A close look at the future of Indian economy

United Nations, Economic and Social Survey of Asia and the Pacific (ESCAP) report outlines defining factors that project growth and stability of Indian economy and surrounding regions in the Asia-Pacific.For India, ESCAP puts forward a positive outlook for increased GDP growth in 2012 as compared to 2011.

Inflation remains one of the key things to watch out for in 2012. Until recently RBI has increased raise policy rates 13 times in 19 months. For the first time in many months, the policy rate was reduced by50 basis points, hinting towards an easing monetary policy. As the government and RBI loosen their death grip over monetary and fiscal policies, ESCAP has a positive outlook for growth in 2012.

On the brighter side, despite tighter monetary policies that directly impacted personal consumption and demand, GDP grew by 6.9% in 2011. The ESCAP survey talks about reducing the impact of inflation on the poor by strengthening the government’s already existing policies to increase distribution of food items at subsidized prices.

Fiscal and budget deficit are challenges that India Inc will have to deal with rigorously. The government has already put targets in place to reduce budget deficits, however failed to achieve them for 2011 due to higher than expected expenditures.

The ESCAP survey acknowledges that the growth in trade deficit combined with depreciation of the rupee against the dollar have contributed to the slowdown in India in the last few years.
While all this does not happen overnight, India has taken massive strides in the field of solar energy. On the upside, more than 10 solar parks have been either completed or commissioned in various stages throughout India in the last 2 years.

The Indian government is currently promoting development and use of solar energy by moves such as reducing custom duties on solar PV panels, acknowledging investment in renewable energy projects and even giving subsidies of up to 70% for investments in solar PV plants in certain areas.

On an aggregate basis, inflation, soaring energy costs and poverty are dragging on the economy which grew 6.9% in 2011.

Energy shortage was also highlighted as possible deterrent to a fiscal surplus on which Kaushik Basu, Chief Economic Advisor to the Government of India, said "If the global prices are high for a product that is imported there is no way you can totally shelter the population. If you shelter it by holding that price completely constant, it appears that you are sheltering customer… but you are building on your fiscal deficit" The report talks about measures like reducing power theft, increasing exploration of oil and gas and developing renewable energy resources.

Source: ESCAP Survey

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Financial Assets for Investment

Before you plan any of your financial investments, you need to know what are the sources you can you can look upon. Various financial assets come into picture before making any investment. Following are some of the financial assets for investment that you can focus on:

Real Estate:
Property Investments in India have normally been a gold mine for most investors. The growth and development of cities across the country have added fuel to the rise in prices across the country. According to a survey conducted by ASSOCHAM, 65% of working individuals prefer real estate as a mode of long term investment.

Property prices in India have increased by 16.5% in the last year according to a study by Makaan.com. The question now for investors is how best to benefit from investments in realty; whether to look at investments directly in property or route the investments to real estate companies that are listed on the stock markets.

Securities:
Here is a list of the main types of investment securities:

• Bond: A bond is a type of loan or debt security for a certain period for which the issuer pays interest at a predetermined rate. Bonds can be issued by credit institutions, government agencies, corporations and public authorities. 
• Equities: Also known as shares, this pertains to the amount of ownership you buy in a company. The general public usually opts for equities. 
• Derivatives: These are financial instruments that drive their value from direct securities, such as equities and bonds.

Commodities: 

whether they are related to food, energy or metals, are an important part of everyday life. Similarly, commodities can be an important way for investors to diversify beyond traditional stocks and bonds, or to profit from a conviction about price movements. 

Years ago, most people did not invest in commodities, because doing so required significant amounts of time, money and expertise. Today there are a number of different routes to the commodity markets, and some make it fairly easy for even the average investor to participate.

Futures Market:

A popular way to invest in commodities is through a futures contract, which is an agreement to buy or sell in the future a specific quantity of a commodity at a specific price.Futures are available on commodities such as crude oil, gold and natural gas, as well as agricultural products such as cattle or corn.

Most of the participants in the futures markets are commercial or institutional users of the commodities they trade. These hedgers may use the commodity markets to take a position that will reduce the risk of financial loss due to a change in price. Other participants, mainly individuals, are speculators who hope to profit from changes in the price of the futures contract. Speculators typically close out their positions before the contract is due and never take actual delivery of the commodity (grain, oil, etc.) itself.

Source: http://www.copyscape.com/prosearch.php

Gold and silver touched all-time highs in 2011

Continuing their record-breaking spree, gold and silver galloped to all-time highs in 2011 on strong demand for precious metals considered as a 'safe-haven investment' in times of economic turmoil and rising inflation.

Gold (99.5 per cent purity) crossed the Rs 29,000 per 10 grams-level to a historic high of Rs 29,155 per 10 grams on December 8, 2011, on good local demand in view of the marriage season coupled with investment buying due to weak equity markets. Pure gold (99.9 per cent purity) also logged a fresh peak of Rs 29,280 per 10 grams during the year.

Silver (.999 fineness) prices hit an all-time high of Rs 75,020 per kilogram on April 25, 2011, on heavy speculative and investment-driven buying in line with global markets, where the metal rose to a fresh 31-year high. The metal witnessed a global rally amid speculation of a supply shortage. Furthermore, successful launching of E-silver by the National Spot Exchange Ltd sharply boosted the speculative nature of the metal.

The domestic market witnessed relentless buying in precious metals due to global volatility in view of escalating geo-political tensions across West Asia, the subsequent impact on crude prices, sustained weakness in world equities, higher inflation and concerns over global economic growth. In May, global markets witnessed a free-fall in prices of the precious metals as speculators dumped their long positions after metal exchanges hiked the margin requirement several times.

Silver ready (.999 fineness) was trading at Rs 52,285 per kg on December 27, nearly 11 per cent higher vis-a-vis last year's close of Rs 47,030.00 per kg. Standard gold (99.5 per cent purity) also flared up by about 34 per cent to Rs 27,500 per 10 grams on December 27, 2011, from Rs 20,585 per 10 grams on December 31, 2010. Pure gold (99.9 fineness) was quoted at Rs 27,630 per 10 grams on December 27, 2011, as against Rs 20,680.00 per 10 grams at the end of last year.


Source: www.rediff.com
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Mysore Maharaja's Rolls Royce - Up For Auction!

The era when the Maharaja’s galloped on chariots and horses, the Great Maharaja of Mysore, Krishna Raja Wadiyar IV was vrooming in the gorgeous Rolls Royce which even the animals envied.

16^th September, Bonhams London, will hold an exclusive auction where this beautiful machine, which just grows younger by the years will be auctioned. It is estimated to fetch about 4 Lakh pounds. A justified number for this blue blooded machine whose owner was one of the wealthiest man who died with a personal fortune of over $400 million in his time.

They have priced the quality and its ability to endure the road conditions of India. This was displayed at the Delhi Durbar celebrations of King George V in 1911 which included many cars for sale that could be used for the honoured guests and the Maharajas themselves at that time.

The beautiful RR Silver Ghost was passed to the maharaja of Mysore and was decorated by the coat of arms of the Maharaja himself.

Along with this, the second Silver Ghost which will be auctioned by Bonhams is recognized from 1908 and is one of the four models from that very year. Another car restored from the 1990’s by an Irish man is a three row seated RR built by Labourdette, a illustrious coach maker.

Another master piece which was used at Brooklands as a test vehicle for the International Touring Car Trial and is estimated to be auctioned to an amount upto 4 Lakh 25 Thousand Pounds.

Source Link- http://www.rediff.com/business/slide-show

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Ways to Profit During Inflation

High inflation in India, previously considered unacceptable, should not be accepted as "the new normal" and the central bank cannot afford to drop its guard claims RBI deputy governor Subir Gokarn.

When inflation rises the value of our money diminishes, all essential commodities become dearer. In fact high interest rates impact our loans and make them costlier.
Rising inflation might just provide investors the opportunity to earn some extra money!

While volatile stock markets will give value hunters an opportunity to identify the right stocks for the next three years or more, investment in fixed deposits, short-term bonds or funds and gold might be a good investment option for the short term.

In the current scenario one can look at a portfolio ratio of 60-30-10 in equity, debt and gold, respectively.

Debt Funds
When interest rates rise following inflationary pressure they have a catalytic effect on debt instruments and the best and safe way of investing in them is through debt mutual funds.
In the last six months debt funds have overshadowed their equity counterparts.

Commodity Funds
Commodity-centric mutual funds could be used as a proxy for investment as they are well placed to benefit from the demand supply gap. Such funds usually investment in commodities like gold, silver, food products and metals

Gold/Silver
For centuries gold has been considered the best form of investment. From kings to potters, everyone bought gold and treasured it all their life. Till date the yellow metal continues to shine.

In times of recession, gold has been the safest bet, surging to all-time highs when all other instruments plunged.

Silver has outperformed gold for the past few months and is likely to give better returns in the coming few months as compared to gold. Silver prices are expected to enhance by 20-25 per cent in the coming year.
The best way to buy physical gold is through bars or coins else one can always invest in gold exchange traded funds.

Oil
Following the turmoil in the Arab world, oil prices are on the boil. So investment in oil itself can be a good hedge against inflation. Owning oil is a great play on the growth in India and China and looks to be a trend with many years left in it.
With some smart planning you can obtain good returns in these times. Your portfolio needs to be reallocated according to the changing market conditions.

Source: http://www.rediff.com/business
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