Category: Personal Finance

What’s driving January’s rally?

• The Q3 results season has begun and most firms are expected to report better results than their previous quarters. Certain sectors like IT have rallied in anticipation of good results and higher revenue guidance.
• Foreign investors have been pouring money into Indian equities since November 2020. The over Rs 1 lakh crore flow into the market has pushed indices to new records. As per a Motilal Oswal report, FII (foreign institutional investor) inflows for the calendar year 2020 were strong at $23.4 billion, the highest since 2012.
• Improved macro factors like inflation levels (CPI or retail inflation reported at 4.59% in December) have raised hope for faster recovery from the economic damage caused by the pandemic.
• Vaccine roll-out in India as well as abroad has also improved the outlook of the economy.
• Global stock markets also hit record highs earlier this week as investors awaited details on the US stimulus.

Factors that could affect post-budget market sessions

FM Sitharaman has a challenging task at hand this year- presenting a post-GDP-contraction budget, wherein the objectives will range from boosting economic growth to creating employment while keeping a check on the fiscal deficit.

Announcements not in favour of equity investments could hurt market sentiment. For example, in July 2019, an increase in the income-tax surcharge for those with over Rs 2 crore income spooked the markets. While the higher surcharge was aimed at the ultra-rich, it spooked foreign portfolio investors (FPIs), especially those with non-corporate structures, causing them to pull out Rs 6,000 crore in 13 trading sessions following the Budget.

Therefore, the risk of withdrawal of foreign investment could cause some correction in the stock market, however, it is unlikely that a correction as sharp as that in March 2020 will repeat this year.

On the other hand, FM Sitharaman has said that this year’s budget will be “unlike anything in the past 100 years” causing anticipation of big announcements to support growth, which will be in favour of the market.

Like always, predicting the movement in the market is impossible.

Where should you invest ahead of the Budget 2021 presentation?

Amid December quarter earnings, Union Budget expectations and cues from the developed economy markets, the benchmark indices have been volatile this week.

An analyst at Kotak Securities quoted in a Financial Express report said that a correction in the Indian share market cannot be ruled out if Nifty and Sensex trade below 14,435 and 49,100, respectively. In that case, long term investors can look for opportunities to buy on correction.

Meanwhile, independent analyst Baliga told Business Standard that valuations are too expensive at the moment and that we may be in the bubble-zone. He goes on to advise investors to book profits and sit on cash as the current rally is being driven by liquidity and sentiments which appears to be disconnected from the reality.

Further, an analyst from HDFC Securities said that the current volatility may be used to review one’s asset allocation. For those invested heavily in equity can look at booking some profits to invest in bonds or gold if underinvested in these asset classes, for some time, and buy back into stocks after equity markets correct reasonably.

As for those looking for sectors to invest in anticipation of Budget announcements, an increased allocation is expected for the health sector, education sector, infrastructure, affordable housing, defence sectors. As for other picks for long-term investors, after the vaccination roll-out, hospitality and tourism-related stocks look attractively valued at the moment and could surge in 2021 in anticipation of a pick-up in pent-up demand among people working-from-home for close to a year.

What’s driving January’s rally?

• The Q3 results season has begun and most firms are expected to report better results than their previous quarters. Certain sectors like IT have rallied in anticipation of good results and higher revenue guidance.
• Foreign investors have been pouring money into Indian equities since November 2020. The over Rs 1 lakh crore flow into the market has pushed indices to new records. As per a Motilal Oswal report, FII (foreign institutional investor) inflows for the calendar year 2020 were strong at $23.4 billion, the highest since 2012.
• Improved macro factors like inflation levels (CPI or retail inflation reported at 4.59% in December) have raised hope for faster recovery from the economic damage caused by the pandemic.
• Vaccine roll-out in India as well as abroad has also improved the outlook of the economy.
• Global stock markets also hit record highs earlier this week as investors awaited details on the US stimulus.

Factors that could affect post-budget market sessions

FM Sitharaman has a challenging task at hand this year- presenting a post-GDP-contraction budget, wherein the objectives will range from boosting economic growth to creating employment while keeping a check on the fiscal deficit.

Announcements not in favour of equity investments could hurt market sentiment. For example, in July 2019, an increase in the income-tax surcharge for those with over Rs 2 crore income spooked the markets. While the higher surcharge was aimed at the ultra-rich, it spooked foreign portfolio investors (FPIs), especially those with non-corporate structures, causing them to pull out Rs 6,000 crore in 13 trading sessions following the Budget.

Therefore, the risk of withdrawal of foreign investment could cause some correction in the stock market, however, it is unlikely that a correction as sharp as that in March 2020 will repeat this year.

On the other hand, FM Sitharaman has said that this year’s budget will be “unlike anything in the past 100 years” causing anticipation of big announcements to support growth, which will be in favour of the market.

Like always, predicting the movement in the market is impossible.

Where should you invest ahead of the Budget 2021 presentation?

Amid December quarter earnings, Union Budget expectations and cues from the developed economy markets, the benchmark indices have been volatile this week.

An analyst at Kotak Securities quoted in a Financial Express report said that a correction in the Indian share market cannot be ruled out if Nifty and Sensex trade below 14,435 and 49,100, respectively. In that case, long term investors can look for opportunities to buy on correction.

Meanwhile, independent analyst Baliga told Business Standard that valuations are too expensive at the moment and that we may be in the bubble-zone. He goes on to advise investors to book profits and sit on cash as the current rally is being driven by liquidity and sentiments which appears to be disconnected from the reality.

Further, an analyst from HDFC Securities said that the current volatility may be used to review one’s asset allocation. For those invested heavily in equity can look at booking some profits to invest in bonds or gold if underinvested in these asset classes, for some time, and buy back into stocks after equity markets correct reasonably.

As for those looking for sectors to invest in anticipation of Budget announcements, an increased allocation is expected for the health sector, education sector, infrastructure, affordable housing, defence sectors. As for other picks for long-term investors, after the vaccination roll-out, hospitality and tourism-related stocks look attractively valued at the moment and could surge in 2021 in anticipation of a pick-up in pent-up demand among people working-from-home for close to a year.

In particular, savings bank accounts bear lower interest rates than those on FDs of banks or NBFCs. Compared to many private and small finance banks there are some Public sector banks that provide savings accounts at significantly cheaper interest rates. A savings account can also be used for parking the emergency funds and hence it is always important to check the interest rates before opting a savings account. Public sector banks, such as IDBI Bank and Canara Bank, presently offer interest rates on savings accounts of up to 3.5% respectively. In contrast with what leading private banks bid, these interest rates are attractive.

HDFC Bank and ICICI Bank, for example, provide 3 to 3.5 per cent interest, and Kotak Mahindra Bank offers 3.5 to 4 per cent interest. Large public sector banks, though, offer their savings account holders much lower interest rates. For example, only 2.70 per cent and 2.75 per cent are provided by the State Bank of India (SBI) and Bank of Baroda (BOB), respectively. Compared to public sector banks, the interest rates provided by small finance banks to their savings account holders are higher. AU Small Finance Bank and Ujjivan Small Finance Bank, for example, give up to 7 percent and 6.5 percent interest rates, respectively.

Interest Rates On Savings Accounts

Sr No	Banks	ROI per annum in %	Minimum balance limit
1	IDBI Bank	3.00 to 3.50	Rs 500 to Rs 5000
2	Canara Bank	2.90 to 3.20	Rs 500 to Rs 1000
3	Punjab & Sind Bank	3.10	Rs 500 to Rs 1000
4	Indian Overseas Bank	3.05	Rs 500 to Rs 1000
5	Union Bank	3.00	Rs 250 to Rs 1000
6	Punjab National Bank	3.00	Rs 500 to Rs 2000
7	Central Bank of India	2.75 to 3.00	Rs 500 to Rs 2000
8	Bank of India	2.90	Rs 500 to Rs 1000
9	Indian Bank	2.90	Rs 500 to Rs 2500
10	Bank of Baroda	2.75	Rs 500 to Rs 2000

Minimum balance limit

The minimum balance threshold for public sector banks’ savings accounts starts from Rs 250 and is zero at the State Bank of India. Opposed to the criteria of major private banks in India, this is maintained much lower because public sector banks are backed by the Government of India and are more involved in branching out with their services to lower and middle class citizens. The minimum balance threshold is Rs 2,500 to Rs 10,000 for Axis Bank and HDFC Bank. The minimum balance threshold in the case of ICICI Bank is Rs 1,000 to Rs 10,000.

Conclusion

The minimum balance criteria for a regular savings account is taken into consideration and excluding the basic savings bank deposit account here. Select a bank which has a solid reputation, strong customer practices, a large branch network and city-wide ATM services; then only a stronger interest in savings accounts will be a benefit.

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