Start the league of Investments

Markets are fluctuating; Sensex is going up & down. No one can estimate what will happen in the next minute. But there is always scope of improvement and chance of getting good returns. You just need to start applying mind on the prospects that are you looking for. These prospects might not be entertaining in the beginning but instead of avoiding it and ignoring its significance, give an eye to it too.

If you are a person who have just started earning a good amount and looking for an investment, this is just the right time you start analyzing your capital and the source of investments. Be it bonds, shares, insurance, mutual funds, etc. what is necessary is how much knowledge you have about all these resources. If you do not have the available knowledge then you might fall at the wrong place. Hence starting with the initial stage of research and later exploring the available resource is a must in this era. 

Your daily routine of work will never get over and you can’t just wait to get done with the work and start investing after that. What you need to do is just resume with your strategies and systematically start implementing your plans. The league of investments needs to be started as soon as possible because the right time can end at anytime and you might be late in acquiring the opportunity.

Be it your first investment or last, your investment can be taken care by Karvy Private Wealth. What you just need to do is:

Contact us on karvy@gmail.com

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Do I Need Insurance?

Imagine that you are on your way to office on a bright Monday morning. The signal changes to red and you halt the car for a while. You are already 10 minutes late for work and your mind is consumed with many different thoughts. The EMI for your dream home is due and your son needs to be admitted to an international school in the neighborhood. While you ponder over your finances, the signal changes to green and before you realize, a bus crashes into your car from behind. As your car jumps forward with a jerk, you are jolted from your seat and before you know it, you are unconscious. You wake up next on a hospital bed with severe head injuries. The doctors inform you that a surgery has been performed and you will not be able to go back to work for another two months. What do you do?

Life is as uncertain as it gets. Nobody can predict the dangers that lie around the corner. Are we prepared to meet these challenges? There are some things we cannot avoid, but we can surely insure ourselves against the damages to minimize their impact. From providing protection against unforeseen events to helping us prepare for the life we plan, insurance has multiple benefits. Insurance also helps in obtaining tax benefits, long-term wealth creation, generating dividends and availing loans against the accumulated cash value. There is a wide variety of policies available that provide cover for life, medical expenses, accidents, professional mishaps, crimes and so on.

Karvy Private Wealth specializes in insurance planning services, assisting clients in picking the right policies. A team of professionals engage in a thorough risk analysis before recommending the insurance policy that best suits an individual/corporate.

To know more:
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Economy and Realty at glance- June 2012

GDP at a nine year low of 6.5%, high inflation at 7.55%. Ironically, in the fight between taming inflation and propelling growth, we are losing out on both

- Revenues of top-25 realty companies declined 9.30% in Q4FY12, mainly on account of low sales off-take due to higher prices and higher mortgage rates.

- The Realty Index on Bombay Stock Exchange (BSE) has dropped by more than 26% during the last one year compared to a 10% fall in the Sensex during the last fiscal year. In order to bring back the enthusiasm of the investor community into the sector, real estate companies will have to focus on factors such as improving cash flow position, lowering inventory, reducing debt and increasing profit margins

- RBI in its mid quarter review of monetary policy in June reaffirms that cheap interest rate is a far-fetched expectation in the wake of high inflation rate

- During the March 2012 quarter, interest cost as a percentage to sales stood at 15% compared to only 8% reported during the March 2010 quarter

- Although international crude oil price has declined by 20% since the beginning of the last fiscal year, the price of domestic fuel has gone up because the depreciation in Indian currency against USD by 25% during the same period has made import of crude oil expensive

- The Indian Rupee has depreciated by 18%, 8% and 32% against the British Pound, Euro and Yen respectively. Hence, a stubbornly high inflation rate will defer a lower interest rate regime

The World this Week June 18 - June 22 2012

The World this Week June 18 - June 22 2012

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10 Countries that depend on Tourism

There are many countries that depend on tourism, but some depend more than others.

Here we take a look at some nations whose economies are built around tourism, according to the United Nations World Tourism Organisation.

British Virgin Islands
Tourism receipts per capita: $17,621
Population: 24,000
Average tourist spends: $1,285

Macau
Tourism receipts per capita: $16,797
Population: 557,400
Average tourist spends: $900

Aruba
Tourism receipts per capita: $14,771
Population: 101,484
Average tourist spends: $1,445

US Virgin Islands
Tourism receipts per capita: $12,466
Population: 106,405
Average tourist spends: $2,495

Turks and Caicos
Tourism receipts per capita: $12,420
Population: 44,493
Average tourist spends: $1,885

Cayman Islands
Tourism receipts per capita: $12,042
Population: 55,456
Average tourist spends: $1,995

Luxembourg
Tourism receipts per capita: $7,909
Population: 511,800
Average tourist spends: $4,170

Bahamas
Tourism receipts per capita: $6,288
Population: 353,658
Average tourist spends: $1,205

Bermuda
Tourism receipts per capita: $5,451
Population: 64,237
Average tourist spends: $1,305

Anguilla
Tourism receipts per capita: $5,319
Population: 15,236
Average tourist spends: $1,280

What is Cash Reserve Ratio (CRR)

CRR is Cash Reserve Ratio. It refers to keeping a portion of net demand and time liabilities (NDTL) of banks with the central banks (In India it’s Reserve Bank of India, RBI). Central bank fixes this percentage of NDTL. Central bank can change this percentage as a monetary measure to control the availability of funds in the economy i.e. to inject liquidity or to suck liquidity. RBI doesn’t pay any interest on such funds held with it.

The following are the demand liabilities of banks. Banks should pay these liabilities on demand which may come at any time.

All liabilities which are payable on demand; they include current deposits, demand liabilities portion of savings bank deposits, margins held against letters of credit/guarantees, balances in overdue fixed deposits, cash certificates and cumulative/recurring deposits,  Demand Drafts (DDs),unclaimed deposits, credit balances in the Cash Credit account and deposits held as security for advances which are payable on demand.

Time Liabilities are those which are payable otherwise than on demand; they include fixed deposits, cash certificates, cumulative and recurring deposits, time liabilities portion of savings bank deposits, staff security deposits, deposits held as securities for advances which are not payable on demand and Gold Deposits.

When a central bank increases CRR, the banks need to reduce the outflow of money by reducing the loans to customers and keep additional amount with the central bank. This usually sucks liquidity in the markets. Let’s examine one by one.

Stock Market: Some traders take leveraged positions (usually 4 – 5 times their funds) in stock markets by taking additional funds from their brokers at an interest rate. This interest rate goes up as the funds won’t be available easily. When the interest rate goes up they reduce the amount of leverage or they take the same leverage positions but expect more returns from Stock market which is possible only when the prices go down. So the overall effect is prices will go down.

Bond Market:  The banks need to increase interest rates to attract more deposits. The prices of the existing bonds will go down because bonds of same profile will be available with higher interest rates.

Over all Economy:  Companies find it difficult to raise funds by issuing debentures/bonds because they need to pay more interest. This may cause them to delay the implementation of their expansion plans and the economy slows down.

The above said effects are in general. They may or may not happen at same time and the extent of impact will also depend on the rate of increase in CRR.

Central banks increase CRR only if it feels there is a lot of liquidity in the market and purchasing power of people is more than required (as expected by the central bank) i.e. when the conditions are hyperinflationary.

It reduces the CRR when it feels there is credit crunch in the market and liquidity is very low. The effects will be opposite to the discussed above. This measure is to increase the over all growth rate of the economy.

On October 6th RBI reduced CRR by 0.5% and again on 10th October by 1% to ease the credit crunch in the current market conditions and to make funds available to the banks.You can find the latest rates from the RBI website itself. Here I am giving the link. Mouse over on reserve ratios (on Right hand side) to see SLR and CRR.

J R D Tata's Excellency

In 1939 the group included fourteen companies with sales of Rs 280 crore (Rs 2.80 billion); in 1993, the year of his death, sales were Rs 15,000 crore (Rs 150 billion) contributed by over fifty large manufacturing companies, besides innumerable holding, investment, subsidiaries and associate concerns, making it India's biggest business group.

Diversification

During the last half of the twentieth century Tata entered several new businesses, many of them unconventional, and produced a vast range of products -- from airlines to hotels, trucks to locomotives, soda ash and other heavy chemicals to pharmaceuticals and financial services, tea and air conditioning to lipsticks and cologne.

The group seemed to make everything and do everything. One of Tata's earliest achievements was to cajole ten rival cement companies to merge and form the Associated Cement Companies, run by the Tatas.

JRD strengthened existing businesses such as steel, power and hotels. At the same time, the group lost interest in some of its older core businesses.

Against all odds

His achievements have to be seen through the lens of India's economic and political history. Under British colonial rule until 1947, India was strait-jacketed by a foreign exchange crunch for almost forty years after independence, which gravely limited industrial entrepreneurship.

From 1964 to 1991 severe government controls on big business further curbed the growth of the Tata Group.Analysing his own performance, JRD Tata insisted that his only real contribution to the group's smorgasbord of companies was Air-India. For the rest, he generously gave credit to his executives.

The leader and the motivator

Leadership, according to JRD meant motivating others. 'As chairman, my main responsibility is to inspire respect.' Sometimes referred to as the 'chairmen's chairman,' JRD adopted a management by consensus style: 'When a number of persons are involved I am definitely a consensus man,' he once said, adding: 'but that does not mean that I do not disagree or that I do not express my views. Basically it is a question of having to deal with individual men heading different enterprises. You have to adapt yourself to their ways and deal accordingly and draw out the best in each man. If I have any merit it is getting on with individuals according to their ways and characteristics. In fifty years I have dealt with a hundred top directors and I have got on with all of them. At times it involves suppressing yourself. It is painful but necessary. To be a leader you have got to lead human beings with affection.'

Professionalism

JRD's respect for his managers bound the group. 'I am a firm believer that the disintegration of the Tata Group is impossible,' he once declared. Most business groups have disintegrated or drifted apart because of family ownership and management, with rival family members wanting to go their own way. In contrast, the Tata Group companies are run by professionals who firmly believe in the trusteeship concept laid down by J N Tata as also by Mahatma Gandhi. A university dropout, JRD was something of a self-taught technocrat, and died long before the phrase 'war for talent' was coined. Yet, almost every senior Tata director from the 1930s onwards held a degree from a foreign university. Tata willingly financed bright young boys who wanted to go abroad for further education.

Quality first

According to JRD, quality had to match innovation. He intensely disliked the laid-back Indian attitude, and much of his fabled short temper was triggered by the carelessness of others. He stressed: 'If you want excellence, you must aim at perfection. I know that aiming at perfection has its drawbacks. It makes you go into detail that you can avoid. It takes a lot of energy out of you but that's the only way you finally actually achieve excellence. So in that sense, being finicky is essential. A company, which uses the name Tata, shares a tradition. The symbol 'T' has to be a symbol of quality.'The achievements of the Tata Group would not have been possible without the support of its workforce. Before JRD took over, the labour situation at key Tata plants was frequently tense despite the fact that management had poured millions into subsidized housing for workers, offered free medical and hospital treatment, as well as free education and was miles ahead of government legislation in terms of labor practices.

A benign boss

According to Tata, the crux of any successful labor policy lay in making workers feel wanted. One of the inherent drawbacks of modern industry with its large and concentrated labor forces was that each man felt 'that instead of being a valued member of a friendly and human organisation, he was a mere cog in a soulless machine.'' Because of this, a worker's attitude towards management becomes one of indifference, mistrust and coldness often tinged with hostility. He is easily led to feeling himself the victim of callous and unfair treatment and little is needed to make him look upon his employers as his enemies and break out into open conflict.'

Tata Steel became one of the earliest companies in India to have a dedicated human resources department. Expressing surprise that the company had functioned for so long without one, Tata commented: 'If our operations required the employment of, say, 30,000 machine tools, we would undoubtedly have a special staff or department to look after them, to keep them in repair, replace them when necessary, maintain their efficiency, protect them from damage, etc.'

9 Management Lessons by Dhirubhai Ambani

Dhirubhai Ambani was not an MBA. He just believed in what was happening around and tried to understand the scenario. This management lessons might be theoretically meaningful for some people but practically what he explained was more of what he actually applied. Following are some of the key management lessons he believed:

1. Roll Up your sleeves and Help: Do not wait for the infrastructure to be created to support any operation. Go out and built yourself.

2. Be a safety net for your team: Always be on the side of your company whenever they need you. It is themost crucial part for any organization.

3. The silent Benefactor: Help is called an Help when it is done for the beneficiary of the benefit seeker and not the benefactor. Help and forget.

4. Dream Big but Dream with your eyes open: No work is impossible if you manage it to do with full passion. Whatever you do, do it as if it is made for you.

5. Leave the Professionals alone: Let the professionals do their work. They are well equipped and well deserving. Don't add to their problem and instead contribute by not questioning their ability.

6. Change your Orbit constantly: When you will change orbits, you will create friction. The good news is that your enemies from your previous orbit will never be able to reach your new one. By the time resentment builds up in your new orbit, you should move to the next level. And so on..

7. The arm-around-the-shoulder leader: Be a person who is easily approachable and frank. The person will be able to explain it to you only if you get into his comfort zone.

8. The Dhirubhai theory of Supply Creating Demand: Follow the market and from theer create a chain of supply within yourself.

9. Money is not a product by itself, it is a by-product by itself: Create opportunities and not money. Money will follow if the scope is huge and you built is to your ability.

Save Tax

The IT Act 1961 is loaded with big dollops of taxpaying/tax saving information. Ways to save tax have always been an interesting consideration for tax payers all across the world and the Indian tax payer is no exception.Since tax saved is money saved, we hold that to be completely justified. While some of the tax-saving avenues are well-treated by the tax payers in the nation, there are some roads to tax saving which are lesser known.

In India, you can enjoy a tax deduction if you have contributions to make to a political party. The IT Act says that any amount of money that is donated to an acknowledged political party can be lawfully claimed for deduction, under Section 80GGC (For corporate it is 80 GGB).This deduction was launched in April 2010, and the same applies to any contributions made to electoral trusts as well.

There is no set upper limit for the deduction amount, but it can exclusively be claimed only if the contribution goes into the party funds.

It is interesting to note here that deduction on donations does not come into play if you are donating money to an individual. It is only applicable if you are donating it to specific organizations.

Simply stated the Loan to Value (LTV) is the ratio of the amount that you wish to borrow for a home to the actual value of the home. The LTV can be calculated from the actual worth of the home, the mortgage being taken and the down payment that has been made prior to the loan.

For example - the value of a house is Rs 40,00,000/- and a down payment of Rs 400,000/- has been made a loan of the balance amount that is Rs 36,00,000 is being sought. In this case the LTV comes to be Rs 36,00,000/- of the actual value of Rs 40,00,000/- which works out to 90 per cent. Thus the LTV is 90 per cent.

On the issue of LTV the RBI has made the following statement on February 03, 2012 vide their circular "RBI/2011-12/383 DBOD.No.BP.BC. 78 /08.12.001/2011-12" -- "In this connection, it has been brought to our notice that banks adopt different practices for deciding the value of the house property while sanctioning housing loans.

Some banks include stamp duty, registration and other documentation charges in the cost of the house property. This overstates the realizable value of the property as stamp duty, registration and other documentation charges are not realizable and consequently the margin stipulated gets diluted.Accordingly, banks should not include these charges in the cost of the housing property they finance so that the effectiveness of LTV norms is not diluted."

For example, Section 80G of the IT Act says that if you are donating funds to a charitable organization, you are entitled to get a deduction of 50 per cent-100 per cent for that.

However, note that there exists a ceiling here -- the percentage of deduction is restricted to 10 per cent of the donor's (gross) total income. Also, only donations in cash are taken into consideration for the purpose and not donations in kind.

Needless to say that the amount of tax you can save is dependent on the amount that you contribute.You would require a proof to claim this deduction and that's a stamped receipt of the amount donated, from the party or the organization to which you have made the contribution.

The Indian taxman has a heart of gold and it is seen nowhere better than this. Section 80 U of the IT Act says that if a taxpayer happens to suffer from any of the listed disabilities (see below), he is entitled to a tax deduction of Rs 75,000.

If the tax payer has a disabled dependent (spouse/parents/children/siblings) to support, Sec 80DD allows him to claim the same.

Disability list includes low vision, blindness, hearing disability, leprosy, loco-motor impediment, mental illness and mental retardation.

This deduction is obtainable only if the disability is at least 40 per centFor severe impairments, 80 per cent or above, the deductible amount becomes more – 1 lakhThe disabled must be fully dependent for upkeep on the taxpayer and must not be claiming deduction for it independently under Sec 80 U

Proof required to claim this deduction will be a disability certificate from a CMO of a government aided hospital or a civil surgeon.

Facts that Insurance agent never tells you

When the insurance advisor approaches to sell a policy or plan, his persuasive tone might drown your doubts. Features that provide a feel good factor are only disclosed to the customers and aspects that have even a marginal negative connotation are conveniently hidden by the agent. A careful inspection of the fine print in the policy document will reveal many such loopholes that may actually prevent you from getting all the promised benefits of the policy. It is, thus, a good idea to get all your doubts clarified right from the beginning to avoid unpleasant surprises later. One may also approach the branch manager or the training manager of the insurance company in order to get all the details simplified whenever there is any confusion regarding the terms and conditions or the features of the plan.

Depending on the insurance variant and nature of the plan the fee and charges will vary. If you are opting for a insurance plan that combines investment and insurance your agent might casually overlook any mention of the allocation fees and administrative charges that the insurance company is going to take from the amount deposited. The first aspect through which the buyer will lose money when taking an insurance policy is the allocation fees, which comprises the administrative charges and the risk premium charges. This implies that when you buy a policy there will be considerable amount deducted from the money paid towards allocation fees and the remaining will only be used to buy units for your insurance account. The allocation fee is typically highest in the first year and thereafter reduces proportionally. Thus in order to recover the basic amount that has been invested the investor will have to wait till the NAV of the remaining amount grows to make up for this amount.

The lock in period is another aspect that the agent is usually shy to explain. This is the mandatory period for which the money must stay invested with that company in order to derive benefits. In case the investor wishes to withdraw during this period there are likely to be severe penalties which will significantly reduce the net amount payable to the investor - as high as 4 per cent of the amount paid may be lost in case you withdraw before the completion of the minimum prescribed lock-in period. Thus while making the decision to buy a policy one must look at the possibilities of any requirements for withdrawing in between and then put in the money.

The surrender charges are never mentioned to the buyer at the time of purchase. The agent will usually promise that the entire NAV of the plan will be paid out to the customer incase the policy is surrendered before its maturity. However, this is not the case in majority of instances. All companies do levy a fixed surrender charge if the policy does not reach maturity. This charge can be quite an amount considering the fact that the plan is held for 10 years or more and surrendered before maturity. Thus while buying a plan it would be wise to carefully consider the maturity period specified for that plan.

There are several other factors that the terms and conditions of any insurance policy mention to which most buyers do not pay any heed at the time of purchase. However this slip up may actually render the policy invalid or make it extremely difficult to claim the full benefits at the time of requirement. It is in your own interest and the interest of the family members whom you are trying to protect, study all the clauses that is mentioned in the fine print of the policy before actually signing the deal.

Top Five nations for real estate investment in the world!!!

According to the latest report issued by the FCCI these are the following countries which are best suited for Real Estate Investment:

1.China

In the list of top nine attractive destinations for real estate investments, China is number 1.
On China, the FCCI study said: "Even amid cautious market sentiments and tightening of government policy, China remains attractive as an investment destination primarily due to its impressive economic growth record and favorable demographics."

2.The United States

The United States is the second most attractive destination for future real estate investments.
Globally, REITs and REMFs have contributed significantly to the real estate finance and developers overseas have capitalised on the growth potential of the sector according to the FCCI report.

3.United Kingdom

The United Kingdom is the third most attractive destination for future real estate investments.

4.Singapore

Singapore is the fourth most attractive spot for real estate investments.
The study also notes that an overview of all the geographies showcased reveal certain common threads. The strongest markets appear to be those in which controls have curbed excessive lending, speculative buying and instability.

5.India

India is ranked as the fifth most attractive destination for future real estate investments, according to a latest report and also "India ranks fifth on the overall index, as it scores better on the country economy development index and the real estate market index.

Source: Rediff

India’s best cities to do business in!!!

There are a lot of things that goes in to setting up a business at a place which you think would be perfect for the kind of market you are aiming to enter. We bring you a list of top 10 cities In India that are most desirable for businesses.

1.Ahmedabad 

Ahmedabad tops the list of cities for successfully running small scale businesses. It offers good scope for pharmaceutical, leather footwear, textile machinery parts, gems and jewellery health and wellness services.

2.Bengaluru

Bengaluru is ideal for B2B services, hand tools, auto component and hosiery sectors. It is second in the list of all cities for electrical goods and apparel manufacturing.

3.Mumbai

Small businesses feasible in India's commercial capital, Mumbai include machine tools, electronic goods and B2B services. Mumbai ranks 3rd among the 100 best cities to do business in.

4.Hyderabad

Hyderabad is ideal for information technology-enabled services (ITeS), offshore services, bulk drugs, and leather tanning. It is India's fourth best city to start a business in.

5.New Delhi

New Delhi is good for starting small business in sectors like rubber, auto components and food processing. It ranks 5th among the best Indian cities to do business in.

6.Chennai

Small businesses like leather products, electroplating, retail, healthcare and wellness do well in Chennai. Currently, about 57 per cent of the total small and medium enterprises are captured by sectors such as retail, healthcare and education.

7.Surat

Surat is best for textile machinery, IT and retail businesses. Surat is the No.1 city for gems and jewellery and textiles business. Overall, it is the seventh best city in India to do business in.

8.Faridabad

Faridabad is known for engineering goods, auto components, food and beverages and retail. The SMEs comprise 45 per cent of the industrial output in the country and contribute to about 40 per cent of India's exports.

9.Jaipur

The pink city of India, Jaipur, is famous for gems and jewellery, food products and garments. It comes second among all cities in terms of gems and jewellery manufacturing. Overall it ranks ninth.

10.Gurgaon

Gurgaon is ideal for electronic goods, engineering goods, health and wellness services. It is a haven for small businesses.

Source :Rediff