Investment Valuation in India

India is in a rising interest rate environment. We have already seen the RBI raising interest rates five times since March 2010. Last week, in its policy review, the central bank left rates unchanged, merely reducing the SLR to 24% from 25%. However, this is certainly not the end of the story. With the inflation showing no signs of easing in the medium term, raising interest rates is one of the most important tools in the hands of the government/central bank. Rising interest rates are generally not taken well by the investors at large. Firstly because it directly hurts the pockets of the individuals. The interest rates are increased to suck money out of the system and to curb the inflation. As rates increase, banks pass on the increase in rates to its customers and consequently home loans become more expensive. People having loans have less disposable income as their monthly payments increase. Let's see how this impacts the businesses. Companies need funds to operate and ...

With just 10 working days for the year 2010 to complete, here is a small analysis of the sectors that have consistently outperformed the Sensex over the last 6 years. Average Yearly Return of the Sensex over from 2005 - 2010 = 29.0% [Max return in Yr 2009 - 77.3%] Sectors that have outperformed the Sensex in terms of Average Yearly Returns: Realty ........................ 98.6%  [Max return in Yr 2006 - 469.0%] (Realty Index introduced in 2006) Consumer Goods ..... 51.5%  [Max return in Yr 2007 - 114.8%] Metals ........................ 50.9%  [Max return in Yr 2009 - 220.4%] Consumer Durables .49.1%  [Max return in Yr 2005 - 110.6%] Auto ........................... 42.7%  [Max return in Yr 2009 - 200.5%] Power ........................ 35.8%  [Max return in Yr 2007 - 125.0%] Oil & Gas ................... 35.0%  [Max return in Yr 2007 - 112.8%] Banks ......................... 32.5%  [Max return in Yr 2009 - 81.0%] On a ...

Mutual Agreement Procedures (MAP) are a formalised set of rules (Treaties) between nations to resolve double taxation or violation of trade agreements between nations. Once a complaint is formlly filed with the host country's adjudicating body, it is evaluated to determine if the claim is legitimate under the existing laws. If the claim is considered legitimate and substantive, the authorities gather all facts of the case and prepare a position paper. The Defending nation responds with a position paper of its own. if the parties do not agree with each other's position paper, they enter into negotiations. Once negotiations are consluded, they are documented and signed by both to confirm the details. The complainant is notified of the decision and has the option of accepting or rejecting the same.   

A Aggregate RiskTotal amount of exposure a bank has with a customer for both spot and forward contracts. American Option An option which may be exercised at any valid business date through out the life of the option. Appreciation Describes a currency strengthening in response to market demand rather than by official action. Arbitrage A risk-free type of trading where the same instrument is bought and sold simultaneously in two different markets in order to cash in on the difference in these markets. Around Used in quoting forward "premium / discount". Ask Price Ask is the lowest price acceptable to the buyer. Asset In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal. At Best An instruction given to a dealer to buy or sell at the best rate that is currently avail...

Some of the common labor laws that needs to be complied with by manufacturing companies. LABOUR LAWS 1. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 2. Equal Remuneration Act, 1976 3. Employees State Insurance Act, 1948 4. Labour Laws (Exemption From Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988 5. The Industrial Employment (Standing Order) Act, 1946 read with The Industrial Employment (Standing Order) Central Rules 1946 6. The Employees Provident Funds and Miscellaneous Provisions Act, 1952 along with the Central Scheme, 1952 7. Payment of Bonus Act 8. The Contract Labour (Regulation & Abolition) Act, 1970 read with Bihar Contract Labour (Regulation & Abolition) Rules, 1972 9. The Minimum Wages Act, 1948 read with Jharkhand Minimum Wages Rules, 2001 10. Workmen’s Compensation Act, 1923, Workmen’s Compensation Rules, 2004 and Jharkhand Workmen’s Compensation Rules, 2001 11. ...

The Direct Tax Code (DTC) Bill, which will replace the existing Income-Tax Act, 1961, has been presented in the Parliament and will be enacted as a law if approved by both Houses, effective from 1-April-2012. TAX SLABS Income Exemption limits are as follows: For men: Upto Rs 2.0 lakh (Raised from Rs 1.6 Lakh) NIL* Between Rs 2.0 Lakh and Rs 5 Lakh: 10% (From Rs 1.6 - 5 Lakh) Between Rs 5.0 Lakh and Rs 10 Lakh: 20% (From Rs 5 – 8 lakh) Above Rs 10 Lakh: 30% (From Rs 8 lakh) *For women: Raised from Rs 1.9 lakh to Rs 2.0 lakh The minimum tax saving is Rs 4000 (Rs 1000 for women assessee) and the maximum tax saving is Rs 24000. Deductions Deductions under Sec 80C has been enhanced to Rs 1.5 lakh (From Rs 1.2 lakhs currently). However, the basket of investments has been modified for deduction under this clause. Investments include: a) Contribution to PPF b) Contribution to PF c) Contribution to superannuation fund d) Contribution for New Pension Scheme (NPS) Sum a – d) ...

This is an interesting article from Forbes... Excerpts: China has often underestimated its actual growth rate and, as a result, the degree by which its actual growth exceeded its potential growth in the past few years, as well as all the problems associated with overheating. Such underestimation often compromised the Chinese government’s efforts at timely and effective macro-control. Given the revised data, the Chinese economy experienced full-blown overheating – not the so-called “slight speeding” or “partial overheating” – right before the global financial crisis. Of course, double-digit inflation was absent this time because China had permanently switched from shortage economy to surplus economy around the mid-1990s. .... ...It was an unprecedented phenomenon that China’s actual growth rate exceeded its potential growth rate for six consecutive years of 2003-2008. After years of overheating, the Chinese economy was destined to undergo a downward adjustment process even if without th...

This is a link to a post that I read on one of the blogs..... Most Americans still appear to be operating under the delusion that the "recession" will soon pass and that things will get back to "normal" very soon. Unfortunately, that is not anywhere close to the truth. What we are now witnessing are the early stages of the complete and total breakdown of the U.S. economic system. ...... Read more

After a long global political battle, China’s decision to open (appreciate) its currency have come as a breather for metal prices, but the long-term impact of Yuan appreciation on metals prices may not be as simple as it looks. China’s purchasing power in the international markets will increase along with the Yuan’s appreciation. China’s demand for commodities is driven by multiple factors such as real demand from manufacturers, construction industry and stockpiling besides speculative demand from traders. However alignment to bulk orders may not encourage buying based on real demand due to appreciation. China being the world’s largest importer of metals and ores, appreciation of Yuan will lower the import price of metals for Chinese importers and manufacturers. This will potentially help push up international prices of these commodities (including in India). This is a positive development for Indian metal and ore producers. However, purchases are eventually determined by demand...

As a continuation to my previous post on reducing carbon footprint, I hope there have been some viewers to the post and at least some who are doing their bit in reducing carbon footprint. CYCLE to WORK This is yet another way of reducing carbon foot print. And for those who don't give a damn to reducing carbon footprint, this will certainly save you money, here are reasons why you should cycle to work. It does not cost you fuel, it is eco-friendly It improves health and you dont even have to spend multiple grands at the Gym. Bicycling is no more a "middle class" or "lower class" trait. And anyways, to protect your "image", you can always buy a high end bicycle. It portrays you as a responsible citizen, improving social image. You can proudly say you are doing this to save environment. So just go ahead, save money, save environment, improve health and reduce carbon footprint.

Unemployment Insurance or Employment Insurance as it is called in some countries provides temporary financial assistance for unemployed citizens while they look for work. In times of distress such as the global financial crisis when people get laid off, this is an effective way to protect people financially, well to an extent at least. At the same time this does not promote or encourage unemployment among people. HOW IT WORKS? This insurance is not applicable for people who have not started working yet. This only applies if you were working as an employee. Eligibility Generally you need to be ‘qualified’ to be insured. Qualification includes Insurable hours - Continuous period of work for a certain minimum hours (eg. 52 weeks) Unemployment – you need to be without work and without pay for some minimum days (eg 7 days) No fault – you should have been fired for no fault of yours and should not have left the job without any ‘valid’ reason. Insurance Premium: A portion of salary (e...

RBI, wide notification no. Notification No. FEMA 20 / 2000-RB dated 3rd May, 2000 have amended the pricing and valuation guidelines for a private company issuing shares to a person resident outside India. RISGHTS ISSUE The offer on right basis to the persons resident outside India shall be at a price which is not less than the price at which the offer on right basis is made to resident shareholders. ISSUE OF SHARES Current Provision - Price of shares issued to persons resident outside India is required to be issued at a value arrived at by a Chartered Accountant who would determine the price in accordance with the erstwhile Controller of Capital Issues (CCI) Guidelines [conservative method of valuation by considering an average of the Net Asset Value (NAV) of the company and the company’s Profit Earning Capacity Value (PECV), which was arrived at based on its past financial performance]. Revised Guidelines - Price of shares issued to persons resident outside India, shall not be...

This article is for all those who care for the environment. And for those who don’t care for the environment, I am sure, they care for their money, at least. Read it and you will surely get tips to save money. We all have heard so much about Global Warming, about Carbon footprints and Carbon credits. Carbon footprints refer to the amount of carbon dioxide (or green house gas) emitted into the atmosphere. Emitting greenhouse gas, along with other issues such as population, urbanization leads to the Global Warming. The issue of global warming is so alarming that corporations and countries now measure the amount of carbon emitted by them and even trade in Carbon credits. Well, the governments and corporations across the globe are arguably doing their bit in making earth a better place to live. But that is not enough. Each one of us (specially in countries such as India and China) are personally responsible for ensuring that we avoid emitting carbon dioxide and other global-warming-...