If you are one of those who invested in gold exchange traded funds
(GETFs) a year ago, the yellow metal has not only turned out to be a great asset protector but also a solid wealth generator. GETFs have given a stellar 28% gains in the last 12 months when the other 26 fund categories — debt, equity and hybrid — have struggled to break the average 20% mark.
What's made gold ETFs more safer is that all of them have same returns (since all the ETFs are tracking the same commodity), while there is huge divergence in the other fund categories — sometimes as high as 40-50 % between the best and worst schemes.
With gold as an asset coming into limelight as the world went into a slump, ETFs tracking metal price rose in tandem as stocks fell.
The gains logged by gold ETFs come in a period when equity funds focussed on banking and FMCG have delivered around 18-19 % returns, GILT (medium and long-term ) schemes have given 13% returns , monthly income plans posted 12% gains and sensex rose 9%, data from fund tracker ValueResearch shows.
Currently there are five gold ETFs such as Gold Benchmark ETF, Kotak Gold ETF, Quantum Gold, Reliance Gold ETF and UTI Gold ETF with more than 1 year history . SBI MF launched its Gold ETF in April this year. With Chinese consumers buying gold aggressively, coupled with onset of the festive season in India, experts predict gold prices will rise further.
"For the last 15 years, dollar has depreciated while gold prices have inched up. For the record, gold has delivered 16-17 % compounded annual growth rate (CAGR) for the past 9 years. If high crude prices continue to push inflation , making gold more attractive as an inflation hedge," Amar Shah, Head of Research (Commodities), Angel Broking, said.
Gold prices in New Delhi market currently trade around Rs 15,200 per 10 grams. Investors have clearly identified gold as a part of their asset allocation strategy , feels Krishnan Sitaraman, director — Crisil FundServices . "Gold's allure lies in the fact that it has proven its mettle during down times.
Thursday, August 27, 2009
Sunday, July 5, 2009
Economic survey...More of a wish list than a governments budget outlook..
The Indian government proposed sweeping economic reforms Thursday and said growth could revive to as much as 7.5 percent this year if the U.S. economy bottoms out by September and the monsoon rains return to normal.
Economic growth for the fiscal year through March slowed to 6.7 percent from an average of 8.8 percent in the previous five years.
"The speed at which the Indian economy returns to the high growth path in the short term depends on the revival of the global economy, particularly the U.S. economy, and the Government's capacity to push some critical policy reforms in the coming months," the Finance Ministry said in its annual economic survey.
The report, released in advance of the nation's new budget, to be unveiled Monday, outlined a wish list of economic reforms, many of which had been blocked by left-leaning coalition partners during the previous administration.
Among the most crucial are proposals to sell down stakes in government-run companies to generate 250 billion rupees ($5.1 billion) a year and eliminate pricey fuel subsidies - both of which would ease India's gaping fiscal deficit. The central government's fiscal deficit more than doubled to 6.2 percent of gross domestic product last fiscal year, causing credit ratings agencies to threaten downgrades.
The ministry said it is "imperative" to trim that deficit back to 3 percent of GDP as soon as possible
The government's deficit has grown after it has enacted three fiscal stimulus packages of tax cuts and spending totaling 3.5 percent of GDP, on top of deep spending on fuel subsidies, government pay hikes, and farmer loan and employment programs.
The report also called for allowing more foreign investment in insurance, banking, defense and retailing, streamlining taxes, and deepening long-term debt markets.
"They are really working toward trying to restore fiscal discipline," said Sherman Chan, an economist at Moody's ( MCO - news - people ) Economist.com. The end to fuel subsidies could help normalize India's fiscal balance in the long run, but is likely to prove controversial, she said.
"There are so many low income households in India," she said. "Any policy change can spark social unrest. Just like China, India doesn't want that to happen."
Late Wednesday, the government announced fuel price hikes of 4 rupees a liter for petrol and 2 rupees a liter for diesel, causing long lines at local gas stations. Retail prices vary by location, but the hikes brought the cost of petrol in Mumbai to 48.76 rupees (about $1) a liter and diesel to 36.70 rupees a liter.
Despite citing "major concern" about falling private consumption, the Finance Ministry was generally positive on India's economic prospects. India's sound banks, adequate foreign exchange reserves, falling inflation, robust rural demand, and strong agricultural production serve as "shock absorbers" that could help spur growth, the report said
Economic growth for the fiscal year through March slowed to 6.7 percent from an average of 8.8 percent in the previous five years.
"The speed at which the Indian economy returns to the high growth path in the short term depends on the revival of the global economy, particularly the U.S. economy, and the Government's capacity to push some critical policy reforms in the coming months," the Finance Ministry said in its annual economic survey.
The report, released in advance of the nation's new budget, to be unveiled Monday, outlined a wish list of economic reforms, many of which had been blocked by left-leaning coalition partners during the previous administration.
Among the most crucial are proposals to sell down stakes in government-run companies to generate 250 billion rupees ($5.1 billion) a year and eliminate pricey fuel subsidies - both of which would ease India's gaping fiscal deficit. The central government's fiscal deficit more than doubled to 6.2 percent of gross domestic product last fiscal year, causing credit ratings agencies to threaten downgrades.
The ministry said it is "imperative" to trim that deficit back to 3 percent of GDP as soon as possible
The government's deficit has grown after it has enacted three fiscal stimulus packages of tax cuts and spending totaling 3.5 percent of GDP, on top of deep spending on fuel subsidies, government pay hikes, and farmer loan and employment programs.
The report also called for allowing more foreign investment in insurance, banking, defense and retailing, streamlining taxes, and deepening long-term debt markets.
"They are really working toward trying to restore fiscal discipline," said Sherman Chan, an economist at Moody's ( MCO - news - people ) Economist.com. The end to fuel subsidies could help normalize India's fiscal balance in the long run, but is likely to prove controversial, she said.
"There are so many low income households in India," she said. "Any policy change can spark social unrest. Just like China, India doesn't want that to happen."
Late Wednesday, the government announced fuel price hikes of 4 rupees a liter for petrol and 2 rupees a liter for diesel, causing long lines at local gas stations. Retail prices vary by location, but the hikes brought the cost of petrol in Mumbai to 48.76 rupees (about $1) a liter and diesel to 36.70 rupees a liter.
Despite citing "major concern" about falling private consumption, the Finance Ministry was generally positive on India's economic prospects. India's sound banks, adequate foreign exchange reserves, falling inflation, robust rural demand, and strong agricultural production serve as "shock absorbers" that could help spur growth, the report said
China's eminence...
It is not Barack Obama's or the Indian Government stimulus packages that should be credited for the signs of revival in global markets. The credit should go to China for using state enterprises to create demand for raw materials around the world.For India, China present an opportunity as well as threat, specially so after the G-20 summit in London, where the US acknowledged China's dominance in the global economy.Many Indian companies source cheap Chinese raw materials and intermediates to keep prices of their end products down, and some other export semi finished goods and services to the Middle kingdom.For many others Chinese products are threat to their survival.Periodically, anti dumping duty is levied on Chinese imports.It is time for finance minister to take note of China as an important trading partner as well as rival. Instead of announcing across the board concessions on raw materials and intermediates, special duty dilutions should be applicable for those companies exporting to China or competing with China in International market.
Friday, June 26, 2009
The world should have paid heed then...Prediction of recession
Lot of us in this world are facing the brunt of recession in some way or the other.But little did we know that it was predicted by Peter Schiff, an American Economic Commentator way back in 2006.The more interesting fact is that the accuracy with which he predicted things.
The link to his prediction is this video:
http://www.youtube.com/watch?v=2I0QN-FYkpw
Few interesting things he mentioned in the video are:
2006 comment : The basic problem of the US Economy, is that we have too much consumption and borrowing, and not enough production and saving. We should not resist the recession, but embrace it, because the disease is all this debt finance consumption. The cure is, that we stop consuming, and start saving, and producing again, and that’s a recession. And sometimes, medicine tastes bad, but you have to swallow it!
2007 comment : The sub prime type crisis is going to unfold in other places such as bonds backed by auto loans, credit card debt, and that’s going to pull the rug out from under the consumer. Not only can he not borrow money to buy a house, he can’t borrow money to buy a car, he can’t use his credit card
Critics said during that time:
"The Central Banks have not yet fired their big guns, they will fire them when necessary, the worst is over."
Now the critic comments seems humorous..isn't it
The link to his prediction is this video:
http://www.youtube.com/watch?v=2I0QN-FYkpw
Few interesting things he mentioned in the video are:
2006 comment : The basic problem of the US Economy, is that we have too much consumption and borrowing, and not enough production and saving. We should not resist the recession, but embrace it, because the disease is all this debt finance consumption. The cure is, that we stop consuming, and start saving, and producing again, and that’s a recession. And sometimes, medicine tastes bad, but you have to swallow it!
2007 comment : The sub prime type crisis is going to unfold in other places such as bonds backed by auto loans, credit card debt, and that’s going to pull the rug out from under the consumer. Not only can he not borrow money to buy a house, he can’t borrow money to buy a car, he can’t use his credit card
Critics said during that time:
"The Central Banks have not yet fired their big guns, they will fire them when necessary, the worst is over."
Now the critic comments seems humorous..isn't it
Education sector Update
To boost its presence in the Indian education sector, Pearson, a Britain-headquartered education and information company is investing $30 million in Indian education resource provider Educomp Solutions and Bangalore-based online tutorial firm TutorVista.Pearson will acquire 50 percent stake in Educomp Solutions for $17.5 million as part of their agreement signed Wednesday. The unit will then be converted into a 50-50 joint venture.
'The focus of the government is not just employment but employability, so there will be a lot of focus on skill-based knowledge,' Vivek Govil, president and chief executive of Pearson Education
The Indian government spends $30 billion a year on the education sector, while Indian consumers spend $50 billion a year on private educational institutions and services, so it makes a huge business proposition
TutorVista has already received funding from Manipal Educational and Medical Group and private equity fund LightSpeed Venture Partners
'The focus of the government is not just employment but employability, so there will be a lot of focus on skill-based knowledge,' Vivek Govil, president and chief executive of Pearson Education
The Indian government spends $30 billion a year on the education sector, while Indian consumers spend $50 billion a year on private educational institutions and services, so it makes a huge business proposition
TutorVista has already received funding from Manipal Educational and Medical Group and private equity fund LightSpeed Venture Partners
Nifty-Now freely floating
From today the National Stock Exchange (NSE) will compute its benchmark Nifty, CNX 100 using the free-float market capitalisation methodology. The weightage will go up for some stocks like ICICI Bank, L&T, Infosys, HDFC, HDFC Bank. But some of the stocks which could get impacted are stocks like ONGC where the weight will come down from around 8.5% to nearly 3.17% that’s reduction of nearly 4.6% in ONGC.
Sector specific - Power, oil and gas, telecom these will be the sectors where we will be seeing reduction in weightage and it will be the banking pack which will gain the most because the weight will go up significantly from around 11.8% to 18.2%. But we need to breakdown the banking sector into the public sector banks and the private sector banks. The public sector banks weight will remain same from around 4.5% to the same around 4.5% but private banks – the weight will go up from 6.2% to 12.3% that is a addition of nearly 6%.
Hence dont be surprised if ONGC dont make a huge impact on market and Private sector banks dictate terms to the market.
Sector specific - Power, oil and gas, telecom these will be the sectors where we will be seeing reduction in weightage and it will be the banking pack which will gain the most because the weight will go up significantly from around 11.8% to 18.2%. But we need to breakdown the banking sector into the public sector banks and the private sector banks. The public sector banks weight will remain same from around 4.5% to the same around 4.5% but private banks – the weight will go up from 6.2% to 12.3% that is a addition of nearly 6%.
Hence dont be surprised if ONGC dont make a huge impact on market and Private sector banks dictate terms to the market.
Friday, June 19, 2009
Inflation Fundas
TV Channels blaring that India's inflation rate slipped into the negative for the first time in 30 odd years. What does it really mean ? It really means nothing to the common man!
Prices are still soaring or atleast stable at their peak - and why is this not reflected in the Inflation numbers ?
This is because India calculates Inflation differently than other countries
* India uses something called the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy.
* Most other developed and developing countries use the Consumer Price Index (CPI) to calculate inflation.
Whats the difference between the two ?
Wholesale Price Index (WPI)
WPI, published in 1902, is a economic indicator that was used by many policy makers and it was replaced by CPI by most countries in the 1970s
WPI measures the change in the average price level of goods traded in wholesale market. In India, about 435 commodities data on price level is tracked through WPI. This price index is published on a weekly basis with a lag of about 2 weeks.
Consumer Price Index (CPI)
The CPI or the Consumer Price Index is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It tracks the prices of goods and services that consumers actually buy therefore providing a more accurate picture of the inflation.
Although India doesn't officially follow CPI - they do publish the CPI index numbers - however, only monthly with a delay of more than 2 months
While the WPI Inflation numbers have slipped into the negative and is reported to be at -1.6%, the CPI numbers are at a whopping 8.7% as declared for April 2009
Next time the inflation numbers are announced - you know what to make of it :)
Prices are still soaring or atleast stable at their peak - and why is this not reflected in the Inflation numbers ?
This is because India calculates Inflation differently than other countries
* India uses something called the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy.
* Most other developed and developing countries use the Consumer Price Index (CPI) to calculate inflation.
Whats the difference between the two ?
Wholesale Price Index (WPI)
WPI, published in 1902, is a economic indicator that was used by many policy makers and it was replaced by CPI by most countries in the 1970s
WPI measures the change in the average price level of goods traded in wholesale market. In India, about 435 commodities data on price level is tracked through WPI. This price index is published on a weekly basis with a lag of about 2 weeks.
Consumer Price Index (CPI)
The CPI or the Consumer Price Index is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It tracks the prices of goods and services that consumers actually buy therefore providing a more accurate picture of the inflation.
Although India doesn't officially follow CPI - they do publish the CPI index numbers - however, only monthly with a delay of more than 2 months
While the WPI Inflation numbers have slipped into the negative and is reported to be at -1.6%, the CPI numbers are at a whopping 8.7% as declared for April 2009
Next time the inflation numbers are announced - you know what to make of it :)
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