Indian Government cashes on Gold Rush

The Phenomenal rise in Gold Price and its entry as a Investment Vehicle in the Last decade attracted many towards the precious metal. The Gold ETF's across the India became flavour and favour. Inspite, this rise the Indian Gold demand remain inelastic and more so Price Inefficient. In Mid 60s till mid 90s Gold remained as the Smuggler's Favourite and M/s Hajji Mastan and Co made a Huge moral victory by smuggling gold over drugs.
Mr Yashwant Sinha then finance Minister lowered the custom duty on Gold. 2001-2002:"In order to discourage smuggling I propose to reduce the duty on gold from Rs 400 per 10 grams to Rs 250 per 10 grams."- Yashwant Sinha.
Well, then Gold was trading at much Lower Price @ $ 300 per Ounce and RS 6000 about in Indian Currency .

The Call of Duty

In a bid to match the import duty with rising prices, the government trebled the customs duty on import of gold by increasing the duty twice by Rs. 100 each time, during the Fiscal Year 2009-10.

On 17^th January 2012 the government again changed the import duty and it has been set at 2% of value from the earlier import duty of flat Rs 300 per 10 grams. This means, at current price of Rs. 27,700 (rounded-off current gold price) for 10 grams of gold, while you used to pay Rs. 300 as customs duty, it will now increase to Rs.560 (approximately) per 10 grams. In other words, customs duty which amounted to 1.08% at current prices has increased to 2% of value; nearly double of the tariff.

What made the government raise the import duty on gold again? Here are a few probable reasons...

One, India is the world's largest consumer of gold and most of the gold demand is satisfied through imports. As consumption of gold increased, the value of gold imports also saw a rise. We know that higher imports require higher foreign exchange to pay for the import bill, causing a strain on the country's trade balances. Higher imports and rising gold prices worsened the rising trade deficit issue. As per December 2011 data, gold and silver imports grew at 53.8% to $45.5 billion.

Is Gold an Investment for Indians..?

Traditionally, Yes and quite wisely Gold is called Woman's Wealth ( Stree Dhan ). Its exchangeable and posses highest liquidity otherwise remains static in Value. Surely, No one has ever called it as trader's paradise.  

Does it make economic sense..

I think Gold at this price of Rs 27000/ looks tad costly but at Rs 20000 sure is a Buy.

Asset Destruction Markets,,? Dollar Is King ..

The Market Hopes are getting on with unsolicited News from the Euro Central Banks . The falling US Deficit on Monday gave fill up towards $. The FOMC meet yesterday again thwarted the more Dollar flooding the market and Today's OPEC resolution struck the ' Death Nail "  on the Over Priced Commodity Complex. As, Crude Nose Dived from the top of Chart, hurling towards its 200 day SMA. The Precious metal and Gold Lost it's Last Leg. Euro firmly settling under the 1.30 against Dollar showed that market have unwound its 'Commodity flirt.
Albeit, the people are going to kick the can when they see Gold prices in the coming months. The Money Fly has shifted from the Gold and Commodity Complex to the more secure US dollar and US Bonds and US Equity.
The crystal gazing for the 2012 seems to be the optimism for the US stocks and one can reasonably expect a rally there. But, As the Alcoa results approach US equities are going to loose the steam and the Major disappointments are likely to follow one after another.

Indian turmoil is on and from inside and from outside the Indian government is appearing more like a Chaotic and Helpless. The Indian Government with all it's lacuna's and short comings on the Public glare. It's like being Caught napping and Pants Down.!!1

The time for India to retrieve the lost ground will come and but may not be in vary near future. Indian rise now appear to be Mirage.

It seems the cornered Indian government may soon find it self in a very Tight Cusp of Financial Difficulties.

Will this hapless and Hope less scene may attract Investors..?

It seems real long term investors who have kept there Money in Safe may find Indian Silver on the Street..?

Indian Budget deficit to rise to 5.5 %..?

The finance ministry on Friday sought Parliament’s approval for a net additional expenditure of Rs. 56,848.46 crore, which will take the fiscal deficit way past the budgeted 4.6% of gross domestic product (GDP).

Submitting the second supplementary demand for grants, the ministry projected a gross additional expenditure of Rs. 63,180.24 crore. Out of that, the government plans to meet Rs. 6,330.8 crore of expenditure through savings on the money already allocated to various departments.

The additional expenditure is a sign of pressure on government finances and indicates that a revenue shortfall is for real, said D.K. Joshi, chief economist at credit rating agency Crisil Ltd.

“As there is no revenue buoyancy, the government has to meet the additional expenditure through higher market borrowing,” he said. Concerns of additional government borrowing pushed up yields in the government securities market. The yield on the 10-year benchmark paper rose to 8.84% in intra-day trading before ending the day at 8.81%, higher than Thursday’s close of 8.79%.

In the first supplementary demand for grants in August, the government had projected an additional gross expenditure of Rs. 34,724 crore, entailing a net cash outgo of Rs. 9,016.06 crore.

In September, the government announced that it will borrow an additional Rs.52,872 crore from the market in the second half of 2011-12, raising its borrowing programme for the fiscal to Rs. 4.7 trillion.

The government had budgeted to borrow Rs. 4.17 trillion for the current fiscal. The government, which has already borrowed Rs. 2.5 trillion in the first half of the fiscal, will now borrow Rs. 2.2 trillion in the second half. Crisil has projected the fiscal deficit at 5.2% of GDP, which may need to be revised upwards, Joshi said.

M. Govinda Rao, director at the National Institute of Public Finance and Policy, said he expects the fiscal deficit at 5.5% of GDP for the current fiscal.

On Tuesday, finance minister Pranab Mukherjee said the government will find it hard to meet the 4.6% target in the year to March because any belt-tightening may hit jobs and slow economic growth even further. The economy is expected to grow 7.6% this year, down from 8.5% in the last fiscal.

“This is a difficult target, given the deterioration in the global economy and its impact on India over the last three-four months,” Mukherjee told the Lok Sabha. “We have to be careful not to overdo ourselves in reaching this target, since that can have an excessive slowing-down impact on growth.”

Indian Infrastructural Growth stalls : shows Data

Index of Eight Core Industries (Base: 2004-05=100)  September 2011

1.         The summarized Index of Eight Core Industries with 2004-05 base is given at the Annexure. 2.         The Index of Eight core industries having a combined weight of 37.90 per cent in the Index of Industrial Production (IIP) stood at 131.50 in September 2011 with a growth rate of 2.3% compared to its growth at 3.3% in September 2010.  During April-September 2011-12, the cumulative growth rate of the Core industries was 4.9% as against their growth at 5.6% during the corresponding period in 2010-11. Coal 3.         Coal production (weight: 4.38%) registered a growth of (-) 17.8% in September 2011 compared to its growth at (-) 1.8% in September 2010. Coal production grew by (-) 4.8% during April-September 2011-12 compared to its growth at 0.2% during the same period of 2010-11.  Crude Oil 4.         Crude Oil production (weight: 5.22%) registered a growth of 0.1 % in September 2011 compared to its growth at 12.5% in September 2010. Crude Oil production registered a growth of 5.1% during April-September 2011-12 compared to its growth at 10.2% during the same period of 2010-11. Natural Gas 5.         Natural Gas production (weight: 1.71%) registered a growth of (-) 6.4% in September 2011 compared to its growth at 12.6% in September 2010. Natural Gas production registered a growth of (-) 8.5% during April-September 2011-12 compared to its growth at 25.2% during the same period of 2010-11. Petroleum Refinery Products 6.         Petroleum refinery production (weight: 5.94%) had a growth of 4.4% in September 2011 compared to its growth at (-) 10.2% in September 2010.  Petroleum refinery production registered a growth of 4.7% during April-September 2011-12 compared to its 2.6% growth during the same period of 2010-11. Fertilizers 7.         Fertilizer production (weight: 1.25%) registered a growth of (-) 2.1)% in September 2011 against its growth at 0.3% inSeptember 2010.Fertilizer production grew by 0.6% during April-September 2011-12 compared to its growth at  (-) 2.3% during the same period of 2010-11.  Steel (Alloy + Non-Alloy) 8.         Steel production (weight: 6.68%) had a growth rate of 6.6% in September 2011 against its 11.7% growth in September2010. Steel production grew by 9.5% during April-September 2011-12 compared to its growth at 7.4% during the same period of 2010-11. Cement 9.         Cement production (weight: 2.41%) registered a growth of 0.9% in September 2011 against its 5.2% growth inSeptember 2010. Cement Production grew by 2.5% during April-September 2011-12 compared to its growth at 4.7% during the same period of 2010-11. Electricity 10.       Electricity generation (weight: 10.32%) had a 8.9% growth in September 2011 compared to its 2.1% growth inSeptember 2010. Electricity generation grew by 9.3% during April-September 2011-12 as against its 4.1% growth during the same period of 2010-11.

Time to separate equity Investment ( E.L.S.S.) and Tax Saving

The Direct Tax Code has removed the Equity Linked Tax Saving Scheme popularly know as E.L.S.S. as the Tax Saving Instrument from the Financial Year 2012. Naturally, the present tax saving schemes shall become ' Dormant ' Schemes and shall commence there Sunset thereafter. This Schemes gave Huge advantage to Small Investors like me, for last 2 decades and are the MOST Beautiful tax saving instruments till today. The Changes from the Governmental Stance as of now on this Schemes is for sure, unless declared otherwise.

However, the sudden Death of E.L.S.S. may put Mutual Fund Houses, Fund Managers and the Investors in a very difficult zone of inconvenience and possibly  future Losses. 

1) End of Liquidity : Naturally, the Lack of Fresh Investment triggers this open ended scheme into a Sunset schemes, wherein no new investment likely to come. The Investment Corpus of the Fund is Just Frozen from April 2012 on wards

2) Fund Management difficulties : ( Likely )

   1) Redemption Only : The Sunset Schemes may have only Redemptions, as investors may switch over to new Schemes increasingly

    2) Larger Cash Holding : The Cash Component maintained by the Fund Managers is likely to Increase in Anticipation of the Likely Redemption by the Investors of the Scheme. This may affect the fund management potential of the Fund Manager and in turn the Performance of the particular Fund.

   3)  Fund ( Under ) Performance :

       A) Falling Market Conditions :
                   In the Falling Market conditions, Asset Under Management ( A.U.M.) of the Fund falls down and Fund Managers make a Huge Efforts to maintain the Net Asset Value ( N.A.V.) thus safe guarding the Investor's Wealth.  However, the extra Cash Call of Sunset Scheme may put a limitation and hesitancy on the Manager. Moreover, in Panicky conditions many Investors sell the press button, putting redemption pressure/ Stress on the A.U. M.of  Fund. This may put enormous pressure on fund and the task of maintaining  ' Beta ' of the Fund with its Underlying Index be stressful. Some Funds may under-perform significantly over the market.

      B)  Rising Market Conditions : 
             
                  The rising market conditions may ' Cushion ' the A.U.M. of the Fund. But, the defensive posturing of Fund's asset allocation i.e. A Larger Cash Calls may affect the fund failing to give Market Performance leave alone the ' Alpha ' i.e. performance better than Market or the Underlying. This again may find opportune Investor to switch or Redeem the FUND. Thus Accentuating under performance of Scheme.

     C ) Volatile Markets may make the conditions from the Bad To Worse for the Obvious reasons

3) Fund Expenses :  Rising Expenses..?

Obviously, the Fund Managers may well have to take calls on market often, for better Fund management and if so, the ' Turnover Ratio' of the Folio may rise and expenses  in many cases may rise. The SEBI Ceiling of expenses if reached, may hamper the fund management perversely.

4) Quality of Management : 

This ' DEAD WOOD ' Fund management may affect the Aspects like  ' Investment Calls' ,  ' Sectoral and Asset Allocation' and '  'Liquidity Management ' and Several other nitty' gritty's involved in better fund management. In Short, Many Funds may find this Task beyond Control and may feel  ' Trap Door' conditions insurmountable.

5) Disinterest by Fund Houses : 

    Some Fund houses may simply ignore this Schemes, for one or all the above reasons. As Such there is no any precedence that I know, but Some Houses were reportedly 'dumping ' in this Schemes, in the ' Haydays' of 2007-08. Even, though the morality of Indian Mutual Fund Industry is not doubtable but the circumstances may turn daunting and difficult to protect investors' wealth.

6) Investor protection :

The best Guy to protect an Investor is Himself. However, even if one takes up the call to invest in E.L.S.S, THE FUND with LOW AUM be Best Avoided for the reason of culpability to the Hostile Circumstances. The track record  and Portfolio Analysis are worthy tools. Investors may take an Independent advise.

The Best Advise to Investors would be to Separate the Equity Investment particularly through Mutual Fund  E.L.S.S. and Tax Saving. Unless, of Course the Finance Ministry extends the Scheme even if, it is on Exempt-Exempt-Tax basis. 


And, It will be highly advisable to take good advise, create prudent strategy and Keep yourself HAPPY.



At Present the only Guy who can tell you further.
   
   
   
 

NMDC, India Result by Indian Steel Minister

Steel Minister Reviews the Performance of NMDC

The Union Steel Minister Shri Beni Prasad Verma has reviewed the performance of NMDC Ltd., a Navratna PSU under Ministry of Steel for the first quarter (April-June), 2011-12 here today. The CMD of NMDC Shri Rana Som briefed the Minister about the performance of the company during the first quarter of 2011-12 and highlighted its achievements against the MoU targets for the year quarter. The Minister expressed satisfaction over the performance of the company in the first quarter of the financial year 2011-12. He was informed that the Company has embarked upon expansion and diversification plans in India and abroad. However, the Minister stressed that the upcoming projects of NMDC in India and abroad specially its 3 MTPA Integrated Steel Plant at Nagarnar, Chhattisgarh, its 1.2 MTPA Pellet Plant in Donimalali, development of Deposit – 11B Mine in Bailadila Sector, Chhattisgarh and Kumaraswamy Mine in Karnataka needs to be completed as per schedule. The Minister also appreciated the R&D efforts of the Company for converting the low grade iron ores such as BHJ and BHQ into value added products. The Company has been consistently showing excellent results. During the year 2010-11, the production of iron ore was 25.16 million tonnes as compared to 23.80 million tonnes during previous year showing a growth of about 6%. Sales Turnover of the company during 2010-11 was Rs. 11367.42 crores against Rs. 6229.54 crores during the previous year, registering an increase of about 82%. The company earned profit before tax of Rs. 9727.17 crores during 2010-11 as compared to Rs. 5207.32 crores during previous year and profit after tax during 2010-11 was Rs. 6499.22 crores as compared to Rs. 3447.26 crores during previous year. The performance has further improved during the first quarter of 2011-12. During the period April – June, 2011, the production of iron ore was 6.07 million tonnes as compared to 5.76 million tonnes in the corresponding period of previous year showing a growth of 5%. The turnover during first quarter of 2011-12 was Rs. 2782.61 crores in comparison to Rs. 2517.99 crores during the first quarter of 2010-11. The profit before tax during Q1 of 2011-12 was Rs. 2662.69 crores in comparison to Rs. 2249.22 crores of the first quarter of 2010-11. ***

The Entrenched Inflation Numerical Down to 8.84%

Indian weekly Food Inflation Data for the week ended September 10, 2011 was out today. The inflation showed the numerical mop down to 8.75 % of about. This rise in Inflation is on the back of Last Years ' Inflation Explosion' of 16%+, and hence shows only numerical value than any applause   It was in last year when the Government of India's Advisor Mr Basu was supportive the inflation by Saying ' Sometimes it is Essential to Have some degree of Inflation and was hopeful of Inflation to come down soon' Mr. Ahuliwalia seconded it. R.B. I tugged the line with its ' Baby Steps' theory. Readers may well remember the ' Onion Explosion' , followed thereafter. It seems Mr Basu, who is from Foreign University not only is inexperienced to Indian Society, it seems ' Big Talking ' Economist, who did not recognise that, In India Inflation is hardly an answer to the economic progress of the country. Had Some Bold steps been initiated then, the India's sustaining power could have been saved. It seems, all Mr Basu wants to promote the Western + China model into India's economic structure and now with experimenting with changing the Indian distribution System of Farm Products, Namely F.D.I in Indian Retail. The Entrenchment of Inflation and India's Growth Story is not only a Number Crunching Exercise, but it is the on the ground growth of the working Indians. The experimented Budget and playing with Inflation has Put Indian growth Story to a Toss. The presumptions and Complacency along with total mis- management has put the Indian Rupee to the throes of 50 against Dollar. It seem that, the government has yet to awaken to the economic call of the current time. It is expecting sell of Indian Companies to the FII's and garner some hard cash. The Tax projections are Considering the Higher Growth rate and is not envisaging the ' Slow down ' With many sectors like Auto, Air lines, Housing debasing and as Inflation with high Interest rates tightening, unless Indian government cuts it's over bulging expenses or stokes the unaccounted money to source the Cash, the Dream soon may turn into a nightmare.... The Inflation date details are here to see the Number Crunching Exercise ....

Wholesale Price Indices for Primary Articles and Fuel & Power in India (Base: 2004-05 = 100) Review for the week ended 10th September, 2011 (19 Bhadrapada, 1933 Saka)

The WPI for the week ended 10th September, 2011 in respect of ‘Primary Articles’ and ‘Fuel & Power’ is given below: PRIMARY ARTICLES (Weight 20.12%)  The index for this major group declined by 0.1 percent to 201.9 (Provisional) from 202.0 (Provisional) for the previous week. The annual rate of inflation, calculated on point to point basis, stood at 12.17 percent (Provisional) for the week ended 10/09/2011 (over 11/09/2010) as compared to 13.04 percent (Provisional) for the previous week (ended 03/09/2011).  The groups and items for which the index showed variations during the week are as follows:- The index for 'Food Articles' group rose by 0.2 percent to 195.7 (Provisional) from 195.4  (Provisional) for the previous week due to higher prices of poultry chicken (8%), fish-marine (6%), gram and urad (2% each) and egg, tea, barley, fish-inland, arhar and moong (1% each). However, the prices of maize (4%), jowar and fruits & vegetables (2% each) and bajra, ragi and wheat (1% each) declined. The index for 'Non-Food Articles' group rose by 0.1 percent to 185.4 (Provisional) from 185.2  (Provisional) for the previous week due to higher prices of raw cotton (4%), raw jute (2%) and raw silk,      gingelly seed, soyabean, copra (coconut) and groundnut seed (1% each). However, the prices of      flowers (16%), castor seed (5%) and linseed and gaur seed (1% each) declined. The index for 'Minerals' group declined by 1.4 percent to 306.3 (Provisional) from 310.8 (Provisional) for the previous week due to lower prices of crude petroleum (3%). FUEL & POWER (Weight 14.91%) The index for this major group rose by 0.8 percent to 168.2 (Provisional) from 166.8 (Provisional) for the previous week due to higher prices of electricity (industry) (7%), electricity (agricultural) (6%),      electricity (domestic) (4%) and electricity (commercial) and electricity (railway traction) (3% each). The annual rate of inflation, calculated on point to point basis, stood at 13.96 percent (Provisional) for the week ended 10/09/2011 (over 11/09/2010) as compared to 13.01 percent (Provisional) for the previous week (ended 03/09/2011).  Build up inflation over the week, financial year end and over the year is given in Annexure-I for some important items. Trend of rate of inflation during last six weeks is also given for some important items in Annexure II. Next date of press release: 29/09/2011 for the week ending 17/09/2011 This press release is available at our home page http://eaindustry.nic.in

Commodities/Major Groups/Groups/Sub-Groups	Weight	WPI Sep 10, 2011	Latest week over week		Build up from end March		Year on year		52 week Average
			2010-11	2011-12	2010-11	2011-12	2010-11	2011-12
Primary Articles	20.12	201.9	0.73	-0.05	8.04	7.17	17.65	12.17	14.79
Food Articles	14.34	195.7	0.73	0.15	9.37	9.27	16.30	8.84	11.16
Cereals	3.37	176.6	0.18	-0.67	2.29	2.97	7.00	4.13	4.11
Rice	1.79	173.3	0.30	-0.06	2.15	3.90	5.71	4.02	3.72
Wheat	1.12	168.1	0.00	-0.71	0.99	-1.47	9.02	-2.72	-0.40
Pulses	0.72	198.1	-2.50	1.43	-2.50	4.59	3.06	1.49	-6.80
Vegetables	1.74	211.7	4.37	-0.38	45.57	47.63	12.25	12.13	13.56
Potato	0.20	159.4	5.90	-0.56	37.49	48.56	-46.09	13.78	-20.96
Onion	0.18	246.5	8.70	-1.99	21.94	46.12	7.48	28.92	40.59
Fruits	2.11	176.5	1.35	-2.75	3.23	-5.26	11.52	17.67	22.00
Milk	3.24	194.6	-0.17	0.15	3.40	11.84	23.55	10.38	11.82
Egg, Meat & Fish	2.41	216.6	0.20	3.34	13.26	9.73	29.29	9.28	14.03
Non-Food Articles	4.26	185.4	1.02	0.11	4.85	-3.29	18.72	17.42	23.72
Fibres	0.88	228.3	-0.79	3.40	16.39	-20.45	31.84	29.13	54.42
Oil Seeds	1.78	162.2	0.58	0.37	2.50	7.49	4.27	16.44	9.38
Minerals	1.52	306.3	0.00	-1.45	5.09	14.89	25.79	25.84	24.09
Fuel & Power	14.91	168.2	0.00	0.84	5.35	6.52	11.48	13.96	11.99
Liquefied Petroleum Gas	0.91	147.3	0.00	0.00	14.99	14.27	15.30	14.27	14.11
Petrol	1.09	172.4	0.00	0.00	8.62	8.70	15.33	23.23	23.41
High Speed Diesel Oil	4.67	167.8	0.00	0.00	6.15	9.24	14.64	9.32	10.36

Commodities/Major Groups/Groups/Sub-Groups	Weight (%)	Rate of Inflation for the week ending
		10-Sep-11	03-Sep-11	27-Aug-11	20-Aug-11	13-Aug-11	06-Aug-11
Primary Articles	20.12	12.17	13.04	13.34	12.93	12.40	11.64
Food Articles	14.34	8.84	9.47	9.55	10.05	9.80	9.03
Cereals	3.37	4.13	5.02	5.45	4.64	5.22	6.23
Rice	1.79	4.02	4.39	4.65	4.40	6.02	5.58
Wheat	1.12	-2.72	-2.03	-1.04	-2.52	-2.80	0.59
Pulses	0.72	1.49	-2.45	-1.56	-4.16	-5.56	-5.63
Vegetables	1.74	12.13	17.47	22.42	15.78	6.52	2.59
Potato	0.20	13.78	21.16	13.38	13.31	16.39	7.22
Onion	0.18	28.92	42.98	42.03	57.01	44.42	37.62
Fruits	2.11	17.67	22.64	16.57	21.58	27.01	26.46
Milk	3.24	10.38	10.02	9.12	9.22	9.51	9.76
Egg, Meat & Fish	2.41	9.28	5.97	7.26	12.62	13.37	9.93
Non-Food Articles	4.26	17.42	18.49	19.88	17.19	17.80	16.07
Fibres	0.88	29.13	23.91	38.60	37.66	37.18	34.32
Oil Seeds	1.78	16.44	16.68	17.43	15.43	15.91	16.47
Minerals	1.52	25.84	27.69	27.48	24.42	20.69	21.25
Fuel & Power	14.91	13.96	13.01	12.55	12.55	13.13	13.13
Liquefied Petroleum Gas	0.92	14.27	14.27	15.28	14.58	14.58	14.58
Petrol	1.09	23.23	23.23	23.23	23.23	23.23	23.23
High Speed Diesel Oil	4.67	9.32	9.32	9.32	9.32	9.32	9.32