MoneyVedam

1. Covid Impact Covid Impact, Part III - To Economy & Trade Covid Impact, Part II - To Jobs & Income Covid Impact, Part I - To your Personal Finance What's in the 1.7 crore Coronavirus Relief Package? 2 . Markets Mayhem Who’s winning when Nifty is @12k? What's behind Nifty's new peak @11470? The Curious Case of Nifty @10452 Demonetization - Impact on investments & returns! FIIs, DIIs and RIs - Part II FIIs, DIIs and RIs - Part I Are Indian Investors smarter? 3. Policy Affairs Budget 2020 Budget(s) 2019 Is this India’s sub-prime moment? Is it a war on currency or oil, again? Budget 2018 – Impact The Big Bank Scam? Startup Funding or Social Welfare?! Did Demonetization really go after black money? The Story behind Farm Subsidies Does India need a Sovereign Wealth Fund? (Part II) Does India need a Sovereign Wealth Fund? (Part I) India's Income Pyramid Rupee Decline – Reasons.. Rupee Decline 4. Mutual Fun...

In response to the coronavirus pandemic, India announced a 21-day lockdown from 24.Mar.2020. Crores of low-income and migrant workers were the first ones to be hit hard by this drastic measure. To provide support to their livelihood during the lockdown period and subsequent recovery period, Finance Minister Smt.Nirmala Sitharaman announced a Rs.1.7 Lac Crore relief package on 26.Mar.2020, the details of which are presented below. The PM Gareeb Kalyan Scheme A. The Pradhan Mantri Gareeb Kalyan Anna Yojana Under this plan, 80 crore poor people in the country will get 5 kg of rice or wheat per month free of cost, in addition to the 5 kg they already get on a monthly basis. Each household will additionally get 1 kg of preferred dal for free for the next three months. B. Cash transfer scheme PM-KISAN Scheme (since 2019) - 8.7 crore farmers will get the first of the three installments of Rs 2,000 front-loaded to their accounts on 1.April.2020. MGNREGA: Wage increased from...

The previous blog gave an idea on the depth of the impact created by covid-19 on jobs and incomes of people. This blog traverses its impact on the macro economic aspects of Indian economy and trade as a whole.  Sectors with lifeline(s) cut-off With several countries announcing lockdown, air travel was the first sector to get impacted by covid-19. Airlines, tourism and hospitality industry took the deepest cut, with some of them facing a threat of bankruptcy in these tragic times. The next wave of sectors that are directly hit by the lockdown are in the manufacturing cluster - capital goods, cement, food products, metals, plastics, rubber & electronics. Not to mention the automobile and auto ancillary sectors which were already reeling under severe stress due to a multi-year downturn in the auto industry. Services sector comprising banking, transport, logistics, retail, real estate, education, entertainment and sports is under lockdown. For the first time in the nation'...

It is one week since India proclaimed a lockdown on 24th March 2020. Tens of thousands of people started moving back to their hometowns. Those fortunate ones that could afford to work from home (wfh) settled back in their homes, while those that could not wfh stare at loss of income(s). Worse off are crores of low-income migrant workers across the nation, with a gloom future due to loss of job, income & livelihood - they are still walking 100s of kilometers back to their homes, also facing a lethal threat of contracting the viral infection. This blog aggregates data from several news sources to present a snapshot of where the nation is heading in terms of jobs & income! India's Workforce - The big picture With a population of 137 crores, India's workforce stands close to 50 crores. Of this, 20 crore people work in farms/agri related primary sector and 26 crore people work in non-farm sector. And at any point in time, about 3-4 crore people are unemployed as they ...

The rapid spread of the novel coronavirus (aka Covid-19) across 104 countries in the world has caused panic and fear in the lives of people like never before. Stock markets across the world have fallen by 30% within a very short span of 3 weeks. Combined with the fight for market share of oil, launched by Saudi against OPEC+, it is not too clear how much more the markets will fall from this point onwards. On the one hand, while people are deeply distressed about the health & safety of their families, they are equally concerned about their job, investments and what the future beholds for them. Several questions arise in the minds of people - although we cannot address the health aspects, we shall try to address some of the key financial health issues here. Questions from an investor - What should I do? Qn1: Should I sell my stocks? Markets have fallen by 30-35% already, primarily due to the exit of large institutional investors. If your invest...

A lot of changes have been proposed to personal income taxes in the recent budget. This blog aims to capture most tax changes impacting the common man.. Changes to Personal Income Tax Assessees can now opt for a new simplified tax regime if they forego all current exemptions (mainly salaried class) such as LTA, HRA & 80C deductions. It also includes foregoing set-off of losses from house property against salary income. 1. 5% tax for income between Rs 2.5 and Rs 5 lakh 2. 10% tax for income between Rs 5 and Rs 7.5 lakh 3. 15% tax for income between 7.5 lakh and 10 lakh 4. 20% tax for income between 10 lakh and 12.5 lakh 5. 25% tax for income between 12.5 lakh and 15 lakh 6. 30% tax for income above 15 lakh Criteria for Non-Resident Indian (NRI) status A person who stays more than 240 days abroad is considered a NRI and can enjoy the respective tax reliefs available. Anyone staying less than 240 days abroad in a financial year is considered as a TAX RESIDENT of India and would be...

Interim budget 2019 was presented in Feb'19 and final budget post election was presented on 5 July 2019 by India's first woman Finance Minister and Tamil nadu's very own Smt.Nirmala Sitharaman. This blog attempts to capture the budget updates relevant to personal taxation. Key Highlights from both budgets Some of the key highlights on personal taxation for FY2019-20/AY2020-21 include: PAN & Aadhar are now interchangeable, allowing one to use Aadhar to file her/his income tax returns. Cash withdrawal in excess of Rs.1 crore will attract TDS of 2% (Tax Deduction at Source) ONE NATION ONE CARD - based on RuPAY to be introduced / used across bus travel, tolls, parking & retail across the country. Tax on Total Income For assessees with income in the range of Rs.2.5L to Rs.5L p.a, complete tax rebate is offered u/s 87A. This means zero tax for income upto Rs.5L. However, assessee must file Income Tax returns if income exceeds Rs.2.5L to claim this rebate. Not...

Today nifty mounted 12000+ but what did that do to individual portfolios and wealth? Who's actually winning? This blog examines these questions in the light of domestic savings and shift in investment patterns! Domestic Savings Domestic savings in India comprises of 3 sectors - households, Private & Public sectors. Households make up the largest pie, making 60% of total domestic savings. Most of the household savings are stored in 2 forms - physical assets (home/land/gold) and financial assets (bank deposits, bonds, stocks & mutual funds). India's savings rate as a % of GDP has declined from 36% (2009) to 30% (2019). Between 2009 & 2019, in particular, households savings rate as a proportion of GDP (Gross Domestic Product) declined from 25.2% to 17%. While inflation was high at 9-11% between 2009-13, it was subsequently brought down by RBI's inflation-targeted monetary policy to sub-4% in 2019. This means, real interest rates (nominal rate minus inflation)...

Ever since the IL&FS crisis hit the Indian markets in Sep'18, several things have changed for the NBFCs (Non-Banking Finance Companies), Banks and investors in debt mutual funds. This blog looks at the core problem and resulting implications for retail investors! Background NBFCs are non-deposit taking organizations that are known to reach channels not easily accessible by banks for lending. NBFCs primarily takes loans from banks and instituitional investors such as Mutual Funds & Insurance companies at say 10% and lends it to businesses such as MSMEs, Real estate builders etc at say 14%. They make 4% (14% - 10%) of the entire loan disbursed, provided such loan gets repaid. Similar to banks, unpaid loans get classified as NPAs (Non-Performing Asset). NBFCs must also set aside money from their profits to cater to such NPAs (called Provisioning). The Stats Per RBI, as of Mar'18, total bank deposits in the country stood at Rs.117Tn (Lac crores), with NPAs of Rs.10Tn. In c...

New year is here - while national budget is being prepared with a lot of vigor in the election year to impress voters, we have the responsibility to prepare a budget for our homes. Some of us may wonder if budgeting is of any use at all as most of our income anyway gets spent every month. This may be true in the initial income earning phase, when our incomes are lower but as we progress in our lives and career, annual planning of home budget greatly helps provide a disciplined approach to track our expenses in a structured manner. A Sample home budget Let us help Bharath, age 34, an administrative executive, prepare his annual home budget for 2019. He lives in a rented house with his wife and two children aged 5 & 3. His monthly take home pay is Rs.40,000 and he is a single income earner for his family. Bharath’s primary expense comprises his rent of Rs.10,000 and he spends another Rs.8,000 on food. His utilities and petrol/transport expenses comes to Rs.4,000....

Knowledge, Discipline & Time are the 3 vertices of an investment triangle. In this issue, we are going to examine the next 2 vertices of the investment triangle – Discipline & Time. Discipline is easy when imposed Discipline in investing is an essential ingredient to successful investing. When we stay invested in a right asset over a longer duration, it certainly pays off. Let us take Suresh, a teacher, who has a home loan EMI to pay for 15 years. Only if he pays his monthly EMIs regularly without fail, he could own the property at the end of the loan tenure. Paying a monthly EMI is a huge commitment and requires discipline on part of the investor. Similarly, take Sara, a lawyer, who pays the premium for her parent’s health insurance policy. Only if she pays the annual premium in a disciplined manner, her parents would be able to avail the hospitalization benefits. Most of us diligently pay our periodic payments in a disciplined way, like Suresh ...

Knowledge, Discipline & Time are the 3 vertices of an investment triangle. In this issue, we are going to examine the first area - Knowledge. Knowledge is foremost As investors, we need to be aware of the various financial products available in the market. Without first hand knowledge of various products, it is easy to fall prey to quick sales tricks and part our money to unsuitable products. Let us take the case of Anand, a manager in a private sector firm. In 2017, when he received his bonus, his relationship manager called him and recommended him to invest in Arbitrage funds (AF). The primary reason cited to him being good returns and no long term tax since arbitrage fund is treated at par with equity funds. It was further explained to him that a portion of the arbitrage funds would be invested in derivatives to cover any fall in stocks held by the fund. Anand was convinced and invested his entire bonus in one such arbitrage fund. However, Anand is very disappo...

In the last issue, we explored 4 major leakages, which if prevented, could go a long way in saving your hard earned money. In this article, we are going to see 4 smaller but recurring leakages, which if left unnoticed, could deprive you of a significant contribution to your long term wealth. Leak 5 – Tax outgo EPF/PPF, children’s education fees & any home loan principal you pay takes care of your income tax rebate in section 80c. However, for those in the middle years of their career, who have completed their EMI liabilities, you may wonder if there are avenues beyond section 80c to save tax. This requires a fundamental shift in viewing assets as cash (or) capital assets. Cash assets such as bank FDs are draining on tax, so you may consider switching a part of them to tax efficient capital assets such as debt funds to plug the tax leakage. Lets say Guru has Rs.25Lacs in bank Fds and he falls in the 30% income tax bracket. At 7% interest, he earns Rs.1.75Lacs on whi...

So far we have seen how to measure the combined returns of one’s asset mix, called the portfolio, understand the difference between nominal & real returns and took a further step to examine the 3 different types in which assets are classified. In this issue, we are going to look at increasing your savings, while keeping income constant, by plugging the leaks on the expenditure side. Income – Savings = Expenditure Most of you may be familiar with this arithmetic, “Income – Expenditure = Savings”. The problem with this math is expenses being variable, savings too becomes variable. This is not good for your financial health in the long run. So, it is important to first select a certain fixed percentage (10% or 30%) of your income as savings and then spend the balance. Leak 1 – Insurance policies Insurance is required only to compensate you for any loss, other than term & medical policy, rest are not required for an individual. Insurance is not an investment, ther...

In this third classification of assets, we are going to understand assets based on whether they could be quickly converted to cash, a parameter more commonly known as liquidity. It is a key characteristic that ties an investor’s preference to a particular asset class. Assets that can be easily converted to cash form Movables and the rest form immovable assets. Movable Assets Most of the cash assets such as bank FD, RD & Post office schemes and capital market instruments such as open-ended mutual funds & stocks are liquid and form part of movable assets. There are 2 stages in one’s life when most people desire to have a higher percentage of the movable assets in their portfolio. They are: - Buying a dream home - Children’s Education/Marriage Lets take Robin who is building his dream home. Due to an unexpected rise in the cost of certain raw materials, say his budget overshoots by 20%. He now needs extra cash to meet this shortfall. Even if he has other properties...