Regulators must reply on facts & not overheated rhetoric: ICI

Mutual fund fees in retirement plans have fallen for two decades, even as the services provided to employers and plan participants have increased, ICI says 

ICI President and CEO Paul Schott Stevens on Monday said, “America’s retirement savers need continued access to information and guidance to make sound investment decisions.”

Stevens further said, “The mutual fund industry provides a tremendous amount of support and information to retirement savers, including disclosure on the cost of investing. Mutual fund fees in retirement plans have fallen for two decades, even as the services provided to employers and plan participants have increased.”

Stevens made the above statements in response to US President Barack Obama’s remarks about the forthcoming Department of Labor’s re-proposed fiduciary duty rule.

US President Barack Obama has given the Department of Labor the green signal for the redraft of a rule to amend the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), according to The White House.

Obama called for a new fiduciary standard proposal from the Department of Labor to protect middle-class retirement savers that he said are being hurt by some advisers' conflicts of interest.

Speaking at the AARP's Washington headquarters Monday, Obama said, “The rules governing retirement investments were written 40 years ago... Today, I am calling on the DOL to update the rules.”

Obama said that while many financial advisers do put their clients first, “there are no uniform rules of the road that require retirement advisers to act in the best interests of their clients.”

Obama endorsed stricter standards for brokers and others who recommend retirement-account investments.

“It is vital that any proposed rules be carefully tailored to ensure that employers and savers still have access to that support and service. Achieving the goal of thoughtful and balanced regulation is never easy, and regulators must reply upon data and facts—not overheated rhetoric,” Stevens added.

“We will carefully review the rule when it is proposed. We urge the Administration to work constructively toward a rule that preserves and improves the services that employers and savers rely upon today,” Stevens further said.

FIIs need RBI approval to buy more shares in ING Vysya Bank

At 10:28 AM, shares of ING Vysya Bank were trading flat at Rs. 925, while the benchmark BSE Sensex is trading up 54 points at 29,030

Reserve Bank of India on Monday said foreign investors would be required to obtain RBI's prior approval for buying further shares in ING Vysya Bank, as foreign shareholding in the bank has reached the trigger limit.

The foreign shareholding through FIIs/Foreign Portfolios Investors (FPIs)/NRIs/PIOs/ADR/GDRs in ING Vysya Bank has reached the trigger limit, RBI said in a press release.

"Hence, further purchases of equity shares of this bank would be allowed only after obtaining prior approval of the Reserve Bank of India," RBI added.

At 10:28 AM, shares of ING Vysya Bank were trading flat at Rs. 925, while the benchmark BSE Sensex is trading up 54 points at 29,030

Global metals deal volumes to remain subdued; CAGR of 1.9% in 2015: PwC

The contrasting fortunes of aluminium and steel companies look set to continue into 2015. Much of the steel sector remains in defensive mode, while there is a much more positive outlook in aluminium

There will be weak momentum in the metals deals market in 2015 according to a new report from PwC.

The report, Metals Deals: Forging ahead, predicts that, as in 2014, the lack of convincing, strong and sustainable growth in the global economy will keep metals deals in a low gear, or even stalling in some parts of the world.
 
Jim Forbes, global metals leader at PwC, said, “With the current level of commodity prices and the downward pressure on economic forecasts, we don’t expect dealmakers to be rushing to the table in 2015. The deal making that will take place is likely to be driven primarily by specific country, industry or company considerations, rather than the global cycle, the direction of which remains uncertain.”
 
Modelling carried out by PwC predicts that global metals deal volumes will remain subdued, with compound annual growth rate (CAGR) of 1.9% in 2015, compared with 0.6% in 2014. Metals deal values are predicted to grow by 47%. This figure may seem high but it comes off a very low base with deal value in the sector close to the lowest it has been in the past decade. The predicted upturn in deal value is mainly due to a relatively large expected jump in the aluminium price index.
 
PwC’s subdued forecast for 2015 metals deals is strongly affected by the uncertainties stalking the global economy such as the oil price dive, concerns over Chinese growth, currency fluctuations, eurozone recession and the spectre of deflation. Growth in demand for metals in China, the largest global consumer of both steel and iron ore, is expected to follow its 2014 pattern and decline further in 2015. Recoveries in metals demand in Europe, the US and Japan are not anticipated to be strong enough to offset this slowdown.
 
Low oil prices create both winners and losers
Continued low oil prices will affect metals deals, particularly those with high oil sector exposure: those with output geared towards consumers markets, such as the automotive industry, are likely to gain. But those focused on pipelines or other oil infrastructure will need to factor in capital spending cutbacks by customers. Similarly, companies supplying steel for large infrastructure projects could face constraints where these are sponsored by governments that are hit by lower oil revenues.
 
Focus turns to non-M&A alliances
54% of metals company CEOs plan to partner with other entities this year, according to PwC’s 2015 Global CEO Survey. This is a huge increase on 2014’s figure of 16%. Their main reasons are to get access to new technologies, new customers or new geographic markets without having to make all of the investments themselves.
 
A tale of two metals
The contrasting fortunes of aluminium and steel companies look set to continue into 2015. Much of the steel sector remains in defensive mode whereas there is a much more positive outlook in aluminium. Lower oil and energy prices will benefit the cost side of both sectors but the demand impact will be much more mixed. Any positive impact on demand is more likely to benefit the aluminium sector. Companies in the steel sector are more exposed to the negative impact that will flow from energy industry capital expenditure reductions. Aluminium deal activity is likely to continue to be focused downstream, with companies seeking to make strategic acquisitions to move further away from the commodity end of the value chain.

Vibrant India! India is at the start of a new business cycle, says Jim Walker at IIFL conference

Good governments can improve physical infrastructure and this can create a strong backdrop for economic growth, says Jim Walker. 

IIFL’s sixth Enterprising India Global Investors’ conference is underway in Mumbai. Delivering the keynote address, Dr. Jim Walker, renowned economist and Founder & MD of Asianomics said, “Virtual connectivity (higher mobile and Internet penetration) has increased significantly in Asia, especially India and China. This offsets some of the slack of weak physical infrastructure. Connectivity frees economies.”



Good governments can improve physical infrastructure and this can create a strong backdrop for economic growth, says Jim Walker.

“India is at the start of a new business cycle. Modi will hopefully provide good government and thus governance in place now. External balances are no longer concerning. Inflation scare is over. RBI will cut rates by 100-150bps. Rupee is under-valued but unlikely to appreciate. Indian markets are not expensive given the 5-10yr growth story,” Dr. Walker said.

Speaking on China, he said the country grew 5-6% last year and growth is likely to slowdown further to 3-5% by next year with downside risks. “Job creation in services sector is offsetting weakness in manufacturing and property. There will be more monetary easing with upto 200bps rate cuts this year. However there is unlikely to be credit expansion or fiscal stimulus. Currency devaluation is possible if growth remains weak,” he added.

Enterprising India-VI will see all major sectors well represented with maximum representation from the Banking and Finance sector (16 companies), followed by IT (10) and Capital Goods & Engineering (7). Sectors such as FMCG, Utilities, Agri-business, Pharma, Media, Cement and Auto will have representations from 4-6 companies. The list of companies from the sectors represented are of varied sizes; 34 companies have market cap of more than US$5 bn, 34 companies have market cap of US$ 1-5bn and 28 companies have market cap of less than US$1b.

Mr. Prabodh Agarwal, Head of Research, Institutional Equities, IIFL, said, “The theme of this year's conference is ‘Vibrant India.’ We believe 2015 would be another good year for Indian equities with key macro factors showing signs of turning around. A cyclical upturn should drive a sharp bounce back in earnings, helped by a sharp drop in prices of commodities, interest rate cuts, and change in business and consumer sentiments.”

The conference will be graced by a host of imminent dignitaries including Mr. SS Mundra, Deputy Governor, Reserve Bank of India, Dr. Jim Walker, Founder & MD, Asianomics Macro Ltd,  Chris Roberts, Renowned market technical analyst, Ireena Vittal, Advisor (Business Building, Emerging Markets, Indian Agri, Urbanization),  Raghav Chadha, Aam Aadmi Party, Adesh Sharma, Managing Director, DFCC, T.N. Ninan, Editorial Director, Business Standard, Vishwanathan Anand, Chess Grandmaster, and many others

Crude Oil Crushed, MCX Futures Fall 4.5%

Crude Oil Crushed, MCX Futures Fall 4.5%

Heavy losses emerged in crude oil today as MCX Crude oil futures were crushed by morethan 4%. WTI Crude slipped heavily after breaking under $50 per barrel even as globalstocks remained supported in choppy trades. Equities managed to hold up on ideas thatGreek debt had been averted for now. Strength in US dollar and comfortable crudeinventories led to heavy selling pressure on crude right from the start and the commodityquotes at $48.80 per barrel, down 2 dollars per barrel on the day. MCX Crude oil futurestrade at Rs 3072 per barrel, down Rs 143 per barrel or 4.50% on the day.

German Ifo business climate index, a measure of business confidence climbed to 106.8 inFebruary, while it was expected to rise to 107.6. In January, the score was 106.7.Meanwhile, the current conditions index of the survey unexpectedly fell to 111.3, while itwas expected to rise to 112.7. In January's, the reading was 111.7. 

The expectationsmeasure of the survey moved up to 102.5 in February. Three members of the Bank of Japan'spolicy board expressed doubts the BOJ can meet its inflation target because of a slowdownin underlying inflation and falling oil prices, minutes of the bank's January monetarypolicy meeting showed. US dollar remained in a good mood amid these economic cues,lingering around 1.1300 against the Euro right now.

US commercial crude inventories increased by 7.7 million barrels, maintaining a totalUS commercial crude inventory of 425.6 million barrels, the sixth consecutive week of ahigher total than at any time in at least 80 years, according to latest weekly EIA data.Total gasoline inventories increased by 500,000 barrels last week and remain above theupper limit of the five-year average range. Total motor gasoline supplied (the EIA’smeasure of consumption) averaged over 8.6 million barrels a day for the past four weeks,up by 3.5% compared with the same period a year ago.

Distillate inventories decreased by 3.8 million barrels last week and remain in thelower half of the average range. Distillate product supplied averaged 4.2 million barrelsa day over the past four weeks, up by 6.6% when compared with the same period last year.Distillate production averaged more than 4.6 million barrels a day last week, down about100,000 barrels a day compared with the prior week’s production.

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Top corporate news of the day - February 24, 2015

Zee Media Corporation has received capital market regulator Sebi's approval to raise up to Rs2bn through rights issue.

Maruti Suzuki launched refreshed version of its popular compact sedan Dzire with introductory prices ranging from Rs0.507mn to Rs0.781mn (ex-showroom Delhi). 

Zee Media Corporation has received capital market regulator Sebi's approval to raise up to Rs2bn through rights issue. 




Lupin has received the final approval for its product, a generic version of Allergan Inc's Lumigan Ophthalmic Solution, from the US Food and Drug Administration.
 
Ashok Leyland has not given up on its maiden car venture, for which it piggybacked on Japanese giant Nissan, despite extremely poor sales
 
Lupin said that the US Food and Drug Administration have raised concerns over production processes at the company's Pithampur plant in central India. 
 
Thomas Cook India has signed an agreement with Global Distribution Systems provider Amadeus on the basis of a combination of its products and future ready innovations.
 
Mahindra & Mahindra launched a new premium variant of the XUV500 priced at Rs1.448mn (ex-showroom, Mumbai). The variant, only 700 units of which will be built, will be equipped with electric sunroof, reverse camera, voice messaging system, aluminium pedals, grey alloy wheels, 6-way power adjustable driver's seat to name a few. 
 
State Bank of India plans to overhaul its transaction banking business, which will include involving trade finance and IT platform-based services for liquidity management.
 
GMR Infrastructure said that it has entered into a definitive agreement to sell its 26% stake in Delhi Cargo Service Centre, a joint venture between Cargo Service Center India Private Limited and Delhi International Airport (Private) Limited. 
 
By the end of March, Bank of Maharashtra will offload non-performing loans worth Rs4-5bn to asset reconstruction companies, a top bank official has said. 
 
Crompton Greaves has bagged a US$20mn order from Indonesian electricity utility PT PLN for setting up 36 transformer bays of 150 Kv in Indonesia. The project, funded by the World Bank, aims to enhance the performance of transmission grid. 
 
Tata Power said it has signed a memorandum of understanding with Siberian Coal Energy Company (SUEK) to tap opportunities in the energy sector. SUEK is an exclusive exporting company of Open Joint Stock Company and the largest Russian coal producer. 
 
L&T Technology Services, a wholly owned subsidiary of Larsen & Toubro has partnered with ThingWorx, a PTC business, for developing technologies on the Internet of Things. 
 
Omaxe has sold its 19.35 acres land at Vishakhapatnam for Rs1.12bn as part of its plan to divest non-core assets and focus on completion of the existing projects.

Technical Comment For The Day: Gold

Technical Comment For The Day: Gold

Gold prices declined during session ending Monday. 

The prices ended the day at Rs 26153 per 10 grams on 23 Feb 2015 against Rs 26277 per 10 grams on 20 Feb 2015. Correction below Rs 26000 and Rs 25800 are the immediate suport zones. 

Gold prices tested a high of Rs 26321 per 10 grams and a low of Rs 25955 per 10 grams.  Volumes for April contract was at 18324 on 23 Feb 2015 against 15730 on 20 Feb 2015.

Make gratuity, leave encashment of deceased employee non-taxable: Assocham

Death of an employee creates a lot of financial hardship to the legal heirs and it will be difficult for the legal heirs to calculate and pay taxes on the termination benefits received, Assocham says

The Associated Chamber of Commerce and Industry of India (ASSOCHAM) has suggested the Central Board of Direct Taxes (CBDT) to issue instructions that ‘leave encashment’, ‘gratuity’ or other termination benefits received by the legal heir of deceased employee will not be taxable.

In a note to the CBDT Chairman, the chamber has stated that death of an employee creates a lot of financial hardship to the legal heirs and it will be difficult for the legal heirs to calculate and pay taxes on the termination benefits received.

The chamber says there is a CBDT circular which states that a lump-sum payment made gratuitously or by way of compensation or otherwise to the widow or other legal heirs of an employee, who dies while still in active service, is not taxable as income under the Income-tax Act, 1961. Infact this circular will cover all other lump sum termination benefits being paid to the legal heir of a deceased employee, who dies while still in active service.

Though there is already a judgement which clearly established the law that gratuity received by the legal heir of a deceased employee is not taxable, even after taking into account the provisions of section 10(10) (iii) of the Act.

However, Section 56(1) and section 2(24) has been amended w.e.f AY 2005-06 to include gratuitous payments received by an Individual / HUF (any sum of money received not exceeding the prescribed amount without any consideration) with a view to widen the scope of Income. There is certain specific exclusion to such gratuitous receipts but such exclusions do not cover the leave encashment, gratuity or other termination benefits received by the legal heir of any deceased employee in connection with the services rendered by him.

Hence, due to the introduction of Section 56(1)(v)/(vi)/(vii) the leave encashment, gratuity and other termination benefits received by the legal heir is now getting taxable though there were CBDT circular issued [before the introduction of Section 56(1)(v)/(vi)/(vii) of the Act] which had exempted such payments. As the earlier CBDT circulars have not been withdrawn there is confusion as to whether these payments to legal heir are taxable income in their hands or not.

Top economic news of the day - February 24, 2015

Stressing the need to boost clean energy generation, President said that the share of renewable power generation will be enhanced to 15% of the total energy mix in the next seven years.

Global rating agency Standard & Poor's said India's low income levels and weak fiscal and debt indicators constrain the country's credit profile. However, the political stability following the general elections last year has created a conducive environment for reforms, which could address these weaknesses. 
 
Stressing the need to boost clean energy generation, President said that the share of renewable power generation will be enhanced to 15% of the total energy mix in the next seven years.
 

Private equity investments in the real estate sector have increased by over two-fold to Rs15,4.1bn in 2014, the highest since 2008, signaling a renewed interest by domestic and global investors, according to a Cushman & Wakefield report.

Nikkei up; Hang Seng down

The Nasdaq ended up 5 points or 0.1% to 4,961 on Monday, while the Dow fell 24 points or 0.13% to 18,117 and the S&P 500 lost 0.64 points or 0.03% to 2,100 

Tokyo stocks opened at 18,468.39 on Tuesday. At 9:28AM IST, the 225-issue Nikkei Stock Average is trading up 62 points, or 0.34%, from Monday to 18,529.37.

Hang Seng opened 24,776.72 today as against the previous close of 24,836.76. At 9:22AM IST, Hang Seng is trading down 154 points or 0.62% from Monday to 24,690.22.

The Nasdaq ended up 5 points or 0.1% to 4,961 on Monday, while the Dow fell 24 points or 0.13% to 18,117 and the S&P 500 lost 0.64 points or 0.03% to 2,100.

Federal Reserve Chair Janet Yellen addresses Congress in two days of testimony starting Tuesday, with investors watching for clues on the timing of an interest-rate increase. 

Sensex to open on a flat note

The going seemed to be good as the market got into the Budget week but suddenly a slight bolt came from the blue. 

The going seemed to be good as the market got into the Budget week but suddenly a slight bolt came from the blue. This time it was the S&P which said that the country's low income levels and weak fiscal and debt indicators constrain the country's credit profile. In a report titled 'Meeting Reforms Expectations Is Key To Maintaining Investment-Grade Ratings On India', S&P says, "The average income in India (unsolicited rating BBB-/Stable/A-3) is significantly below that of its peers and the government is also more heavily indebted."

The silver lining of course which India is banking on is that political stability following the general elections last year has created a conducive environment for reforms, which could address these weaknesses.  We will get a big hint of this in the budget. Meanwhile, the Budget session started on Monday with President Pranab Mukherjee saying that inclusive growth was a top priority of the government and it was committed to expand the job market.

The outlook is a flat start.  We expect the usual volatility ahead of the F&O expiry. Global markets are subdued. US indices closed lower following a cooling in Oil prices; WTI crude fell 2.7% to sub-$50 a barrel levels.  Investors also turned apprehensive ahead of Greece’s economic reform plans scheduled today. The Dow, S&P 500 and Nasdaq were all down marginally.  Asian markets are trading mixed, with Japan's Nikkei 225 higher and Hong Kong's Hang Seng trading lower.

Earnings and valuations continue to cause some worries and it is nothing unknown. Among the 360 of the NSE CNX 500 stocks for which estimated EPS estimates are available, 240 have seen downgrades in the past three months after companies' sales and profits hit multi-year lows in the 3-month period ended December 31, 2014, says a report.  The top 30 companies, whose stocks constitute the benchmark Sensex, reported a 1% fall in revenue in the December quarter from the same period a year ago, its weakest revenue growth since the March quarter 2009, a report in ET added.

Moody's Investors Service says that the majority of Asian oil & gas companies, with their ample liquidity, remain well-positioned in the face of lower oil prices, but  their standalone credit quality will deterioriate."The steep drop in crude oil prices since mid-2014 will materially reduce the earnings and cash flows of these companies and weaken their credit metrics in 2015," says Vikas Halan, a Moody's Vice President and Senior Credit Officer.

Monnet Ispat & Energy zoomed 12.3% to a high of Rs. 63 on reports of the company winning one coal block in Chhattisgarh.

Shares of Crompton Greaves Ltd ended 2% lower at Rs. 176 after company has bagged an order worth $20 million from PT PLN Indonesia for setting up 36 transformer bays around Indonesia.

Shares of Technofab Engineering Ltd hit 20% upper circuit at Rs. 160.

Shares of Ashiana Housing Ltd ended 13% higher at Rs. 306.The company has announced the launch of residential project "Ashiana Anmol" located in Sohna (Gurgaon). The entire project is spread across 13.337 acres of land with total saleable area of approximately 11.50 lakhs sq. ft.

Shares of Hindalco Industries ended 1% lower at Rs. 154 after the company reportedly said that it has bagged one more mine in the ongoing coal auction.

Shares of Lupin ended 2.71% lower at Rs. 1,645. Lupin said that it has received the approval for its product, a generic version of Allergan Inc's Lumigan Ophthalmic Solution, from the US Food and Drug Administration (USFDA).