Sona he, Sada ke Liye!!

Gold investment worldwide has grown dramatically in the last five years, but compared with the total stock of financial assets, gold bullion investment is still just a tiny proportion.
Several factors are now stimulating gold investment by new pension fund money - as well as by private investors.

Demand from New Gold Investment Markets

Sales of gold jewellery across Asia are surging as the local economies boom and private investment grows. China's gold investment demand grew by 20% in 2007, while Indian consumers bought a record 900 tonnes – well over one-fifth of the total world market.
Gold buyers in Asia tend to think of their jewellery as a form of gold investment. Prevented from owning gold bullion until very recently, they buy gold to protect their savings from inflation and currency shocks.
That's why the most popular form of gold jewellery in Asia – heavy chains and bracelets – is known as "investment jewellery" in the gold industry.

Gold Investment vs. the Falling Dollar
As the US Dollar has slumped gold investment has outstripped the gains in all major world currencies.
In the five years to 2008 buying Euros to defend against the Dollar's decline has returned 47%. Gold investment, on the other hand, has returned 131%.
British, Australian, South African and Indian citizens undertaking gold investments in 2007 all enjoyed the gold price reaching record new all-time highs.
When Inflation Looms, Gold Investment Shines
The surge in crude oil prices has closely matched the gains in gold prices since 2003, but many people now thinking about gold investment will also want to consider the surge in world food prices, the boom in base metals such as copper, and the current all-time highs in the cost of shipping.
Rising demand for better housing and durable goods from Asian consumers is certainly a factor. But many gold investment analysts also point to the huge growth in credit and debt in the West.
The money supply in the United States has doubled in the last seven years. In Europe, growth in the money supply hit a near-30 year record in late 2007, increasing the appeal of gold investment as the value of each Euro in circulation threatens to shrink under the weight of new notes and electronic account balances.

Gold Investment: The Antidote to Complex Debt Defaults
The global credit crunch first bit when the alphabet soup of MBS, CDOs, CDS and ABCP turned sour as the US mortgage market turned down.
These instruments thrive in the opaque, off-balance-sheet environment of modern financial engineering.
But transparency is important. The modern world has audited accounts, and open exchanges, and 'public' companies for a good reason: because previous generations understood that when investment stops being open and transparent, and reverts to cosy secret deals, complex contracts, and big executive bonuses, then it is general investors who get cheated. Transparency helps stop these problems developing.
In stark contrast to the burgeoning complexity of modern securities markets gold investment remains uniquely simple , and - dealt the right way - uniquely transparent.
A solid gold investment sets you free from the risk of credit default or banking failures.

Submitted by :
Bishakha Kumar

Green Shoots Vs Yellow Weeds

'Green shoots' has been a favorite phrase amongst economists in recent months, as the slowing momentum of global economic decline raises the hopes that recovery from the recession may be near . After the collapse of Lehman Brothers in September 2008, the global financial system nearly melted down and the world economy went into free fall. Infact, the rate of economic contraction in the fourth quarter of 2008 and the first quarter of 2009 reached near-depression levels.
Come mid-2009 many pundits are suggesting that the recent data from the manufacturing, housing market, labor markets suggest that the “green shoots” of an economic recovery are blossoming. These tentative green shoots that we hear so much about these days may well be overrun by yellow weeds even in the medium term, heralding a weak global recovery over the next two years. First, employment is still falling sharply in the US and other economies. Indeed, in advanced economies, the unemployment rate will be above 10% by 2010. This will be bad news for consumption and the size of bank losses.

Second, in countries running current-account deficits, consumers need to cut spending and save much more for many years. Shopped out, savings-less, and debt-burdened consumers have been hit by a wealth shock. Third, weak profitability, owing to high debts and low economic – and thus revenue – growth, and constant deflationary pressure on companies’ margins, will continue to constrain firms’ willingness to produce, hire workers, and invest. Fourth, rising government debt ratios will eventually lead to increases in real interest rates that may crowd out private spending.
Finally there is a risk that the increase in commodity prices might choke off a sustainable recovery if it weighs on industrial production and consumption. The recent increase in commodity prices, has contributed to an increase in the Baltic Dry shipping index. Moreover although trade finance is no longer quite as impaired as at the turn of the year, global trade continues to be quite weak as evidenced from recent data from China, the US and other countries.
In India’s case, benchmark equity index ,BSE sensex has soared 92 per cent from 2009 lows in early March, mainly driven by foreign fund inflows of almost $7 billion. India Inc has already raised Rs 5,000 crore from qualified institutional placements (QIPs) so far in 2009 and announced plans to raise another Rs 24,000 crore. The government today announced that industry output, as measured by the index of industrial production (IIP), grew 7 percent which may indicate that the decline in factory production has been arrested and adds to hopes of economic recovery.
Recently at the CEO round table organized by The Economic Times on the theme: Green Shoots or Yellow Weeds: Is the Recovery for Real? , Wipro chairman Azim Premji was heartened by the return of stability but warned that a runaway fiscal deficit could end up harming the economy. On the positive side , The panelists unanimously felt that India was on a strong wicket and that immense opportunities exist in the Indian market for companies to tap into.
To sum up, green shoots are more visible as of now but there are yellow weeds too. It is the duty of the governments and the central bankers to protect the green shoots and weed out bubbles. If they fail to do so, bubbles would impact the global economies badly.

Submitted by:
Sachin Matpal

Accelerating disinvestments of Public Sector Enterprises

When India launched measures to reform the economy in 1991, one of the items on its agenda was the restructuring of public sector enterprises. What this implied was that the ownership structure of PSEs had to change gradually from public ownership of equity shares to private holding. The process by which ownership change was to be brought about was through disinvestments.

If the public sector was perhaps necessary in the early stages of India’s economic development, disinvestment has become necessary and desirable – in the prevailing regime of liberalization. Firstly, because majority of the PSU firms are loss making which managed to survive only on the state financial support, thus, not only weakening the economy but were diverting badly need funds away from where they were badly needed. Secondly, it is desirable as resources released by disinvestment can make the State perform its basic functions efficiently, reduce the debt and interest burden. Therefore as recently seen the emphasis in the new economic policy changes is on the supply side, by deregulation and delicensing certain sectors,introducing tax reforms, and through disinvestments and privatization of PSEs.

Economic survey 2009 emphasized the unsustainability of fiscal deficit with borrowed funds. Such borrowed funds were being used for current revenue expenditure, and the casualty was infrastructure development.And it is supposed that if the momentum of disinvestments is maintained the government would be able to garner substantial amounts that should help reduce the whopping fiscal deficit which is 6.8 per cent of the GDP.
The recent issue of IPOs of NHPC and OIL alongwith the proposals for a host of companies waiting for the government nod for disinvestment include Bharat Sanchar Nigam Ltd (BSNL), railway consultancy firm RITES, National Aviation Company, and Ircon is all part of the government’s fund raising plans. However, one of the issues on which no clarity has emerged is the manner in which the unlisted PSUs will be allowed to tap the capital market with an initial public offer. One view is that allowing unlisted PSUs to tap the capital market would not necessarily result in any proceeds for the centre and not help meet the government’s fiscal deficit. Hence, such IPOs should be structured in a manner that will enable the government to also divest its stake and mobilise resources to reduce the fiscal deficit.
Another view is that PSU disinvestment should not be used as an instrument to meet the government fiscal deficit. Instead, it should be used to subject the PSUs to market discipline so that its management can measure its performance from its stock valuation in the open market. Such a view also supports more listed PSUs to float new stock to raise resources from a reviving stock market.

What will emerge out as an outcome of the current disinvestment procedure of the government is yet to be seen. But it is an irony indeed that the private companies in the rest of the nations are being rescued by the Government’s bailouts and in India the reverse is happening through disinvestment.

Jaya Roopwani
MBA(IB)2009-11

Cashonova Quiz- 9

Hi All,

Sorry for the delay in the Cashonova Quiz , but neways here goes.
Hope to have loads of replies:-

1.












Name the film, remember this is a finance quiz

2.









Connect the 3 visuals (you have to think a bit laterally for this)

3.








The above companies are 5th, 4th, 3rd and 2nd in a particular list. Who is 1st?

4.












What does the above graph represent?

5.








Name the character

6.









Logo of which organisation?

7. This is a term coined during the financial crisis to describe a situation where the unemployment rate among men is far greater than that amongst women. What is this term called?

8.

----- Traders is a slang term to describe investors who look to trade in high - risk investments. ------ Traders prefer to invest in riskier endeavours and seek higher risk premium as they go on.Fill in the blanks

Drought- A Painful State

India’s vast farming economy is on the verge of crisis because of the drought that has hit the entire country this year. Out of the 604 districts 161 has been declared drought prone and the sowing of crops nationally has reduced by 20%. This fear of drought has pulled down the sensex by 626 points. Many economists have predicted that this drought will have a downward revision on the India’s growth rate of GDP.

Agriculture and allied activities accounts for a significant share in India’s GDP (17%), with over 60% population earning their livelihood via these activities. Drought has a direct impact on the production and the price of agri goods. Over 50% of the population that depends on agriculture and allied activities are marginal farmers or producers. Its expected that production of rice will fall by 10 million tons this year. This loss in production will lead to higher price, and marginal farmers or producers will end up buying goods at higher price to meet their basic amenities.

Agricultural Labourers are feeling the pain too. Due to low production, employment will also be severely affected. It has also been said that share of agriculture in rural income is down to about 40%. This will affect a large section of the population in India.

Its also feared that the season may turn out to be as bad as 2004 when the GDP fell by 1% from 8.5% to 7.5% due to similar causes. But this prediction of downward revision is likely to be proved wrong. It is predicted that India’s GDP will still grow at the rate close to 7% this year as predicted earlier.

Forecasting the impact that drought can have on our economy, government is taking drought relief measures that will protect the rural income and in turn help in lowering the impact of drought on growth rate.

Though economists are divided whether the drought will have much impact on the GDP or not, any impact on the production and price due to drought will have a direct impact on the employment and demand which in turn negatively affect GDP. Surely, drought is a serious issue that the government is facing. Relying on the old buffer stock for consumption problem may be a short term solution to the problem of drought, but it’s time for the government officials to put on their thinking caps on and take some substantial steps to cure this problem.

Submitted By:

Neha Daga

Chetan Raghav

It's All Less Taxing Now

Our finance minister, Mr. Pranab Mukherjee released the draft of the long awaited Direct tax code to be implemented from year 2011 on Wednesday,12^th August,2009 . The new tax code represent a radical review of the Income-Tax Act, 1961 which is in operation right now. It marks a paradigm shift in the Tax structure of our country.

Taxes serve the main objective of financing government expenditure. There used to be a time when there were 11 different tax-rates depending on the income of an individual. The rates used to be as high as 97.75% of the total income of an individual. Naturally, most of the people tried to evade taxes. Even now, when the tax structure has been eased a lot, people try to evade taxes. Now consider the situation, after this tax code will be implemented-The tax rate for people having income from 1.6 lakh-10 lakh is only 10% which means that majority of Indians will be paying only 1/10^th of their earnings. So the basic motive behind changing the existing tax structure is to simplify the tax procedures by introducing moderate level of taxation and expanding the tax base.

The tax rate slabs have been expanded with an assumption that more people will be encouraged to pay taxes now. Prima facie, tax structure looks to be quite impressive-The slabs for individuals have been drastically changed. It proposes to tax incomes up to Rs 10 lakh at 10%, that between Rs 10 lakh and Rs 25 lakh at 20% and sum in excess of that at 30% which is in sharp contrast to complicated tax structure applicable now-a-days. For someone earning say, Rs 14.5 lakh per year, the new numbers could look something like this: Rs 1.6 lakh (basic exemption) Rs 3 lakh (saving) Rs 9.90 lakh taxable income, tax rate for Rs 10 lakh = 10 per cent Tax liability = Rs 99,000. Looks brilliant, but the tricky part lies in the fact that all the perks that an employee used to enjoy in his salary will now be brought under the tax net. This means the taxable income will now be higher. But on the whole, new tax structure stands to benefit middle-class.

One good news for students pursuing higher education through loans is that the term ‘higher education’ has been enlarged to include full-time studies in graduate or postgraduate course for the purpose of deductions under savings. Also, there will be no more any confusion between AY(Assessment Year) and PY(Previous Year), now only FY, i.e financial year will be used. The tax draft has also tried to make the corporate sector happy. The tax rate on profits of the company has also been decreased from 30% to 25%.

The new tax structure basically aims at encouraging the idea of savings among people and at the same time leaving more disposable income in hands of people for the purpose of increasing consumption in the times of recession. Apart from this, the new tax code also tries to reduce the incidence of tax avoidance. It has incorporated a whole chapter on provisions to prevent tax-evasions. Taking into account all these, the new tax code looks to be a well-structured, comprehensive and better tax structure that was much needed in India’s quest to be a developed nation. The only thing to be seen now is how successfully will this new tax structure be implemented and adopted by government and people of our country.

Contributed By:

Arun Singhal

Opportunities In Distress!

Recession is possibly the best time to launch a new business, expand an existing one or get ahead in career if you understand the importance of creating and delivering genuine value during the time when people need it the most!!

It’s true that during a recession, the media turns a little bit of negativity into a mountain of pessimism. This makes a lot of people financially paranoid. People become socially conditioned to expect the worst. If you buy into this social hysteria, you become a victim too. But if you tune out such panic and maintain a grip on rational thought, you’ll see some amazing opportunities popping up everywhere you look.

During such times people get scared and start cutting back on expenses. They stop buying stuff they don’t need, or ostensibly as they are made to think so! This causes some companies to do poorly, especially companies that don’t provide the value that we really need. We can put off non-essentials and live without new credit cards and fuel-guzzling SUVs for a while.

We become more sensitive to receiving genuine value. When we spend money, we want to make sure that we are getting a fair deal. Consequently, businesses that provide genuine value can actually do better during a recession. More and more people will flock to those businesses in tough times, while the fluff companies will only be on a downward spiral.

Companies trying to extract money without providing fair value in exchange find it tough to survive a recession. Many of the dead or dying financial companies are like that. Recession helps to weed out the companies that are not creating and delivering value. Many of those companies were doing a good job at one time, but they failed to keep pace. Companies that cannot adapt to changing values deserve to die off, and are replaced by new companies that have a better sense of people’s current needs and desires.

The need of the hour is to create and deliver genuine value, because that is what is going to help a company rise above recession and sustain its growth over the years. And History testifies that, the ones which could weather, could last!

Submitted By:

Mehak Gandhi

Cashonova Quiz 8 with Answers

1) Whose face is hidden behind the note?










Ans)Ben Bernanke





2) Connect







Ans)All have currencies named after them. Simon Bolivar (Bolivia and Venezuela) , Hernandez Balboa (Colombia) and Quetzel (Guatemala)



3) What currency is this?






Ans) Pound


4) Identify the 2 gentlemen and tell me who comes next in the list?






Ans)D Subbarao, these 2 are Bimal Jalan and YV Reddy



5)








The lady above is a parody of a financial institution. Name the financial institution.
Ans)Bank of England
6) What was Five Hundred Thousand called in the old Persian number system?
Ans)Crore

7)













This is a film poster, of a film named after an institution which is of high significance particularly in the history of insurance. Name the institution.
Ans)Lloyds of London

8)"His income and PAN card would help. Even if you have below taxable income,then also you can get a PAN card. So, one should apply for a card, aswithout it one cannot get return of income," said Agarwal. This is a statement made by the father, of a young boy in Orissa who was signed up by a voluntary organization as a model. Who is this boy, and what is his significance in the history of finance?
Ans)Ayush Ranjan Rout, youngest PAN card holder