Finance

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Traders in the stock and other financial markets use technical analysis to make their trading decisions. Candlesticks patterns offer an excellent visual aid to the price movements in a certain period of time.

These patterns are formed through candle bodies, which are solid areas between the opening and closing prices and wicks representing the highs and lows. A solid candle may be formed when opening price is equal to the low and closing price is equal to the high. Thin candles, i.e. candles that have a small body and long wicks result due to price volatility that fluctuates a lot in a single trading session.

Candlestick charts include data for several timeframes in single pricing bars. That includes the opening price, the closing price, the high of the session, and the low of the session. Therefore, they are more beneficial for technical analysis of stocks in comparison to traditional line chart which just shows the closing prices.

With his book “Japanese Candlestick Charting Techniques”, Steve Nison introduced candlestick patterns to the Western countries in 1991. Several formations having colorful names, such as evening star, bearish dark cloud cover, and three black crows are identified by traders. Additionally, hammer and Doji patterns are used for long and short side trading strategies.

Reliability of candlestick patterns

Although there are a large number of such patterns, not all work well. Greater popularity of candlestick patterns has reduced their reliability because these have been deconstructed by the algorithms of the hedge funds. Such stock market players rely on quick executions when compared to traditional fund managers and small individual traders. Often individual traders and fund managers use complex strategies based on multiple technical charts and indicators that are found in popular texts.

Here are five patterns that perform well to help predict price momentum and direction. Each pattern works within surrounding price bars to predict high or low prices. In addition, these patterns are time-sensitive in two ways. Firstly, these perform within the limitations of charts under review, such as daily, weekly, or monthly. Secondly, the effectiveness quickly reduces by three to five bars after the completion of the pattern.

Five popular candlestick patterns

Candlestick patterns predict reversal and continuation. The reversal patterns predict modification in price direction. On the other hand, continuation patterns predict the extension in the current price movements.

1. Three line strike



This is a bullish reversal pattern that carves three black candles within a downward trend. Each bar shows a lower low and closes near to the intrabar low. The fourth bar shows an even lower opening but reverses in a wider range outer bar that closes higher than the first candle within the series. The opening print also marks the fourth bar low. According to the well-known investor Thomas Bulkowski, this reversal pattern is able to predict higher prices with an accuracy rate of almost 84%.

2. Two black gapping



This bearish two black gapping pattern is a continuation trend appearing post a notable top in an uptrend. It also shows a gap down yielding two black bars that post lower lows. This candlestick pattern is predictive of a decline that will continue to further lower lows and may trigger a broad scale downward trend. This pattern is able to predict lower prices with 68% accuracy.

3. Three black crows



Three black crows is a bearish reversal pattern beginning at or near the high during an upward trend. It shows three black bars that post lower lows that close near to the intrabar low. This candlestick pattern predicts a continued decline in the price reaching lower lows that may even result in broad scale downward trend. The most bearish pattern often begins at a new high because it often catches buyers that enter momentum plays. The accuracy of this pattern to predict low price trends is 78%.

4. Evening star



The bearish evening star trend is a reversal pattern beginning with a tall white bar carrying an upward trend to a new high. The market gaps higher on the next bars but fails to bring in new buyers. As a result, narrow range candlestick formations are created. A gap below the third bar completes the pattern and indicates a further decline to continue towards even lower lows. This may result in broader scale downward trend. This candlestick pattern is able to predict reduced prices with 72% accuracy.

5. Abandoned baby



This abandoned baby is a bullish reversal pattern appearing at the low of a downward trend. It is formed post a series of black candles print lower lows. The market gaps lower on the next bar but new buyers do not enter the market resulting in a narrow range Doji candlestick that opens and closes prints at the same price. The pattern is completed with a bullish gap on the third bar and predicts continued recovery to reach higher highs. This may result in a broader scale upward trend. Higher prices can be predicted using 70% accuracy using this pattern.

Candlestick patterns are used by market players as these provide continuation and reversal trend predictions. These patterns are beneficial as they offer early signals. Traders and investors who are able to understand these patterns may earn higher profits through stock market investing.

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The Food Safety and Standards Authority of India (FSSAI) was established to regulate food standards – everything from manufacture, storage, distribution, sale and import – and improve the country’s notoriously lax approach to food hygiene and adulteration.

As India’s top food safety authority, the FSSAI has the last word on what can be sold on store shelves. How it sets and enforces standards has been the subject of much debate in the scientific, health and business communities.

Recently, Union Minister of Food Processing Industries, Harsimrat Kaur Badal, called out the FSSAI’s rules and so-called inspector raj practices for being outdated, according to news reports.

As a relatively young body, FSSAI does not have standards for foods in all categories. It has taken steps to bring its food safety research and quality assurance up to international standards in terms of setting guidelines and best regulatory practices.

In the latest legal news, FSSAI announced a tied up with Decernis Ltd. to access a database of more than 70,000 global food standards and regulations. Decernis is a US-based provider of regulatory expertise and intelligence on food, consumer and industrial product safety.

This database contains standards for food additives, contaminants and other food products sourced from more than 170 countries. The body will offer training sessions for employees to better assess risk and compliance and generally bring Indian standards in line with international levels.

Impact on FMCG industry

The FSSAI and FMCG industry have clashed in the past over food quality and the authority’s power to levy fines and deny approval to products, most famously in 2015 over the temporary withdrawal and ban on Nestle India Ltd.’s Maggi noodles.

The body is working on new food labelling regulations for foods high in salt, sugar and trans fats, as well as defining junk food. To disincentivize the purchase of junk food, the authority has suggested banning junk food advertisements on entertainment targeting children.

It has proposed imposing a so-called fat tax on packaged and processed foods and sweetened drinks.

Not surprisingly, FMCG majors such as ITC Ltd., Nestle and Dabur Ltd. are up in arms over the idea, saying consumers who choose to spend extra for the pleasure of junk food will continue to do so. They say companies will have to pass on the cost of any tax to consumers and this will eventually hurt their bottom line.

But in recent share market news, a spokesperson for Hindustan Unilever Ltd. said the company supported the FSSAI’s attempts to promote safe and nutritious food and that FMCG companies had a responsibility to contribute to the cause.

While the question of food safety is viewed differently by the regulator and FMCG sector, the FSSAI has managed to secure co-operation from the industry on some issues.

To address prevalent malnutrition and undernutrition in India, the regulator ordered brands such as ITC, Patanjali Ayurved Ltd. and HUL to begin fortifying wheat flour with vitamin B-12, folic acid and iron. It also said all major edible oil manufacturers and processors will begin fortifying cooking oil with vitamins within the next few months.

Other FMCG companies such as Coca-Cola India Pvt. Ltd. and Mondelez India Foods Pvt. Ltd. have joined hands with the body to train street food vendors and provide safe food to underprivileged schools in Delhi, respectively.

For more of business news, visit BloombergQuint.

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How Will GST Affect The Export Sector?

by Vinaya HS on June 1, 2017

in Finance

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The landmark goods and services tax (GST) is set to come into effect on July 1. For all the complexities in moving to the new framework, the application of a single tax regime is seen as a boon for economic growth and fiscal transparency.

GST will subsume indirect taxes currently imposed by the Centre, such as central excise duty, customs duties, service tax and certain cesses and surcharges.

At the state level, GST will absorb value-added tax (VAT), central sales tax, luxury tax, entry tax and entertainment tax, among others. Instead, central GST and state GST will replace these myriad indirect taxes.

Exports will remain zero-rated under GST’s five slabs. However, the export sector, especially small- and medium-sized firms, worries about what might come with this uncharted territory. In particular, they fear the new GST regime may limit the upfront exemptions that they have come to expect on export duties.

These incentives have helped Indian products remain competitive in foreign markets and subsequently contributed to economic growth. The Export Promotion Capital Goods scheme, for example, is for duty-free sourcing of machinery for export purposes, and the Advance Authorization Scheme allows duty-free sourcing of raw material.

GST latest news indicates that the GST Council has included a provision to keep the duty drawback on goods manufactured in India for export. It’s essentially a rebate on the tax charged on imported and domestic materials or services used to produce such goods.

If enacted, the effect of the duty drawback on export-dependent sectors, such as handicrafts, would be positive. Exporters who have paid tax on the inputs mentioned above, but whose products have no tax against them, will now be able to adjust these duties so their goods don’t become uncompetitive in global markets.

According to Commerce Minister Nirmala Sitharaman, the finance ministry will refund 90% of export duties paid during the manufacture of items for export. This will be done in a seven-day period under the new GST regime through an online portal. If for some reason, this seven-day deadline is not met, the government will pay interest to exporters at a rate of 6%.

In this sense, GST will be a boon for exporters. Duties must be paid at the time of the transaction, and refunds processed after export. The intervening gap had worried exporters because of the impact on their cash flow and working capital, and since tax authorities might take months to process refunds. Smaller export firms had demanding an exemption from paying any tax under GST on account of this delay.

Now, the process of claiming these drawbacks and refunds is easier through the high-tech, fast-track mode available online. Furthermore, once the GST IT network is integrated with the customs infrastructure, accessing drawbacks may become even more efficient.

On the downside, the government is reviewing the Foreign Trade Policy, which means some export incentives may be eliminated.

Industry experts also say GST implementation for the export sector could increase costs by 1.25%

For more legal news in India, visit BloombergQuint.

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In 2015, the Forward Markets Commission, the former commodities regulator, was merged into the national capital markets regulator, the Securities and Exchange Board of India (SEBI).

In April 2017, SEBI approved a proposal to integrate the spot and derivatives markets by introducing options trading in the commodities market.

Currently, SEBI only regulates derivative contracts in commodities. But in this year’s Union Budget, Finance Minister Arun Jaitley proposed that the spot market for commodities and the derivatives market be integrated.

The ministry had been consulting experts from SEBI and commodities markets and Jaitley said a committee would be formed to examine a new operational framework.

Technically, derivatives prices are supposed to be based on the prices of the underlying commodities that are traded in spot market. Experts believe the integration of spot and derivatives markets will improve regulatory control and increase transparency in spot trades and how they affect prices of futures contracts. SEBI is also counting on the reforms to increase volumes of exchange-traded commodity future contracts.

When commodities spot markets do come under SEBI’s purview through integration, the government plans tough regulations to avoid a calamity such as the USD 916 million dollar-fraud at the National Spot Exchange Ltd. (NSEL) in 2013.

The commodities exchange collapsed after it defaulted on payments to market participants and had to suspend trading.

Jaitley had proposed the integration saying farmers would benefit from reforms in the commodities market. Spot trading is largely the norm in wholesale markets or agricultural produce market committees, which means traders often outmaneuver farmers and miss out on profits.

In the latest legal news, the new SEBI Chair, Ajay Tyagi, has also said commodity markets are a priority for him so farmers and end-users gain. He noted that, aside from the Agricultural Produce Market Committee, which regulates agricultural products, most commodities in India are not regulated.

According to experts, integrating the spot and derivative markets could pose problems. While derivatives are standard contracts that have specific qualities and grades, the spot market allows several varieties, qualities and grades of the same commodities to be traded in the same market, with some regional variations.

Analysts also warn that volatility in the agricultural commodity market can have a rub off effect on economic policy.

As yet, there is no clarity on how the new framework will address agricultural and non-agricultural commodities.

For more on the stock market news, visit BloombergQuint.

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What’s In Store For Aviation Stocks?

by Vinaya HS on May 14, 2017

in Finance

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Indians are flying more than ever, with domestic air passengers hitting 100 million, double what they were six years ago.

In the latest aviation news, shares of Indian carriers have been buoyed by data showing air traffic in the January-March quarter of 2017 grew 18.5% compared to the same quarter in 2016, led by IndiGo Airlines’ parent company InterGlobe Aviation Ltd.

Domestic airlines ferried more than 2.72 crore passengers in the quarter, with IndiGo flying almost 40% of passengers, and Jet Airways (India) Ltd. trailing at just under 18%.

These factors have given markets reason to cheer. This year, shares of InterGlobe Aviation, Jet Airways and SpiceJet Ltd. have all performed well, with the latter beating competitors in terms of gains and all three outperforming the S&P BSE 500.

There are a few reasons for this revival in aviation stocks.

For the last month, aviation turbine fuel (ATF) has been cheaper on account of global crude oil movements and foreign exchange rates. This is good news, at least until oil marketing companies review fuel prices.

Then there’s the perennial question of when Go Airlines (India) Ltd. will list its shares, which has kept investors restless for years. Plans for a GoAir IPO are believed to have been in the works since 2015, but owners the Wadia Group have kept markets waiting on the right time.

Recently, GoAir’s CEO hinted once again that he believes the time is right for an IPO. The company was among the first airlines to fly the new Airbus A320neo and has 144 of them on order.

The most recent IPO in the airline sector was InterGlobe Aviation, which raised Rs 3,000 crore in 2015. The company recently established a wholly-owned subsidiary for airport services that has yet to start operations. Jet Airways has made a similar move to set up its own airport services subsidiary.

So, will this market sentiment remain positive?

Lower oil prices over the last two fiscal years have helped propel most Indian carriers to profitability. However, the Brent crude average of USD 55 per barrel in the quarter ending March 2017 is much higher than the USD 35 a barrel in the same quarter of 2016, and this has already rattled airline executives.

For this reason, analysts are projecting a decrease in airline net profits for the March quarter on a year-on-year basis.

Yield management figures in the March quarter will also determine the performance of aviation stocks. While observers have pegged February and March yields as reasonable, IndiGo yields are expected to slide for the entire quarter. Edelweiss Securities Ltd. expects higher passenger volumes will be offset by fuel costs, which will hit the airline’s net profit.

Recent cues from the government indicate some good news may be in store for the airlines.

According to Minister of State for Civil Aviation Jayant Sinha, a blueprint for expanding terminal capacity at Delhi Airport is on the way, and passenger movement at Delhi Airport could increase from 60 million to around 90 million in the next few years.

Investors also warmed to news that Sinha has promised to speed up forest clearance for Navi Mumbai International Airport.

For more on stock market & business news in India, visit BloombergQuint.

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Transfer Pricing 101

by Vinaya HS on May 14, 2017

in Finance

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One of the main difficulties facing foreign companies in India is the issue of transfer pricing. In the past, it’s cast a chill on investor sentiment and cemented India’s reputation as a land of inconsistent and unpredictable tax rules.

Foreign companies such as Vodafone Group, Cairn Energy and Royal Dutch Shell have been embroiled in litigation surrounding transfer pricing and retrospective application of taxes.

Not only has this delayed business plans in India due to anxiety about tax outcomes, it’s also given birth to a new catchphrase, “tax terrorism” – the sudden levy of massive retrospective tax bills on companies by overzealous authorities.

Several cases of “tax terrorism” have triggered a showdown between multinationals and Indian tax authorities, even scaring off foreign institutional investors who had been approached to pay retroactive tax by the Income Tax Department.

What is transfer pricing?

Transfer pricing refers to the pricing of transactions between related parties, such as a parent company and its subsidiary. Because the two parties are associated, the transaction may be priced differently than if it had been between two unrelated parties (known as the “arm’s length” principle).

The transfer pricing mechanism ensures that revenue is properly captured so all taxes due are accounted for, rather than evaded. The term refers to the calculation of profits made by multinationals and how they’ve shifted to the parent company.

In India, transfer pricing has also become a political issue, largely because of the negative impact it’s had on the ease of doing business for international companies and their Indian operations.

In 2012, the government introduced advance pricing agreements (APA) between taxpaying organizations and the Central Board of Direct Taxes (CBDT) that calculate taxes for future international transactions for a predetermined period.

APAs give companies and tax authorities the opportunity to negotiate a tax rate and avoid going to court later. They cover a five-year period and can be either multilateral, bilateral or unilateral.

What do transfer pricing and APAs mean for multinationals doing business in India?

In October 2014, the government introduced a “rollback provision” enabling retrospective application of APAs, thereby avoiding litigation over transfer pricing.

By agreeing on transfer pricing rates and methodology before transactions occur, it helps avoid disputes that can go on for years across multiple tribunals.

Vodafone, one of India’s largest telecom service providers, has borne the brunt of the government’s tax collecting efforts since acquiring Hutchison Essar Telecom services in 2007.

In 2015, the Bombay High Court sided with the telecom major, which had challenged the tax authorities’ demand to add USD 1.3 billion to the taxable income of one of its units. Vodafone has since been pursued for more than USD 2 billion in a separate capital gains tax case.

In the latest legal news, the CBDT released its first annual report on the APA programme in India, which revealed 815 applications had been filed in India since the programme was launched.

It showed that 42 applications for bilateral APAs since February 2016 have come from the US. The UK and Japan followed, with 39 and 17 bilateral applications received, respectively.

Of the 815 applications, the CBDT has entered into 152 agreements (141 unilateral), roughly half of which are with the IT and financial sectors.

While APAs are one outlet for foreign companies to avoid lengthy tax battles in India, they still have reason to be nervous. In April, tax authorities demanded Cairn Energy UK Ltd. pay USD 1.6 billion in interest on a USD 2.9 billion retrospective tax bill.

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There are numerous examples of how easily Indians can lose whatever privacy they have through intentional or unwitting leaks of personal information.

Last year, financial data from up to 3.2 million debit cards were compromised in a leak affecting major banks such as State Bank of India, HDFC Bank, ICICI Bank and others.

Subsequently, more than 35,000 patients of a Mumbai-based diagnostic laboratory were victims of a data hack that saw their medical records – including test results – spilled online.

And the largest database of all has not been immune to careless handling of information either. In more than seven years, the Unique Identification Authority of India (UIDAI), the agency that collects biometric data used to issue Aadhaar cards, has stored information from more than one billion Indians.

According to the Centre for Internet and Society, the government itself has made public details of bank accounts and personal information of more than 130 million Aadhaar holders. The Centre has confirmed there was a leak, but denied the UIDAI was responsible, blaming other government agencies.

Recently, the government made it mandatory for Indians to have an Aadhaar card – in addition to their Permanent Account Number (PAN) – to file their tax returns, ostensibly to widen its taxpayer base and distribute welfare benefits more efficiently and accurately.

Activists have challenged this requirement in the Supreme Court. The challenge at hand is based on the necessity of Aadhaar card rather than concerns over data security, but critics warn the biometric system, which contains fingerprints and iris scans, can be used to steal identities and snoop on law-abiding citizens.

That’s because the UIDAI has contracted private companies, such as Microsoft, to provide authentication services and e-KYC requests.

This has amplified the lack of clear, thorough and overarching privacy protection laws in India.

According to the Aadhaar Act, 2016, it’s illegal to impersonate or knowingly duplicate Aadhaar data. However, enforcement and investigation are at the behest of the UIDAI, and punitive measures are unclear.

The involvement of corporate players, along with the overzealous application of Aadhaar – demands for its presentation have come from schools, hospitals and other non-government service providers – have advocates and cyberlaw experts raising the spectre of a lawless digital frontier.

In recent legal news, Attorney-General Mukul Rohatgi said the Centre is considering a data protection regime, possibly by Diwali.

But even while fending off accusations that Aadhaar is a covert surveillance tool, the Centre has told the Supreme Court that Indians do not, in fact, have “absolute” right over their bodies and cannot refuse to provide biometric samples.

The Information Technology Act contains a few sections on how corporations should handle sensitive personal data. Beyond those sections, there is no legal framework that safeguards Indians’ digital privacy and security: laws that address consent, duration, which data are private or public, how they should be obtained and stored and the nature of reparations for misuse are absent.

With the onset of digital payments, the move toward a cashless society and the popularity of social media, cyberlaw activists are pushing India adopt a more sophisticated data privacy statute. Globally, governments have recognized that technology is not infallible and have backed this up with legislation that governs the use and storage of personal data and punishes violators.

The former chair of the UIDAI, Nandan Nilekani, has also spoken in favour of stronger privacy laws not only to protect personal information, but also to improve digital literacy.

For the latest business news, visit BloombergQuint.

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The Burden of Debt is not one that everyone can handle well. For some, it is the idea that you have to pay more than what you borrowed with steep interest rates and finance charges. With multiple offers on credit cards and other means of financing, it is tempting to acquire things on credit. It seems hassle-free to lead a life without any debt. But realistically speaking, that’s not always possible.

Everyone knows that missing a credit card payment can land you into a soup. Missing credit card payments is one of the cardinal sins of personal finance. While most are able to make timely payments owing to the fear of late fees & penalties, every now and then an unforeseen expense comes along and wrecks your finances. If credit card bills and other expenses are piling up weighing you down, it may not be such a great idea to let your credit card hurt your finances. It may be time to prepare a debt consolidation strategy with a Personal Loan – rather than pay the exorbitant interest rates on missed credit card payments.

People also like to maintain a certain lifestyle and this usually entails spending on different things. So, avoiding consumption altogether is not always possible. However, by intelligently managing your expenses, you can live the life you want and pay for it on a timely basis. This is where a personal loan comes in. You can avail a personal loan to consolidate your debt.

A debt consolidation strategy implies merging separate loans into one single loan. This also includes loans taken from different financial institutions and on credit cards. You can simply refinance all outstanding loans with a new loan from a single institution. The advantages of this are that you get to pay a uniform rate of interest on all the loans on a single day. This is especially beneficial for those running high credit card dues. That’s because there the rates can be more than 40% per annum.

Using a personal loan to your advantage and make regular payments while paying a predetermined equated monthly installment could be the answer to your financial woes. The jury is always out on how to best manage your personal expenses. While some believe that taking on external debt in the form of a loan should best be avoided when it comes to paying your personal expenses, the views are changing.

A Personal Loan can be used for multiple purposes. Getting a sanction for these loans is easy as well. Lenders look at the applicant’s credit score, income, and repayment capacity. Unsecured Personal Loans usually come with higher interest rates. But with collateral, you can avail reduced rates.

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The 2017 fiscal year was a stellar one for midcap stocks, which continued their outperformance of benchmark indices: consider the 35% positive returns from midcaps in FY ‘17, compared to the Nifty’s 19%.

According to a Motilal Oswal report, investors who bet on midcap stocks over the last five years have been rewarded – they outperformed the Nifty by 50%

While blue chip and tech stocks dominate market news in India, smaller, lower-profile players have been catching analysts’ eyes.

In particular, midcap pharma stocks have done better than midcap IT stocks. Despite the perpetual risk of Indian pharma coming under the US Food and Drug Administration (FDA) scanner, observers expect domestic companies to receive regulatory approvals within the next few months – a fillip for the overall sector.

The growth opportunities for the domestic pharma industry lie in lifestyle and environmental factors that will require increased spending on drugs and medicinal products.

Here’s a look at some midcap pharma stocks singled out by analysts:

Ajanta Pharma Ltd.

Ajanta Pharma specializes in finished dosages, with a focus on cardiology, ophthalmology and dermatology. Between 2011 and 2016, it witnessed a CAGR of 30% in domestic formulations sales, vs. a 14-15% industry CAGR.

Motilal Oswal has highlighted new products and a steady flow of abbreviated new drug applications (ANDA) as reasons to watch the company.

While Ajanta’s US business is still nascent compared to other midcap pharma companies, its FY ‘17 projected US revenues are Rs 190 crore. The company is also growing Asia and Africa, where it is a leader in anti-malaria formulas.

Laurus Labs Ltd.

Laurus Labs, which is in the business of manufacturing active pharmaceutical ingredients (APIs), only listed its shares in December after registering annual growth of 41% (CAGR) between 2012 and 2016.

The firm’s operations are export-heavy – only around 20% of revenues are from the domestic market, which includes clients such as Cipla, Natco and Mylan. Some analysts have questioned the company’s dependence on a few big-name customers.

Recently, the Government Pension Fund of Norway sold more than 5.67 lakhs shares in Laurus. The company’s founder and CEO expects the return ratio to be above 20% once its formulations start generating revenue.

Vivimed Labs Ltd.

Vivimed Labs is another midcap pharma player with a steady stream of exports and MNC clients. It manufactures APIs, formulations, specialty chemicals and pharmaceuticals and has passed FDA inspections of its plants in Spain, Mexico and India.

The firm saw heightened investor action after it declared a consolidated net profit of Rs 51.71 crore for the quarter ending December 2016 – a 125% year over year increase. This was also on the back of a 74.29% sales increase.

For more business news, visit BloombergQuint.

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The Future of FMCG Stocks

by Vinaya HS on May 9, 2017

in Finance

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FMCG stocks rose after the Indian Meteorological Department (IMD) forecast a normal monsoon, which is seen as a bellwether of rural demand and consumption.

All FMCG majors saw an immediate drop in rural demand for consumer non-durables after demonetization.

But even prior to the latest Indian market news based on the IMD’s announcement, the sector has been witnessing a bit of an upswing to tame a slowdown.

Established FMCG stocks, such as Godrej Consumer Products, Hindustan Unilever, Marico, ITC and Colgate-Palmolive, have long been the darlings of seasoned investors for their consistent margins and earnings. But the entry of Patanjali’s products, with its brand loyalty and novelty factor, surprised many industry veterans.

An increase in raw material costs has also resulted in higher prices for some FMCG staples, such as biscuits and soap.

FMCG’s growth rate has historically been 1.2 times nominal GDP. This number has come down to 0.8 times since FY ‘13, according to a recent report from CII and Bain & Company. Experts say e-commerce has made only a dent in this figure, and companies have simultaneously lowered their investments in marketing, promotions and new product launches during the same period.

However, over the last three months, the BSE FMCG and Nifty FMCG indices have beat the Sensex and Nifty by 2% to 3%. FMCG funds have subsequently returned 16.5%. Zoom out and the trend becomes even more apparent: over a five-year period, FMCG funds have delivered a 18% return.

What explains these metrics?

Between FY ‘13 and FY ‘16, the government made efforts to stimulate rural demand: spending on initiatives such as MGNREGA has coincided with the sluggish FMCG rate of growth to GDP.

Although rural agricultural incomes increased in the third quarter of FY ‘17, on average, by more than 8% year-over-year, this year’s Union Budget provided a 1 lakh crore increase to the agricultural credit target. FMCG stocks read this as a sign that rural consumption would soon pick up.

The CII and Bain & Company report noted there’s significant room for FMCG to grow in the next five to 10 years – anywhere from 9% to 17%, depending on the nominal GDP growth rate. Last year, it grew at 9% until the third quarter, with rural growth outpacing urban growth 1.7 times. Food led the way, with 10% growth, mostly due to volumes.


Observers expect GST, set for introduction on July 1, will also benefit the FMCG sector with its uniform national sales tax making pan-India administration simpler.

In such a fiercely competitive sector, brands must continuously evolve to perform and win some recall among consumers.

Analysts say with FMCG, the bottom line for investors will always be corporate performance, rather than bandwagon buying and selling led by irrational market exuberance.

For more business news in India, visit BloombergQuint.

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The Future of Oil and Gas Stocks

by Vinaya HS on May 9, 2017

in Finance

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Crude oil prices are now roughly half of what they were when Narendra Modi came into power in 2014. The odds of returning to USD 90-100 a barrel any time soon look slim, even after oil producers – both OPEC and non-OPEC – agreed to cut oil output late in 2016.

Observers have given a margin of USD 40-70 for crude oil prices by the end of the year. This wide range reflects an era of volatility – neverending geopolitical turmoil in major oil producing nations, plus the increase in US shale oil drilling, part of the Trump administration’s “America first” energy policy.

The impact on India is multifold. India currently imports more than 80% of its crude oil and 40% of its natural gas. According to S&P Global Platts, with the country’s ever-increasing oil demands, this number is unlikely to reduce. Indian oil firms seem to have taken note: Oil and Natural Gas Corp. Ltd. (ONGC) has five projects worth USD 1.1 billion in the pipeline to raise domestic production.

In the same three-year period that’s seen the election of Modi and the collapse of crude oil prices, the S&P BSE Oil and Gas Index has gained more than 50%. Oil marketing and downstream companies such as Bharat Petroleum Corp. Ltd., Indian Oil Corp. Ltd. and Hindustan Petroleum Corp. Ltd. have also witnessed a threefold surge in share price, along with gas distributors and importers. Their peers, however, such as ONGC and Oil India Ltd. have underperformed.

Of late, Indian oil and gas marketing companies have turned their attention to local pricing: oil and gas stocks rose after reports that state-run oil firms have met government officials to consider dynamic fuel pricing.

The introduction of daily price revisions would bring India on par with international retail fuel markets and influence private oil and gas players to adopt the system. Stocks of IOC, Bharat Petroleum and Hindustan Petroleum, which represent more than 90% of India’s retail fuel market, all rose on this Indian stock market news. If companies do enact dynamic pricing, oil companies’ retail prices will better reflect crude movement and impact their overall margins positively.

Markets may react less favourably to upcoming quarterly results from oil and gas majors. According to data from BloombergQuint, seven oil and gas firms, including GAIL India Ltd. and Reliance Industries Ltd., are expected to show an aggregate decline in revenue for the January to March quarter, compared to the preceding quarter.

The flat net profit and sluggish earnings are on account of weak refining margins, fluctuations in crude and product prices and slower growth in domestic fuel consumption in the quarter.

While benchmark Brent crude averaged USD 54.6 a barrel in the January to March quarter – a 7% increase from the October to December quarter – experts expect this summer’s heavy driving season to help boost oil and gas prices, and as a consequence, explorers.

Looking ahead to how the movement of crude prices will affect India, if it remains under USD 60 a barrel, analysts expect markets to hold steady long term. Above that, consumers will feel the brunt of inflation and the government’s subsidy targets and budget estimates will be thrown into disarray.

Most estimates of crude prices hover on the low end for now, meaning consumers, investors and oil and gas firms may be in for a mixed financial bag.

For more of the latest business news, visit BloombergQuint.

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The Employees’ Provident Fund Organization has recently amended rules that allow members to withdraw from their retirement savings for housing purposes.

As part of the government’s mandate to ensure affordable housing for all Indians, members can now withdraw a maximum of 90% of their funds to make a down payment on a new home, repay housing loans or pay monthly installments toward a new home or plot of land.

The four crore strong EPFO collects provident fund contributions on behalf of private sector employees as well as their employers.

The allowance for a one-time debit comes with provisos: members must have spent at least three years in the EPFO to withdraw any savings. They must also pool together with at least nine other account holders who are part of the co-operative society through which a new home or piece of land will be purchased.

To curb misuse, the EPFO will pay the co-operative society, developer or creditor directly, rather than give cash to account holders.

In the past, members who wanted to withdraw provident fund savings for housing purposes were required to have completed five years of service. They could only withdraw a maximum of 36 months’ worth of salary, depending on whether they were buying land or a ready-made dwelling.

The EPFO’s move has brought some hope to the real estate sector and developers, who are still smarting from last year’s shock demonetization move.

In the face of a slowdown and supply-demand mismatch, property developers already had trouble repaying massive bank debts. The EPFO changes that make owning a home easier for Indians may rub off on them, and this, in turn, could be a silver lining for India’s state-run banks, whose debtors include several builders.

State-run banks were already struggling with sluggish demand for credit: now, they have more than INR 6.14 lakh crore of non-performing assets on their books – roughly 9.5% of total gross loans, according to Credit Suisse. The Economist Intelligence Unit predicts this figure is only going to increase in the next year.

The fear is that this ballooning debt could wreak havoc on the country’s economic growth. But with the EPFO veering away from its core objective of ensuring Indians save for retirement, its support for those who want to buy homes can be a welcome stimulus for the real estate industry.

If the EPFO changes have any positive change on builders’ balance sheets, and those of related industries such as infrastructure and steel, this may very well cascade down to banks and their NPAs.

Observers expect this to bring some relief to public sector banks while they await a fresh capital infusion from the government. The real estate sector – by no means the only culprit in India’s bad loans mess – is responsible for more than INR 16,000 crore in stressed assets to public and private lenders.

Read more of market news on BloombergQuint.

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5 Things You Must Ensure Your Used Car Has

by Vinaya HS on April 24, 2017

in Finance

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Ishant decided to buy a used car, but was worried because a few years back, his father had a bad experience while buying a pre-owned vehicle. Mr Roy had bought the car from a friend, and based the transaction on trust. So, he did not carry out any checks. His friend had hidden many facts during the sale. In a few months, Mr Roy had an unusable vehicle. So, Ishant made sure to take some precautions. He carried out five essential checks when buying a used-car.

Are you also planning to buy a used car? Then make sure you check it properly before making the purchase.

Five essential used-car checks

Ensure that the car you are buying ticks the following boxes:

1. Tyres in good condition:
Conduct a thorough check on all four tyres before buying the car. Check for punctures and the quality of the threads; you should also check the age of the tyres. If possible, owners should change the tyres every two to three years. Make a note if the present tyres are older. Conduct these same checks on the spare tyre too.

2. Engine without flaws:

The used car must have a good engine in working condition. Check the engine carefully. Listen for strange noises or rattling; look for fluid leaks, and unusual vibrations. Find out if the engine has given trouble in the past. The car engine must be working in a smooth way before you buy the vehicle.

3. A sturdy chassis:

The chassis is the frame of the car. A good way to inspect the chassis is to crawl under the car. Check for rust, dents, cracks, and more. The chassis must be as strong and well-shaped as possible. This can give you a fair idea of the general condition of the car and its suspension. So, it is an important factor to consider.

4. Brakes you can rely on:

The brakes of the car must be in perfect condition. Under no circumstance should you drive a car that has faulty brakes. Take the car on a test drive to check just how responsive the brakes are. Drive slowly at first to check how well the brakes work. You can increase the speed if you are happy with the brakes. Check whether the car brakes smoothly when braking abruptly. Go ahead with the purchase only if you are completely sure.

5. Proper documentation and insurance:

All documents related to the car must be in order. Check the tax documents and insurance papers to ensure everything is up-to-date. Make sure there are no discrepancies or unresolved legal matters associated with the car or its registration papers. Then, you need to make sure if the current owner has paid all the premiums. At this point, try to transfer the no-claim bonus to your name.

Summary

If you are not confident of carrying out these checks yourself, take a trusted mechanic with you. The mechanic should be able to assess the car and its components in a correct manner. Wait for him to give you a proper report. Buy the car only if you are satisfied with all the checks. Few people buy the first car they see and not regret it. So, prepare to look around. Do not make a deal until you are happy on all counts.

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5 Myths About Women and Car Loans Busted

by Vinaya HS on April 24, 2017

in Finance

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Karan and Nitya were thinking of buying a car for their family. Karan tried to talk Nitya into buying a car that looked fashionable. But, Nitya was particular that the car was for family use. She wanted it to have good safety features. So, they finally settled on a used car that was high on quality and easy to use, though it was not so fashionable.

Car manufacturers are now designing vehicles to match women’s preferences. A Nielsen study looked into gender-specific auto needs and found that women play a crucial role in decision-making nowadays. Here are some myths about car purchases related to women:

1. Very few women drive in this country:

One of the many myths in India about women drivers is that they are few in number. The gender gap is reducing on Indian roads. This may be because women have access to better career opportunities now. More women are buying used cars and new cars and availing loans. For instance, Patna, saw an increase of about 37% women drivers in 2010 2011 from the previous year. The number of car registrations by women too doubled between 2008 and 2011.

2. Women do not buy cars for independent use:

This is another myth surrounding women and cars. The fact is that auto companies are now designing their products keeping women in mind. More women are buying cars, as they have more control over their finances. Unlike before, they are more involved in decision-making. Women are buying more passenger vehicles, including sedans. Maruti, India’s largest car manufacturer reported that it made 11% of its sales across brands to women, and expect women to buy more cars in future.

3. Very few women drive to earn a living:

This is another myth. The number of professional female drivers is not as low as people believe. The number of woman cabbies in India is growing. Online taxi services in the country are also welcome to the idea of woman cabbies. These services have boosted the number of female commercial drivers. Uber has partnered with UN Women to create 10 lakh jobs for female drivers by 2020. This will only increase the number of women applying for auto loans.

4. Car loans for women are more expensive:

Many lenders have specific loan options for women which are comparatively inexpensive. Some institutions even cut the interest rate on car loans for women. So, the idea that car loans are more expensive for women is incorrect.

5. Women do not influence car buying decisions:

This myth no longer holds true. About 50% of the women respondents in a Nielsen study had played an important role in influencing car-buying decisions. About 25% had decided on key features of the vehicle including the make and the kind of car. Around 75% of them were the sole decision-makers when they bought a car.

The bottom line

Things are not the same as they were before. Rising incomes are enabling more women to buy cars. Thus, they are also more likely to avail auto loans to finance their car purchases.

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Owning a home is a dream, dear to both man and woman alike. It gives a great sense of security financially as well as personally. But, at the same time, it is a huge investment too. And, that’s why most of us seek for a home loan to fulfill this dream. Though the basic factors and eligibility criterions remain same, but women have an upper hand compared to her male counterpart while applying for home loans. Governments and banks have taken several steps and introduced various policies and schemes to empower women and make her financially independent. Initiatives like special accounts for women and the girl child, concessional rates on home loans, and other women specific special schemes provides an extra edge to women folk to apply home loans.

So, as a woman, if you are looking to purchase a house, here are the four major benefits you will be entitled to as against your male counterpart:

1. Concessions on interest rates – Interest rates are one of the most crucial considerations while availing a home loan. Even a small variation in the interest rates has a huge impact on the monthly EMIs. And, since a home loan is a long-term financial affair, lower rates of interest or concessional rates can help you save a considerable amount of money over the entire loan period. This is where women applicants are at an advantageous side because they get preferential or lower interest rates. However, this is true only when the woman is a primary applicant or a co-applicant for a home loan.

2. Lower stamp duty rates – Despite being a part of the loan amount, no concessions are provided by lenders. Instead, stamp duty rates are decided by respective state governments and thus differ from state to state. Though there is no universal rule, yet, many states offer lower stamp duty for women property buyers. Usually, a concession of 1%-2% is given to women property buyers in some states, and it is a huge relief on the loan amount. For example, it could mean a straight price cut of Rs. 1-lakh for a house that costs Rs. 50-lakh.

3. Higher chances of loan approval – Lenders and banks have a pre-defined eligibility and loan acceptance criterions, and it is important for the applicant to meet those criterions to avail a loan. A credit score is an important consideration as it determines the risk potential of the applicant. This holds good for both men and women applicants. However, there is a general perception that women pay their dues on time and are less risky borrowers compared to men. Hence, though all the terms and conditions are taken into consideration, women applicants have higher chances of getting their loan application approved.

4. Special schemes by banks and builders – When a woman is a sole applicant or the primary applicant in case of a co-applicant, different banks offer different home loan packages and schemes. These schemes will have lower interest rates on the loan availed. The concessional home loan rates are a great boost for women to buy properties. In addition to the special packages offered by financial companies, some property developers and builders also offer time bound schemes to encourage women to buy houses. Offers like discounted rates, waiving of on miscellaneous charges and the like are certain privilege points for women property buyers.

The above-mentioned factors are crucial benefits while availing home loan. So, for all the women out to there, make the most of these benefits. It’s time you own your dream home and embark on the next level of financial security and personal independence.

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Home Loan Interest Rates Guide For Women

by Vinaya HS on April 24, 2017

in Finance

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Call it a move towards women empowerment or term it as benefits for less risky borrowers; the fact is women enjoy a handful of crucial benefits pertaining to home loans, as compared to their male counterparts. Yes, you read that right. Some banks and non-banking financial companies offer benefits like low home loan interest rates, higher chances of loan approval, and women special schemes. Many states also provide lower stamp duty rates for women property buyers. In addition, builders and developers also offer time bound special schemes to encourage women folk to buy properties.

Interest rate of home loans is one of the major considerations while availing a loan. It decides the total repayment amount at the end of the loan tenure and also affects the monthly pay-out in the form of EMIs. Even a slight variation in the rate of interest can make a huge difference on the repayment amount. As home loans are a long-term financial commitment, low-interest rates are always an advantage. Hence, in this regard, women are more beneficial than male home loan applicants. Though the rate of interest varies from bank to bank, in general, it is observed that banks offer women home loan applicants at least a minimum of 5 bps lower than the normal home loan rate. For example, if the normal home loan rate is 8.60%, then the home loan rate for women applicants will be 8.55%. The difference may appear minimal, but it saves a considerable amount of money on the whole.

The provision of the low rate of interest for a home loan can be availed only if the woman is the sole applicant or she is the primary applicant in the case of being a co-applicant. Also, the property for which the loan application has been filed should be either in the sole name of the woman applicant or she should be the primary owner in case of joint ownership of the property. In the instance where these mandatory criterions are not met, the women will not be eligible to avail any concession on the home loan interest rate. For example, in the case of a husband-wife applying for a home loan jointly, the wife has to be the primary applicant to avail the benefit of low-interest rate. In case they apply for a home loan with the husband being the primary applicant, they will not qualify to avail the stated benefit. The same reasoning applies in the case of ownership of the property for which the home loan is being sought.

Generally, government banks and financial institutions offer better home loan rates when compared to private banks and financial institutions. A comparative analysis shows that the interest rate offered by government financial institutions range from 8.50% to 8.65%; whereas the interest rate offered by private financial institutions range from 8.65% to 10.05%. However, private financial institutions like Tata Capital Finance Limited offer quite competitive and attractive home loan rates for women at 8.65%. So, as we see that there is certainly a variation in the home loan rates, there is also a possibility of variations related to other terms and conditions. Thus, it is always recommended to do a thorough market research before applying for a home loan. After all, even a minimal difference in interest rate can make a huge difference to your loan repayment amount.

In conclusion, to make the most of the available benefit of low home loan interest rates, women applicants must have a thorough know-how of updated home loan rates – normal and women-specific, of various banks and non-banking finance companies, along with related terms and conditions.

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A look at India’s new tax structure under GST

by Vinaya HS on April 24, 2017

in Finance

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Despite pleas from various industry bodies to delay the rollout of the goods and services tax (GST), the government is determined to see through one of India’s most ambitious economic reforms on July 1st.

The long-awaited move is meant to supplant and streamline a web of indirect taxes levied by the central and state governments. This complex framework has been blamed for stifling economic output, alienating foreign companies and causing an administrative nightmare for inter-state business.

What state and central taxes will GST subsume?

At the moment, there is a clear separation of powers between the Centre and states when it comes to taxation. GST will subsume indirect taxes currently imposed by the Centre, such as central excise duty, customs duties, service tax and certain cesses and surcharges.

At the state level, GST will absorb value-added tax (VAT), central sales tax, luxury tax, entry tax and entertainment tax, among others.

Instead, central GST and state GST will replace these myriad indirect taxes. An integrated GST will also apply to cross-border or interstate sales and purchases and will be collected by the Centre. Barring those items exempt from GST, tax rates for goods will fall into four brackets (5%, 12%, 18% and 28%). The Centre will have authority to levy excise duty on certain goods over and above GST (e.g. tobacco).

What positive impact will GST have on Indian business?

Corporate India has generally reacted favourably to GST, as it will rationalize India’s cumbersome tax system. Both domestic and multinational companies have singled out India’s opaque and unpredictable tax regime as a barrier to operating here.

Creating a uniform economic zone with an overarching national sales tax will also make it easier to transport goods within the country and improve supply chain processes by eliminating internal borders and checks. This should reduce the cost of production and boost competitiveness on a local and global scale.

The government has said that indirect tax revenues will decline in the short term on account of GST introduction, but in the long run it’s expected to widen the tax base.

One reason for the immediate hit to indirect tax revenue is that taxpayers with an annual turnover of Rs 20 lakh (Rs 10 lakh in special categories) are exempt from GST, and small taxpayers (those with an annual turnover of up to Rs 50 lakh) have the option to pay a flat tax rate.

What about the drawbacks of GST on industry and individuals?

The government maintains that GST will reduce the overall tax burden on goods, which is between 25%-30%. However, the various cesses meant to compensate states for lost tax revenue within the first five years may lead to a marginally higher tax liability.

According to the latest news on GST, Revenue Secretary Hasmukh Adhia suggested the standard tax rate for services may rise from the current 15% to 18%. If this happens, this may squeeze consumer demand in the short-term.

While the finance minister has tried to allay fears of inflation due to a higher service tax, analysts predict some short-term disruption from such a monumental event. The GST Council has yet to assign rates to each category of goods, but the finance ministry has speculated that essential food items will remain outside the bounds of GST.

The timing of GST implementation coincides with the onset of the monsoon. If weather patterns are unfavourable, this could serve as a double whammy that affects corporate earnings.

For more legal news in India, visit BloombergQuint.

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Are Credit Card Reward Programs Worth?

by Vinaya HS on April 11, 2017

in Finance

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Credit card reward programs are the often the biggest reason why people apply for them and many card issuers provide exciting reward programs to attract potential customers and offer several incentives for choosing credit cards as the preferred mode of payment.

While many users who are savvy know that the primary purpose of credit cards is to use the interest free revolving credit that they offer to help manage your finances better. However, while this basic functionality is offered by all card issuers, it is the reward programs and allied benefits that come with using a credit card to make major expenses that really make them a compelling proposition.

It is not just a card that banks and card issuers are trying to sell, it more of a lifestyle that they believe will entice users and these benefits are real. Card issuers offer many rewards and incentives like discounts at major ecommerce portals, lifestyle brands and fine dining restaurants in order to attract high earning members who are salaried and make big spends on a regular basis.

Some premium cards also come with benefits like golf lessons and concierge assistance for high net worth individuals but these cards come with high annual membership charges. So for the most part, credit card providers had been watering down rewards programs for non-premium cards with low credit limits and making it harder to earn points or adding caps.


Consumers have also become smarter with their credit card use, using interest free days and balance transfers to reduce the interest they pay. This means banks are carrying more costs, which results in fewer benefits to customers. However, credit card rewards are still the most lucrative way to earn rewards like air miles and earn free travel opportunities thanks to your credit card!

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Home loans can be tricky creatures. No doubt they help you achieve your long-standing goal of owning a house. But they cost a lot. And at times, many of the costs are not obvious initially.


Most people focus on factors like EMI, loan tenure and interest rate. But as already mentioned, there are several other hidden charges that can miss the eye of the borrower.


Let’s have a look at these easily missed charges so that you can be better prepared for these in future:


Valuation Fees – This is the cost of physical inspection and valuation of the property. When a loan application is submitted with the lender, they conduct various inspections to understand whether the amount of loan applied for is justified or not. The lenders don’t want to over lend.


Legal Fees – This is similar to valuation fees. At times, lenders just to be sure hire external legal consultants to validate the legal status of the property. This legal cost is to be borne by the loan applicants and at times, is clubbed with the valuation fees only and not charged separately.


These fees are to be paid at the time of taking a new loan. But there are others that are to be borne during the tenure itself:

Conversion Fees – This fee is charged if you want to switch to lower interest rates. If you had borrowed originally at 11% and now the rate is 9%, it makes sense to shift your loan to lower rate and save extra interest. A similar fee is charged if one is shifting from fixed to floating loan type or vice versa.


Loan Tenure Change Fee – as your income increases, you might want to pay more EMI and reduce your loan tenure. This can be done by paying a small fee to the lender for change in loan tenure.


Penal Charges for Late Payment – Any delay in EMI payment and lenders have the option to levy a Late Payment Charges.

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In the recent budget announcement, the finance minister has proposed to reduce the definition of ‘long term’ with respect to real estate from 3 to 2 years. This means that property seller will now benefit more from the tax deduction options available for long-term capital gains from sale of property.


Earlier, if you made capital gains on sale of property that was held for less than 3 years, then it will be termed as short-term capital gains.


Now this has been changed to 2 years. So capital gains made on sale of property held for more than 2 years will be termed as long-term capital gains. Such gains are taxed at 20% with indexation benefits.


That is not all. One can even avail tax exemption on long-term capital gains by either investing in another residential house or by investing in capital gains bonds issued by PSU companies.


It must be noted that if you decide to sell a property that is taken on loan, within 5 years from taking possession, then you will be required to treat the deductions claimed in earlier years too as income of the year in which you sell the property. So technically, all the tax benefits of previous years will stand reversed.


This is why a lot of people selling property in a hurry end up paying huge taxes. They are not careful and do not fully understand that repercussions of selling the property from tax angles. So in general, one should avoid selling the property that has been acquired just a few years ago as it will result in a lot of taxation (on your capital gains) and also, there is a possibility that your tax benefits of previous years will be reversed. So before deciding to sell a property, make sure you discuss it with your tax advisors.

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