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Wednesday, June 26, 2013
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Posted by Unknown at 8:43 PM 0 comments
Banking licence aspirants firm up deals
Mumbai: Even before the start of the application process, corporates aspiring for a bank licence are striking strategic deals ahead of putting their proposal before the Reserve Bank of India. On Monday, Reliance Capital and Religare Enterprises announced strategic deals with foreign investors as part of their plans to pursue a banking licence.
Reliance Capital said that it had entered into an agreement with Sumitomo Mitsui Trust Bank and Nippon Life Insurance, two leading financial institutions from Japan, which plan to take between 4-5% stake each in the bank proposed to be set up by Reliance Capital if it receives the go ahead from regulators. Religare Enterprises, meanwhile, struck a deal with US bank Customer Bancorp offering a stake worth $51 million through a combination of promoter divestment, preferential allotments and issue of convertible warrants. The transaction was aimed at bringing down promoter stake below 49%. With the last day for applications—July 1—drawing close companies are making public their banking ambitions. Three Kolkata-based groups—Srei, Bandhan and Magma—are all set to apply for a banking licence later this week. LSE-listed Srei Infrastructure is one of the leading infrastructure finance companies in the country, while Bandhan is a leading microfinance firm in the eastern region. Magma is a non-banking finance company (NBFC) with interest in different product lines, including general insurance.
The Reserve Bank of India will have two levels of screening of the banks. In the first stage, the panel will identify applicants that are fit and proper. RBI has said that this is a process of elimination and not all fit and proper applicants will get a licence. In the second stage, an external committee will go through applications and make their recommendations to RBI.
According to sources, RBI has got in touch with former governors and deputy governors to be part of the screening panel. Former RBI governor Bimal Jalan is one of the names doing the rounds as part of the screening panel. RBI sources said that there was disappointment within the central bank over the inability of some private banks to reach out and expand the market. "The feeling is that some of the smaller private sector banks are focusing almost entirely on shareholder value and there is no attempt to expand their reach of banking services," said an official.
Posted by Unknown at 8:33 PM 0 comments
RBI can’t stop feeble crossing 60
Mumbai: The rupee entered uncharted territory on Wednesday, slipping below the psychological resistance level of 60 as the Reserve Bank of India gave up defending the local currency at the 59.98 level —a position it had been holding for several days through intermittent dollar sales. The rupee which tracked global cues weakened as the dollar gained against most emerging market currencies.
The local currency, which opened to highly volatile trade after closing at 59.68 on Tuesday, saw the exchange rate slip beyond 60 in afternoon trade only to settle at the day's low of 60.73. The sharp fall of the rupee led to a corresponding fall in bond prices as well as a 77-point fall in the sensex. Similarly, prices of gold hit a one-month low in the bullion market following a global crash in the precious metal while silver hit a twoand-a-half-year low. Besides making all imports expensive, a weak rupee will severely hurt those planning to travel or study abroad. However, some bankers say that the inflationary impact of a weak rupee would be softened by a crash in international commodity prices including oil and gold. But this has almost eliminated hopes of a rate cut by the RBI in its monetary policy review next month.
Gold, silver prices fall on global cue Gold prices slumped to a one-month low, to Rs 26,145 per 10g on Wednesday, on the back of a steep fall in global prices while silver dropped to a three-year-low, at $18.63 an ounce. The slide set in on reports that the US was withdrawing its stimulus programme.P 20 'Problems global, solutions local'
Foreign exchange dealers said Wednesday's fall of the rupee was triggered by month-end demand for dollars. Once the rupee crossed the 60-level it triggered stop-loss positions among buyers who rushed in to cut losses, thereby pushing the rupee down even further. Whether the rupee continues to slip or rallies on Monday would depend on how the dollar moves against the euro late on Wednesday.
The crash in the rupee has exposed the central bank's weakness in defending the rupee through dollar sales. Dealers said that the market took the opportunity to test the level to which RBI would go by bidding aggressively for dollars. Late evening, RBI sought to hit back on speculative buying by asking banks to verify that foreign institutional investors are buying dollars in the forward markets only to cover their underlying positions in equity markets and not for speculative purposes.
If the rupee steadies at levels above 60 against the dollar, as some traders are forecasting, there will be immense pressure on the economy as import bills soar. Companies will face problems as their foreign debt burden would have risen 10% in less than a month. Importers who cannot pass on their increase in costs will come under strain. But bankers are hopeful that this is an aberration and the local currency would return to sub-60 levels in the medium term. "The rupee has depreciated beyond what the REER (real effective exchange rate) would suggest. There should be a correction above 60 is not fundamentally where it should be" said Shikha Sharma, MD & CEO, Axis Bank. The REER is a rate that is derived by comparing India's currency relative to a basket of other major currencies after making adjustments for inflation.
Bankers say that although the problems are global the solutions are local. The only way to strengthen the currency, they say, is to speed clearance of stuck projects which can restore confidence in equity markets and restore capital flows from foreign institutional investors.
Posted by Unknown at 8:24 PM 0 comments
Monday, June 24, 2013
NORMS HURDLE Mahindra Fin opts out of banking licence race
The current set of guidelines, particularly the latest RBI clarification, make the rules "disadvantageous for large, successful NBFCs" and the company will apply for a licence only if the rules are amended, Mahindra Finance said in a statement on Monday.
The bone of the contention is the guideline that states that right from inception an NBFC that converts to a bank will attract CRR and SLR. For an NBFC like Mahindra Finance, which has an asset base of around Rs 30,000 crore, it would attract CRR and SLR of around "Rs 8,000-9,000 crore", said a source with the knowledge of the matter.
For smaller NBFCs the burden is necessarily much less. "An NBFC with Rs 2,000 crore asset base, for instance, will need to pay only around Rs 600 crore so the rules are biased against bigger NBFCs," the source said.
The issue of RBI guidelines – which allow the conversion of NBFCs into a bank but do not provide any flexibility for a NBFC and a bank to coexist for a reasonable period of time – has already caused some NBFCs to ask for conditional licences or not apply at all. The guidelines say that CRR and SLR will be applicable right from inception even though the building of CASA will take some time for a
newly converted bank. Sources say that the board of Mahindra Finance has decided that its NBFC model is successful enough to continue as it is without converting into a bank unless the regulations change.
The last date for applying for abanking licence is July 1, 2013. Some of the top names in the fray include L&T Finance, India Infoline, Religare, Aditya Birla Group, Tata Capital and Edelweiss while others like Shriram Capital is seeking exemption to keep its truck finance company as a separate unit. NBFCs say it is unfair that existing banks are allowed subsidiary NBFCs but new banks are not permitted, the only exception being insurance and credit card NBFCs. "Asset finance NBFCs are not allowed," said the source.
According to the RBI clarification, after getting the licence, players will have 18 months to start a bank. The Mahindra Finance board has "therefore decided not to apply for a bank license under the current set of guidelines read with clarifications and to intimate RBI accordingly along with the reasons for its decision. Should the guidelines be amended, to permit coexistence of NBFC and a bank in the same group, or should these concerns be addressed in any other manner, the company will be happy to apply for a banking license," the company statement said.
Mahindra Finance isn't the only player that has decided not to bid for a banking licence. One of the oldest NBFCs in the market, Sundaram Finance, too, isn't applying for a banking licenc
Posted by Unknown at 6:52 PM 0 comments
Sunday, June 23, 2013
How brokers put stock mkt at risk Two Cos Placed Orders Up To 271 Times Their Margin Deposit
Mumbai: The recent legal battle between Emkay Global Financial Services and NSE in the Securities Appellate Tribunal (SAT) has revealed details of how some brokers, with complete disregard to the trading rules laid down by bourses, play with the system and put the entire market at risk.
According to NSE's showcase notices to Inventure Growth & Securities and Prakash K Shah Shares & Securities, the two brokers had put in orders worth between 144 times and 271 times their margin deposits while bourses allow exposures of not more than nine times the margin in most liquid of stocks.
A margin deposit is a builtin safety system for the exchange under which brokers keep money in the form of cash, fixed deposits and bank guarantee with the bourse and the volume of trade they can undertake is a multiple of this margin. The simple rule of the trading game is higher the trading exposure-margin ratio, higher is the risks involved for the market.
The NSE showcase notice to Inventure mentions that against a total deposit of Rs 4 crore, it had placed orders worth Rs 1,083 crore, which is 271 times its margin money. On the other hand, Prakash K Shah had a margin deposit of Rs 2.88 crore and had placed orders worth Rs 416.71 crore, or 144 timers its margin.
These brokers regularly placed such orders that broke the margin rules.
These facts came to light when on October 5, 2012, a dealer at Emkay Global entered some erroneous trades worth about Rs 960 crore for 50 stocks that constitute the nifty index, quoting prices which were far lower than the previous levels. As a result, within 2 minutes nifty had crashed 15.5% and the trading was halted for about 15 minutes by NSE officials.
Subsequent to the trades and squaring off of its positions by Emkay Global, the total loss to the brokerage was about Rs 51 crore. The brokerage has moved SAT to reverse the trades of that day in which some brokers had made illegal gains.
The showcase notices also show that these two brokers had placed orders worth thousands of crores on behalf of clients who had annual income less than Rs 1 crore. For example, NSE notice to Inventure noted that the broker had placed orders worth about Rs 1,083 crore on behalf of a client that had an annual income of Rs 57.5 lakh. Prakash K Shah had placed an order worth Rs 116 crore on behalf of a client that had annual income of not more than Rs 10 lakh.
Subsequent to the notice, Inventure was fined Rs 50 lakh and Prakash K Shah Rs 40 lakh, with 50% of the penalty amount as suspended, meaning these entities will get back half the amount if they do not break any rules for the next six months.
Atop Inventure official said that the brokerage was contesting NSE's penalty at SAT. Calls to Prakash K Shah's main office in Fort area in Mumbai remained unanswered.
SAT has fixed July 23 as the next date of hearing in the Emkay Global-NSE case.
CRASH COURSE THE CASE
On Oct 5, 2012, NSE nifty crashed 15.5% in 2 minutes after an Emkay Global dealer entered erroneous trades worth Rs 960cr; trading was halted for about 15 minutes WHAT'S A MARGIN DEPOSIT?
Abuilt-in safety system under which brokers keep money with the exchange in cash, FDs and bank guarantees and can place orders up to nine times this deposit
WHAT DID BROKERS DO?
Besides placing orders up to 271 times their margin deposit, they are also accused of putting in orders worth thousand of crores for clients who had annual income of less than Rs 1 crore
Posted by Unknown at 7:07 PM 0 comments
Thursday, June 20, 2013
Double whammy: nears 60, sensex drops below 19K Markets Crash As Fed Signals Stimulus Cut
The global meltdown was triggered by indications that the US Federal Reserve may stop the monthly infusion of $85 billion through bond buyback, popularly called QE 3, and a weak Chinese manufacturing data as also the fall of the rupee led to a
massive 526 points slide in the sensex—the biggest single-day loss in 21 months. The close at 18,719, much below the psychologically important 19,000 level, was precipitated by a Rs 2,100 crore net selling by the FIIs on Dalal Street.
Similarly, the rupee also closed at its all-time low of 59.58 against the dollar. But that's not all. Trading in the government bonds market was also suspended for an hour because of a bond price crash, which is a rare occurence. Yields on the 10-year bond had risen by 12 basis points (a basis point is one hundredth of a percentage point).
SLIPPING NOTES
Rupee weakening due to fear of a possible end to US Fed's move to pump money into economy to boost growth
Strengthening dollar, improving economy prompts investors to leave emerging markets and chase US assets
Widening current account and trade deficits fuelling anxiety over dollar outflows
Rupee is not in a shambles. We should not be overly pessimistic... We will take actions when warranted
— RAGHURAM RAJAN CHIEF ECONOMIC ADVISER
Posted by Unknown at 7:35 PM 0 comments
Tuesday, June 18, 2013
Rupee follows global slide, hits all-time low against $ FIIs Dumping Indian Bonds Triggers Fall
The sharp fall in the value of the rupee will spur inflation and force the government to hike fuel prices. It also increases prices of local gold vis-Ã -vis international prices which will make the yellow metal appear like a sound investment despite efforts by the government to dissuade gold purchases. Besides making all imports expensive the weak rupee will make overseas travel and education more expensive.
The present fall has been triggered by a massive selloff by foreign institutional investors in Indian bonds. In 18 sessions FIIs have sold bonds worth $4.7 billion.
Though all emerging market currencies have weakened against the dollar, India will suffer the most because it has the largest current account deficit of $80bn after the US. Around $15bn inflow could be affected
With QE (quantitative easing, through which the US government pumped in huge money into the financial system at low rates) being terminated earlier or on schedule, the implication will definitely mean fewer FII funds coming in, though there would still be positive flows. Around $15 billion could be affected—only affirmative policies within the economy can retain such flows, or else the balance of payments will be under pressure as this cushion will be less supportive," said Madan Sabnavis, chief economist, Care.
Dealers said that there was a demand for dollars from public sector banks which appeared to be on behalf of defence purchases or oil refiners.
"The depreciation of emerging market currencies is a global phenomenon. South Korea has also depreciated against the dollar and so have the Brazilian real and South African rand," said Ashish Vaidya, head of fixed income, currencies and commodities trading at UBS India. He added that RBI intervention has been mild because it sees this as a part of a global phenomenon. "The central bank is following a strategy of containing volatility and going with the trend," he added.
Although there is no word from the Federal Reserve on withdrawal of stimulus, global funds appear to be bracing themselves to a possible early withdrawal of quantitative easing ahead of schedule. The three phases of quantitative easing (or QE1 to QE3) refer to the unconventional monetary measures adopted by the US Federal to inundate money markets with dollars by purchase of debt of up to $85bn every month. Signs of a recovery in US have raised expectations that the Fed would bring an early end to this practice.
In the currency futures market, near-month dollar/ rupee contracts on the National Stock Exchange, MCXSX and the United Stock Exchange all closed around 58.88.
Posted by Unknown at 7:58 PM 0 comments
Sunday, June 16, 2013
IMD warns of extreme rain, BMC urges people not to leave home
Mumbaikars, especially in the island city, woke up to very heavy rainfall on Sunday. From 8:30am to 11:30am, Colaba recorded 122mm and Santa Cruz 35mm, causing floods in several areas. Though it continued to rain thereafter, the intensity became a lot less, with Colaba recording 147.2mm from morning till evening. Santa Cruz recorded 115.4mm in the same period.
Rainfall intensity is likely to be more on Monday. The weather bureau has warned of very heavy to extremely heavy rainfall, accompanied by strong winds gusting up to 50kmph in the city and the suburbs. As per the bureau's glossary, 64.5-124mm rainfall is 'heavy', 124.5-244.5mm 'very heavy', and above 244.5mm 'extremely heavy'. Also, high tides up to 3.68 metres are to occur at 6.12pm. If high-intensity rainfall continues in the evening, people may get into trouble finding transport for heading home from work.
Taking note of the forecast, the BMC has issued a warning: "We appeal to citizens to leave home only after consulting various media on the amount of rainfall and waterlogging in their areas. Citizens should not leave home unless necessary." It has also cautioned people against venturing into sea.
Monday's rainfall was caused by two weather systems: an active offshore trough running from the Gujarat to the Kerala coast and an upper air cyclonic circulation over Gujarat. "Together, these systems are causing rainfall over the Konkan and Goa region, including Mumbai," said V K Rajeev, director of weather forecast, IMD, Mumbai.
Moreover, very strong south-westerly winds are blowing along the west coast. For Mumbai, this means heavy rainfall with strong gusts of wind.
Posted by Unknown at 11:00 PM 0 comments
Friday, June 14, 2013
MONEYMAKEOVER Use surplus funds to repay your debt
Planning, saving regularly are key to living financially healthy life, says Gaurav Mashruwala
Manoj Walambe, 31, is an engineer and lives in Pune with his wife Rasika. His father is a government employee and will retire in four years while his mother is a housewife. Childhood was humble — basic needs were taken care of but there were no luxuries. His father used to plan the family budget and save regularly, a habit which ensured that all financial responsibilities were taken care of.What is the couple saving for?
Once they have children, the couple would require Rs 5 lakh for each child's education and Rs 3 lakh for each child's marriage. For retirement, the couple wants a corpus which would generate an income of Rs 2.40 lakh annually 25 years from now. Apart from these goals, they are planning a foreign trip in the next five years. The costs will be revised based on inflation.
Where are they today?
Cash flow: The family's approximate annual gross inflow from all sources is Rs 6.26 lakh against an annual outflow of Rs 3.98 lakh. This includes routine family expenses, EMI on loan, vacation, insurance premium and regular savings.
Net worth: The Walambes' total assets are valued at Rs 52.54 lakh. This includes invested and liquid assets worth Rs 4.04 lakh. Assets held for personal consumption — house, car and jewellery — are worth Rs 48.50 lakh. The outstanding home loan amounts to Rs 7.82 lakh, which is about 15% of the total assets. Contingency fund: Against the mandatory monthly expenses of Rs 21,500, the balance in savings bank, cash at home and liquid fund together comes to Rs 95,000, which is approximately four months' reserve.
Health & life insurance: Manoj's employer provides a health cover of Rs 2 lakh each to him and his wife. Manoj also has life insurance worth Rs 50 lakh in the form of a term plan.
Savings & investment: The couple's savings account balance and liquid funds amount to Rs 95,000. They have investments in equity mutual funds and gold mutual funds worth approximately Rs 1.12 lakh and Rs 7,000, respectively. Their EPF and PPF balance is Rs 1.89 lakh.
Fiscal analysis: The family is saving approximately 58% of their total inflow. Annual debt payments comprise about 18% of their income after tax. Out of total assets, only about 7% is held from investment perspective while the rest is for self-consumption. This is typically the case with couples in early part of their careers. Over a period of time, savings are diverted towards productive investments and ratio of invested assets in comparison to personal assets improves significantly. Health and life insurance is inadequate.
The way ahead
Contingency fund:
They should maintain a contingency reserve of Rs 60,000, of which Rs 15,000 should be held as cash in hand and the balance in FD linked to a savings bank account. As and when the EMI reduces, they should accordingly cut the contingency reserve.
Health & life cover:
The couple should increase the health cover by Rs 5 lakh each. Manoj should buy an additional life insurance term plan worth Rs 50 lakh
Planning for financial goals
Repayment of housing loan: They should use the excess funds lying in liquid assets over and above the contingency fund to pay the loan, besides voluntarily increasing the EMI contribution by Rs 10,000. Also, all bonus and increments should be used to pay back the loan and become debt-free in the next three-four years.
Children's education and marriage:
Once the home loan is paid off, the family should start investing Rs 4,000 and Rs 1,000 systematically in equity mutual funds and gold mutual funds, respectively, for their children's education and marriage and increase the amount by
15% every year.
Retirement: The couple should start an SIP of Rs 10,000 in an equity mutual fund to meet their retirement needs and enhance the amount by 10% per annum.
Planner's eye
R arely couples do who we come are across methodical about their finances. Planning family budget, saving regularly and clearly defining financial goals are ingredients to living a financially healthy life.
Posted by Unknown at 9:42 PM 0 comments
Thursday, June 13, 2013
Mumbai gets freeway today, not without bumps No CCTV Cams Present On Signal-Free, 17-km Route
Fourteen kilometres of the long-awaited Eastern Freeway will be opened to traffic by 9 am on Friday, making a signal-free drive possible between Chembur and South Mumbai. But there are riders: for a 17-km long bridge (3km to be opened in December), there is going to be little supervision by the traffic police, and the freeway's feeder and arrival routes, including roads leading to the main entrance and exit points,haveobstacleslike encroachments and parking of heavy vehicles.
The number of towing vans and traffic cops to be present on the freeway will not be sufficient for such a long route, said a traffic expert. "Hence, there should be a good CCTV camera system, including a control room from where the police willbe ableto monitor the entire length of the freeway and ensure that traffic violators are booked, and, more importantly, ensure quick action in case there are accidents," the expert said. The main challenge will be maintaining the flowof traffic ateither end of the freeway, said an expertworking closely with the government. "Between the freeway's Orange Gate ramp and CST, there are encroachments along P D'Mello Road and also parking of heavy vehicles. I think the solution lies in giving proper space to private truckers and motorists coming to ports and godowns. Their present parking site on P D'Mello Road has to go if smooth traffic flows has to be maintained from the freeway for South Mumbai."
Things are not smooth at the other end of the freeway—Shivaji Chowk near R K Studios in Chembur—either. "Here, four roads culminate, bringing a high volume of traffic. Hence, signalling time will go up for traffic coming from the freeway," said Vidur Shah, a resident of Chembur. "This will be a dampener for those hoping for a fast commute towards Navi Mumbai from the freeway."
Transport expert Ashok Datar said all entry and exit ramps along the freeway should be made ready at the earliest to achieve the intended benefits of a costly infra project. "Maximum accessibility to the freeway will multiply its success." 1
Orange Gate landing and
take-off on P D'Mello Road | Hutment and godown encroachments, parking of heavy vehicles between Orange Gate ramp and CST. Certain stretches are uneven and thus prone to waterlogging 2
Novelty factor | Since the EFW is 14-km long, motorists will take time to get used to its exit and entry ramps. Ramps in spots like BPT Road toll post and Bhakti Park in Wadala are yet to be built. A 700-metre road between BPT Road and Wadala-Chembur Road, which will provide continuous connectivity along the EFW, is yet to be completed 3
Points at Shivaji Chowk near R K Studios in Chembur | Four major roads culminate here. Thus Navi Mumbai-bound traffic at the EFW exit at Shivaji Square will have a long wait for the green signal. Parking of heavy vehicles on the Mankhurd-Vashi Road can further reduce traffic flow
TRAFFIC VIOLATIONS
The police fear that some motorists may not be able to resist the temptation to speed up on a flyover as long as the freeway, thus leading to accidents BENEFITS Friday onwards | Traffic to Navi Mumbai, Goa, Pune, Chembur, Kurla, Panvel, Deonar and Mankhurd
December onwards | Traffic to Thane, Airoli, Mulund and Ghatkopar after a 3-km section of the EFW is opened
General | The EFW's Ghatkopar end is near the Jogeshwari-Vikhroli Link Road and the upcoming Santa Cruz Chembur Link Road
TRAFFIC RESTRICTIONS
Entry to the EFW barred for two- and
three-wheelers, animal carts, bicycles and tricycles, and pedestrians
Entry barred for heavy vehicles like trailers and transport vehicles except BEST and state buses. Entry barred for luxury private buses
Like on JJ flyover, the traffic police are to monitor vehicular speed
PROJECT PARTICULARS MMRDA engineers involved | Chief engineer: Sharad Sabnis; superintending engineers: D P Deshmukh, V N Ghanekar; executive engineers: J R Dhane, M V Jaitpal, D S Bhaik; deputy engineers: A B Dhabe, G D Rathod, S Vijay Kumar; assistant engineers: J B Patil, V S Kambale, P S Pawar, B V Biradar Consultants | Consulting Engineering Services, STUP Consultants
Contractors | Simplex Infrastructure, Madhucon Projects, J Kumar
Times View: Let EFW be used without delay
Two days of monsoon have been able to expose the state of preparedness of Mumbai's infrastructure agencies. And it would be unfair to target the BMC; other agencies, too, have not covered themselves with glory. But what we find really galling is the continued wait for a worthy (from Delhi?) to inaugurate the Eastern Freeway even though the roads below are creaking under the combined weight of traffic and water logging. Seeing an empty— and completed—EFW while negotiating traffic and accumulated water on the old roads is a cruel joke.
This Times View appeared on June 11, following which the government opened the Eastern Freeway to traffic
Posted by Unknown at 8:16 PM 0 comments
Wednesday, June 12, 2013
How to become a crorepati with a normal income
- The amount invested every month/year
- Rate of returns
- Time period the amount stays invested
1. Amount invested every month/year
It's intuitive that the more you are able to save and invest today, the larger your reward will be down the road. However, this table shows that even the smallest addition to your savings each year can make a big difference in reaching your targeted amount.
Amount invested per year (Rs.) (assumed rate of returns at 12%) | Total investment (Rs.) | Value after 25 years (Rs.) |
10,000 | 3,00,000 | 29,41,000 |
11,000 | 3,30,00 | 32,35,000 |
15,000 | 4,50,000 | 44,12,000 |
25,000 | 7,50,000 | 73,53,000 |
50,000 | 15,00,000 | 1,47,00,000 |
100,000 | 30,00,000 | 2,94,00,000 |
2. Rate of return
The rate of return (the amount you earn on your savings) has a huge impact on the amount of money you'll end up with. Different investment vehicles have different expected returns. For example, Indian stocks have historically returned more than 15 per cent per year. Cash, in contrast, has a current return of 8-9 per cent per year. Your goal is to find a rate of return that offers the highest potential for growth, but at the lowest possible potential for risk of loss. Over time, we have found that the most prudent solution is a diversified combination of investment assets (stocks, bonds, cash, real estate, and alternative investments).
Assuming that you could invest Rs. 100 at 11 per cent per year, you would have Rs. 1,359 at the end of 25 years. However, if you were able to invest Rs. 100 at 15 per cent per year, you would have Rs. 3,292 after 25 years.
Year | 5% (in Rs.) | 11% (in Rs.) | 15% (in Rs.) |
0 | 100 | 100 | 100 |
5 | 128 | 169 | 201 |
10 | 163 | 284 | 405 |
15 | 208 | 478 | 814 |
20 | 265 | 806 | 1,637 |
25 | 339 | 1,359 | 3,292 |
30 | 432 | 2,289 | 6,621 |
35 | 552 | 3,857 | 13,318 |
40 | 704 | 6,500 | 26,786 |
45 | 899 | 10,953 | 53,877 |
50 | 1147 | 18,456 | 1,08,366 |
3. Time period the amount stays invested
To illustrate the power of compounding over time, please refer to the tables below. In the first example, Rs. 2,000 was saved and invested each year from age 19 to 26 (for a total of eight contributions). In the second example, Rs. 2,000 was saved and invested each year from age 27 to 65 (for a total of 39 contributions). At age 65, the first example ended up with Rs.1,019,161 (vs. Rs. 805,185 in the second example), even though the total amount contributed over the eight-year period was only Rs.16,000. The reason? The first example had eight more critical years to invest at the same rate of return at the beginning of the investment period. That's the power of compounding!
Example 1 | Example 2 | |||
Age | Annual investment (in Rs.) | Year-end value (in Rs.) | Annual investment (in Rs.) | Year-end value (in Rs.) |
19 | 2,000 | 2,200 | 0 | 0 |
20 | 2,000 | 4,620 | 0 | 0 |
21 | 2,000 | 7,282 | 0 | 0 |
22 | 2,000 | 10,210 | 0 | 0 |
23 | 2,000 | 13,431 | 0 | 0 |
24 | 2,000 | 16,974 | 0 | 0 |
25 | 2,000 | 20,872 | 0 | 0 |
26 | 2,000 | 25,159 | 0 | 0 |
27 | 0 | 27,675 | 2,000 | 2,200 |
28 | 0 | 30,442 | 2,000 | 4,620 |
29 | 0 | 33,487 | 2,000 | 7,282 |
30 | 0 | 36,835 | 2,000 | 10,210 |
35 | 0 | 59,324 | 2,000 | 29,875 |
40 | 0 | 95,541 | 2,000 | 61,545 |
45 | 0 | 153,870 | 2,000 | 112,550 |
50 | 0 | 247,809 | 2,000 | 194,694 |
55 | 0 | 399,100 | 2,000 | 326,988 |
60 | 0 | 642,754 | 2,000 | 540,049 |
65 | 0 | 1,035,161 | 2,000 | 883,185 |
Minus amount invested | 16,000 | 78,000 | ||
Total | 1,019,161 | 805,185 | ||
How much the amount has increased by | 64 times | 10 ti |
Posted by Unknown at 10:45 PM 0 comments
Tuesday, June 11, 2013
Re falls to another record low of 58.40 RBI Intervention Pulls Back Currency From Levels Close To 59 Against Dollar
Mumbai: The rupee neared levels of 59 against the dollar on Tuesday before intervention by the Reserve Bank of India through public sector banks pulled the domestic currency back to close at 58.40 – another record low and down 25 paise from its previous close.
RBI also ordered all exporters in Special Economic Zones to repatriate full value of exports within a period of 12 months from date of export. Earlier, there was no time limit for repatriating proceeds of exports from SEZs. Dealers said that although RBI appears to have sold dollars through some public sector banks, there was no major intervention. "The recovery from 58.98 was so swift that it appeared that there was not much of dollar demand at the higher level. There is a view that the rupee has breached its fundamental levels while the weakening has been stemmed, it might take some major action for the rupee to reverse it movement," said Harihar Krishnamoorthy, treasurer, First Rand Bank. He added that there has been some buzz in the market of a dollar bond by the government. According to bankers, RBI has not come out with sledgehammer measures to stamp out volatility because dollar has been gaining against currencies globally. "Even in other Asian countries like Malaysia, Thailand and Indonesia, there has been a currency rout," said Krishnamoorthy.
According to dealers, one of the reasons why the rupee has been hit harder than other emerging markets has been the sell-off in the bond markets. "Conventional wisdom is that if you have a large current account deficit, you raise interest rates," said a banker. The sell-off in the bond markets has raised fears that RBI may hike rates in its mid-quarter review on June 17. Fears of currency-related losses for corporates and an interest rate hike led to the sensex falling 1.53% on Tuesday.
While the sharp fall in the value of the rupee has taken traders by surprise, there is no panic in the market. Some bankers feel that there is some irrationality in funds moving back to US treasuries as it is unlikely that the US Federal Reserve would withdraw the fiscal stimulus immediately.
WHAT RBI CAN DO TO SUPPORT RUPEE
Float a global bond issue | A $10bn mop-up would immediately turn sentiment
Ask exporters to bring in funds | This has been another favourite tool of RBI to curb speculation among exporters and importers
Hike interest rates | Higher rates create an arbitrage opportunity for banks to bring in dollars, convert them into rupees and lend them in local markets Sell dollars | RBI's dollar stash stood at $287.8 bn on May 31, down $4bn from the previous week; a sharp burst of dollar sales coupled with other measures could stem the slide
Ease ECB norms | RBI follows a counter cyclical approach — it allows corporates to borrow more overseas when the currency is weaker than its fundamentals and places restrictions when it appears overvalued
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2,240CR EXIT Apax nets 3-fold gain in Apollo Hosp stake sale
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Monday, June 10, 2013
3RD WETTEST JUNE DAY IN 21 YEARS STUNS CITY
Santa Cruz Has Already Covered 12% Of Annual Rainfall; Intensity Of Showers May Ease Over Two-Three Days
That apart, in the 24 hours from Sunday 8am to Monday 8am, the island city recorded an average of 70mm while the eastern and the western suburbs recorded 109mm and 159mm, respectively.
What's more, Mumbai suburbs also recorded the highest rainfall in the state this season, followed by Thane, which too received a substantial 150mm.
Sunday's sudden downpour, which led to water-logging in several localities across the city, grounded scores of Mumbaikars who get the weekend off to conduct their weekly shopping and other chores.
The heavy showers continued on Monday morning. By evening, Colaba had recorded 58mm while Santa Cruz 59.7mm. What's more, Santa Cruz has already covered about 12% of the annual rainfall. In just 10 days of June, Colaba received 270mm while Santa Cruz got 361mm.
According to the India Meteorological Department (IMD), the excessive rainfall is a by-product of the double systems that are currently active near the city's coast. "There is an offshore trough stretching from Gujarat coast to Kerala coast. Moreover, there is an upper air circulation over the trough. Cumulatively, these are causing the heavy rains and thundershowers over the city," said N Y Apte, deputy director general of the IMD, Mumbai.
The rain has further brought down the heat. Though humidity levels are understandably high, maximum temperatures on Monday were 26.8 degree Celsius in both Colaba and Santa Cruz—both more than six degrees below normal.
The southwest monsoon has further advanced to some more parts of the north Arabian Sea, Saurashtra, Kutch and Gujarat region, the remaining parts of Madhya Maharashtra, Vidarbha, Odisha, Bay of Bengal, most parts of Chhattisgarh and Gangetic West Bengal as well as some parts of south Madhya Pradesh and Jharkhand.
Tuesday, though, is likely to see the rains ease, said the IMD. The met department forecast occasional spells of rains or thundershowers; one or two of these spells may be heavy. "We will have to wait and watch, but the upper air circulation may weaken in a day or two. This will decrease rainfall intensity," said Apte. MONSOON METER
Above average rainfall cheers parched state Sandeep Ashar TNN
Mumbai: The onset of monsoon in the drought-hit state has been impressive. So far, about 60% of the state has received above average rainfall.
Data from the chief minister's office shows that 21 of the 35 districts in the state received morethan 100%of the rainfall usual for this time of the year.
These districts include some of the worst-hit by drought, such as Jalna, Aurangabad, Satara and Sangli, where the precipitation recorded was 123%, 138%, 176% and 179% of normal, respectively.
Since June 1, the city suburbs have recorded 301 mm rainfall, which is 166% of the average.
The island city received 213 mm, or 116% of the normal rainfall. Rainfall in neighbouring Thane was 142% of the average.Only threedistricts,Gondia,Bhandara and Nagpur in Vidarbha region, received rainfall that was below 50% of the average. Eight districts witnessed 50-75% of the average rainfall.
About93%of the average rainfallwas recorded in Beed district, which, too, faced ravaging drought conditions over the past months.
Thehighestdeviation was recordedin Dhule, where rainfall was 281% of the normal precipitation, followed by Ahmednagar at 221%, Sangli at 179% and Satara at 176%.
Latest official data shows that water in reservoirs in the state stands at 14% of capacity. Senior state officials said they were hoping the good spell of rain would continuesothatwater levelsin dams rise.
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New cluster plan to reshape Mumbai
Mumbai: To cope with the ever-expanding urban sprawl in and around the city, the state government has proposed a brand new makeover plan. Under the new plan, the Brihanmumbai Municipal Corporation (BMC) and government town planners will carve out medium andlargesized neighbourhoods from a pocket,whichcouldthen be redeveloped using the cluster redevelopment approach.
The state urban development (UD) department has already proposed an amendment in norms to allow civic officials and government town planners to undertake the exercise of surveying and defining the clusters. The proposal could soon be broughtbeforethestatecabinet,officialssaid. In line with the state's cluster redevelopment policy, the minimum area of a cluster will be 1 acre. It could contain variouscategoriesof buildings—dilapidated, unauthorized, legal, slums etc. A cluster will be defined formally following an exercise of suggestions and objectionsfrom those affected.
The redevelopment of a cluster could either be taken up by a public agency or a private developer, who is proposed to be appointed through a transparent process. A floor space index (FSI) of 4willbe providedfor their integrateddevelopment.
Incentives of individual buildingsor structureswithin a cluster will vary depending on normsfor eachcategory. Development control regulations will also have to be amendedbeforeenforcing the plan,sourcessaid.
The new plan is also proposed to be enforced in other cities in the Mumbai Metropolitan Region. The ever-expanding urban sprawl had led to a spate of illegal buildingsin these parts.
In light of the Mumbra building collapse tragedy in April this year, which claimed 74 lives, CM Prithviraj Chavan had announced a plan to extend the cluster redevelopment modeltoillegal buildingstoo.
Existing provisions of the Maharashtra Regional and Town Planning Act, 1966, lack adequate provisions for dealing with such unauthorized structures, sourcessaid.
The illegal buildings, however, won't be provided any incentiveFSIfor redevelopment, sources said. Residents of such buildings will also have to bear the cost of construction, a senior official added.
URBAN CHAOS
Close to 5 lakh families reside in over 30,000 buildings in Mumbai. A sizeable number of these are in derelict condition
About 1.5 million families reside in densely populated slums. Many of these do not even provide basic facilities
Hardly 10% of the city's development plan for 1991-2013 has been implemented
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3 banks fined 10.5cr for KYC rule breach
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The rupee recorded one of its sharpest intraday falls to close at an all-time low of 58.14 against the dollar on Monday
Besides bringing about a general increase in prices, a weak rupee also directly hurts those who are planning to travel or study abroad. The fall in the rupee will make it difficult for the RBI to bring down inflation and stimulate growth as the depreciation increases fuel price. It also makes it difficult for RBI to cut interest rates as this would make it cheaper for traders to speculate on the dollar firming up further.
BAD NEWS FOR...
• Foreign travel, education, imports and foreign debt service for cos
• Cars and home appliances with imported components
GOOD NEWS FOR...
• Remittances back home
• Exporters Gradual slide in Re to boost exports, say bankers
Mumbai: Monday's fall in the rupee was prompted by strong gains in the dollar in the international market, coupled with uncertainty in equity markets and a sell-off of bonds by foreign investors.
The previous low seen by the domestic currency was on June 22, 2012 when it touched 57.16 against the dollar. Since then the rupee recovered to touch a high of 51.88 in October before weakening again. The rupee has depreciated over 7% against the dollar during the current fiscal making it the worst performing currency in Asia.
According to Madan Sabnavis, chief economist with rating agency Care, the fundamental driving the rupee movement is ultimately the change in the country's foreign exchange reserves as decline in reserves would result in depreciation. Foreign currency assets, after increasing in the months of March and April, have declined to $258.50 billion in May.
Bankers say that while a gradually weakening rupee would have a self correcting effect by addressing the factors that led to the fall, the volatility could badly hurt the rupee. "A gradual depreciation would reduce import demand and promote exports. It would also make Indian assets attractive for foreign investors. But wild swings in the rupee hurt everybody. Exporters too will lose because of mark to market losses on their hedging positions on the rupee" said a trader with a multinational bank.
"The dollar has been strengthening against currencies of a number of emerging market economies. This is mainly owing to the expectation of the Federal Reserve discontinuing the quantitative easing programme sooner, resulting in fewer funds flowing down to the emerging markets. Also, the European Central Bank and the Bank of England maintained key interest rates at the same level. This would also provide for strengthening of the dollar," said Sabnavis.
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Sunday, June 9, 2013
Forced to prepay gold loan?
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