact on the people. The Central Government is also planning to provide $39 billion of loans to MSMEs. It will help to recover the businesses thereby helping to revive the economy. This proffer can be used by the firms to borrow 2/10th of their credit limit. It will also have a fund to pay for defaults, if any. The government is considering the problems of the manufacturing units who are struggling to operate their business amid lock-down.

Real estate sees investment growth in 2019

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How to minimize taxes when selling real estate.

Economy, Real Estate, Real Estate News - April 30, 2020

Real estate sees investment growth in 2019

Real estate sees investment growth in 2019

Real estate market witnessed an increase by 27% in investment during the year 2019. This increase is due to the Real estate sector now being transparent in operation and money-making. Many foreign investors and domestic investors have a great interest and belief and have invested in this sector in hope of making profits. Also, many government policies played a key role in helping this sector escalate.

Real estate witnessed a record of $6 billion during the financial year 2019. Investment compared to last year was $4.76 billion which has now increased by 27% to reach a record high of $6 billion. Major investment was 10% in hotel, 40% in office and development sites by 41%. Cities with high investment rates are Bangalore, Mumbai, Delhi, Hyderabad, Ahmedabad, Kolkata, etc. There were many steps taken by Government to increase the liquidity of cash to create interest for the investors. Major contributors were foreign investors with 65%. On the other hand, domestic players were 35%. Hotels saw a 10% increase compared to 2018 report and development sites saw 5% growth compared to 2018. India is a hub for many developed countries searching land, warehousing, and office space. Quick urbanization looks good for this part. Interest for private properties has flooded because of expanding urbanization and rising family unit pay.

Real estate sees growth in investment in 2019

India is among the top 10 Real estate markets globally. Government allows 100% FDI inflow in this sector. They have also passed a scheme which states 60 million houses are to be built by 2022 where 40 million are in rural region and 20 million are in urban region. Government is aiming to build 100 smart cities which will help to reduce number of people migrating to urban areas. Relaxation in certain norms has helped to elevate this sector. Key drives to increase are easy finance, increase in population, rapid urbanization, increase in the income of people, increase in economy, growth in tourism and policy support by Government.

As of now, COVID-19 is affecting various sectors all over country due to lock-down. There is a 20% decline in Real estate. Due to low-income and decrease in spending power of people there will be a decline in sale. COVID-19 pandemic may have serious declining impact in the present year. Quick urbanization looks good for the part. As per the Government, the sector will witness a $1.3 trillion investment by 2025. The increasing young population of India will help in building education space. The healthcare space is expected to grow to $372 billion by 2022. With an increase in number of tourists, there will be increase in number of guest houses and service apartments. Also, increase in demand for hotels industry is expected to increase up to $15.3 million by 2025.

Lenders seek replacements for debt schemes

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Easing of risk weights on loans given to MFIs and NBFCs

Economy, Market News, Markets - April 30, 2020

Lenders seek replacements for debt schemes

Lenders seek replacements for debt schemes

Debt mutual funds are the funds which are invested in instruments like treasury bills, certificate of deposits and c-papers. This instruments have fixed interest earnings with fixed tenure. Although, this interest is fixed for throughout the period of investment on the underlying asset. The main goal is to collect wealth through the interest earned and increase the overall investment value. Best debt scheme is decided on the basis of the credit rating given to them. If the credit rating is high. it means debt security have higher chances of paying the interest and principle during the time of maturity.

Debt schemes are usually taken by the investors and high network individual (HNI). They are risk averse and not ready to invest in equities. They choose debt funds according to their requirement for short to medium term. While investing in any scheme, investor considers points like what is the objective of funds? In which category this funds fall, how much risk is involved. Factors like cost, investment horizon and financial goal is also considered. Debt funds are evaluated on the factors like fund history, fund returns and ratios like financial ratios and expense ratios. Some best performing debt funds are SBI magnum constant maturity fund, ICICI prudential constant maturity gilt fund, UTI gilt fund, Axis banking and PSU debt fund and Kotak dynamic debt fund.

Franklin Templeton’s decision:

Franklin Templeton is one of the biggest mutual fund house and stands in 9th position in the country. They have recently announced that they are winding up the their 6 debt schemes. They are credit risk fund, duration fund, dynamic accrual fund, short term income plan, ultrashort bond fund and income opportunities fund. If valued altogether, this 6 schemes hold around 30,000 core asset of investors. After these scheme got windup, investors who had invested in this scheme cannot withdraw their cash on the basis of the asset they have put and their money is locked.

Liquidity concerns:

After Franklin Templeton scraped six debt schemes, liquidity became the main concern for the financial institution. Therefore they have asked investors and HNI’s who have borrowed fund from the banks and other financial institution to bring additional margins in debt mutual fund. This also includes franklin Templeton’s schemes. Investors and promoters have invested money in these schemes to raise money so that they can invest in the market or any other short term scheme to meet their short term capital requirement. Many high network individuals have borrowed money from NBFCs and bank to invest in the mutual funds. They are giving more than 8% returns and are more risky.

How will businesses survive social distancing?

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Business - April 30, 2020

How will businesses survive social distancing?

How will businesses survive social distancing?

India is a firm believer of unity. In the wake of Covid-19 outbreak, upholding social distancing is the requisite act to follow. In India, most of the businesses are done because of the good relationship maintained with their clients and all other stakeholders. Personal connections and physical interactions are valued at its peak. Current scenario of the country has almost all the companies shift to work from home model. This work from home model has created a buzz in the country, and a 100% absence of personal connection among all the stakeholders.

Importance of IT department:

This pandemic situation has abruptly provided utmost importance to the IT department. IT department is working immensely to give the best service to their clients. But there are many untraceable problems which may come in their way. Problems such as, how the productivity and efficiency of an employee can be traced? How impactful this can be while delivering the services to the clients? All this factors will be a foremost concern for all the companies. Inherently, there are many difficulties faced in maintaining social distancing and organizing businesses online. However, doing the businesses online can be proved a hectic task as most of the businesses will use the Cloud based operations and day by day their services are more perilous and unsecure.

Threats faced by businesses:

Media reports states that Cloud based operations have many threats like security problems This can cause a major problem to the companies as their crucial information and company secrets are at risk. Organizations are facing dilemma to find the exact match between “least cost” and “Best service offered” to the clients. IT department is the key to all the problems. Software’s which ensures highest security, developing a program which will assemble maximum data and ensuring data safety and transferability are the need of several companies. Developing this kind of software can be a trump card for the developers. Such software can be constructed using DevOps and DevSecOps.

The current situation is an enormous opportunity for the companies to study the market in a hasty manner. Every department in an organization is crucial and has its own advantage for the benefits of the company. Analyzing and forecasting data can help companies to mark a competitive advantage.

Learning from the crisis:

It is very important for all the companies to break the previous working pattern and construct themselves as per the situation demands. Now, it’s time to share the maximum knowledge a person possesses at any level of hierarchy with their subordinates. It will help the company gain maximum profit and expand business. Another vital aim that companies should not forget is that to keep the cost under control and boost the revenue. Customer satisfaction should be the priority. Otherwise it will just take few minutes for a customer to change their source where they are beneficial the most.

But a big question arises, will all these activities continue once we pull through this pandemic? Well, once all the things get restored hope, everything will bounce to as we expect.

Effects of Covid-19 on cryptocurrency market

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