No point in tinkering with interest rates

 

 

How important is the credit policy? That depends on how important you think the level of interest rates is for India’s economic growth. According to a recent paper by International Monetary Fund economists Rahul Anand and Volodymyr Tulin, titled Disentangling India’s Investment Slowdown, it doesn’t count for much.

The economists find that 1) interest rates, both nominal and real, are negatively related to investment growth; 2) real interest rates are more important for investment activity than nominal rates; 3) other things being equal, a one percentage point rise in the real interest rate has a two percentage point cumulative impact on the investment rate over the next four quarters; and 4) the most significant finding that real interest rates account for only a quarter of the investment slowdown.

A surprising result is that of a positive correlation between real interest rates and new investment—the authors explain it by suggesting that higher interest rates, after controlling for business confidence and policy uncertainty, may be associated with higher expected returns from investment as well as higher demand for investment funding. They conclude that while the level of real interest rates matters for investments already in the pipeline, it is not a deterrent to new investment.

If the level of real interest rates explains only a quarter of the investment slowdown, what factors account for the other three-quarters? The authors point to two of them—low business confidence and policy uncertainty, while they also mention supply bottlenecks.

To be sure, lowering nominal interest rates will certainly provide relief to firms that are neck deep in debt. But the crux of the problem, as the paper points out, is that in the absence of structural changes in the economy, any lowering of interest rates will lead to a revival of demand that will soon come up against supply bottlenecks, stoking inflation.

What should the Reserve Bank of India (RBI) do on Tuesday? The latest number for retail inflation has come down to 8.1%, but core CPI (Consumer Price Index) inflation is sticky at a high 7.9%, indicating that any pickup in growth could lead to a revival of inflation.

With the repo rate at 8%, the real policy rate is still slightly negative. It would be much more negative if we take inflationary expectations into account, rather than current inflation. It remains to be seen whether the fall in food prices was seasonal. All these factors signal caution.

As the paper cited above argues, what really matters for investment is the removal of policy uncertainty. That can only happen if we have a business-friendly government after the elections. Lowering interest rates before that would be pointless and can only fan inflationary expectations.

 

LOVE GUPTA

PGDM 2nd SEM

Have an equity-oriented portfolio for long-term goals

 

I want to start investing in mutual funds (MFs) through systematic investment plans (SIPs). I am 30 years old and can invest Rs.50,000 per month. I have a long-term view and moderate risk capacity. 

 

—Rakesh K. Karn

As a young person with many years of earning, saving, and investing to look forward to, you are in a great position to have a well-planned financial future. The sum that you are planning to invest on a monthly basis is a significant amount, and you could create more than one portfolio with it.

 

The way to do it would be to look ahead in your life and identify the situations when you are likely to require significant amounts of money. Retirement, although a couple of decades away, is always something to save for, and the earlier you start doing it, the better. 

 

If you have or plan to have children, saving for their future expenses should be considered as financial goals. If you have medium-term goals, such as buying a house, they should be factored in as well.

Once you have such a list of known goals, then you should create specific portfolios that are geared towards achieving each one. 

 

The constituents of each such portfolio (the actual MF schemes) would be determined by the number of years you have to reach them.

 

The further the goal, the more equity-oriented the portfolio would be, with the rest of the allocation going to debt, or as you see fit, and in gold.

 

For example, you could structure your monthly investment of Rs.50,000 into four different portfolios. One for retirement, a very long-term portfolio with 80-90% of the allocation to equity funds. Two portfolios each for education needs in, say, 12 years, that would have significant equity allocation but also some debt and gold allocations (totalling about 30%, for example). The last portfolio could be a medium-term portfolio that would address an expenditure that is three to five years away and which would be light on equity and heavy on debt investments. 

 

You can choose the actual schemes to invest in such portfolios from the schemes in Mint50 list, Mint’s chosen set of 50 MF schemes .

 

This would be the proper way to approach your investment choices. If you find the process difficult to understand and/or execute, you should consider consulting with a financial planner who can structure your portfolios in a way that best suits your financial needs.

 

Ishwar

PGDM,1st Year

Source:-Mint

Bharti Telecom buys Airtel shares for Rs.172 crore, hikes stake

Bharti Telecom stake in Bharti Airtel has been now been raised to 43.72%, the company said in a BSE filing 

 

Bharti Telecom bought 13.04 lakh shares for Rs38.18 crore at NSE and 54,000 shares for Rs1.58 crore at BSE on 25 March, thus raising the stake marginally from 43.57% to 43.61%, the filing said. Photo: Mint

New Delhi: Country’s largest telecom operator Bharti Airtel on Friday said one of its promoter group entity Bharti Telecom has bought 57.14 lakh shares of the company for Rs171.92 crore through various market transactions.

Bharti Telecom stake in the company has been now been raised to 43.72%, the company said in a BSE filing.

Bharti Telecom bought 13.04 lakh shares for Rs38.18 crore at NSE and 54,000 shares for Rs1.58 crore at BSE on 25 March, thus raising the stake marginally from 43.57% to 43.61%, the filing said.

Additionally Bharti Telecom purchased 22.71 lakh shares for Rs67.53 crore at NSE and 1.34 lakh shares for Rs3.99 crore at BSE on 26 March, which led its stake to increase to 43.67%.

Besides on 27 March, the promoter group entity bought 17.50 lakh scrips for Rs54.41 crore at NSE and 2 lakh shares for Rs6.2 crore at BSE, further raising the stake to 43.72%, it added.

As on quarter ended December 2013, Bharti Telecom held 43.57% stake in the company. The promoter group had 65.23% in the company at the same period.

Shares of Bharti Airtel on Friday closed at Rs316.55 apiece, up 1.88% on the BSE. 

 

NITESH KUMAR SIONGH

PGDM 2ND

SOURCE-- MINTLIVE NEWS

Have an equity-oriented portfolio for long-term goals

 

 

As a young person with many years of earning, saving, and investing to look forward to, you are in a great position to have a well-planned financial future. The sum that you are planning to invest on a monthly basis is a significant amount, and you could create more than one portfolio with it.

 

The way to do it would be to look ahead in your life and identify the situations when you are likely to require significant amounts of money. Retirement, although a couple of decades away, is always something to save for, and the earlier you start doing it, the better. 

 

If you have or plan to have children, saving for their future expenses should be considered as financial goals. If you have medium-term goals, such as buying a house, they should be factored in as well.

Once you have such a list of known goals, then you should create specific portfolios that are geared towards achieving each one. 

 

 

The constituents of each such portfolio (the actual MF schemes) would be determined by the number of years you have to reach them.

The further the goal, the more equity-oriented the portfolio would be, with the rest of the allocation going to debt, or as you see fit, and in gold.

 

For example, you could structure your monthly investment of Rs.50,000 into four different portfolios. One for retirement, a very long-term portfolio with 80-90% of the allocation to equity funds. Two portfolios each for education needs in, say, 12 years, that would have significant equity allocation but also some debt and gold allocations (totalling about 30%, for example). The last portfolio could be a medium-term portfolio that would address an expenditure that is three to five years away and which would be light on equity and heavy on debt investments. 

 

You can choose the actual schemes to invest in such portfolios from the schemes in Mint50 list, Mint’s chosen set of 50 MF schemes .

This would be the proper way to approach your investment choices. If you find the process difficult to understand and/or execute, you should consider consulting with a financial planner who can structure your portfolios in a way that best suits your financial needs.

 

md.aquil alam 

2nd semester pgdm

source. live mint

 

Asian stocks edge higher on growing hopes of China stimulus

TOKYO (Reuters) - Asian stocks were up slightly in a cautious start to the week on Monday, with investors holding out hopes that China would take steps to stimulate its economy.

MSCI's broadest index of Asia-Pacific shares outside Japan tacked on 0.3 percent after rising to a three-week high on Friday on heightened speculation Beijing will launch new spending measures and on reduced tensions in Ukraine.

Tokyo's Nikkei stock average (NIK:^9452) rose 0.4 percent.

China's Premier Li Keqiang on Friday sought to reassure jittery global investors that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.

China stimulus hopes were unable to shore up all equity markets in Asia, however, with South Korea's KOSPI (.KS11) trading nearly flat.

"It's difficult for the market to solely move on talks about stimulus with no concrete plan to back them up," said Kim Yong-goo, an analyst at Samsung Securities in Seoul.

The euro lingered near a one-month low hit against the dollar on Friday after an unexpected drop in Spanish and German inflation bolstered expectations the European Central Bank could further ease monetary policy as early as Thursday.

"It all depends on whether the ECB views the recent slowdown as a temporary pullback or a deeper problem. Given the abundance of policymakers talking about the possibility of negative rates, we believe they are growing more concerned about growth and inflation," Kathy Lien, managing director at BK Asset Management in New York, wrote in a note to clients.

The euro was already under pressure after suggestions of more ECB action last week from Germany - whose policymakers have in the past repeatedly voiced concerns about unorthodox monetary easing.

The focus now turns to euro zone inflation figures due later in the global session in light of Friday's weak Spanish and German inflation data.

The euro was little changed at $1.3752 after hitting a one-month low of $1.3704 on Friday.

YELLEN, U.S. DATA EYED

The dollar drew support from a rise in U.S. Treasury yields amid hopes that the Federal Reserve will taper its massive monetary easing and pave the way for an eventual rate hike.

Yields of intermediate-dated Treasury notes neared two-month highs on Friday. The sustained pressure on yields follows comments from Federal Reserve Chair Janet Yellen earlier this month that raised the possibility of rate hikes starting as early as the spring of 2015.

Yellen will speak in Chicago later in the session and the focus is on whether she maintains her stance on rates, which the market has interpreted as hawkish.

Investors will also have a chance to begin gauging whether the frigid winter was really the key cause behind the string of soft U.S. data seen earlier this year, with the March Chicago PMI due later in the session.

The dollar was nearly flat at 102.83 yen, hovering below a two-week peak of 102.98 reached on Friday.

In the commodities markets, gold remained under pressure amid an improvement in risk appetite following upbeat U.S. consumer spending data that brightened prospects for the economy.

Spot gold traded at $1,295.61 an ounce, near a six-week low of $1,285.34 hit on Friday.

Prospects for Chinese stimulus lifted copper, but the metal was still on track to close March with its biggest monthly fall since June as the world's second-largest economy is still expected to face a slow first quarter. (MET/L)

Three-month copper on the London Metal Exchange briefly touched a three-week high of $6,680.00 a tonne, but prices are still on track to close the month down about 5 percent.

Simmering tensions between Russia and the West and disruptions to African oil supplies helped U.S. crude trade near a three-week high. (O/R)

U.S. crude for May delivery edged down 22 cents to $101.45 a barrel after settling on Friday at its highest since March 7.

(Additional reporting by Jungmin Jang in Seoul; Editing by Shri Navaratnam)

Pradeep Shukla

PGDM2 SEM

Sensex, Nifty on record-hitting spree; banks rally

 

Mumbai: The Sensex and Nifty hit a record high for a sixth straight session on Monday on the back of strong inflows from foreign institutional investors and supportive cues from Asian stock markets.

 

In the morning trade, the Sensex touched an all-time high of 22,467.21, up 0.57% or 127.24 points. Nifty, too, hit a lifetime high of 6,730.05, up 0.51%, or 34.15 points.

 

 

The gainers included NTPC Ltd that jumped 1.9% to Rs.123.15 and State Bank of India (SBI) that rose 1.52% to Rs.1,931.20.

 

Among the losers, Wipro Ltd shares lost 0.43% to Rs.549.15, while Tata Consultancy Services Ltd (TCS) fell 0.34% to Rs.2,098.4.

 

The BSE power index was the top sectoral gainer, up 1.31%. The oil and gas index and the metal index were up 0.9% and 0.86%, respectively. The IT index was top loser on BSE, down 0.47%.

 

State-run banks extended recent gains after the Reserve Bank of India (RBI) on Thursday extended the deadline for banks to implement Basel III capital rules by a year to 31 March 2019, due to concerns from the industry on potential stress to asset quality.

 

 

Bank of India rose 7.73%, Canara Bank jumped 6.55%, Punjab National Bank (PNB) soared 6.42%, Bank of Baroda was up 5.14%, Yes Bank Ltd rose 3.54%, Federal Bank of India Ltd jumped 2.45% and Axis Bank Ltd rose 2.24%.

 

Suzlon Energy Ltd was trading at Rs.11.35 on BSE, up 15%, after media reported that the company is planning to raise Rs.10,000 crore via share sale in Senvion unit.

 

GMR Infrastructure Ltd was trading at Rs.22.30 on BSE, up 3% from its previous close, after it reported that it had filed a draft red hearing prospectus with the Securities and Exchange Board of India (Sebi) for initial public offering (IPO) of its unit GMR Energy Ltd.

 

Since the beginning of this year, BSE Sensex has gained 6.04%, while foreign institutional investors have bought $3.61 billion during the period from local equity markets.

 

Investors says RBI is likely to keep interest rate unchanged in the annual monetary policy on 1 April as the retail inflation is yet to show definite signs of moderation.

 

US markets ended higher on Friday after a report showed consumer spending rose 0.3% from a month earlier in February. All eyes are on the US employment report for March due this week which is expected to show an improvement. The S&P 500 gained 0.5%, Nasdaq Composite was up 0.1% and Dow Jones Industrial Average gained 0.4%.

 

Asian markets were trading higher on Monday cheering data released on Friday that gave hopes of a recovery in US consumer spending. Japan’s Nikkei Stock Average was up 0.43%, while Hong Kong’s Hang Seng marginally up 0.07% and China’s Shanghai Composite was marginally down 0.02%.

 

At 9.28am, the Sensex was trading higher by 0.39%, or 87.50 points, at 22,427.47, while the Nifty was trading up 0.35%, or 23.65 points, at 6,6719.55 points.

Rahul kumar Gupta

PGDM,1st Year

source:-Mint

BSE Sensex, Nifty hit new lifetime high on foreign inflows

 

the BSE Sensex continued its record-setting spree, hitting a new lifetime high in opening trade on strong rally in power, oil & gas, auto, banking and PSU stocks, driven by sustained capital inflows.

Brokers said sustained capital inflows by foreign funds at the domestic bourses and widespread buying by retail investors on expectations that the Reserve Bank of India will keep interest rates on hold in its policy review on Tuesday, helped the key indices to continue their record-setting spree.
Further, a firming trend in other Asian markets also buoyed the trading sentiments here, they said.
The 30-share index of the Bombay Stock Exchange rose by 124.89 points, or 0.55 per cent, to trade at an all-time high of 22,464.86, surpassing its previous intra-day record high of 22,363.97 reached on March 28.
The 50-share NSE Nifty too scaled a new high of 6,728.85 by surging 32.95 points, or 0.49 per cent.
Sectorally, the BSE power sector index gained the most, rising 1.25 per cent, followed by Oil and Gas index (0.93 per cent), PSU index (0.81 per cent) and Auto index (0.73 per cent).
Among other Asian markets, Hong Kong's Hang Seng rose 0.81 per cent while Japan's Nikkei gained 0.98 per cent in early trade on Monday.


anand maurya
pgdm-2sem