Month: April 2021

Gold Up 7% This Month: Current Pricing Offers Right Entry Pt. For Long Term Investment

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Investment

oi-Roshni Agarwal

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After seeing a sharp fall, gold prices from Rs. 44800 on April 1 to Rs. 48085 today (April 21) on the MCX have gained over 7 percent in April alone. At present what is supporting rise in gold price is retreating levels of US treasury yields as well as softer dollar.”The U.S. dollar had edged lower this morning, supporting prices, with gold’s upward momentum from overnight continuing in Asia,” OANDA senior market analyst Jeffrey Halley said.

Gold Up 7% In April: Time Is Right To Invest In Gold For Long Term

Gold Up 7% This Month: Current Pricing Offers Right Entry Pt. For Long Term Investment

“Providing that U.S. 10-year yields remain softer, gold appears to be gathering strength for a test of the 100-day moving average at $1,802 an ounce in the days ahead.”

What is supporting rise in gold prices?

Inflationary concerns led by global stimulus measures will also be supportive of gold prices in the medium to long run.

Ultra-low interest rates (dovish stance worldwide of global central banks)

Falling yield and dollar

Physical demand ahead of wedding season and festivities is also pushing gold prices higher.

“The uncertainty on the pandemic front is back. New waves and variants of the virus, and the resulting lockdowns, could trigger pullbacks in risky assets like equities. Gold could benefit from the resulting risk aversion, as happened last year,” says Chirag Mehta, senior fund manager, alternative investments, Quantum Asset Management Company.

According to Hareesh V, head of commodity research, Geojit Financial Services, “Any signs of weakness in the global economy could lift sentiment in favour of the yellow metal higher”.

Gold will also find support if equity tumbles

Equities are suggested to be highly volatile though the timeframe shall not be that long. Now if in the midst of economic slowdown amid curbs, earnings come in weak and investor turn jittery. In risk-off mode, gold will gain favour and this will again brighten the prospects of gold.

FDs also offer negative real return:

As the deposits in the current scenario of one year tenure offer nothing or rather negative real rate of return. So, in order to preserve their capital or retain their money’s purchasing power, investors find safe haven in gold.

Current prices provide an entry point into gold for long term allocation

Gold as an investment should be looked at from long term horizon of say 5 years or more to get the capital appreciation benefit.

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Corona Insurance: Who Should Buy Corona Rakshak Policy And Why?

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Major Features of Corona Rakshak Policy

  • The Corona Rakshak Scheme has a single premium payment term, which means you can pay all of your premiums in one lump sum and avoid making any more periodic payments.
  • The Corona Rakshak Policy includes an individual cover that ranges from Rs 50,000 to Rs 2.5 Lakh in coverage.
  • If the policyholder tests positive for Covid-19 at a government-approved center, 100 percent of the amount insured is charged as a lump sum to the policyholder.
  • A policyholder does not need to undergo prior medical screening in order to be eligible for this policy, and it is not required for purchasing or investing in the Corona Rakshak Policy.
  • One of the most appealing aspects of the Corona Rakshak scheme is that it has no deductibles, meaning that the medical care and monitoring are not jeopardized.
  • Persons between the ages of 18 and 65 can apply for the policy. A proposer of a higher age may purchase insurance for adult family members without protecting himself.

Benefits of Corona Rakshak Policy

Benefits of Corona Rakshak Policy

Hospitalization

If a policyholder tests positive for Covid-19 and has to be hospitalised, their hospital bills are fully protected by this benefit. This policy covers all expenses associated with the diagnosis, care, and hospitalisation for Covid-19, and the policyholder is assured of having to invest any excess funds on his own.

Treatment due to Covid

When a patient does not need to be admitted to the hospital, this feature covers all medical expenses for 14 days and allows the policyholder to use the lump sum amount for any treatment-related expenses. It’s a useful advantage that guarantees you get the best medical care possible, regardless of how long you’re in the hospital.

Payout due to Covid

The Corona Rakshak policy enables its policyholders to receive their sum assured in a lump sum format. This aspect is beneficial for policyholders under this benefit, where they can choose to use that same amount for making payments towards consumables such as PPE kits.

Compensation due to Covid

Policyholders may use this feature to request a benefit payment if they lose their income as a result of a Covid-19 diagnosis. As a result, the policy seeks to meet your financial needs and requirements, even if you lose your work.

What happens when a person tests Positive?

What happens when a person tests Positive?

On a positive diagnosis of COVID requiring hospitalisation for a minimum of 72 hours, a lump sum payout equal to 100% of the Sum Insured would be paid. A government-approved diagnostic centre must have a positive COVID diagnosis. Payment can be made only if you are admitted to the hospital for a minimum of 72 hours after receiving a positive COVID diagnosis.

Who Should Consider Corona Rakshak Policy?

If you already have health insurance but are concerned that a positive diagnosis for covid-19 will result in a loss of income, Corona Rakshak could be for you. PPEs (personal protective equipment) and other consumables are not often protected by standard health insurance plans. This is where Rakshak could come in handy. If you already have sufficient health insurance, opting for Corona Rakshak for income replacement makes sense because most insurers’ premiums are just 1-2% of the amount insured.

This is a one-time bonus that will last for the duration of the Policy and will end when it is paid.

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Value of FPI stock holdings soar by $105 bn in Sept-March: Report

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The value of foreign portfolio investors’ (FPI) holdings in domestic equities reached a record $555 billion in 2020-21, a whopping $105 billion growth between September 2020 and March 2021, according to a report.

Against this, the value of holdings by domestic institutional investors (DIIs) at $203 billion was not even half, according to the data compiled by Bank of America (BofA) Securities.

Also read: Markets crash on heavy FPI selling

FPIs have put more money into the markets since then, having invested a net of $7.2 billion till April 16 (year-to-date 2021), making the country the only market that has seen net positive inflows in the year, despite a dip in March when it slowed to $1.4 billion from $3.5 billion in February and $2.2 billion in January.

That means so far YTD 2021, they have net added zero investment unlike in all other emerging markets which saw massive outflows.

In 2020-21, FPIs, which have been the main driver of domestic equities, have pumped in a record $37 billion or ₹2.75-lakh crore into the equities, the highest in two decades, according to the data from the National Securities Depository.

Previously, in fiscal years 2010, 2011 and 2013, FPI inflows had crossed $20 billion. Investments zoomed as major central banks pumped in trillions of dollars to try and revive pandemic-hit economies, flooding markets with liquidity.

On the other hand, domestic institutional investor inflows remained a negative ₹1.38-lakh crore in 2020-21 taking the total value of their holdings to $203 billion, spread across exchange-traded funds ($38 billion), large-cap fund ($24 billion), flexi cap funds ($22 billion) and mid-cap funds ($16 billion), it said.

According to the report, after pumping a record $37 billion in 2020-21, the value of FPI holdings in domestic equities is at a record high of $555 billion, which was only $450 billion at the end of September 2020 or 21.4 per cent of the market capitalisation.

As of June 2020 quarter, the value of FII investments in equities stood at $344 billion or 18.7 per cent of the market cap, which means in just three months, it has jumped 31 per cent. In September 2019, the value of FII investments was $429 billion.

Meanwhile, the report also said domestic institutional investors also turned net buyers of equities till April 16 (YTD21), with a net addition of $2.2 billion which is back to pre-pandemic level — they became net buyers in March after being net sellers for the past eight months in a row.

Also read: Bank, financial stocks get lion’s share from FPIs

For FPIs, real estate/financials/energy were the main investments, while for DIIs it was more thematic funds, mid-cap funds, large & mid-cap funds.

So far in 2021, active funds drove the flows ($1.2 billion) vs passive funds ($263 million), taking the YTD 2021 FII inflows at $7.2 billion until April 16.

Against this, FPIs have been net sellers in major EMs in April — Taiwan (-$5.5 billion), South Korea (-$1.3 billion) and Brazil (-$828 million). YTD inflows for India ($7.4 billion), Taiwan (-$10.6 billion), South Korea (-$14.1 billion) and Brazil ($3.1 billion).

FPI flows’ sectoral deployment in the country were skewed in favour of real estate ($500 million), financials ($374 million) and energy ($311 million), whereas it was -$330 million in IT, -$223 million in healthcare and -$31 million in utilities. Of the $555 billion of investment/holdings, the maximum was in financials at 36.2 per cent, followed by IT at 13.8 per cent, energy at 13.3 per cent, utilities at 2.6 per cent, materials 2.2 per cent and real estate 1.03 per cent.

The NSE500 stocks are majority owned by the founders (46 per cent), FIIs (20 per cent), retail investors (9 per cent), domestic mutual funds (7 per cent), government (5.5 per cent) and banks, financial institutions and insurers (5 per cent).

Since December 2020, the ownership patterns have changed quite a bit for the founders (up 120 basis points), retail (up 20 bps) and FIIs (-150 bps).

India MSCI valuation premium to EMs is now at 41 per cent, which is 1 per cent below the long-term average.

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Interest On Income Tax Refund: Know All About It

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Taxes

oi-Roshni Agarwal

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Income tax refund accrues to those taxpayers whose tax liability for the given financial year is lower than the tax paid either by way of tax deducted at source, tax collected at source, self assessment tax etc. And the extra amount can be claimed by filing income tax return or ITR for the particular financial year within the timeline allowed for the purpose.

Interest On Income Tax Refund: Know All About It

Interest On Income Tax Refund: Know All About It

Now if your income tax return has been processed and you have happened to receive the refund with or without the interest component, here are some facts about the interest component one should be knowing :

1. If the amount of refund is less than 10% of the determined tax on regular assessment then no interest shall be payable. Say in case of TDS of Rs. 5.98 lakh and tax liability computation of Rs. 5.48 lakh, the refund amount is less than 10% of the tax payable value so no interest shall be payable.

2. In case the refund exceeds the limit, the taxpayer will get due interest:

“If refund arises out of TDS, TCS or advance tax paid during the financial year, the interest shall be calculated at the rate of 0.5% for every month or part of month”. Interest calculation is started from the beginning of April of an assessment year.

3. Also the payment of interest on refund depends on the ITR furninishing date:

If ITR has been furnished by the assessee on or before the due date, the interest shall be payable from April 1 of the Assessment Year to the date on which the refund is granted. If the tax return is not furnished by the due date, the interest shall be payable from the date of furnishing return of income to the date on which refund is granted.

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Third party motor insurance premium may go up in 2021-22

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The general insurance industry is hoping for an increase in third party motor insurance rates for 2021-22.

The rates are notified by the Insurance Regulatory and Development Authority of India (IRDAI) on an annual basis and had not been changed last year due to the Covid-19 pandemic.

The new rates for 2021-22 are yet to be notified by IRDAI.

According to general insurers, the premium needs to be revised in order to make the segment sustainable.

Further, court judgements in the recent past have also had an impact on the sector.

“Our view is that last year we didn’t get a hike in rates . Before that in February 2020, exposure draft for an increase had come but then the first wave of Covid happened and that was put in the cold storage,” Bhargav Dasgupta, Managing Director and CEO, ICICI Lombard, General Insurance, had said after the fourth quarter results in a media call.

Responding to a question, he had also pointed out that court judgements had had an impact, even on past claims. He, however, did not comment on the expected quantum of hike in rates.

The Covid -19 pandemic and lockdown had brought down motor claims in the initial months but they have started coming back to normal, according to insurers.

Meanwhile, industry data indicates some traction in motor insurance premium in recent months.

In 2020-21, motor third party premium increased by 4.4 per cent to ₹10,650 crore compared to ₹ 10,198 crore in 2019-20.

However, on an overall basis, motor premium fell 1.68 per cent to ₹ 67,790 crore last fiscal.

“In 2021-22, along with the expected uptick in the health segment, any increase in the premium levels of the Motor TP segment, which was held steady in 2020-21, could drive the non-life premiums,” Care Ratings had said in a recent report.

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Tata Steel, HSBC execute paperless trade transaction

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For the first time ever, Tata Steel and HSBC executed a blockchain-enabled, paperless trade transaction.

The paperless trade transaction was made possible by Tata Steel’s collaboration across the spectrum over the Contour and essDOCS platforms.

Also read: Tata group to import 24 cryogenic containers to transport liquid oxygen

The live trade finance transaction involved export of steel by Tata Steel to Universal Tube & Plastic Industries, UAE.

The Letter of Credit was issued by HSBC UAE for Universal Tube & Plastic Industries, UAE (importer), with HSBC India as the advising and negotiating bank for Tata Steel, India (exporter).

Tata Steel plans to explore similar opportunities in other export markets in future.

Peeyush Gupta, VP (Steel Marketing & Sales), Tata Steel, said adoption of this platform enables a faceless yet trustworthy all-time interface for better customer experience. This initiative, executed in collaboration with HSBC, demonstrates Tata Steel’s effort to lead technology-led disruptions by challenging the status quo and reimagining the global trade set-up, he said.

Hitendra Dave, Head-Global Banking & Markets, HSBC India, said having pioneered Blockchain technology deployment in trade finance, the bank is focused on enhancing its utilisation across a wider spectrum of trade finance transactions.

The transaction is a significant step towards mass commercialisation and adoption for a transformative impact on trade finance, he added.

Contour, which has been built on blockchain technology, enables the underlying LC trade transaction to be fully digitised from the LC issuance to presentation of documents. It also enables parties to transfer, manage and present electronic Bills of Lading and supporting documents within its platform via the interface with essDOCS’ CargoDocs platform.

Also read: Tata Steel to rejig Corby tube plant in UK

Corporates can reduce the costs associated with handling paper-based documents, its reconciliation and streamline their processing flow.

It also helps to reduce the document negotiation and banking transaction cycle from weeks to a few days, thereby aiding in unlocking of working capital for businesses.

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Bank, NBFC loan collections drop up to 10% as Covid intensifies, BFSI News, ET BFSI

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April took a sudden turn for banks moving towards normalcy.

Bank, NBFC loan collections drop up to 10% as Covid intensifies

Bank and non-banking finance companies saw a drop in loan collections from the first fortnight of this month.

Collections dropped 5 per cent to 10 per cent as lockdowns hit businesses.

Banks are now going slow on disbursals too sensing troubled times ahead.

The worst affected have been the micro and small enterprises, micro-finance and the commercial vehicles (CV) segments where collection efficiencies dropped rapidly.

Weak business activity

As per a report by Emkay Global, the first fortnight of April 2021 has been weak in terms of business activity which is down by 20% across various segments due to lower working days and onset of an aggressive second wave of Covid-19 infections. This is expected to fall further with far stricter enforcement of localised lockdowns.

The collection efficiencies were improving from August-September onwards on a month-on-month basis across asset classes. However, a year back, the restrictions announced so far are lower in trajectory or intensity. So while there will be an impact on collections and delinquencies, the impact should be lower than what we saw in Q1 of last year.

Bank, NBFC loan collections drop up to 10% as Covid intensifies
Bank, NBFC loan collections drop up to 10% as Covid intensifies

But if there was a rise in the intensity of cases accompanied by containment measures and restrictions, it could further impact collections.

In the case of NBFCs, gold loan and home loan NBFCs will be least impacted whereas unsecured loans, MSME loans and wholesale loans will be more impacted given the vulnerability of the underlying borrower class.

The spread intensity and duration of the pandemic, how long the lockdown and curbs last and vaccine trajectory will decide the severity of hit to banks.

The customer cash flows

The salaried class includes a large segment of IT professionals whose salary levels and jobs have not been impacted, though their discretionary expenditure has come down.

However, a bulk of the salaried class is facing pay cuts and job losses while among the self-employed, those in the essential segment like agrochemicals, pharmaceuticals, have not seen much impact but others have faced a drop in cash flows.

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DCB Bank acquires minority stake in Techfino Capital

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DCB Bank Limited, a private sector bank, has acquired a minority equity stake of about 9 per cent in Bengaluru-based non-banking financial company (NBFC), Techfino Capital Private Limited (TCPL).

The funds raised by TCPL will be used in enhancement of current tech stack apart from on-lending to customers. Techfino provides customised consumer loans in education and healthcare sectors. It is present in key metros and tier II cities across India.

RBI Report on Trends: NBFC sector remains resilient

Complementing strengths

Narendranath Mishra, Head, Agri and Inclusive Banking, DCB Bank, said, “DCB Bank and TCPL are delighted to be associated in this manner. Micro loans or granular loans as a financial solution hold much promise. We value each other’s experience and expertise to build a granular loan portfolio with patience and nuance. DCB Bank and Techfino complement each other’s strengths, and this is an opportunity for both organisations to grow the customer franchise.”

DCB Bank launches virtual video booth for KYC

Jayaprakash Patra, Co-Founder Director, Techfino Capital Private Limited, added, “The association with DCB Bank is an important milestone. It shall help in the growth of the business as TCPL goes about providing financing solutions to its customers. Together, we aim to create a win-win ecosystem, offering our customers a bouquet of customised financial solutions using TCPL’s robust technology platform.”

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Banks may skip dividend payments for the second year, BFSI News, ET BFSI

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After HDFC Bank, it may be the turn of other private sector banks including ICICI Bank, IndusInd Bank, Axis Bank and Yes Bank to skip dividends for the second year in a row.

HDFC Bank, the country’s most valuable lender, has already announced its stand that it will skip dividends.

As Covid cases surge and ravage the economy, cash conservation would be the foremost on the agenda of banks, which are likely to see huge defaults.

Dividend payments

Last year the Reserve Bank of India had barred banks from paying dividends for the fiscal year ended March 2020 so that they conserve capital in view of the economic shock caused by the Covid-19 pandemic.

In his address, which included other policy measures, RBI governor Shaktikanta Das said the ban on dividend payment will help banks conserve capital.

Covid woes: Banks may skip dividend payments for the second year

“It is imperative that banks conserve capital to retain their capacity to support the economy and absorb losses in an environment of heightened uncertainty,” Das said.

“It has, therefore, been decided that in view of the Covid-19-related economic shock, scheduled commercial banks and cooperative banks shall not make any further dividend payouts from profits pertaining to the financial year ended March 31, 2020 until further instructions.” Though there is no RBI restriction yet on dividend payments, banks are likely to skip payments this year too to conserve cash.

In respect to dividend payments, Yes Bank, and HDFC Bank are ahead of other banks. Their dividend yields since FY2011 are in the range of 0.65-1.93%. Banks including Axis, IndusInd, ICICI come next in line in rewarding investors.

For HDFC Bank, this is the first time in the last one decade at least that the lender, of its own, did not offer any dividend. Even in FY20, it had offered an interim dividend before the RBI barred banks from announcing dividends.

Acute stress


Given the second Covid wave all over the country, non-performing assets (NPAs) or bad loans of public sector banks (PSBs) could cross 18 per cent if there is deterioration in economic activity due to the pandemic, former RBI deputy governor has H R Khan said.

As per the Financial Stability Report released by the Reserve Bank of India (RBI), the NPAs of the banking sector were projected to surge to 13.5 per cent of advances by September 2021, from 7.5 per cent in September 2020, under the baseline scenario.

The report had warned that if the macroeconomic environment worsens into a severe stress scenario, the NPA ratio may escalate to 14.8 per cent.

With regard to public sector banks, Khan said the latest Financial Stability Report indicates that NPAs can go up to 16 per cent in severe case scenario but extreme case scenario has not been portrayed this time.
“Given the second wave all over the country, I think the extreme case scenario is something which one has to factor in. So, 18-20 per cent NPL (non-performing loan) is not ruled out for public sector banks.

“So, systemic risk is something which the government does not want to take upon its shoulder,” he said.

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DCB Bank acquires 9% stake in Techfino Capital, BFSI News, ET BFSI

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DCB Bank, announced that it has purchased a minority equity stake in Techfino Capital Private Limited worth approximately 9%. (TCPL). Techfino, a non-banking financial company (NBFC) headquartered in Bengaluru offers customised consumer loans in the education and healthcare sectors through its technology platform.

DCB Bank serves diverse business segments comprising retail, micro-SME, SME, mid-Corporate, Agriculture, Commodities, Government, Public Sector, Indian Banks, Co-operative Banks, and Non-Banking Finance Companies (NBFC).

Narendranath Mishra, Head Agri and Inclusive Banking, DCB Bank, said, “DCB Bank and TCPL are thrilled to work together. As a financial solution, micro or granular loans hold a lot of promise. To build a granular loan portfolio with patience and nuance, we respect each other’s experience and expertise. The strengths of DCB Bank and Techfino complement each other, and this is an opportunity for both companies to expand their consumer franchise.”

Jayaprakash Patra, Co-Founder Director, Techfino Capital Private Limited, said, “The association with DCB Bank is an important milestone. Using TCPL’s comprehensive technology platform, we hope to build a win-win environment by providing our customers with a variety of customised financial solutions. The funds raised will be used in enhancement of the current tech stack apart from on-lending to customers.”



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