SEBI May Restrain Excessive Derivative Speculation

by Vinaya HS on September 8, 2017

in Finance

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The Securities and Exchange Board of India is planning to curb the excessive derivative speculation. The market regulator wishes to bring major changes to the structure of equity trading in the country. The move has come in wake of the government’s recent realization that it is because of the high concentration of equity trading volumes in the derivative segment, which is leading to the major loss of the tax collection revenues.

We can expect several announcements of various measures by the capital market regulator to boost cash equity volumes in the times to come. These measures intend to restrain the excessive derivative speculation.

As per the stock market news, India has become the 2nd highest speculative equity market in the world which has happened due to the derivative trading. The first slot is occupied by the country of South Korea. This has led to a lot of consideration by the government and the Sebi as well.

As per a survey done recently, the derivative trading was found way higher than the cash trading. The ratio of equity derivative turnover to cash segment turnover was found to be 15.2:1 which means that more than 15 trades in derivatives were happening for one cash market trade. This has caused a lot of deliberation in the office of the Prime Minister and Finance Ministry as they are losing out a major share of the taxes.

In the month of April, the derivative trading was even higher with the average monthly derivatives to cash turnover ratio was found to be 18.6:1. Also in May, the same ratio was 20.2:1. All this is impacting the Securities Transaction Tax (STT) collections hugely. The Tax collection movements clarify that any flow in cash volumes sees a multiple push in STT collection.

According to the legal news India, 67% of the ₹7,350-crore STT which was collected during FY’ 2015-16 came from the cash segment. This trend has been on similar lines for many years.

Normally, the cash segment on an average contributes to over 60% of the government’s STT. Such is the figure even when the accounting is for less than 10% of overall equity trading. As per the trend, an increase in STT means an increase in cash market volumes and vice versa.

After witnessing such ratio, the board had issued a discussion paper in the month of July with the aim of orderly growth, development and alignment of both cash and derivative markets.

In the month of December last year, in an announcement Prime Minister Narendra Modi had said in a SEBI function, that the equity markets were contributing less to the STT tax collections. He had also made a promise to bring sound and prudent policies and modify the practices for increasing the tax contribution from various market participants which will be done in a fair, efficient and transparent way.

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The National Stock Exchange or NSE has filed a consent application with the Securities and Exchange Board of India (Sebi) for the matter of settling the colo issue. Through the consent mechanism, the application has been filed under the settlement regulations of the market regulator. Sebi after reviewing the consent application will get back to NSE and announce the following action. NSE is going to work with the market regulator so that the matter can be resolved at the earliest.

The consent application was filed by the NSE before the deadline could lapse in the two days. As per the norms of the market regulator, it is expected that the consent application should to be made within the time span of two months of having received the show cause notice (SCN) by the Sebi.

In the month of May this year, the market regulator Sebi had given away show cause notices to the NSE and 14 of its management personnel at key positions (current and former) for having the irregularities at its colocation facility. As the legal news points out, the trading systems which is used by the National Stock Exchange at its colocation facility was likely to be under the manipulation which was giving a preferential access to some of the select brokers and high frequency traders. To this show cause notice, NSE has already sent its reply.

The consent application has come after the Vikram Limaye has taken the charge as the managing director (MD) & chief executive officer (CEO) at the NSE. The market news says that the NSE has not mentioned any settlement amount in the consent application but NSE has mentioned in the application that it has boosted its system and processes to prevent any chances of occurring the same thing again.

Consent process is quite like an out of court settlement process. It is a negotiation between the capital markets regulator and an entity by paying a penalty or by undergoing a voluntary ban from the stock markets. Under the consent process, an alternative dispute redressal mechanism permits the defaulter to make a settlement for a pending issue with Sebi by accepting a penal action without admitting or denying the guilt. After the consent is filed by the alleged wrong doer, the terms of settlement offered by the applicant are kept before the Sebi. The high powered advisory committee (HPAC) of Sebi, which is led by the retired high court judge and three other experts, looks after the matter. After having analyzed all the facts and circumstances of the case, the HPAC gives its recommendations if the application should be accepted. After this, a panel is formed with two whole time members of Sebi who consider the recommendations and take a final decision.

As per Vikram Limaye, the MD and CEO of the NSE, says that the market regulator will review their application and then decide upon taking it for consent. He wishes to close this asap.

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Since 1860, the Indian taxation has undergone multiple iterations to meet the requirements of government finances and economic policy. There have been multiple acts to deal with the irregularities in the tax system. The Central Goods and Services Tax Act, 2017 (GST) can be considered another attempt to dissolve the economic disparities and irregularities prevalent in the system.

Tax slabs for goods and services

The 14th Goods and Services Tax Council meeting embarks multiple changes in the tax slabs 2017-18. Rates for goods are pegged at nil, 5%, 8%, 12%, and 28% and compensation cess to be levied on certain goods has been broadly approved. However, healthcare and educational services have been exempted from the purview of GST.

The government has approved tax rates for about 1200 items, of which 19 percent would levy the highest tax rate of 28 percent, putting them in the highest tax bracket, followed by 43 percent in the 18 percent bracket and 17 percent in 12 percent bracket. 7 percent of goods have been exempted and 14 percent will fall in 5 percent tax slab. Thus, 81 percent of items falling under the bracket of 18 percent or below and 19 percent with the highest tax levy of 28 percent.

Manufacturing sector is the major contributor of India’s GDP. With the government initiatives like ‘Make in India’ and ‘Digital India’, it is foreseen to multiply the growth further, keeping the scenario in mind the rates of capital goods, industrial and intermediate items have been set to 18 percent. Many commodities would see reduction because of the cascading tax effects. Common use products, such as food grains, would get cheaper as the council has decided on the service tax. There would be a differentiated tax rate for beverage sector. Telecom sector will be taxed at the same rate as before; however, luxury sector has taken a maximum hit, with highest tax rate of 28%. The tax on gold is still to be decided.

Government is of the opinion that majority of commodities would witness reduction in the tax rates and there would be greater tax ebullience resulting from efficiency. It is also believed that there would be less tax evasion and more transparency. The future is still hazy but GST could be considered another strong measure by the government in the light of tax reforms.

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How Retirement Plans in India Work

by Vinaya HS on September 8, 2017

in Finance

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Retirement is supposed to be the best time of your life, where you reap the benefits of years of hard work. In order to achieve a worry-free retired life, it is important to plan for the years ahead.

You may invest in a retirement scheme, and avail of the benefit of regular income. The amount, known as retirement annuity, may then be used to fulfill your financial obligations, cover expenses towards medical bills, finance your children’s education, and support your family. Most retirement schemes offer tax deduction under the Income Tax Act, and hence you may make investments to avail of such benefits.

Compulsory features of pension plans in India

There are numerous pension plans in India, offered by private institutions and by the government. Every plan comes with its own set of features and benefits. Some of the basic features of retirement schemes in India are mentioned below.

1. Guaranteed maturity benefit

Maturity refers to the accumulated corpus over a period of time. In order to provide safety of the invested money, it is mandatory that retirement plans with a guaranteed maturity benefit offer 101% of the premiums paid or the Fund Value, whichever is greater.

2. Guaranteed death benefit

In the case of active policies, your nominee is entitled to receive a guaranteed death benefit in an unfortunate event of death. This amount should be 105% of the total premiums along with additional top-ups if any. Guaranteed death benefit ensures financial protection for your family, even in your absence.

3. Surrender or discontinuation

Earlier policy companies were allowed to forfeit paid premiums if you did not make further premium payment. Retirement schemes now come with the option of discontinuation or surrender of the policy as per the wish of the policyholder, subject to certain charges. However, according to the latest features of retirement schemes, the amount has to be invested in single premium deferred pension plans or immediate annuity policies.

Besides the aforementioned aspects, features of retirement schemes may vary from provider to provider. You should conduct extensive research and make a choice based on your needs.

Retirement plans – Should you invest?

The young generation may not place emphasis on retirement planning as they may believe it is a long way off. However, it is important to understand that the earlier you begin to plan for your golden years, higher will be the returns. Such plans work on the power of compounding, and hence you may enjoy greater benefits in the future.

Retirement planning helps you live the lifestyle you have always envisioned. Besides, you may obtain the necessary amount to meet contingencies. You may choose from a wide range of options, such as immediate annuity plans, plans with or without life cover, annuity certain plans, and immediate annuity, besides others.

It is important to be prepared for what the future may bring. Pension schemes ensure that you live a better life ahead. With regular payouts and high yields, you may live your retirement years on your own terms.

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Checklist for Choosing the Best Pension Plan

by Vinaya HS on September 8, 2017

in Finance

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At some or the other point in life, you may wonder if you will be able to meet your financial obligations once you retire. Without a source of regular income post your retirement, it may become difficult to have a financially secure future. In order to avoid such a situation, you should invest in a life insurance retirement scheme and live your golden years with ease.

Pension plans help in building a corpus for your retirement. By investing regularly in your early years, you may enjoy the benefit of periodic income once you retire. Besides, you may also avail of tax benefits on the invested amount. With such advantages, you may opt for a retirement scheme and live a tension-free life post your retirement.

With numerous plan options available in the market, choosing the right one may turn out to be an overwhelming experience. You may refer to the checklist mentioned below in order to choose the best plan based on your needs.

1. Types of retirement schemes

One of the most popular types of retirement plans in India is provident funds. There are certain government plans as well, such as Senior Citizen Savings Scheme (SCSS), Monthly Income Scheme (MIS), and Public Provident Funds (PPF), among others. You may also consider other plan options, such as immediate annuity, annuity certain, immediate annuity, pension plans with or without life cover, and guaranteed period annuity plans, among others.

2. Tax benefits

Section 80CCC of the Income Tax Act details out the tax deductions on annuity plans. According to this section, tax deductions are allowed up to a maximum of INR 1 lakh on annual premiums paid towards an existing policy or while purchasing a new policy. In order to reap tax benefits, you may choose a plan option that is eligible for such deductions.

3. Early access

The goal of pension schemes is to have money available once you retire. However, it is impossible to rule out the chances of any untoward incident along the way. This may entail a premature withdrawal to cover costs towards an unfortunate event. For this purpose, you may select a plan that offers early withdrawal, so that you have the necessary amount when you need it the most.

4. Features and benefits

Different schemes have varied features and advantages. Some plans provide annuity as early as 40 years, while some have a vesting age of 79. Some retirement schemes give a share of the insurer’s profits to policyholders, while some do not.

It is therefore imperative to conduct extensive research and compare the features of various plans. You may also consider the benefits of the best pension plans and make a choice based on your needs.

Investing in a retirement scheme helps in obtaining a regular stream of cash flow to meet your financial needs post your retirement. It ensures an independent and financially secure life in your golden years

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Indian Pension Schemes: Problems & Prognosis

by Vinaya HS on September 8, 2017

in Finance

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The pension system in India has undergone a paradigm shift in the last few years. Numerous private companies have come up with attractive retirement plans to help individuals live a financially secure life post their retirement. Besides, the government has introduced schemes to help the common man avail of the benefits of a pension.

However, the pension system in the country is ridden with numerous issues. Most government retirement plans such as Public Provident Fund (PPF) provide manifold benefits for the organized working class.

One big problem is the disparity in the returns received. Public sector employees avail of numerous scheme benefits. Besides, public employees are also covered under the General Provident Fund (GPF), in addition to their pension benefits. The private sector employees, however, are not offered the same benefits and often receive low returns.

Structure of the pension system in India
Most countries around the world offer social security benefits to protect the elderly post their retirement. Social security plans provide individuals with a secure and comfortable retirement. Such a system, however, does not exist in India. Many government-centered plans in India work on employer and employee contribution. Again, this is beneficial to the organized sector, while employees of the unorganized sector do not receive any sort of economic support.

Most plans offered in India include gratuity, provident fund, and pension schemes. Gratuity and provident funds offer employees a lump sum amount post retirement, while pension plans offer annuity payments every month. Provident fund system works on a method wherein both employees and employers make an equal contribution of 10-12% of the monthly earnings. The accumulated corpus, along with interest earned, is then returned to the employee post retirement.

The government of India has also introduced numerous other schemes that facilitate this cause, namely National Old Age Pension (NOAP), and Atal Pension Yojana, besides others.

Problems and prognosis of the Indian pension system

There are numerous drawbacks of the Indian pension system, one of them being poor administration. Besides, the risk of investment and inflation are borne by individuals and not by the government. Another issue is the rising pension expenditure by the government due to lavish retirement benefits offered to public employees. Unless such a pension structure is adjusted, such government-sponsored pension schemes will soon become financially unsustainable.

The current pension system in India is governed and regulated by government agencies. Right from participation criteria, to investment guidelines, to benefit entitlement – the government decides it all. This often turns out to be a huge issue due to the lack of transparency and public accountability as well as the conservative regulatory environment.

From the aforementioned issues, it is quite evident that new mechanisms need to be implemented in order to rejuvenate the pension system in India. Encouragement of private participation, enhancement of system efficiency, relaxation of investment norms, and other policies could be enforced. This will certainly help in changing the current scenario for good.

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Most investors are well-versed about shares but often have little understanding of derivatives. The latter is a high-risk high-reward investment option for those willing to assume more risk. Derivatives are based on an underlying asset or on the performance of companies and are traded differently from share trading.

Share and derivative trading have distinct benefits and it is important you understand the different products before making your decision. Both these options are well-situated for certain instances and comparing the two products will help you to build your overall portfolio.

Understanding derivatives

Derivatives are traded financial products that are based on certain underlying assets. These offer you the right or an obligation to buy or sell the underlying asset in the future at a pre-determined price. Therefore, the price fluctuations of the underlying asset have a significant impact on derivatives and so they are more volatile.
Difference between shares and derivatives

1. Leverage

Leverage is a mechanism that allows you to bank the profits made on the transactions. Derivatives have leverage built within the transaction and allow you to trade without actually blocking the entire capital needed for the trade. For example, if you buy a derivative for INR 1000, the value of the underlying may be INR 10,000. Therefore, when the price of the underlying asset increases by 1%, the actual profit on the derivative trade is 10% of the transaction. This allows you to earn higher profits in a shorter period of time; however, this leverage comes at a higher risk.

2. Risk

The risks associated with derivative trading are directly proportional to the potential rewards. You may be able to earn huge returns on your investment within a short period of time. However, there is also a higher risk of losing your capital investment. Stock market trading is more transparent and the risks are confined only to those shares where you assume an exposure. Therefore, it is recommended you trade in derivatives only if you have the appetite for high-risk.

3. Yield

Shares are able to deliver returns without any variations in its selling price. For example, you may earn rental income on a property in addition to the capital appreciation. Similarly, shares allow you to earn dividend income irrespective of the increase and decrease in its trading price. In comparison, derivatives have only the resale or execution value and may become completely worthless in case the underlying asset moves in an opposite direction.

4. Volatility

Both shares and derivatives are volatile; however, the latter more in comparison to the former. Higher volatility means heavier price movements to provide more profits. But it also means there is a possibility to make greater losses. On the other hand, the volatility in shares is much lesser than derivatives.

Derivatives and shares are good instruments to include in your investment portfolio. Therefore, understanding the pros and cons of both products is important to make your decision.

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The India International Exchange also known as India INX, is soon going to introduce the gold kilogram contracts. As of now the gold contracts on the India INX are in the denominations of the troy ounces where one troy ounce amounts to 31.10 grams.

India INX is a wholly-owned subsidiary of the BSE that started its trading activities on January 16, 2017 and it operates out of the Gujarat International Financial Services Centre (IFSC) GIFT City, Gandhinagar. The exchange, India International Exchange, operates from the International Financial Services Centre (IFSC) GIFT City, Gandhinagar. It has the advantage of the residential products all across the asset classes under its roof. It is the country’s first international exchange to be set up at GIFT City.

The exchange has already started trading in 53 additional single stock and futures contracts, taking the total number of likewise derivatives offerings to 107 on its platform, to view NSE option chain. Also, recently the exchange had commenced trading in 33 new single stock derivatives.

The gold contracts on the India INX which are already achieving the daily average turnover of USD 30 million, the Managing Director and Chief Executive Officer of INX, V Balasubramaniam, says that we have seized the opportunity to further entrench our position in this market by launching the gold KG contract.

Mr. V Balasubramaniam also details the analogy of the retail revolution what the India International Exchange is trying to do. He explains that in the previous scenario, one used to go to the grocer, garment shop or the electronic store, but now we go to a supermarket today as we get everything under one roof. Likewise, he believes to have built up the exchange in nothing but in the way of a financial supermarket where you can get all financial products you need at one single place without any trouble.

To explain further, what happens in an exchange is that if you wish to buy a particular product let’s say X and sell a product Y, then you are expected to have separate contract notes, separate bank accounts, settlements, and arrangements. But under this new concept, all of this is blended here seamlessly. Here, it is a single transaction and we also have a portfolio approach to facilitate the international investors.

In the India International Exchange, all the contracts are settled in US dollars. With the single stock futures of foreign stocks such as Apple, Google, and Microsoft, along with others, the INX also offers top Indian stocks too.

It offers precious and expensive metals contracts of gold and silver too along with the base metals like zinc, lead, copper, nickel, aluminium, and many more. The exchange feels that this will grow even more in the second phase. The exchange has also believed to have applied to the market regulator Sebi to introduce crude oil futures as well as natural gas contracts as the latest legal news points out.

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Sebi has recently expanded the position limit for farm commodity futures across all the levels of the client, member and the exchange. This is done by the board in order to expand the base for traders and investors in the agricultural commodity nifty futures.

The market regulator SEBI, had issued a circular in the last week of the month of July’17 saying that the stakeholders have given a feedback that the present quantitative value of client segment position limits for agri commodity derivatives is not sufficient and hence is not in agreement with the deliverable supply of the agri commodities.

After an intense discussion with the stakeholders based on Commodity Derivatives Advisory Committee, the exchange board has come up with the division of the client-level position limit for agri commodities, the legal news confirms. The three categories suggested are sensitive, broad and narrow. Since the sensitive commodities, which have had frequent instances of price manipulation in the past five years, would need regular government intervention in terms of stock limits, import and export restrictions, and other trade barriers, therefore the clients under sensitive commodities will enjoy a position limit of 0.25% of deliverable supply. In case of the broad commodities, which are not characterized as sensitive but have an average deliverable supply for the last five years as 10 Lakh metric tonnes in numerical term and Rs 5,000 Cr in value term, the clients under broad commodities will avail a position limit of 1% of deliverable supply. The last or the narrow category includes the commodities that are not part of either of the aforesaid two categories, such category will attract a client level position limit of 0.5% of the deliverable supply. The deliverable supply would include production and imports.

Sebi has directed Commodity exchange to revise the position limit and declare the details by July 31 every year after gathering data from concerned departments. After the declaration every year, the revised position limit for agri commodities will apply for all contracts starting from Sep’ 1. For this year, the exchanges like NCDEX, MCX and NMCE are expected to complete this in the time span of 20 days and make the revised position limit starting from Oct’ 1.

Coming on to the next level, the member level, the position limit in agri commodities would be 10x the numerical value of client level position limit of 15% of the market wide open interest, whichever is higher. Another segment, the exchange level position limit shall be kept at 50% of the annual estimated production and import of the commodity.

As far as clubbing of position limits is concerned, the regulator has directed Comex to jointly issue a uniform norm and declare the same in next 30 days. NCDEX has finalized position limits across chana contracts that expire in Sep’17 and beyond at 30000 tonnes for clients. For black pepper, it is 900 tonnes, liquid commodities like castor have a limit of 12000 tonnes, and guarseed at 2400 tonnes.

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NTPC Bets On Solar To Power Renewable Energy Biz

by Vinaya HS on August 18, 2017

in Finance

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The National Thermal Power Corporation, NTPC, is the country’s largest producer of the thermal power. NTPC aims to concentrate more on the renewable energy in the years to come and also wishes to increase its presence in the arena of solar power generation. The corporation believes this is their bit towards a better planet and a greener world.

The chairman and managing director of NTPC, Gurdeep Singh, has expressed in the business news that the corporation is redefining their strategy and their business plan. As they move forward, the capacity addition of the corporation will be less in the coal and will be more in renewable energy space.

The company is clearly going to focus on the solar photovoltaic plants and not on the windmills for the reason that the prices of solar equipment that includes the prices of the photovoltaic plates have reduced considerably. This has made the solar power more reasonable and much more affordable as compared to the windmills.

As the legal news India confirms, this year there was an intense bidding for the solar power projects. The bidding was recorded as low as the bid of Rs 2.44 per kilowatt hour or kwH for Bhadla Solar Park in Rajasthan. Projecting the future prices, NTPC anticipates that the price of the solar power per kilowatt hour will be somewhere between Rs 3 to Rs 3.25 kwH. This increase in the price of the solar power per kilowatt is due to the impact of the new taxation structure Goods and Services Tax or GST on solar power generation. GST is expected to increase the rate of solar power marginally.

Gurdeep Singh further pointed out that they are contemplating to add renewable as early as possible which is up to 25 gigawatt (gw) by 2025. The company has already added 4 gw currently. NTPC has already opened tenders for 10 gw of renewable power projects.

NTPC has been assigned to develop 15 gw solar power through National Solar Mission’s second phase in three tranches between 2014-15 to 2018-19. The first tranche constitutes to about 3 gw or 3,000 megawatt and the second tranches consists of 5 gw and the last tranche consisting of the 7 gw. Talking about the first tranche, 1,380 mw of solar power has already been commissioned.

Along with this, the thermal giant is also considering on the co-firing biomass with coal for electricity generation. It is not only the part of the wish list of the NTPC, but the corporation is extremely aggressive on its work regarding the development in the carbon-free power.

The corporation is considering to install electric vehicle charging stations in the Metro cities. After already commissioning two charging stations for electric vehicle in the city of Delhi and Noida, the NTPC is planning to add 20 more soon. The corporation wishes to set up stations in New Delhi Municipal Corporation area initially and later expand its business across the country. The corporation is in discussion with the different state governments for the fulfillment.

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Government has been recommending the exporters from the pharma industry to look for newer markets for the pharma export. This recommendation from the government has come due to the multiplicity of the same drug in Indian market. There are many pharma companies in the country and the competition is intense. Hence there has to be some other way out to increase the production of pharma. Increasing the exports and that too to a newer destination which is untapped but has a potential for the Indian drugs must be contemplated and executed. This is why the government has suggested the drug exporter to hunt for new markets. India has been already exporting half of its total pharma produce.

In the last 5 years, India has consistently beaten China in pharma exports to Latin America. India is 4th largest pharma supplier to US. Now, the Indian exporters of pharma products must focus on rather smaller but emerging and untapped markets to sustain. The ministry of commerce and industry has issued guidelines to export regulation bodies to convey to the drug exporters to think about the diversification of their plans into young markets. It is believed that India will do fairly well in the countries like Myanmar, Peru, Ecuador, Colombia, Turkey, and Venezuela.

In fact, to believe the business news, Myanmar has approached the Indian market for the same. This is an amazing opportunity that looks highly lucrative for the country as the country has expressed an interest in buying the generic drugs from India to cater to the country’s government hospitals. The proposal from Myanmar to buy generic drugs has resulted a very positive response. As many as 60 Indian pharma companies have expressed their inclination in catering to the country’s requirement. To quote some past figures and data, the pharma exports to Myanmar during the period of April to February was about $162 million whereas the exports to the country was $152 million in 2015-16.

As per the recent data shared by the Pharmaceutical Exports Promotion Council (Pharmexcil), the pharmaceutical exports reduced though marginally to $16.4 billion during the FY’17from $16.89 billion during the FY’16. The reason of the fall is quite evident and is known to all. The reasons which was cited for the lack of growth in the pharma exports was a price erosion and the absence of the blockbuster drugs.

The country’s economy had high hopes from Pharmaceutical exports especially after the success of information technology (IT) industry. As per the industry figures, in FY’17, IT services exports was at $160 billion which was 10 times of drugs and pharma and equal to 60% of India’s goods exports. The pharmaceutical exports from India in the year 2016-17 was not very pleasing. It was only $16 billion which was 4.7% low year on year basis and accounted for 5.8%in FY’17 of India’s total goods exports as compared to the 6.4% in the FY’16.

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India has got the position of 88th in the list with 676 million Swiss francs or CHF (about Rs. 4500 Cr) money parked by the citizens of India with Swiss banks. In the previous year of 2015, India was placed at 75th position while in the year 2014, India had occupied a position of 61st.Before 2007, India used to be in the list of the top 50 countries as far as money in the Swiss banks is concerned. The year 2004 was exceptional when India was closest to the top of the list when it was ranked on the position of 37th.

It is believed that the Indians have allegedly held a mammoth amount of illegal or black money in Swiss banks which they have transferred in past to other places when there was a global suppression began on the banking secrecy practices in Switzerland.

The Swiss National Bank (SNB) had compiled a data in the December month of the year 2016, according to which as per the figures, the money which is officially parked by the Indians in the Swiss bank accounts only contributes to a nominal share of 0.04%as compared to the share of 0.08% in 2015 of the total funds kept by all the foreign clients in the Swiss banks. This data comes from the Zurich based SNB. A rather new framework has been established for the automatic exchange of the worthwhile information like black money related data is shared between the two countries. The Swiss authorities disclose only the official figures which as per them are ‘liabilities’ or ‘amounts due’ to their clients. These figures, however, do not clarify the magnitude of the alleged black money which is parked by the Indians in the Swiss bank accounts. Also, these official figures as confirmed by the SNB does not include the money that is held by the Indians, NRIs or other people who have an account in Swiss banks in the names of entities from different countries.

The business news states that the amount of total money that the foreign clients have held in the Swiss banks has increased nominally from 1.41 trillion CHF to 1.42 trillion CHF.The number one position in relation to the money parked with swiss banks is held by the citizens of United Kingdom. UK has accounted about 359Bn. CHF which means a whopping share of 25%alone of the total foreign money with Swiss banks. The United States has closely followed the league with CHF 177 bn. or around 14%share of the total foreign money.Others countries that hold the top ten positions include West Indies, France, Bahamas, Germany, Guernsey, Jersey, Hong Kong and Luxembourg with a single digit number shares.

The legal news confirms that the total money that belongs to the developed countries is around CHF 824 bn. Whereas the developing nations account for CHF 208 Mn.

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Information Technology industry has been the most aggressive recruiter in past. The market news has confirmed that the IT industry has been firing many of their employees lately in order to reduce their workforce in a measure of cost cutting. But in spite of that, the IT services industry has remained to be the most aggressive hirer in May of this year.

As per the study by the job platform TimesJob, in the month of May’17, where the overall talent demand increased by 4%, the IT or BPO industry has witnessed a magnanimous 24% rise in the demand for talent workforce as compared to the previous month of April’17.

TimesJobs study also revealed that the industry of BFSI or the combined industry of banking, financial services and insurance was the second most aggressive recruiter. BFSI has a 14% growth in talent demand. The third spot was grabbed by the consulting services. The consulting services sector recorded a 13% growth in talent demand. The fourth most aggressive recruiter was found to be the automobiles sector which had registered a 12% increase in the talent demand.

The business head of TimesJob, Mr. Ramathreya Krishnamurthy, has stated that the job cut in some of the departments of the IT and BPO industry has been due to the automation where the need of the man power is replaced by the machines or technology. But at the same time, since the new jobs that are hugely created due to the economic growth and technological revolution, the demand for manpower has risen too. This neutralizes the automation effect, in fact it ends up in creating more job.

As the business news says, as per the Nasscom figures, the IT industry has added 1.7 Lakh new jobs in the year 2016-17. Team Lease, a manpower solutions firm, said that the company has witnessed an aggressive hiring from the IT industry in both the services and the product companies in the departments of data science, 3D modelling, cloud and block chain. The IT industry has also laid off people who have been working for the redundant roles but they have also hired new work force with the latest technology needed. The company believes that the sector that includes IT, BPO, and product companies combined would have recorded a growth of about 15% in recruitments in May this year as compared to Apr’17.

Ciel HR Services, another recruitment firm, says that IT services hiring has reduced but if we talk about overall IT industry, the manpower has increased in a good demand. Also, if we talk about the location or city-wise, it is observed that the talent demand increased more in the tier-II cities as compared to tier 1 cities. For example, Jaipur had recorded a 20% hike in the talent demand.

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Good news is in store for the start-ups and small companies. Now the insolvency process for small companies and start-ups can be completed within a maximum of 135 days as the Insolvency and Bankruptcy Board of India (IBBI) creates rules for fast track insolvency resolution.

The exact definition of small companies is clearly stated in the Companies Act2013. Also, the definition of startups was stated by the Commerce and Industry ministry via a notification about a month before. The legal news confirms that the small companies or start-ups are those who have a share capital of less than Rs. 50 Lakhs and their annual revenue lower than Rs. 2 Cr and their total borrowings is also less than Rs. 2 Cr. These rules pertaining to fast-tracking insolvency process have been specified and clearly mentioned in the Insolvency and Bankruptcy Code. Along with the startups and small companies, an organization that is unlisted, also called as Limited Liability Partnerships (LLPs) that has a total asset of up to Rs. 1 Cr in the preceding fiscal would also be part of this new rule of fast-track insolvency process.

According to the business news, the fast track insolvency process will be completed within a timeline of 90 days. Normally in the other cases like for the bigger firms, the insolvency tracking process takes about 180 days. But, the arbitrating authority on the approval of National Company Law Tribunal (NCLT) may also give an extension of 45 days to the period of 90 days if he deems it necessary. In that case, the completion of the process will take a total of 135 days.

The Insolvency and Bankruptcy Board of India has also stated the norms for ‘Fast Track Insolvency Resolution Process for Corporate Persons’. The norms include the details like the process which must be followed starting right from the initiation of insolvency resolution of eligible corporate debtors till it reaches the decision along with the approval of the resolution plan by the arbitrating authority. A corporate debtor will have to write an application to the arbitrating authority or NCLT for starting fast track resolution process with the proof of default. After the application is acknowledged, the IRP will be appointed. And if the interim resolution professional (IRP) holds an opinion that in this case, the fast track process does not apply for the applicant, the IRP will have to communicate the same to the adjudicating authority within a maximum of 21 days.

Thereafter, the concerned authority will pass an order to transfer the corporate insolvency resolution process from fast-track to the normal corporate insolvency resolution.

These norms are created to help resolve the bad debt situation in our country. Especially the small firms and start-ups by this rule will be hugely benefitted. The norms of IBBI also comes along with the details on the procedures and deadlines to be followed like appointment of interim resolution professionals (IRPs) and submission of claims of financial dues to help in fast track resolution of insolvency as early as possible.

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Task Force Formed On Aviation

by Vinaya HS on August 2, 2017

in Finance

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There is a lot to cheer for the civil aviation industry. The U.S.-India Business Council (USIBC) has recently formed a task force. This task force is set up with an intention of finding out new and lucrative opportunities in the sector of civil aviation in India.

The panel has been constituted which will be headed by the engine maker Pratt and Whitney’s Managing Director of India, Palash Roy Chowdhury who will be the Chairman of the panel. The panel of the task force will also be co-chaired by Amber Dubey, who is global consultancy KPMG’s partner and India head of aerospace and defense.

The business news confirms that the USIBC or the U.S India Business Council has launched its India-Task Force on Civil Aviation which will be responsible for recognizing the opportunities for the implementation based on the NCAP or National Civil Aviation Policy.

USIBC said in a statement that the task force has been set up to have themselves involved with different stakeholders to encourage global best practices and resolve the several potential glitches that may come up as a result of the United States and Indian company’s deep involvement to strengthen the India’s mushrooming civil aviation market. One of the panel’s KRA will be to work towards providing an encouragement to the scheme UDAN, which is a Centre’s regional connectivity scheme. They are also expected to concentrate equally on the airport maintenance and boosting its infrastructure, enhancing and monitoring airport security, maintenance repair and overhaul or MRO, and skill development.

Since last two years, India’s domestic civil aviation industry has recorded a growth of a double-digit which makes the country’s domestic aviation sector as one of the fastest growing in the world. USIBC believes that their member companies are devoted to the make the various schemes and government’s flagship programs such as the “Regional Connectivity Scheme” and “Make in India” highly successful by bringing the best in technology in place and concentrating on equally important matters of airport infrastructure and security.

We all are aware of the increase in the flight traffic in India. The reasons have been the affordable air tickets, various discounts, deals, and offers offered by various airlines, etc. making the country witness an annual growth of more than 20% in the domestic air passenger traffic. Also, there is an increase in the total passenger throughput which is soon going to touch as much as 270 million passengers by the end of this year.

The market news also points out that this task force is also aimed at promoting bilateral dialogue between civil aviation industry of India and the government and partnering with governments. As the chairman of the panel shares, that with this newly constituted task force, the panel wishes to support the growth of U.S. corporations in India. They intend to do this by aligning with the priority areas of the Indian government and also cultivate the spirit of entrepreneurship and creation of job opportunities. The panel believes that this will surely contribute to the global economy in the coming times.

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Digital Payments

A couple of years back, my sister introduced me to online stores. And, since then I have remained glued to online shopping for almost everything such as apparels, grocery, food, footwear, books, accessories, kitchen utensils and appliances, home décor – you name it and I will have it ticked off. Initially, I used to select the Cash on Delivery option for payment, simply because I wasn’t confident about sharing my credit and debit card details with a website – thanks to all the news revolving around about phishing and data insecurity. But, this payment method soon started becoming a hurdle in my daily routine because many times either I had to postpone my schedule or rush back home to receive a delivery. This encouraged me to attempt online payment, and I was glad at the way it simplified shopping. And, trust me, now I prefer digital payment over cash transaction- at both physical stores and online stores!

This personal experience left me wondering, if digital payment had such an impact in my life, how it must have revolutionised the business sector. To begin with, banks and non-banking financial companies have been gradually moving away from the four-walled brick and mortar set-ups by embracing digitization for their services. For instance, to apply for a personal loan, or any other loan, you need walk up to the bank; rather choose to conveniently apply online. This development in the financial sector has made it imperative for corporates and vendors to realise the benefits of conducting business digitally.

One of the main challenges faced by businesses is delayed payments. Delayed payments adversely affect the entire business cycle – operations, inventories, management, and miscellaneous expenses. Factors such as postal time for cheques/Demand Drafts to reach you, formalities for clearance of cheques/Demand Drafts, approvals on payment orders, and other such long processed formalities results in the overall delay of payment in entire the trade cycle. In such a scenario, digitisation of payments makes way for a hassle-free payment process by:

i. Enabling instant payments regardless of whether the sender and receiver are in the same town, district, or country;
ii. Increasing the speed of payments by easing the process of making and receiving payments;
iii. Reducing processing and transaction cost by up to 90% as compared to cash payment;
iv. Becoming more efficient in tracking and controlling expenditures;
v. Improving traceability and controlling of expenditures;
vi. Increasing privacy and security of payments, and reducing associated crimes;
vii. Increasing the transparency of payments and providing a first entry point into the formal financial system;
viii. Increasing risk management capacity of corporates or individuals.

Needless, to say the above-mentioned will remain advantageous provided we have adequate infrastructure for a universal, affordable, easy, integrated, and secure platform for digital transactions. Digital payments have already started revolutionising the business arena, and with changing economic landscape it is pertinent that all businesses move towards digitisation. And, remember, efficient use of this technology can effectively transform the financial lives of not only businesses but individuals too!

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Know How a ULIP Works

by Vinaya HS on July 29, 2017

in Finance

Offering the dual benefits of investment and insurance, Unit-Linked Insurance (ULIP) plans play a major role in financial planning. In addition to offering a life cover to the family of the person who has purchased, it acts as an investment mechanism for wealth creation.

How ULIPs work?

When you invest in a ULIP, a portion of the premium is allocated towards providing the life cover, while the rest is invested in different fund options.

As per your investment objective, you can invest in different fund options. Here are some of the examples of the fund options offered by ULIP plans:

Name of Fund Risk Element Type
Equity Funds Medium to High Risk Invest in company stocks with the prime motive of capital appreciation.
Income, Fixed Interest, and Bond Funds Medium Risk Money is invested in government securities, corporate bonds, and other fixed income instruments.
Cash Funds (or money market funds) Low Risk Money is invested in bank deposits, cash, and other money market instruments.
Balanced Funds Medium Risk Invest both in equity and fixed interest instruments.

The insurance company pools money from all ULIP policyholders and invests the remaining amount (i.e., after deducting expenses and life cover amount) in the funds chosen by investors. Once the money is invested, the total corpus amount is divided into different ‘units’ with a face value. Then each investor is assigned ‘units’ in proportion to the invested amount. At any point in time, the value of each unit is called the Net Asset Value (NAV).

Any increase or decrease in the value of underlying assets is also reflected in the NAV. The fund value represents your growing corpus by way of NAV. At maturity, the insurer pays the fund value. In the case of the untimely demise of the policyholder during the policy tenure, the higher of the sum assured, fund value or death benefit is paid.

Know How a ULIP Works

Charges and Fees

ULIP charges are levied by insurers by deducting the number of units. The premiums you would pay are subject to certain charges before they are invested in the fund chosen by you. These charges are deducted either monthly or yearly, as per your policy and its terms.

A quick look at some of the charges levied on ULIPs:

Charges Levied on a ULIP Meaning
Administration Charges A fee is levied for administrating the policy every month.
Fund Management Charges These are charged towards managing the fund.
Switch Charges As per your goal or market condition, you can switch between different funds. In a policy tenure, a fixed number of fixed switches are given and subsequent to this, each switch would attract charges.
Surrender Charges These are levied for premature encashment of units.
Mortality Charges Depending on the age and the coverage amount, these are levied towards providing a death cover to the policyholder.
Premium Allocation Charges These are deducted upfront from the premium.

Partial Withdrawals

Though it is always recommended to stay invested for a longer duration; one can make the partial withdrawals from ULIPs to meet any financial requirements without hampering the continuity of the plan. This withdrawal can be made any time after the completion of five policy years, and a limited number of free withdrawals are offered by insurers in a policy tenure.

Top-Ups
ULIPs also offers the flexibility of making additional investments through top-up. It means, the policyholder can invest the excess funds in the plan and reap the benefits of market conditions.

ULIPS like ICICI Pru Guaranteed Wealth Protector offer the dual benefits of a capital guarantee and life cover. Though returns in ULIPs are market-oriented, with capital guaranteed feature, in any case, you will not get less than what you have invested.

Conclusion

In addition to saving money, tax planning is an imperative part of financial planning. Not only your insurance premiums, in fact, not only death benefits paid under ULIPs along with maturity amount, but top-up investments are also tax-free under the Income Tax Act.

Investing in a ULIP is the simple and easy way to enjoy the triple benefits of life cover, high returns and tax savings with ease to invest online. So, now when you understand the nitty-gritty of ULIPs, there is no point of holding yourself back.

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In a latest survey conducted by the FISTM, a financial services technology leader, the results show a stupendous increase in the use of mobile devices and other digital banking by Indians as compared to the last year. One of the prime cause of the increase in the mobile banking and digital payment was demonetization as per the business news.

As per the FIS Performance Against Customer Expectations (PACE) report, where about 1000 banking consumers were surveyed, it was found that more than 60%of the respondents have used mobile devices in this year to check their account balances, view latest transactions, in the paymentof various bills, transferring the funds,and other banking transactions. Last year in 2016, the same report gave the figure of 39% and last to last year i.e. 2015, the figure was 34%.

Other findings of the report were,

• 18% respondents use their bank’s credit cards exclusively
• The significance of the primary bank providing digital payment options has increased for all age groups.
• More than 30% of the payments of the respondents are done with mobile apps
• Consumers wish to have better connectivity with their banks
• 64% use their banks mobile app to make payments
• 84% make bill payments from their bank accounts

NITI Aayog recently said that digital payments rose 55%in 2017 as compared to 28% increase in five-year period ending 2016.

The recent demonetization of high-value currency notes to phase out black money has added fuel to the fire, the market news says. This led to adoption of digital modes of payments. If we compare the figures pre and post demonetization, the numbers on digital solutions are eye popping with more than 100% increase in usage in terms of the number of transactions. Paytm alone recorded more than 435% increase in mobile payments. These include mobile wallets, pre-paid cards as well as paper vouchers like Sodexo. The average value on digital payment solutions also increased by 62%. Also, the value of transactions for mobile banking increased by 30% (from 780.8 lakh transactions with value of Rs. 1,13,578 Cr. pre-demonetization to 896.1 lakh transactions with value ofRs. 1,48,583 Cr post-demonetization.

Though demonetization is not the only contributor in the rise of mobile banking and digital payments. One of the reports clearly shows that the people are anyway moving towards digitalization. A study shows a rise of 22% in cashless payments in Oct’2016 (before demonetization) as compared to the last year’s figures of October 2015. This clearly shows the increased acceptance for digital payments in the country.

India is all set for a revolution in digital payment and mobile banking. The digital payments in India are expected to hit $500 billion by 2020 which will contribute about 15% to India’s GDP, as per the ‘Digital Payments 2020’ report by Google and BCG. This trend that has already gained ground and is expected to continue and become more expansive in future.

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Uncertainty Plagues NSE’s Much Awaited IPO

by Vinaya HS on July 29, 2017

in Finance

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It has been a while since we are expecting the country’s largest stock exchange, National Stock Exchange, to release its much-awaited IPO. As per a recent share market news, Securities and Exchange Board of India (Sebi) has asked the stock exchange to refile the offer document for its initial public offer (IPO). It is anticipated that the IPO of NSE will beraising more than Rs. 10,000 Cr. from the investors.The IPO will witness existing shareholders offloading 20-25% shares to the public through the OFS.

NSE had filed its prospectus for the approval from the regulator, Sebi last year in the month of December. Since then the exchange went through many material changes and latest updates in the offer document. Moreover, as per the rule, the financial numbers for a company which is going to have an IPO cannot be more than two quarters old. The IPO of NSE is now stuck on the ‘unfair access’ controversy at its co-location facility.

Now, unless the issue co-location facility is resolved, the IPO of the NSE cannot proceed as communicated by both the board and the exchange. The business news says that the co-location controversy may take another six months to resolve and till then we will have to wait.

However, the exchange has been trying to make the process quick and controversy to end by settling the case through the consent mechanism. The exchange believes that this may avoid lengthy procedures and case will be resolved soon. Though the board is not sure if the NSE issue will be able to get settled through the consent mechanism.

The rules of consent mechanism says that an alleged wrongdoer settles the matter with the regulator without admitting or denying the guilt. As a consequence, Sebi in that case may either levy a penalty on the wrongdoer or mayban the wrong doer from the stock market, or sometimes even both. Various companies have resorted to this “consent mechanism” in past. The firms that have used the consent mechanism in past to settle disputes with Sebi include Reliance Infrastructure, Suzlon, RBL Bank, and JP Morgan. But, as a matter of fact,all the matters are hardly settled through the consent mechanism.

The experts of this matter believe that the board will be able allowing the consent mechanism after it determines the gains made by brokers and associated entities due to the lapses at NSE’s co-location facility. But the news says that even after numerous audits on NSE, none of the audits have been able to ascertain the gains made by the entities involved. This has also been followed by the appointment of forensic auditor by Sebi to find out the gains made by brokers or other entities involved.

It may take another 2-3 months to get clarity that whether Sebi will be go for the penal action or will settle the matter through consent. Only after this, NSE will be able to come out with an update on its IPO document.

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SEBI Cracks Down On Fake Stock Tips

by Vinaya HS on July 29, 2017

in Finance

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The market regulator, The Securities and Exchange Board of India (Sebi), has asked the support of Telecom Regulatory Authority of India (TRAI) to help them act against the malpractice of fake investment advices which are sent to the people by unknown entities. The legal news India confirms that Sebi has lately requested TRAI to develop a special software which can curb such mobile messages and the investors can be saved from misleading messages.

These unknown entities claim to be a part of some leading Indian brokering houses like Motilal Oswal and HDFC Securities. But these broking houses have denied all the allegations and have stated clearly that they are not the ones who have been sending these messages. These broking firms claim that some unknown entities are using their names to their advantage. The broking firms had raised a complaint against these fake messages, seeking an action from the board. The broking houses had also raised a similar complaint with the Mumbai police cyber-crime cell as well.

Contemplating on the seriousness of this issue, Sebi wants TRAI to develop a software that can scan some chosen keywords and then they can further decide whether to broadcast the message or not. The board strictly wishes to find out how such misleading and fake news related to the stock market is circulating without any authorization.

The share market news also reveals that the board has had a discussion with the cyber cell that is responsible for crime investigation under the economic offence wing of Mumbai Police and has thought what can be done about this issue. The cyber cell spokesperson has said that they are trying to find the location of the sender of the messages and they also said that the software used by them to generate these messages is quite complicated. But they hope to reach the defaulters soon as their expert team is working on it.

The fake messages that the phone users have been receiving is regarding buying shares of a penny stock, the entry price, stop loss, trade quantity, the target price and the holding period. Some of the stock operators give a reason too like the company is going to receive a big order from a MNC or it is on the verge of being acquired by a well-known firm. These messages have been successful in trapping some investors because the phone subscribers think that these messages are being sent by top broking companies and hence are genuine. One of the securities head believes that the organizations who send these messages are mostly promoters of substandard companies who do not have a good trading volume. While the rulebook of Sebi says that only the registered investment advisors and research analysts can give advices that are related to investment.

The same thing has also happened in past when this kind of unauthorized activity had happened. For this reason, the regulator had always warned investors through electronic broadcasting platforms to not fall in prey of such messages.

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