Category: Personal Finance

Consumer Price Index-based Inflation (CPI) Eased At 5.30%, In August

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Personal Finance

oi-Kuntala Sarkar

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The Consumer Price Index-based Inflation (CPI) or retail inflation for August, 2021 has eased at 5.30%, compared to 5.59% in July, according to the National Statistical Office (NSO) data, published today. Consumer Food Price Inflation (CFPI) for August is at 3.11%, compared to 3.96% in the previous month.

Consumer Price Index-based Inflation (CPI) Eased At 5.30%, In August

Food prices, mostly in vegetables eased this month that led to that improvement in CPI. In addition to that, Aditi Nayar, Chief Economist of ICRA commented, “The welcome decline in the CPI inflation in August 2021 was broad-based, led by all the components except clothing and footwear, and fuel and power. Contrary to our apprehension, the CPI inflation receded appreciably, led by lower than expected food inflation.” The core-CPI inflation eased to 5.5% in August from 5.7% in July. However, the heading price of edible oil is a concern still now, which registered a hike of 33% (y-o-y).

Madhavi Arora, Lead Economist, Emkay Global Financial Services commented to GoodReturns, “Today’s CPI inflation surprise is lower by our estimates by 30bps, led by sequentially lower than expected food inflation. However, the core remains high and sticky. Core inflation may remain under pressure amid the lagging impact of passing on of high global commodities and margin pressures.” She also thinks that the ensuing demand revival in contact-sensitive household services amid reopening could pressure core services inflation ahead. Overall, core inflation will likely remain sticky ahead and will likely outdo headline inflation through the year.

The surge in fuel costs and transportation costs led to high inflation rates in the domestic market, this fiscal. But since July, the CPI inflation came under control, within the Monetary Policy Committee’s (MPC) target range. The CPI inflation has been above 6% in the 1st quarter of this fiscal, in May it was at a high of 6.30%.

Madhavi Arora later added, “The headline CPI may average almost 60 bps lower than the RBI’s forecast of 5.7%. With the monetary reaction function currently hinging more on growth revival becoming sustainable, the RBI is unlikely to change key policy rates this year and the focus will be more on surplus liquidity management.

According to government sources, India’s Kharif food grain production is likely to touch a new record of over 150 million tonnes in 2021-22 crop year. With better food grain productions and easing fuel prices in the country, inflation should improve in the next quarters.

However, Aditi Nayar is expecting a policy normalization in February, next year, “with a change in the stance of monetary policy to neutral from accommodative, followed by a hike in the repo rate of 25 bps each in the April 2022 and June 2022 meetings.”

Story first published: Monday, September 13, 2021, 19:24 [IST]



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New umbrella entities explained: Why India has delayed their retail payment systems

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The NUE license shall be granted by RBI according to the power of authorization of payment operations conferred under Section 4 of the Payment & Settlement Systems Act (‘PSSA’), 2007.

By Trisha Shreyashi

In a bid to boost the Retail Payment System (‘RPS’), Reserve Bank of India (‘RBI’) had come up with the proposal of “New Umbrella Entities” (‘NUE’), similar to Unified Payments Interface (UPI). While NUEs promote private participation, it became pertinent to ensure that consumer data is secured. Further, it is essential that sustainable financial principles are followed so that the motto of de-risking payments ecosystem is achieved in essence. NUE is seen as an alternative mechanism to India’s flagship processor, the National Payments Corporation of India (NPCI).

The NUE license shall be granted by RBI according to the power of authorization of payment operations conferred under Section 4 of the Payment & Settlement Systems Act (‘PSSA’), 2007. In consonance, RBI announced a draft framework to authorise pan-India NUE for RPSs. It mandates a minimum of INR 300Cr. be maintained as reserves at all times. These NUEs shall be duly registered under the Companies Act, 2013. Further, only entities owned and controlled by Indian residents staying in India in preceding financial year for more than 182 days, shall be eligible to apply as promoter/promoter group. This indicates the intention to limit the role of foreign entities, while allowing foreign investment under diktat. It is also subject to corporate governance norms and RBI retains the right to approve/appoint Directors to the Board.

These NUEs would be primarily responsible in developing new payment systems, standards and technologies, clearing and settlement mechanisms, while monitoring, addressing and preventing relevant risks and frauds. It would diversify easy payment options beside boosting transaction volumes with tremendous expansion of e-commerce. Thus, NUE could also become instrumental in furthering financial inclusion and promotion of fintech.

However, the NUE authorization has been shelved citing data storage and localization issues despite being proposed with a view to minimize concentration risks in RPS. A five member committee under the chairmanship of P. Vasudevan, Chief General Manager, RBI has been directed to review license applications, analyse macroeconomic impact and security risks in light of the proposed framework. Announced about a week ago, it shall also put forth recommendations to address the concerns thus arising.

Other impediments must also be considered to evaluate the adverse impact, if any, on the banking ecosystem. For instance: Capital, infrastructural costs, technology requirements in deploying products, settlement management & operations, rise in risks due to reconciliation & security issues, liquidity costs to support free flow of funds by customers etc. It also seems prudent to examine the impact on smaller banks. Forced to deploy additional payment instruments modeled on zero pricing strategy, they’d end up bleeding more.

Commercial banks had vehemently opposed the NUE proposal. They had urged rather to strengthen the domestic NPCI. While the idea of NUE is to expand the competitive landscape of RPS, the issue of data transfer and security involving foreign entities is indeed a bonafide objection. Moreover, the array of events that unfolded in the recent past make it prudent to notice that the concerns are not unfounded. For instance:- Failure by Mastercard, Amex & Diners Club in furnishing audit reports certifying compliance with Indian norms in regard to data storage rules.

To address the concerns, RBI announced extensive guidelines that are mandatory for all entities involved in payments & settlements to follow, to protect and prevent breach or misuse of the customer details in their database. The Personal Data Protection (PDP) Bill, under review before the Joint Parliamentary Committee, might prove to be a game changer in building a robust data storage & processing system. For the time being, India could subscribe to Global Data Protection Regulation (GDPR) to strike a balance between consumer woes and commercial interests, until a germane data protection framework for fintech is enacted.

Disclaimer: The author is a legal professional. Views expressed are personal and not necessarily that of Financial Express Online

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SBI Platinum Deposits Vs HDFC Green Deposits: Interest Rates & Benefits Compared

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SBI Platinum Deposits

SBI Platinum Deposits was introduced last month to celebrate the 75th anniversary of India’s independence, and the term of this unique plan is capped between 15.08.2021 and 14.09.2021, which means the deal will expire tomorrow. Domestic Retail Term Deposits including NRE and NRO Term Deposits of less than Rs 2 crore, New and Renewal Deposits, Term Deposit and Special Term Deposit products, NRE Deposits for a period of 525 Days and 2250 Days only are the eligible deposits under the scheme according to SBI.

Products such as Recurring Deposits, Tax Savings Deposits, Annuity Deposits, MACAD Deposits, Multi Option Deposits (MODs), Capital Gains Scheme, NRE, and NRO Deposits of Staff and Senior Citizens are not eligible under SBI Platinum Deposits. SBI Platinum Deposits can be made for a period of Platinum 75 Days, Platinum 525 Days or Platinum 2250 Days where the payment of interest will be made at monthly/ quarterly under term deposits and on maturity under Special Term Deposits of SBI.

As applicable for Term / Special Term Deposits of SBI, premature withdrawals are also allowed under SBI Platinum Deposits. The scheme is available across all the channels of SBI such as bank branch, Internet Banking and YONO.

SBI Platinum Deposit Interest Rates

SBI Platinum Deposit Interest Rates

Senior Citizens and SBI Pensioners will continue to receive the same benefits of the SBI WECARE Scheme under the SBI Platinum Deposits for a period of 5 years and above, with no extra benefit under the Platinum Deposits. Interest rates of SBI Platinum Deposits for both regular and senior citizens are as follows.

Tenor ROI For Public ROI for Senior Citizens
Existing Proposed Existing Proposed
Platinum 75 days 3.90% 3.95% 4.40% 4.45%
Platinum 525 days 5.00% 5.10% 5.50% 5.60%
Platinum 2250 days 5.40% 5.55% ROI applicable under SBI WECARE Scheme (6.20%)
Source: SBI

HDFC Green & Sustainable Deposits

HDFC Green & Sustainable Deposits

HDFC Ltd. launched Green & Sustainable Deposits last month, a scheme that promotes the United Nations’ Sustainable Development Goals (SDGs). “Green and Sustainable Deposits will help enhance HDFC’s participation in projects directly supporting United Nations’ SDGs and empower our depositors to opt for financial products that have a positive impact on the environment, and the society at large,” HDFC Ltd. has mentioned on its website. Any resident or non-resident Indian citizen can make deposits for a period of 36 to 120 months under this special scheme.

Regular customers would receive a 6.55 percent annual interest rate on deposits of less than Rs 2 crore, whereas elderly people over 60 years will receive an additional 0.25 percent annual interest rate on their deposits. Interest is compounded yearly under the scheme for the cumulative option.

Individual deposits up to Rs 50 lakh per calendar month made or renewed by a customer using the online platform of the company, as well as auto-renewed deposits, will fetch you an additional interest rate of 0.10 percent p.a.

As a matter of concern let me remind you that HDFC Ltd. has received AAA ratings from both CRISIL and ICRA for 27 consecutive years which simply indicates the security of your deposits apart from attractive interest rates.

HDFC Green Deposits Interest Rates

HDFC Green Deposits Interest Rates

With effect from 17th August 2021, interest rates on Green Deposits of HDFC Ltd. are in force which is as follows.

Period of Deposit Monthly Quarterly Half-yearly Annual Cumulative Interest Rate
33 Months 5.90% 5.95% 6.00% 6.10% 6.10%
66 Months 6.30% 6.35% 6.40% 6.50% 6.50%
99 Months 6.35% 6.40% 6.45% 6.55% 6.55%
Source: HDFC LTD.



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Sensex, Nifty end lower today; banks, financials fall, ICICI Bank, SBI Life among top laggards, BFSI News, ET BFSI

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Domestic equity indices ended in the red on Monday, with BSE Sensex down 0.2% at 58,177 points and Nifty 50 down 0.08% at 17,355. Mid and smallcap stocks outperformed the market today, with BSE Midcap index closing 0.32% higher and the smallcap index ending with a gain of 0.80%.

Nifty Media, Nifty Metal and Nifty Realty were among the other indices rose today. The remaining sectoral indices fell, which includes Nifty Bank Index and Nifty Financial Services down 0.58% and 0.19%, respectively.

ICICI Bank, HDFC Bank and SBI Life Insurance were the top laggards among Sensex stocks. While Kotak Mahindra Bank, Bajaj Finserv, Chola Invest and Power Finance emerged were among the top gainers in the index.

Stock Talk

SBI Life Insurance Company:

Canada Pension Plan Investment Board has offloaded 2.3 crore equity shares in SBI Life at Rs 1,171.07 per equity share, while BNP Paribas Arbitrage bough 96,35,692 equity shares at Rs 1,171 per share on BSE, the bulk deals data showed.

Punjab National Bank:

The board has approved raising Rs 6,000 crore through issue of Basel III additional Tier-1 (AT-1) bonds or Tier II bonds or combination of both in one or more tranches.

Indiabulls Housing Finance:

The company has received approval from the Competition Commission of India to divest its mutual fund business and sell it to Groww for Rs 175 crore

Other key takeaways

SREI’s Rs 35,000-crore loan may be classified as NPA

Banks may classify Rs 35,000 crore loan given to SREI group as Non Performing Asset (NPA) by the end of this quarter after the National Company Law Tribunal (NCLT) set aside the previous order restraining banks from such classification.

According to analysts’ estimates, Indian Bank and Canara Bank have exposures of ₹2,000 crore and ₹1,200 crore, respectively, to Srei group, while ICICI Bank and Axis Bank have ₹800 crore each.

India’s inclusion in global bond index to attract $170-250 bln inflows

India could be included in the global bond index early 2022, which can attract $170-250 billion in bond inflows in the next decade, said Morgan Stanley in a recent note.

Investors have been staying away from the Indian bond market for the past few years, given the widening fiscal deficit, above-target inflation and gradual weakening currency. However, recent macroeconomic stability could change early next year, according to analysts at Morgan Stanley.

US Markets

Wall Street ended sharply lower on Friday as investors weighed signs of higher inflation. Shares of Apple Inc tumbled following an unfavorable court ruling related to its app store.

The Dow Jones Industrial Average index fell 0.78% to close at 34,607.72 points, while the S&P 500 lost 0.77% and closed at 4,458.58. The Nasdaq Composite dropped 0.87% to 15,115.49.

Gold prices subdued as firm dollar dims safe-haven appeal

Gold prices were subdued on Monday as the dollar held firm, while cautious investors awaited readings on U.S. consumer prices due this week that could be crucial to the Federal Reserve’s decision on when to exit its super-supportive policy. Spot gold was flat at $1,787.40 per ounce after having recorded a weekly decline of 2.1%.

Market Outlook for the week ahead

-Nifty has been in a narrow range for the last 5 days and any breakout above 17,450, with above average volumes, may take Nifty to 17,550 levels. According to experts, Traders are advised to book profits if Nifty gives a daily close below 17,250 level.

-The market is expected to turn stock specific, and the Nifty will undergo a healthy consolidation this week, making it prudent to stick to the buy on decline strategy to accumulate quality stocks.

-As Nifty is not expected to breach 16900 in its consolidation phase, dips towards psychological level of 17000 would offer incremental buying opportunity in this week

– Bank Nifty is expected to form a higher base above the upper band of the recent range breakout area (36200). Experts stick with a positive stance with Bank Nifty gradually heading towards 37700 levels in September. Any breather in the coming week would offer an incremental buying opportunity in quality banking stocks.



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Gold Rates In India Fell By A Tad, On September 13

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Personal Finance

oi-Kuntala Sarkar

|

In line with the last week’s declining trend, at the starting of this trading week, gold prices in India dropped again marginally. Today, on September 13, the 22 carat gold rate is quoted at Rs. 46,010, whilst the 24 carat gold is quoted at Rs. 47,010 per 10 grams. In the international spot gold market the prices increased by only a 0.14% at $1790.30/oz, till 3.27 PM IST. The Comex gold rate dropped marginally by a 0.04% at $1791.3, and the MCX gold in October future in Mumbai was up by 0.12% as of 3.32 PM IST, today. However, the US dollar index, on the international spot market, was up by 0.13%, driving the gold rates down by a tad as gold is a dollar-dominated asset class. In India, Indian Bullion Jewellers Association (IBJA) determines the gold rates, depending on the current market trend.

Gold Rates In India Fell By A Tad, On September 13

Gold rates in different Indian cities are quoted differently, daily. Today’s gold rates in major Indian cities follow:

City 22 carat (INR/10 Grams) 24 carat (INR/10 Grams)
Mumbai 46,010/- 47,010/-
Delhi 46,140/- 50,340/-
Bangalore 43,990/- 47,990/-
Hyderabad 43,990/- 47,990/-
Chennai 44,390/- 48,390/-
Kerala 43,990/- 47,990/-
Kolkata 46,550/- 49,250/-

The present gold market is quite a volatile one, the investors are not completely sure about where to take the shelter. Gold rates have been mostly down in the last week, and at the start of this trading week, although the US economic condition did not show robust growth. Mixed anticipation regarding the US Fed tapering is not allowing investors to be very sure about the future.

On the other hand, some economists are also skeptical about the yellow metal and asking buyers to focus more on equities and hard assets, when the markets of these are climbing high. Gold is now quoted below $1,800 in the global markets and the rates are not expected to reach 2020’s levels very soon. Hence, some investors are being doubtful.

Story first published: Monday, September 13, 2021, 16:37 [IST]



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Private Life Insurance Companies Reported Robust Growth In Premium

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Insurance

oi-Kuntala Sarkar

|

Private life insurance companies have reported a growth in individual Annualised Premium Equivalent (APE) over the last few months. The figures went up to 39% in August (y-o-y), 31% in July (y-o-y), and 16% in June (y-o-y) on a low base of 6% fall in August 2020 (y-o-y), and 7% fall both in July 2020 (y-o-y), and June 2020. Hence, the low base effect and month-on-month (m-o-m) improvement trend has aided this growth. On the other hand 2-years individual APE CAGR increased to 14% in August, this year from 10% in July 2021, and 4% in June 2021. However, the group APE fell by 1% in August, this year (y-o-y), for the private players.

Private Life Insurance Companies Reported Robust Growth In Premium

Here are the growth rates of some major players, operating in the segment. HDFC Life reported a 17% (y-o-y) growth in the overall APE was driven by a robust 27% (y-o-y) growth in the individual APE, although the group APE was down 32% (y-o-y). The 2-years individual APE CAGR at 20% was higher than the average of private peers at 14%. ICICI Prudential Life reported a 36% (y-o-y) growth in the overall APE, driven by a 34% (y-o-y) growth in the individual APE and 59% (y-o-y) growth in group APE. Max Life, however, reported a subdued growth than other private players; the company reported a 9% (y-o-y) growth in the individual APE. The company experienced a 10% growth in 2-year individual for August, and a 6% for July, which is lower than the average for private peers at 14% and 10% boom, respectively.

Unit-linked insurance plans (Ulips) – the insurance policies that offer ‘the potential of wealth creation while providing the security of a Life Cover’ got robust capital markets supporting revival. Additionally, growth in non-par savings and annuity segments are the key factors behind this growth in the premium of these private players.

On the other hand, LIC, the biggest public life insurer in India has recorded a 5% in August 2021 (y-o-y) in the overall individual APE segment, which was down by 4% in July (y-o-y) and up by 1% in June (y-o-y). In the case of the private players, the base was quite lower, but LIC has a higher base, recorded in the last year. According to reports, 2-years individual APE CAGR was down by 2%, while it was down by 14% for private peers. For LIC, 18% (y-o-y) growth in group APE led to a subdued 2% (y-o-y) growth in the overall APE. However, the growth in the life insurance premium segment is indicating that the economy is gaining a modest momentum, showing an increasing trend of income generation.

Story first published: Monday, September 13, 2021, 16:30 [IST]



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SBI Platinum Deposit Offer To End Tomorrow: Latest Rates & Benefits Here

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SBI Platinum Deposits

The deposit period of the scheme comes in three types i.e. Platinum 75 Days Platinum 525 Days Platinum 2250 Days. Domestic Retail Term Deposits including NRE and NRO Term Deposits (

SBI Platinum Deposits Interest Rates

SBI Platinum Deposits Interest Rates

All other terms and conditions, including interest rates, remain unaffected for all other tenors of Domestic Retail Term Deposits (below Rs. 2 crores) and NRE and NRO Term Deposits. According to SBI, senior citizens and SBI pensioners would continue to receive benefits under the SBI WECARE Scheme for a period of 5 years and above, with no additional rate benefit under Platinum Deposits. Following interest rates of SBI Platinum Deposits are as follows for the regular public and senior citizens.

Tenor ROI For Public ROI for Senior Citizens
Existing Proposed Existing Proposed
Platinum 75 days 3.90% 3.95% 4.40% 4.45%
Platinum 525 days 5.00% 5.10% 5.50% 5.60%
Platinum 2250 days 5.40% 5.55% ROI applicable under SBI WECARE Scheme (6.20%)
Source: SBI

SBI Fixed Deposit Interest Rates For Regular & Senior Citizens

SBI Fixed Deposit Interest Rates For Regular & Senior Citizens

With effect from 08.01.2021, SBI fixed deposit interest rates are in force. For a deposit amount of less than Rs 2 Cr the most recent rates are as follows:

Tenors For Public (in % p.a.) For Senior Citizens (in % p.a.)
7 days to 45 days 2.9 3.4
46 days to 179 days 3.9 4.4
180 days to 210 days 4.4 4.9
211 days to less than 1 year 4.4 4.9
1 year to less than 2 year 5 5.5
2 years to less than 3 years 5.1 5.6
3 years to less than 5 years 5.3 5.8
5 years and up to 10 years 5.4 6.2
Source: Bank Website



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Everything you want to know about Bitcoin mining, BFSI News, ET BFSI

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Currency or money, the central instrument in trade – local, national or global – always came in physical form. While their transmission with the advent of technology has gone digital, they continue to be rooted in the diktats of the respective central banks that issue them. The advent of cryptocurrency in 2009 has given the global economy digital currency that is not regulated by any central bank or a single administrator.

Unlike regular currency that is printed, cryptocurrencies including Bitcoins are ‘mined’. This ‘mining’, unlike the normal activity associated with the term, is more of an intellectual pursuit than a physical one. The only similarity to real-world mining is that the more Bitcoins you mine, their supply dwindles (only 21 million bitcoins can be mined) and the more precious they become. And this bitcoin mining requires some serious hardware.

Bitcoin mining in other words is a process where one adds transaction records to the crypto’s public ledger or blockchain, which has past transactions. It is a decentralized computational process. The term blockchain comes from the chain of blocks that this ledger of earlier transactions contains. This chain is a confirmation to the rest of those networked to it that a particular transaction has taken place.

Bitcoin nodes use the chains to help differentiate an attempt to re-spend coins that have been used somewhere else already with a legitimate transaction.

Blockchain prioritizes fraud prevention. The mining process ensures any transaction is added to the blockchain only after validation and helps prevent fake or fraudulent transactions. Due to steady growth in the number of miners and the increasing complexity of calculations, mining is no longer seen as just a means to make money. It has become a competition as only the first person to solve a block on the network receives cryptocurrency as a reward.

The entire mining process has deliberately been designed to be resource-intensive. This level of difficulty in arriving at the number of blocks that are found each day ensures miners are at a steady level. With proof of work a must to be considered valid, each block must have such proof. Other Bitcoin nodes verify the proof of work when they receive a block and use the hashcash proof-of-work function.

The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. While mining allows the introduction of Bitcoins into the system, those involved in it receive transaction fees as well as a ‘subsidy’ of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner and also motivates people to provide security for the system and prevents hacking.

The average time taken to mine a new bitcoin is 10 minutes, but it also depends on the kind of mining power that one possesses. Given this challenge, competition among bitcoin miners is also intense. If this mining power is say five or ten ASICs (application-specific integrated circuit), a person might be able to mine 0.01 Bitcoin a day and would require 100 days to have mined a full Bitcoin. It is this level of difficulty that spurs each miner to give it his or her best in the process.

While mining Bitcoins is definitely time and resource-intensive, trading in them is simple and secure, thanks to ZebPay. ZebPay lets you buy and sell cryptocurrencies, including Bitcoin, instantly and in a hassle-free manner.

For the latest crypto news, investment tips and real-time price updates, follow our Cryptocurrency page.

Disclaimer: The above content is non-editorial, and TIL hereby disclaims any and all warranties, expressed or implied, relating to the same. TIL does not guarantee, vouch for or necessarily endorse any of the above content, nor is it responsible for them in any manner whatsoever. The article does not constitute investment advice. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified.



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China to target biggest payment app Alipay in tech crackdown, BFSI News, ET BFSI

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Beijing: Chinese regulators have ordered sweeping changes to the country’s biggest payment app Alipay, as the ruling Communist Party attempts to rein in “the unruly growth” of the tech giants.

Alipay—with more than one billion users in China and other Asian nations including India—was told to spin off its profitable micro loan business, the Financial Times reported Monday, citing a person with knowledge of the matter.

Currently, the app allows users to pay with a traditional credit card linked to their bank or offers small unsecured loans to buy anything from toilet paper to laptops.

“The government believes big tech’s monopoly power comes from their control of data,” the source close to financial regulators told the newspaper. “It wants to end that.”

Alipay’s parent company Ant Group is China’s biggest payments services provider.

Regulators pulled the plug on the fintech conglomerate’s record $37 billion stock market launch in November after founder Jack Ma criticised officials for stifling innovation.

Ma’s business empire has been targeted in a wider crackdown on tech firms aimed at breaking monopolies and strengthening data security, which has wiped billions off companies’ valuations.

The outspoken billionaire has largely remained out of the limelight since the crackdown began.

After separating its payment and loan businesses Alipay will have to hand over customer data used to make its lending decisions to a new credit scoring joint-venture that is partly state-owned, two sources familiar with the arrangement told the Financial Times.

Alipay did not immediately respond to AFP’s questions on how the order would affect its business.

Regulators have also asked Ma’s e-commerce platform Alibaba and other internet firms to stop blocking links to rival services, Zhao Zhiguo, a spokesman for the ministry of industry and information technology, said at a briefing on Monday.

China’s market regulator last month announced rules to bring down so-called “walled gardens” built by tech companies that aim to lock users into their services.

“It is unreasonable to restrict.. access of website links, which not only affects the user experience but also damages rights and interests of users and disrupts the market order,” Zhao said.

“Users have responded strongly against this.”



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7 Stocks Available On A Bonus Basis, Should You Buy These Stocks?

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List of companies whose stocks are available on cum bonus basis

Name of Company Ex-Bonus Date Record Date
Sportking India Sept 23 Sept 24
GEE Ltd Sept 21 Sept 22
TPL Plastech Sept 16 Sept 18
APL Apollo Sept 16 Sept 18
Kanpur Plast Sept 15 Sept 16
Apollo Tricoat Sept 16 Sept 18
ACE Integrated Oct 7 Oct 8

Bonus shares does not mean you should buy the stocks

Bonus shares does not mean you should buy the stocks

Bonus shares does not make the stock an automatic buy. The stock is likely to fall proportionately once the stock goes ex-bonus. For example, if company A has declared a bonus of 1:1 and the stock is quoting at Rs 100, the stock is likely to fall to Rs 50 once it goes ex-bonus. Having said that it may not fall by the exact amount, but, more or less it does.

Also, it is extremely important to remember that you need to analyze the fundamentals of a company before you invest. For example, do not invest purely on the basis of bonus issue. In the above, what we are highlighting is the fact that the above companies are purely available on a bonus basis and we are not in any way recommending these stocks.

Markets look expensive

Markets look expensive

Irrespective of the bonus shares, we are telling investors to book profits and not to buy shares, including any of the above, purely because the markets are over valued. The Nifty and the Sensex have just zoomed in the last 2-months powered by massive liquidity flowing into domestic institutions, particularly mutual funds. Fundamentally things look expensive at the moment. According to a recent report by broking firm Motilal Oswal, the Sensex is looking expensive compared to long term averages. The Nifty moved from 16,000 points to 17,000 points within 19 trading days, one of the fastest 1000 point milestone in its journey. HDFC Bank, RIL, and TCS contributed 50% of the 1000 points move from 16,000 to 17,000 points.

Market cap to GDP ratio at highest since 2007

Market cap to GDP ratio at highest since 2007

According to India Strategy Report by Motilal Oswal Financial Services the Mcap-to-GDP ratio at 111%, is the highest since 2007. Nifty is currently trading at premium to LPA on P/E and P/B basis. IT and Consumer valuations are at 15-year highs.

According to the India Strategy Report report, the Nifty 12-month forward P/E of 21.8 times is at a premium of 21% v/s its long term average, of 18.0 times. At 3.3 times, 12-month forward P/B for the Nifty is at a 15% premium to its historical average of 2.6 times. We are advising investors to be careful and not jump onto the bandwagon.

Disclaimer

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. We suggest that you consult a professional advisor. The article merely lists out companies that are offering bonus shares and should not be construed as a buy.



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