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What are Gold funds and what are the benefits?

What are Gold Funds and what are its benefits?

 

Gold funds are unique type of mutual funds, through which investors can invest directly or indirectly in Gold Reserves. They can invest in the gold producing stocks, mining company stocks or in physical gold. Gold funds are the most convenient asset to invest, without the risk of theft or paper work as they are in digital form. This fund is kind of an open ended investment, where investor can issue or redeem at any point of time based on the units which they hold. However, their price directly depends on the metal (gold). Some investors use gold funds to hedge and diversify their portfolio and protect against uncertain economic condition. Many investors diversify around 10 to 20 percent of their portfolio by investing in gold funds. Golds funds are regulated by the SEBI and it is ideal for investors who are risk averse.

 

Types of gold funds available across globe for investors:

Gold Mining Funds:

In this, funds are invested in stocks of the mining companies and returns depends on the performance of these stocks. However, investment does not get affected due to any fluctuation in economy as gold price is affected mainly due to the fluctuation in demand and supply of gold. Gold exchange traded funds were first introduced by Benchmark Asset Company in India. This funds basically invest in the gold through Demat account. Returns and value of the investments totally depend on the price of gold. Investment in Gold Fund of Fund is same as exchange traded funds as in this, investments are made in particular unit of the Exchange traded funds without opening the Demat account.

 

Main purpose of Gold Funds:

Main purpose for investors to invest in gold funds is to grow their investment value and create wealth in whatever period the investment is made with protection against the market fluctuation. Price of Underlying asset varies according to change in demand of gold and at the time of maturity returns are calculated on current gold price. If gold price is increased, it gives more returns at the time of redemption.

 

What are tax charges for Gold Funds?

Normally, the tax which is charged on the Gold Jewellery is applicable to the Gold Mutual Funds schemes. But, taxes also vary according to the tenure. If investments are made for less than three years than revenue is added to the total gross income and considered as short term. But if investments are made for more than three years than 20 percent tax is applicable with indexation norms and CESS charges. However, if capital gains is through exchange traded funds (Gold ETFs), tax exempt is given. No TDS is applicable to Golds Mutual funds. During the time of buying or selling of funds, same tax is applicable as on Gold Jewellery.

 

Benefits of Gold Funds:

Flexibility in investment:

Gold funds allows investors to invest according to their convenience, comparing to the physical purchase of the gold. Investment can be made as low as Rs 500 and even small income class can also invest in this fund rather than purchasing physical gold which costs higher than these funds and gives flexibility. Gold mutual funds are one of the safest investment as these funds are regulated by Security exchange board of India and they continuously monitors the performance of this type of funds so that investors can analyse their future returns. Gold Funds are also safer than holding physical assets (Gold) as it is in de-materialized form.

 

Highly liquid:

Gold funds are high liquid funds as investors can redeem them in short term and are also protected against the uncertain economic situation. However, during market hours only, it can be buy or sell and net asset value of previous day is considered at the time of selling and trade is offset in one or two working day. To balance the overall portfolio, investor may always choose gold funds. Gold price is not directly affected to one investor’s overall investment and stocks in which investment is made. Gold fund is considered as one of the safest investment with good returns.

 

Some finest Gold Mutual Funds in India:

Axis Gold Funds has given return in a year up to 26% and for 3 to 5 year period 4%.
SBI Funds has given returns up to 22% in a year and 6% in 5 years.
HDFC Gold Fund has given returns of 22% in a year and 6% in 5 year period.

 

 

 

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Importance of Financial Literacy. Why it is a must have today

Importance of Financial Literacy.

 

One of the main concern is Financial literacy in this present situation, as it is directly affects the country’s economic development. India stands way behind in financial literacy level comparing to other countries. As per the media reports, India accounts for nearly 20% of the world’s population, but 76% of India’s adult population is not even mindful of the simple financial theories. It discloses that financial literacy is very low in India vs. the rest of the world.

 

Financial literacy, like other developed nations, has still not been a priority in India. The lack of basic financial knowledge contributes to deprived investment and decision-making. Thus a maximum of Indian people invest in plans which have short maturity and physical assets to achieve their personal goals, which offer fewer benefits and do not contribute to the country’s economic growth.

 

As per the media reports, nearly 76% of Indian adults do not grasp the fundamental financial principles and are thus financially illiterate. The studies suggest that India always had a low rate of financial literacy relative to the rest of the world. In fact, we are still far behind other countries and now is the time for developing countries like India to realize the value of financial literacy.

 

Why it is Important?

It is important because it will help us to know how money is to be invested and handled and how it can be used in ways that makes a person financially more secure in the future.

Justification for its importance is as follows:

 

Value of money:

Firstly, it is very imperative for all of us to know the value of money. This will help us to handle our finances efficiently. Financial literacy will teach us the importance of saving and appropriately budgeting the funds. We should not waste our money on unnecessary and expensive products. We can understand better, the difference between our wishes and needs and we should prioritize things in our daily lives according to our quintessence.

 

Keep the Debt in Control:

Being financially literate will help us to have a proper check-in our debt. Too much debt will make us profoundly troubled. If we are financially competent, we can decide how debt can be afforded and will be able to pay off timely, especially if we have mortgage and insurance bills. This will teach us to plan for the education and future needs of our children as well as medical and hospital expenses without the need to lend money.

 

Imparting financial Knowledge among Youngsters:

Being financially aware will enable us to protect the future of the coming generation. We should teach them how to make budgets and save for years to come. They will also understand how their parents work hard to fulfill all their needs, even at their young age. In making them understand the importance of financial literacy, responsibility and reverence for their parents will also be taught. This will also help them realize that they will be financially secure as soon as they age. Imparting financial knowledge will help them to be more responsible and street-smart.

 

To be ready for any kind of uncertainties and to add other income streams:

We face emergencies that need cash, or resources to sustain or overcome our financial and emotional crises. In times like these, being financially educated saves us the trouble of borrowing money, which only brings us more problems. Financial literacy will benefit us to invest in stocks and develop more income sources besides our salaries. The creation of multiple revenue streams gives us the buoyancy that financial crises can survive.

 

Assistance in old-age:

If you are financially literate at a young age, you will be stress-free for the rest of the life, as all the provisions to secure the future would be initiated earlier itself. An appropriate retirement and pension plan at the age to 30 will be rewarding for an entire life.

 

Works as a helping hand:

If we spend a certain amount of money for instance we invest in stocks, we assist the company’s business to expand. This will generate more jobs and will help the company to generate more profits. This results in improving jobs and helps to create a more progressive nation. Being financially stable gives us the opportunity to share our blessings with the poor. Helping others brings us an overwhelming feeling of fulfillment.

 

 

How co-working spaces can restart post lock down.

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Corporate bond funds: A mix of risks and returns.

Corporate bond funds: A mix of risks and returns.

 

Investors in debt funds have been worried in the past few years, considering the uncertainty in the market. Investors want to allocate their money in schemes which have less volatility and provides decent gains. Banking bond schemes and Public Sector Undertaking Bonds (PSU Bonds) schemes are the preferred sectors by the debt fund investors. Nonetheless, corporate bond funds can also be worth investing. As of April 2020, corporate bond funds approximately have ₹86,000 crore in assets under management.

 

Mistakes committed while investing:

For more than two decades, debt funds invested in bonds issued by corporations have been in existence. But in the long run while chasing for high returns, some debt funds are invested in the instruments which have low credit rating and did not perform well over a period of time. In fact, a small part of the portfolio invested in such securities which really has a good strategy. However, a credit risk overload in the portfolio will harm if the underlying bonds fail to repay interest or principal.

 

Corporate bond funds:

As part of its reclassification exercise, the Securities Exchange Board of India (SEBI) tightened the concept of debt fund categories. Thus, corporate bond funds have been separately developed as a group. They are a more secure group of debt funds. Most schemes are open-ended and invest primarily in highly rated corporate bonds like AA+ and contributes almost 80% in the portfolio of investors. Looking at Corporate bond funds as a category, these type of funds fetched 8.8% return in the timeline of one year.

 

Corporate bond funds vs Public Sector Undertaking Bonds (PSU Bonds) vs Banking bond schemes:

Corporate bond funds, Public Sector Undertaking Bonds (PSU Bonds) and bond schemes issued by banks, all three categories create a safe bunch of investments in debt funds. However, all the three categories are not similar and have their own characteristics. Banking & PSU Debt funds must be invested in the bonds issued by banks and bonds from public sector undertakings (PSUs). Banking & PSU Debt funds may also invest in bonds issued by the banks and public sector undertakings (PSUs) with a lower credit rating.

In case of corporate bond funds, the sector is not restricted but investment in bonds with ratings below AA+ has been strictly limited by the regulator to 20% of the scheme. Obviously, comparatively higher ratings do not mean that returns are guaranteed or credit incidents will not take place. But the probability is very less. In the wake of Covid-19, the country is under lock down and many corporates are suffering due to market failure and poor liquidity. Although, Indian government made various provisions for the revival of economy as well as banking sector.

Reserve bank of India (RBI) made provisions like providing money to banks which further they can lend to corporates. But the truth is, companies which have low credit ratings find it difficult as banks hesitate to lend money to them. Therefore, it is rational for investors to stick to funds invested in top-rated bonds. Corporate bond investments fetch almost more 100 basis points than government bonds compared to returns on top-rated corporate bonds with the same maturity period.

 

Precautions before investing:

Past returns and performance offer a sense of the scheme’s success. However, search the portfolios for the risks involved. Unless the fund has a paper exposure below AA+, there is an increased risk. The Nippon India Prime Debt Fund, for example, has 5.5% exposure to A rated bonds. On the credit side, some funds can take limited or no risks. However, they may be at risk by investing in long-term government bonds and corporate securities. The L&T triple ace bond fund, for instance, has been updated over a 5.36-year cycle.

While the UTI Corporate Bond Fund has changed over a 3.73-year period as of 31st April, 2020. These funds show strong numbers in the declining interest regime, such as the one we are in, as portfolio bond prices are growing. However, if the tide turns, such schemes may see silent returns unless fund managers properly churn out the portfolio.

Invest in a fairly short-term and high credit quality fund if investors wants to shrink the risk. Capital gains earned from assets held for more than 3 years in corporate bond funds are taxed at 20% after indexation benefits. Then the profits would be added to the income of the investors and taxed at a marginal rate. In a nutshell, it is always better to do your own research before investing into any schemes this will help an investor to get the clear idea about the scheme and also the expected future gains.

 

 

Market update 19th May 2020. Vodafone Idea rises 17%

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Market update 19th May 2020. Vodafone Idea rises 17%

Market update 19th May 2020. Vodafone Idea rises 17%

 

Overall performance:

After 3 days, Indian indices ended on higher note. However, NIFTY did not cross the 8,900 mark. After market closed, SENSEX was up by 167.19 points or 0.56%, closing at 30,196.17 and NIFTY was up by 55.85 points or 0.63%, closing at 8,879.10 While, the S&P BSE midcap index was up by 56.96 points or 0.52%, closing at 11,112.13 and S&P BSE Small cap declined by 21.13 points or 0.20%, closing at 10,355.18 NIFTY Midcap 100 closed at 12,471.15, up by 61.80 points or 0.50% and NIFTY Small cap 100 closed at 3,811.95, up by 7.05 points or 0.19%.

 

Global indices and commodity:

When Indian market closed, DAX was trading at 10,975.92, down by 76.266 points or 0.69%, NASDAQ was trading at 9,234.83 up by 220.27 points or 2.44% and CAC was trading at 4,447.57, down by 1.13% or 50.77 points. While, SGX Nifty was up by 42.50 points or 0.48% and trading at 8,828.00 Currently, Gold is trading at 46,718 up by 56 points and 0.12%, Silver is trading at 47,520 down by 182 points and 0.38%. Crude oil is trading at 2,401 which is down by 1.00 points and 0.04%.

 

Currency:

At the closing time of Indian indices, USD was trading at Rs 75.64, down by 0.36%. EURO was trading at Rs 82.82, up by 0.29% and GBP was trading at Rs 92.49, up by 0.23%.

 

Sector:

Today, other than banking sector, all other sectors ended on a higher note. The S&P BSE Auto index increased by 144.11 points and S&P BSE IT gained 100.68 points or 0.75% At closing, NIFTY BANK fell by 86.95 points or 0.49%, closing at 17,486.25. While, NIFTY IT increased by 132.20 points or 0.99%.

 

Top 5 gainers:

Share price of Bharti Airtel increased by 60.75 points or 11.29%, closing at Rs 598.80, Adani Ports gained 25.90 points or 8.83% and closed at Rs 319.20. ONGC increased by 4.25 points or 5.83%, closing at Rs 77.15. Bharti Infratel gained 11.65 points or 5.63%, closing at Rs 218.75 and UltraTechCement which is increasing from two consecutive days, was up by 130.35 points or 3.94% and closed at Rs 3438.15.

 

Top 5 losers:

Today, UPL declined by 36.15 points or 9.62%, closing at Rs 339.65. Vedanta fell by 2.70% or 2.50 points, closing at Rs 90, Induslnd bank decreased by 8.95 points or by 2.38%, closing at Rs 367.80. Share price of Reliance fell by 31.85 points or 2.21%, closing at Rs 1408.90 and Larsen declined by 17 points or 2.09%, closing at Rs 796.35.

 

Stock in news:

UPL was in news as share price of the company fell around 10%, even after the market ended on higher note today and closed at Rs 339.65. Bharti Airtel was also in news as today their share price increased by more than 11%, closing at Rs 598.80. Other than these stocks, most active stocks were Vodafone idea, SBI, Tata motors, ICICI Bank, BHEL and Bank of Baroda in terms of volume.

 

 

Fifth tranche of economic package covers MNREGA, Health and more.

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

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

 

Overall performance:

Indian stock market started with on a good note this week but ended at lower note and market saw the most volatile week because of many reasons such as resurgence trade tensions between China and US and Rs 20 lakh package which announced by PM Narendra Modi attracted investors and indices to rise by 2 percent. After the announcement of details of this stimulus package by Finance Minister Nirmala Sitharaman, market witnessed decline in indices.

On 11th May, SENSEX opened at 31,479.74 and closed at 31,561.22 while on Friday market closed at 31,097.73 down by 382.01 points or 1.7 percent compared with opening price on Monday. On the other side, NIFTY opened at 9,226.9 on Monday and closed at 9,136.85 on Friday lower by 90.05 points or 1.2 percent. However, the S&P BSE 500 Index increased by 10-30 percent which includes around 30 stocks. The S&P BSE mid-cap index increased by 0.67 percent and the S&P BSE Small-cap index increased by 0.47 percent.

 

Global indices, currencies and commodities:

Global indices, DAX was trading at 10,818.48, down by 86.00 points or 0.79% on Monday while today it was trading 10,465.17, up by 128.15 points and NASDAQ was trading at 9,121.32 up by 1.58% or 141.66 points while now it is trading at 9,014.56, up by 70.84.
When market closed on Monday, Gold was trading at Rs 45,656 which is now trading at Rs 47,381 and silver was trading at Rs 42,972, and currently trading at Rs 46,718.
On Monday, at the time of closing of Indian indices, USD was trading at Rs 75.74 which is now trading at Rs 75.56. EURO was trading at Rs 81.96, currently trading at Rs 81.98 and GBP was trading at Rs 93.37 which is now trading at Rs 91.89.

 

Sector wise update:

On Friday, NIFTY bank closed at 18,833.95 which was around 19,600 on Monday when market opened, lower by around 766.05 points. While, NIFTY Auto which increased 4.26 percent on Monday, declined by 97.35 points or 0.73% closing at 13,196.35 on Friday.

 

Top 5 gainers:

Share price of jubilant life sciences increased by 21 percent this week closing at 472.40. Vedanta gained 20 percent after they decided to delist at price of Rs 87.50, closing at Rs 92.95 on Friday. Shares of Indian cements jumped by 16 percent this week and on Friday it gained by 13.22 percent, closing at Rs 114.30. MphasiS share price increased by 14 percent this week, closing at Rs 845.30 and share price of Escorts gained 11 percent this week and closed at Rs 823.55.

 

Top 5 losers:

Reliance industries share price fell by 6.56 percent or by 102.40 points and closed at Rs 1,459.40 on Friday. Share price of Dr. Reddys Lab decreased by 6.25 percent or 248.90 points, closing at 3,735.10, then GAIL India fell by 6.08% or 5.55 points, closing at Rs 85.80, IndusInd bank shares declined by 4.92 percent or 21.65 points, closing at Rs 85.80 and share price of tech Mahindra declined by 4.78% or 25.65 points and closed at Rs 510.55 on Friday.

 

Which stocks were in news?

On Friday, various companies were scheduled to announce their March quarter earnings. This includes L&T Finance and technology services, Cipla, Mahindra and Mahindra financial services, Tata chemicals, Nippon life asset management, Crompton greaves consumer and IIFL Securities. Most of these companies posted losses. Many Auto sector stocks were also in news as share prices of auto companies increased in mid-week. Most active stock by volume were Reliance, ICICI bank, HUL and Maruti Suzuki, Tata motors, Axis bank, Yes bank, Biocon, SAIL and BPCL.

Vedanta was in news after they announced to delist from stock market at a price of 87.50, After online bookings for passenger train started, shares of IRCTC locked in 5 percent upper circuit closing at Rs 1,303.55 and up by 62.05 points on Monday. Stocks of aviation sector saw slight increase after announcement of packages by finance minister, Indigo gained around 2 percent, closing at Rs 984 and spice jet increased around 3% and closed at Rs 45.60 on Friday.

 

 

Fourth tranche includes structural reforms in various sectors

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Credit risk funds. Should you invest?

Credit risk funds. Should you invest?

Credit risk funds are debt funds that lend not less than 65% of their portfolio in the lower rated instruments (less than AA rated papers). The borrowers have to shell out higher interest charges to compensate for their lower credit rating, which translates into a higher risk for the lender due to an increased possibility of default. Although, these funds lend mostly for short duration. They are still one of the riskiest in the category.

These funds are ideal for an investment horizon of at least 3-5 years. There is a high probability of incurring losses if held for short term.These funds tend to deliver higher returns than Bank Fixed Deposits thereby involving higher risk.

 

Portfolio with Credit Risk Funds fetches:

Higher Return : These funds take high risks and invest that money in the low risk instruments and the returns generated are higher as compared to other funds.

Tax Benefits: These funds are tax-efficient as the Long Term Capital Gains (LTCG) is flat 20% where as if the assessee is in 30% slab still LTCG will be taxable at 20%.

Extended Supervision: In these funds, fund managers play a very significant role in obtaining remarkable returns. Credit rating alone is not the only basis of decision making. There are various parameters such as the company’s scope of expansion, its potential and business model.

For instance,

ICICI Prudential Credit Risk Fund is presently giving return of +8.64% p.a.

Kotak Credit Risk Fund is presently giving return of +7.44% p.a

HDFC Credit Risk Fund is presently giving return of +7.55% p.a

 

 

Debt, hybrid mutual funds see large outflows in April

Market update 11th May 2020

Market update 11th May 2020. IRCTC 5% Up

Market update 11th May 2020. IRCTC 5% Up

Overall performance:

Indian stock market closed lower on 11th May. At close, SENSEX was down by 81.48 points or 0.26% at 31,561.22 and NIFTY was down by 12.30 points or 0.13% at 9,239.20. However, the S&P BSE Small cap index fell by 10.56 points or 0.10% closing at 10,628.14 and S&P BSE mid cap index was up by 0.65% or 74.20 points closing at 11,498.01.

 

Global indices and commodities:

When Indian market closed, DAX was trading at 10,818.48, down by 86.00 points or 0.79%, NASDAQ was trading at 9,121.32 up by 1.58% or 141.66 points and CAC was trading at 4,485.11, down by 1.42% or 64.53 points. While, SGX Nifty was down by 41 points or 0.44% and trading at 9,215.00
Currently, Gold is trading at 45,656 down by 156 points and 0.34%, Silver is trading at 42,972 down by 321 points and 0.74% and Crude oil is trading at 1,844 which is up by 7 points and 0.38%.

 

Currency:

At the time of closing of Indian indices, USD was trading at 75.74, up by 0.19%. EURO was trading at 81.96, up by 0.07% and GBP was trading at 93.37, down by 0.35%. Indian Rupee ended higher by 0.26% at 75.74 per Dollar.

 

Sector:

Sector wise, the S&P BSE Finance index declined by 77.21 points and S&P BSE Auto rose by 522.72 points or 4.23%. At closing, NIFTY BANK fell by 402.40 points but NIFTY Auto increased by 231.95 points or 4.26%.

 

Top 5 gainers:

Today, most of the top gainers were auto stock. Hero MotoCorp gained 6.42% closing at 2,0885.65. Tata Motors increased by 6.23% closing at 86.10, Maruti Suzuki and Bajaj auto gained 6.09% closing at 4,937.80 and 2,566.30 respectively. Bharti infratel increased by 5.37% closing at 183.60.

 

Top 5 losers:

ICICI bank declined by 5.20% and closing at Rs 320.15, both BPCL and Dr Reddys Labs fell by 3.06% closing at Rs 314.80 and 3,862 respectively. Kotak Mahindra decreased by 2.38% closing at Rs 1,188.45 and HUL fell by 1.98% closing at Rs 2,048.

 

Stock in news:

Most active stock by volume were reliance, ICICI bank, HUL and Maruti Suzuki. After online bookings for passenger train started today, shares of IRCTC locked in 5 percent upper circuit closing at Rs 1,303.55 and up by 62.05 points. Other stock in news was Vodafone idea as their share price jumped today by 9.52 percent, closing at Rs 4.40 and around 77,55,07,976 shares were traded today.

 

 

BSE, NSE to launch rupee derivative contracts

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BSE, NSE to launch rupee derivative contracts

BSE, NSE to launch rupee derivative contracts

 

The NSC IFSC  and India INX have introduced rupee derivatives which will help in bringing much needed added liquidity in the economy. This will supplement their customers with several investment options.

The motive behind introduction of rupee derivatives:

The CEO of NSE, Vikram Limaye communicated to the media that the introduction of rupee derivatives will help in the development of (Gujarat International finance tech) GIFT IFSC as a hub of global financial services. This IFSC platform will help in the rupee exposure of non resident participants. This non residents’ participation will also enhance the IFSC’s extended trading hours and USD settlement. They’ve already received permissions for offering securities trading in any currency except the Indian rupee.

 

Importance of introduction of rupee derivatives:

Mr. Limaye added that this measure will enhance the efficiency of Indian rupees’ price discovery. It will be done by eliminating the onshore and offshore markets’ segmentation. It will also allow for trading and hedging using rupee derivatives contracts to their trading partners viz. IFSC entities and banking units. The Finance Minister Nirmala Sitharaman did the inauguration of the rupee derivatives contract. The contract will be having a lot size in NSE IFSC – Rs 20 lacs and India INX – Rs 10 lacs and the contract will be settled in cash.

 

The futures and options:

The futures at the NSE IFSC will have in total three monthly expiry contracts . The options at NSE IFSC will have total seven weekly and three monthly expiry contracts. For the other one i.e India INX, there will be in total eleven weekly and twelve monthly contracts. In the past few months due to the corona virus pandemic crisis, there is an acute volatility faced by the currency markets. The introduction of rupee derivative contracts in the IFSC will lead to more stability during these situations.

 

The Contracts:

The chairman of India INX, Ashishkumar Chauhan communicated to the media that the size of contract will be Rs 10 lacs and the trading is made available from 8th May 2020, 3:30 pm IST. The trading is for both the pairs viz. USD-INR and INR-USD. He added that for the USD-INR product, many of the people like the exporters, importers, traders, etc associated with any kinds of businesses have expressed their keen interest. The Gandhinagar GIFT City is the only IFSC situated in India having zero short term, zero long-term, zero stamp duty and zero transaction taxes as of now.

Each and every businessman interested should consider trading and hedging using rupee derivatives contracts at the GIFT City. The MD and CEO of India INX, V Balasubramaniam communicated to the media that he looks towards the best participation of members and international participants. This will be the first launch of offshore Indian rupee derivatives contract.

 

 

What are liquid funds? Find more

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Market Update 8th May 2020. Cyient locked on Lower Circuit

How the stock market performed on 8th May?

Overall performance:

Indian indices ended higher on 8th May witnessing profit booking during the last hour of trade which pulled the NIFTY below 9,300. SENSEX closed at 31,642.70 up by 0.63% or 199.32 points. NIFTY closed at 9,251.50 up by 0.57% or 52.45 points. However, the S&P BSE Small cap index fell by 48.05 points or 0.45% and S&P BSE mid cap index was up by 0.04% or 4.13 points closing at 11,423.81.

 

Global indices and commodity:

When the Indian market closed, DAX was trading at 10,887.52, up by 128.25 points or 1.04%, NASDAQ was trading at 9,041.42, up by 1.41% or 125.27 points and CAC was trading at 4,537.86, up by 0.95% or 36.45 points.

Currently, Gold is trading at 46,050, down by 111 points and 0.24%, Silver is trading at 43,281, up by 158 points and 0.37% and Crude oil is trading at 1,841 which is up by 7 points and 0.38%.

 

Currency:

At the time of closing of Indian markets, USD was trading at Rs 75.54, down by 0.28%. EURO was trading at Rs 81.89, down by 0.25% and GBP was trading at Rs 93.84, up by 0.17%. Indian Rupee ended higher, 21 paise at Rs 75.55 per Dollar.

 

Sector:

Sector wise, the S&P BSE Finance index declined by 0.37% and S&P BSE Auto down by 1.29%.

At closing, NIFTY BANK fell by 138.90 points and NIFTY IT increased by 0.83%.

 

Top 5 gainers:

HUL increased by 4.89%, closing at Rs 2,089.45, Nestle was up by 3.85% and closed at Rs 17,802.95, Tech Mahindra gained 3.84% and closed Rs 536.20. Dr Reddys Labs closed at Rs 3,984, up by 3.81% and Sun Pharma increased by 3.72%, closing at Rs 469.

 

Top 5 losers:

Cyient fell by 10%, closing at Rs 208.50, RBL bank declined by 7.37% and closed at Rs 119.35, Axis bank declined by 3.85%, closing at Rs 382.05 while, NTPC fell by 3.81% , closing at Rs 87 and M&M decreased by 3.48%, closing at Rs 386.70.

 

Stocks in news:

Most active stocks were SBI, RBL Bank, Yes bank and RIL in terms of volume. Cyient was in news as their stock hit lower circuit today at 10%, closing at 208.50 due to weak revenue growth management guidance for Q1FY21. After US based private equity fund firm, Vista Equity announced to buy stake in RIL’s digital unit Jio, share price of RIL gained 3.64% or 54.85 points and closed at 1,561.80

 

 

India’s borrowing target now raised to Rs 12 lakh crores

 

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Government may issue tax-free bonds

Government may issue tax-free bonds

Over the past weeks, the COVID-19 pandemic has emerged as a significant global challenge inducing turmoil in the economies. This outbreak is having a severe impact on people, economy and business. Countries are battling and taking every possible measure to combat the spread of corona virus. One of which is the lock down strategy. Lock down is the last resort and has actually helped to save lives. Along with this, it has invited a huge fiscal gap. This fiscal gap will broaden itself once the lock down is lifted. Lock down has hit the earning and spending cycle at an individual level, which will greatly impact future tax collections.

 

Government to raise funds:

Government plans to raise short term funds to fulfill temporary need. They plan to raise this money from the RBI through ways and means advances (WMA). Finance ministry suggested the issue of tax-free bonds. Under this, they plan to raise Rs 10,000 crore by giving multiple installments to ensure its success.. However, Rs 10,000 crore may not be sufficient enough for the anticipated immediate expenses.

It is yet under discussion, as to whether bonds should be sold by a direct public issue or issued via a public sector company. Historically, tax free bonds was sold by National Thermal Power Corporation Limited (NTPC), Rural Electrification Corporation (REC) and Power Finance Corporation (PFC). Further, discussions as to how many number of installments should be provided and other terms and conditions are in process. As per the prevailing marginal tax rates, calculation shows that 5.5%, 10-year tax free sovereign instrument will effectively cost 7.7%.

 

Good news for the retail investors:

Looking at the current scenario, if these bonds are kept open for retail savers and corporations, they will willingly opt for parking their hard earned money into these bonds. After the news of Franklin Templeton freezing 6 of their plans, investors have fear carved in their minds with respect to safe keeping and growth of their capital.

Government will issue these tax free bonds to raise funds for specific purposes. Generally, the funds are raised from debt market by the Central government in the form of weekly securities auctioned by the Central bank. In contrast to last FY target of Rs 4.74 lakh crore, borrowing target of FY21 is marked at a net amount of Rs 5.11 lakh crore.

If retail investors get a chance to participate, this scenario will be the first of its kind and create history. Issuing tax-free bonds to retail savers and corporations will provide them a window of safer investment. At the same time, raising money through these government instruments will over populate the market and increase rates. The CARE estimates reveal that until today, the lock down would have sucked a huge chunk of Rs 1 lakh crore of GST monthly collections.

 

 

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