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Krishna Institute reported a net profit of Rs. 79 Cr.
Business, Editorials, Market News, Markets - July 13, 2022

Stemrobo eyes global expansion, targets to close FY23 with net revenue worth Rs. 70 crores.

Stemrobo eyes global expansion, targets to close FY23 with net revenue worth Rs. 70 crores.

 

STEMROBO Technologies Private Limited is an educational technology company. The company focuses on leveraging technology in education. The company acts as an enabler for students to learn and innovate in the field of STEAM, Robotics, IoT & Artificial Intelligence( AI).

Stemrobo is working with over 5,00,000 students and teachers, to nurture innovation and creativity at the K-12 level with the help of Stemrobo’s unique custom-designed patented DIY kits, innovative pedagogy, and world-class content, and methodologies delivered through its team of 200+ innovation engineers spread across India.

The company has reported a rise in its profit by 7 times. Stemrobo has recorded a profit of Rs. 2.8 crore in FY22 as against Rs. 34.6 lakh in FY21.

In the next six months, Ed-tech company STEMROBO is going to expand its operations in Nigeria and Cote D’Ivoire in West Africa. Further, the company plans to launch the East Africa chapter in September this year. The focus is on the primary and secondary schools across Kenya and Rwanda. In May 2022 the company started its operations in West Africa. They also launched its programs in 50 primary and secondary schools in Ghana. The company has targeted to reach 250 schools in Ghana by FY23.

The company goals to close FY23 with net revenue of Rs 70 crore and a net profit of Rs. 10.5 crores. There is an increase in net revenue by 108.3% i.e. Rs. 30 crores in FY22 from Rs. 14.4 crores in FY21.

STEMROBO caters to the K-12 segment. The company wants to generate its revenue through annual subscriptions from schools at a minimum guarantee of 250 students. It claims to set up Science, Technology, Engineering, and Mathematics (STEM) based tinkering labs in the schools backed by teacher training, DIY robotic kits, and software. The company has partnered with 2000 schools. And further plan to partner with 5000 schools across India and reach 2.5 million students by the end of next year. 

Furthermore, the ed-tech firm has launched 30 offline centers in India. They also aim to expand through franchise models. The students can use STEMROBO’s offerings through annual subscriptions of Rs. 500.

Stemrobo eyes global expansion, targets to close FY23 with net revenue worth Rs. 70 crores.
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Indigo to “rationalise” salaries of technicians following mass sick leave.

Loan growth, higher margins, and lower costs to drive bank bottom lines in Q1.

NBFCs and HFCs securitization volumes almost doubled.

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Easing of risk weights on loans given to MFIs and NBFCs
Banking, Business, Market News, Markets - July 12, 2022

Loan growth, higher margins, and lower costs to drive bank bottom lines in Q1.

Loan growth, higher margins, and lower costs to drive bank bottom lines in Q1.

 

Indian banks are predicted to post strong core earnings growth in the June quarter. This is due to the improved margins and decline in credit costs. However, rising yields may affect the marked-to-market losses impacting the earnings. The analysts estimated that the credit growth for the banking system will increase by 12%, driven by private banks. Net interest margins may go up by 3%. This is due to better net interest income and an upward interest rate cycle. The treasury loss and lower fees may decline the other income by 27%.

 

The net profit of the overall banking is predicted to drop by 11.5% on QoQ basis. The margin outlook, guidance on deposit accretion for some banks and treasury loss have to be monitored.

 

State Bank of India (CMP Rs. 484.95) is expected to report strong PAT growth. HDFC Bank (CMP Rs. 1,391.80) may report a drop in net profit and NIM is expected to remain range-bound. Kotak Mahindra Bank (CMP Rs. 1718.95) could continue improvement in loan growth however net profit might decline on a QoQ basis. ICICI Bank (CMP Rs. 759.90) might maintain its loan growth momentum as retail continues to see traction while Axis margins are expected to improve. The banks that have a higher share of floating rate books, including mortgages, could have increased credit growth, and rising interest rates. Valuations have also been corrected. This provides a margin of safety. Additionally, asset quality is on the mend, with the risk of a fresh NPA cycle remaining low. This should lead to healthy profitability and return ratios for banks. The gross bad loans might ease up and the overall slippages, recoveries and provisions may return to normal.

According to analysts, the overall Gross non-performing assets ratio is estimated to decline by 20 basis points or by 5.2% in the June quarter. Further, there will be lower slippages reflecting a low EMI bounce rate at 22%, better recovery trends in retail and higher w-offs with banks sitting on excess provisions. Asset quality is expected to improve. As increasing interest rates and the end of the moratorium are building pressure, stress behaviour in the MSME segment needs to be monitored.

Loan growth, higher margins, and lower costs to drive bank bottom lines in Q1.
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NBFCs and HFCs securitization volumes almost doubled.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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AXISCADES Wins $1.2M Aircraft Cabin Interiors Contracts
Business, Market News, Markets - July 12, 2022

Indigo to "rationalise" salaries of technicians following mass sick leave.

Indigo to “rationalise” salaries of technicians following mass sick leave.

 

On 2nd July 2022, a large number of its cabin crew members took sick leave, to participate in the competitor’s Air India recruitment drive. As a result, 55% of Indigo’s domestic flights were delayed.

Indigo has decided to “rationalise” the salaries of its aircraft technicians and remove “anomalies caused by the pandemic”

On Friday, 22 out of 25 of the airline’s aircraft maintenance technicians went on sick leave in Hyderabad and Delhi. They skipped work to protest against their salaries and low increments. Continuous salary cuts during the pandemic added fuel to the employee’s already simmering anger. In April, Indigo suspended some of its employees due to the pandemic. This led to the mass sick leave of the employees indicating a protest. The DGCA ordered Indigo to compensate passengers for delayed flights.

Indigo expects higher attrition levels among its crew, as Air India is hiring aggressively and Akasa Air and Jet Airways are starting their operations this year. This has created a lot of opportunities in the aviation industry.

Indigo had cut down the salaries of its employees during the COVID-19 pandemic. Last week, the has increased the salaries of pilots and cabin crew by 8%. On the other hand, Air India has restored the salaries of its employees by 75 %.

On Monday, an email was sent to the aircraft maintenance technicians by SC Gupta the Vice President (Engineering) of Indigo. The email sent by him was accessed by PTI. He stated that, the Covid-19 pandemic severely affected the aviation industry over the past 30 months. He also mentioned that the technician’s commitment towards the company has remained consistent through difficult times. He further said that he is apprised of the concerns about salary increase and during the last two years the company have not been able to revise the compensation. He has shared that the company will “rationalise” the salaries of its aircraft technicians. This will come into effect from August 1, 2022.

 

Currently, the share price of Interglobe Aviation Ltd is Rs. 1701.35. The price increased by 6.70 points or by 0.40%. The opening price was Rs.1696.65 and closing Rs. 1694.65. The market cap of the company is Rs. 65,545.

 

Indigo to "rationalise" salaries of technicians following mass sick leave.
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Brent oil fell over 4% in a week amid economic crisis

Adani group to enter into 5G spectrum

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Fiscal Discipline in Focus: Government Plans Deficit Reduction by FY26
Business, Markets - July 12, 2022

NBFCs and HFCs securitization volumes almost doubled.

NBFCs and HFCs securitization volumes almost doubled to Rs. 33,000Cr. in April- June

The securitization volume originated by Non-Banking Financial Companies and Housing Finance Companies has doubled in Q1FY23 to Rs.33000Cr. as per a report, released on Monday. Securitization is the conversion of loans into marketable securities for fulfilling cash requirements to third parties many times described as collateralized Debt Obligations (CDOs).

The growth in volume is witnessed to be double 1.9 times in Q1FY23 compared to RS 17,200Cr. in FY22. During Q1FY21, volumes were significantly affected by pandemic and nationwide lockdown and dropped to Rs. 7,500 Cr. in March 2020. The volumes are forecasted to cross a mark of Rs. 1.5 Lakh Cr. in FY23 if there are no further Covid-19 disruptions in the country. The growth in demand for credit has been picked up which was partly met by loan securitization. Since securitization is one of the key tools for NBFCs and HFCs it will help them to diversify their portfolio and enhance their customer base.

The predominant use of securitization is to transfer the credit risk from one investor to a wide range of investors who can tolerate that risk and thus resulting in financial stability and providing an additional source of funding. Fund repayment has been stable over the past few months with the agency’s rate at 97% in April 2022. The total of Rs. 1,5 lakh crore volume in securitization is expected in FY23 compared to Rs. 1.3Lakh Cr. in FY22. It is done in 2 ways either by Direct Assignment (DA) or by Pass-through Certificate(PTC). In the past, DA has contributed around 60% share and 40% to PTCs. In FY23, DA and PTCs are in line with the past trend.

Securitization has dominated, with approximately 46% volumes followed by vehicle loans with around 26% and microfinance at 11%. Securitization of assets has increased sharply from 46% in Q1FY22 to 70% in Q1FY23. The ease in lockdowns and improvement in efficiency in the collection has majorly given the ease to investors to participate in securitization. Another reason for an increase in volumes is because the microfinance sector has been almost absent from this market and was able to restrict the decline and enhance investor interest in the securitization market.

Brent oil fell over 4% in a week amid economic crisis

Adani group to enter into 5G spectrum

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https://www.equityright.com/rbi-expects-inflation-to-cool-from-october/
Business, Equities, Market News, Markets - July 12, 2022

Adani group to enter into 5G spectrum

Adani group to enter into 5G spectrum:

 Gautam Adani, a led conglomerate to engage in a bidding clash with Reliance & Airtel for 5G spectrum. Adani Group’s entry into the 5G spectrum will result in intensified competition for revenue. Analysts believe Adani Group to engage in a battle for 5G airwaves auction. The auction will be on July 26, in both the coveted but expensive 3.3-3.67 GHz and the cheaper 26 GHz bands. Adani Group as the fourth bidder will increase sell off the spectrum. This will lead to more sales of the spectrum, which is good for the government. The price will rise 10% over the reserve price of Rs.317Cr. a unit.

Adani Group clarifies it doesn’t want to enter the consumer mobility space but would participate in the upcoming auction. Adani Group intends to provide private network solutions with enhanced security at its airports, logistics, power generation, distribution, and manufacturing units. They mentioned their plans align with their recent proposition of increasing the Adani Foundation’s investment in education, skill developments, and healthcare. Despite their current focus being on 5G private captive networks, they would target both 5G airwaves 26 GHz and C-band also called mid-band. As ecosystems are now developed around C-band and not much around 26GHz waves.

Adani telco will include services in automation of factories, remote education centers or remote working facilities, and other 5G storage solutions. Spectrum leasing means one company leasing spectrum from telecoms for a fee to corporates keen to invest in such networks. The large corporates can be setting networks on their own or in a tie-up with a technology company. Adani group will have the facility to serve enterprise offerings which include the private network as a service. The entry of Adani Group could make difficult situations for cash-strapped Vodafone Idea. This would dampen future revenue streams for the current telecom companies. Vodafone Idea may either overbid or miss out on the opportunity to participate in the auction.

The Centre plans 72Ghz worth 4.5 lakh Cr. to be valid for 20 years at the base price in various low bands (600 Mhz, 700 Mhz, 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz, 2300, 2500 Mhz), mid (3.3-3.67 GHz) and high (26 GHz) frequency bands. However, the government expects telecoms to use both mid and high-band spectrum to roll out 5G services.

RBI expects Inflation to cool from October.

TCS profit misses estimates as recession fears hit IT spending.

Avenue Supermarts’ profit jumps 490% to Rs.680Cr. in Q1.

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Shaping the Future: Key Trends in the Hospitality Industry
Business, Editorials - July 11, 2022

Brent oil fell over 4% in a week amid economic crisis

Brent crude fell over 4% in a week amid economic worries; could trade in $98 and $112 range.

Brent crude reported a weekly drop of 4.1% while WTI down by 3.4%, after the first monthly drop since November. Prices fell on Tuesday as Brent’s $10.73 drop was the contract’s third-biggest daily drop since 1988, when it began trading. On 5th July 2022, Brent Crude fell by $10.73, which was the contact’s first monthly drop since November.
Central banks around the world are increasing interest rates to control inflation, raising fears that rising borrowing costs could slowdown growth. While potential lockdown in shanghai due to covid-19 could affect oil demand. The restrictive monetary policy of major economies threatened economic growth. This led to the fall in US oil benchmark, tracking a decline in a commodity markets. There was a rise in oil prices this year by 35%. This is due to the disrupted oil supply due to the war in Ukraine and also the global economic recovery. This also affected the price of natural gas, as it surged upto 17% in US and EU.

An important export route for Kazakh oil is in the risk of being suspended. It demands a Russian court order for it to temporarily shut down. After labour strike ended in Norway, there was a fall in the crude oil prices. The price of natural gas and crude oil also fell as th e Euro record a 20-year low against the US dollar. According to the US non-farm payroll data,in June the economy added more jobs than expected. This is an indication of constant strength of labour market. This gives gives the Federal Reserve ammunition to deliver another 75-basis-point rate hike this month. The US energy firms this week hit the highest since march 2020 by adding two oil rigs, bringing the total to 597. Due to the economic fears the prices of oil fell this week. However, the markets are still indicating bullish signals. The supply tightness is likely to intensify than to ease. The price volatility may continue this week. The western countries has banned oil export from Russia. This have supported prices and sparked a re-routing of flows while the Organization of the Petroleum Exporting Countries (OPEC) and allied producers struggle to deliver on pledged production increases. In this week the Bent crude could trade could trade in $98 and $112 range. This week the rupee will decide the crude movement. .In the domestic market, crude has very good support at Rs 7970.00, sustaining below this can show Rs 7760, while upsides Rs 8390 and Rs 8550 are acting as a resistance.

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RBI's Revised Co-Lending Norms Set to Transform NBFC Growth
Business, Expert Views - July 11, 2022

RBI expects Inflation to cool from October.

RBI expects inflation to cool from October:

Inflation in India is expected to slow down from October. The Central bank will minimize its aggressive action to cut down inflation, as per Governor Das.

As per RBI governor Shaktikanta Das, global factors should have more consideration while assessing inflation targets and current developments in Europe. The governor was focused on the importance of monetary policy. It will help in reducing inflation and inflation targets, despite fears that policy tightening could crease economic growth. He also added, after controlling inflation in the second half, there are chances of recession in India.

The Central bank on Friday eased its monetary policy to increase foreign investment and lift foreign exchange reserves. In India, inflation is above RBI’s target since the start of the year. This affected a hike in interest rates by 90 basis points in the last 2 months. All the central banks have been fighting against inflation driven by surging commodity prices, the Russia-Ukraine war, and supply chain disruptions. In June, RBI said expected inflation was at 6.7% and will cool down from October.

The impact of global factors on the domestic economy has increased over past years due to pandemics and war. So there should be greater recognition of global factors in local inflation and economic growth. This requires more coordination among countries to tackle problems. As per International Monetary Fund’s Latest projections, around 77% of countries have reported an increase in inflation, and this number could reach up to 90% in 2022.

Conclusion:

RBI governor suggested that not all tightening sessions have ended in recession.  He even mentioned that these measures won’t last long. The Central Bank and other major banks have revised GDP projections. It indicates a loss of pace in the growth of the economy rather than loss of a level. RBI governor mentioned many times that RBI plans to bring down inflation to 4% with a sensible slowdown in the economy. Inflation has also raised concerns about whether monetary tightening will end in a global recession or if there can be a soft landing. Global factors have difficult policy alternatives between price stability and economic activity.

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Adani Wilmar enters the coveted large-cap category by AMFI

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Business, Editorials, Equities, Expert Opinions, Market News, Markets - July 10, 2022

Adani Wilmar enters the coveted large-cap category by AMFI

 

Adani Wilmar enters the coveted large-cap category by AMFI

On 5th July 2022, the Association of Mutual Funds of India (AMFI) declared its semi-annual categorization of stocks which takes into consideration data from January 2022 to June 2022.

The Association of Mutual Funds of India (AMFI) classifies all listed companies into large-cap, mid-cap, and small-cap, on a semi-annual basis. Active equity fund managers build their portfolios based on AMFI’s stock categorization on.

According to the stock categorization by the Association of Mutual Funds of India (AMFI), shares of the Life Insurance Corporation of India (LIC) and Adani Wilmar were classified as large caps. AMFI has also classified shares of Adani Power, Cholamandalam Investment and Finance, Bank of Baroda, Hindustan Aeronautics Ltd (HAL), and Bandhan Bank as large-cap from the mid-cap category.

 

New large-cap additions:

On the new listing, the market cap for the large-cap is Rs. 475,000 Cr. Stocks such as Adani Power, Cholamandalam Investment and Finance, Bank of Baroda, Hindustan Aeronautics, and Bandhan Bank have been upgraded from mid-cap to large-cap. Currently, the market cap of Adani power is Rs. 1,01,533 Cr. And its market price is Rs. 263. Additionally, Adani Wilmar is also added to the large-cap category with a market cap of Rs. 76,161Cr and CMP Rs. 582. LIC has been upgraded to a large-cap and recorded a market cap of Rs. 444,425 Cr. And the current market price is Rs. 702.65. The market cap of Cholamandalam Investment and Finance (CMP Rs. 643), Bank of Baroda (CMP Rs. 98.65), Hindustan Aeronautics (CMP Rs. 1759), and Bandhan bank (CMP Rs. 273.45) are Rs. 52,822 Cr, Rs. 51,015 Cr, Rs. 58,820 Cr, Rs. 44,046 Cr. respectively.

 

New mid-cap additions:

AMFI has moved IDBI Bank, HDFC AMC, Godrej Properties, Steel Authority of India (SAIL), Zydus Lifesciences, Jubilant Foodworks, and PB Fintech (Policybazaar) from large-cap to mid-cap category. The market cap for mid-caps is Rs 164 billion. The stocks that have been added mid-cap category are Vedant Fashions with market cap of Rs. 24,335 Cr. and CMP Rs. 1003, and Delhivery with market cap of Rs. 36,772 Cr. and CMP Rs. 507.55. Some stocks have been upgraded from small-cap to mid-cap category. These include Tata Tele Maharashtra, KPR Mill, Tanla Platforms, Poonawala Fincorp, Phoenix Mills, SKF India, and Chambal Fertilizers.

 

New small-cap additions:

Stocks that have been downgraded from mid-cap category are AGS Transact Technologies, UMA Exports, Veranda Learning, Hariom Pipes, Campus Activewear, Rainbow Children’s Medicare, Prudent Corporate Advisory Services, Venus Pipes, Paradeep are added to the small-cap category. Moreover, Nuvoco Vistas, Aditya Birla AMC, UCO Bank, Natco Pharma, GR Infraproejects, Indiamart Intermesh, Happiest Minds, Ajanta Pharma, and Sanofi India.

To make sure a consistent investment universe for equity mutual fund schemes, AMFI categorizes stocks into large-cap, mid-cap, and small-cap. However, a change in the category doesn’t need to result in inventory entries. The equity fund managers find the newly added and upgraded to large-cap stocks more attractive.

As per the AMFI, about 74% of newly listed stocks were classified as small-cap.

The market cap of the top 100 large-cap stocks declined to 68.8% from 71.4% in the July review. However, the market cap of mid-cap stocks which starts from 101 to 250, increased to 16.9% as against 16.2% in the last review. In the previous review, the market cap of small-cap stocks was 12.29% which increased to 14.3% .

 

After the stock categorization by AMFI, Adani Wilmar declined by 0.92% i.e from Rs. 582.05 to Rs. 576.70. Similary Adani Power also slipped from 262.75 to Rs. 262.70 which is 0.02%. However, stocks such as LIC, Bank of Baroda, Vedant Fashions have been increased by 0.04%, 0.81%, 1.16% respectively. Hindustan Aeronautics Ltd which is upgraded from mid-cap to large-cap fell by 0.68%. Even though some stocks have been upgraded by the AMFI there is a fall in the some stocks.

 

 

 

 

 

Stock Categorization by the AMFI
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Investing in Real estate.

 

 

 

 

 

 

 

 

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Business, Uncategorized - July 7, 2022

Loan against FD.

Loan against FD.

 

All Non-Banking Financial Company (NBFC’s) and Housing Finance Companies (HFCs) accepting FD’s now offer loans on FD’s under certain terms and conditions. Any individual who has invested in FDs may claim loans against deposits by paying two percent above the FD rate for the loan period, and this can be executed after three months of deposit. The loan against the FD option can be considered over the option of prematurity of fixed deposits.

 

Pre-mature withdrawal theory of FD:

Given the current economic situation where government initiates to bring liquidity into the system, HFC and NBFCs have also re-established their liquidity characteristics in their FD schemes. Organizations offer FD options with premature withdrawal. However, no partial withdrawal option will be offered to the clients. In the event of premature withdrawal, the entire FD will be canceled and the interest on penalties for the period FD will be charged. Let’s suppose, for 5 years from 2017 to 2022, an individual has ₹10 lakh in FD. If he wants to close the FD prematurely in 2020, he must give up 1% to 2% annually in penalty charges for 3 years. You probably only need 50% of the money, but you have to withdraw the entire funds.

 

Brief about availing Loan against the FD’s:

In case of financial crises such as medical bills or marriage payments, people prefer to search for loans from multiple outlets to fulfill their requirements. One such source is a fixed deposit loan. The loan against an FD is a secured loan where your fixed deposit funds can act as a collateral to receive a loan. You will obtain a loan balance of up to 90% of the deposit. You don’t have to pause and take the money from FD for loan whereas you will receive a loan against FD.

 

Who can apply for this scheme?

Anyone with a deposit account can use FD loan irrespective of salary, occupation and credit rating. The following individuals may apply for an FD loan –

• All the fixed deposit holders may apply for a loan from FD, including individual holders or joint accounts.
• If you are minor, then this scheme is not applicable for you.
• Five-year tax saving FD investors can not apply for this type of loan.

 

Pros from this scheme:

The FD loan does not have any obligation and it is impartial of any occupation and can be used by employees or self-employed persons. To get this loan, you don’t need a good credit score. The sum credited to your account can be issued within hours of application.

• FD loans have a lower rate of interest than other unsecured loans, such as personal loans.
• There is no fee for processing to avail this scheme. Most banks don’t charge any kind of processing fee for this scheme. If the banks charge any fee, the processing fee will be negligible as compared to the processing fee for other loans.
• You may not have to interrupt the FDs and chose to withdraw prematurely. In turn, this saves you from losing interest in fixed deposit.
• Loan for both domestic and NRI Fixed deposits are available.
• To avail this scheme, the process is very simple and hassle-free. The process of this scheme is easy and straightforward with least documentation. The form is handled quickly and there is no much involvement of paperwork.
• The loan may be paid in installments or for a lump sum, but it must be paid up to the expiry of your FD term.
• The main benefit of the FD loan is that the financial company does not check the credit score and the past records. Your FD account acts as a security so that banks recover money from the FD account if individual default due to any uncertainties.

 

Cons from this scheme:

• If an individual is unable to pay the amount loan borrowed, the bank is entitled to recover the funds from a fixed deposit in order to recover the borrowed money.
• The holding of the loan against the FD will not exceed the maturity period of the fixed deposit. This means in any circumstances the borrower needs to pay back the loan before the maturity of FD.
• If you do not have a fixed deposit and you require immediate money, a personal loan can be considered as better, cheaper and viable option.

 

The loan limit of various banks for Loan against Fixed deposits:

The SBI Bank, Bank of Baroda, ICICI Bank, Citibank, Punjab National Bank sanctions loan up to 90% of the total funds available in fixed deposits. Bank of Baroda and Axis Bank sanctions loan up to 95% and 85% respectively of the total funds available in fixed deposits.

 

How to avoid emotional investing

 

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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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