“Markets have overreacted to global events. But, that doesn't mean they can't fall further”
— Motilal Oswal, CMD, Motilal Oswal Securities
— Parag Parikh, chairman, Parag Parikh Financial Advisory Services
— Aditya Puri, managing director, HDFC Bank
— Arun Kejriwal, director, KRIS Securities
|Commodities ||Inflation in Feb08/Feb07 ||Share in consumption*|
|Egg, Fish and Meat||7.65%||2||2.9|
|Fruits and Vegetables||6.07%||11.5||15.2|
|*Urban per capita consumption in kg and litres|
Experts say that 40% of a domestic airline’s operating cost goes towards aviation turbine fuel (ATF). Every time the price of ATF or the tax on this fuel goes up, the hike is immediately passed on to passengers. However, the fuel surcharge has now crossed Rs 1,600 and airlines are reluctant to raise it again so close to peak season. This is despite the fact that ATF prices in Delhi have gone up from Rs 44,716 per kilolitre in February 2008 to Rs 47,049 in March. Does this mean that flying will inevitably get more expensive? Not if the state governments of Andhra Pradesh and Kerala have anything to say. The two southern states recently cut the tax on ATF from over 30% to just 4%.
“Standardising the ATF tax at 4% would lead to a 10% reduction in our overall operating costs, which is pretty substantial,” says a GoAir official. The advantage has so far been restricted to airlines, but ideally this benefit should be passed on to passengers flying from and to these two states.
An industry veteran says that it’s likely that other states will also cut the tax, if not so dramatically. With low-cost airlines set to woo travellers even more this season, chances are that any tax reduction will immediately translate into lower fares.
— Sushmita Choudhury
Flying into the country
|Year||Remittance ($bn)||Purchasing power (including inflation) with 2004 as base ($bn)|
India has beaten China when it comes to receiving remittances, says a World Bank report. In 2007, the report says, Indians sent a whopping $27 billion back home, easily topping China ($25.7 billion) and Mexico ($25 billion). Higher remittances should translate into higher purchasing power. However, while remittances increased by 44% between 2004 and 2007, the rupee appreciated by 15% against the dollar during this period. So, after accounting for appreciation, remittances increased by just 32%. Then factor in inflation, and the growth in remittances is just 13%. If, as the report mentions, purchasing power is measured by the price of crude oil instead of the CPI, there would have to be almost twice the increase in actual remittances between 2004 and 2007 to maintain the purchasing power of these remittances. This will also have a bearing on the destinations preferred by migrants. The depreciation of the US dollar might make Europe more attractive.
— Rakesh Rai
The What and Why
• Financial products and services are converging
• Distributers/agents sell multiple products
• This has created gaps in regulation of distributors
• Faaida is a new body that aims to bring distributors of all products under one roof
• This will help reduce mis-selling
The Securities and Exchange Board of India (Sebi) looks into stock market related regulations, the Insurance Regulatory and Development Authority (Irda) covers insurance, the Reserve Bank of India (RBI) looks at banking and the Pension Funds Regulatory and Development Authority (PFRDA) looks into matters regarding pensions and pension funds. So who regulates the financial intermediaries?
The convergence of financial services and products is here. Banks offer wealth management services, insurance companies offer investment and retirement products and now mutual funds offer commodity-linked products. With so much convergence, there are naturally issues and concerns regarding regulation.
Independent financial advisers (IFA) do not have a common platform as of today. Some of them are fund distributors-cum-insurance agents, others offer tax filing and management services as well. A new industry body representing these IFAs called the Financial Advisers Association of India (Faaida) is now trying to ensure that these intermediaries become more professional. To this end, it has launched an initiative to unite, educate, train and empower financial advisers to not just sell, but also actually offer advice on financial products and match the services offered by large financial organisations.
While Faaida has not yet applied to Sebi to become a selfregulatory organisation (SRO), it plans to propose to Sebi to consider it as an SRO. In the guidelines, Sebi has asked IFAs to be a member of an SRO. This means any potential adviser and seller of financial products will have to be a member of an SRO. If the Faaida decides to apply for SRO status, financial intermediaries will have their own industry association to look out for their welfare. This will leave them free to provide better services to investors and prospective customers.
|Cover up to (age of policyholder)||85|
|Minimum cover (days)||1|
|Maximum cover available (days)||365 (renewable)|
|Plan options (on varying cover)||5|
|Plans for||Individual and family|
You know that medical care is prohibitively expensive in most of the developed world. However, unless the visa requirements insist upon travel health insurance, most people conveniently ignore this cover. That’s because the claims process for such policies is notoriously complex, and the kind of services and benefits available are not really what the doctor ordered.
Now, ICICI Lombard has tied up with UnitedHealth International to offer a travel medical insurance that promises decent cover and an easy claims process for travellers from India to the US.
It works like this. Once you sign up for the policy, you are given a UnitedHealth card, which lets you access all the facilities and benefits that are available to United’s customers in the US. Says Sudhir Menon, head, travel insurance, ICICI Lombard: “This plan is good for those who are likely to stay in the US for long periods.”
It looks like an ideal plan for those senior citizens planning to visit their children in the US, particularly since it is available to anyone below the age of 85. It’s also a cheap option for Indian students in the US. University insurance costs anything above $1,000, while this cover (a one-year student policy) costs Rs 15,000.
The Securities and Exchange Board of India (Sebi) has finally cleared the air regarding entry and exit loads on bonus units of mutual fund schemes. The regulator has asked asset management companies to state in the draft offer documents that no fee will be charged on bonus units. The argument behing the move is that it is investors’ money which contributes to the earnings and that investors are not entering the scheme afresh. Hence charging an entry load does not make any sense. However, this really does not make a tangible difference to investors, as mutual funds have not been charging entry or exit loads on bonus units and on reinvested dividends. What this step does is to do away with the existing legal lacunae.
Some figures that have immediate or long-term personal finance implications
tonnes is the demand for gold ETFs, as of December 2007.The huge leap from just 19.2 tonnes a year earlier proves that investors are finally taking over from jewellery buyers
crore rupees is the amount invested in equities by MFs between January and March this year despite a volatile market
is the number of propertyrelated IPOs expected in this year according to an Ernst & Young report
is the number of hot spots in India.The size of the wi-fi market is curently $137 million but is expected to mushroom to $891 million by 2011-12
Quiz: Financial Wisdom
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