It has been nine weeks of continuous rally. The market is overstretched. A correction is due after Monday. The only question is, will the correction continue?
The market surged on strong retail data from the US on the last trading day of the week. Positive global cues were the driving force for the market on the beginning of the week also as the BSE Sensex touched its 25-month high on Monday with US unemployment holding steady at 9.7%. After two range-bound trading sessions, the market plunged on Thursday on concerns over the possible tightening of monetary policy. The food price index accelerated for the second straight session, rising to 17.7%, which is higher than an annual rise of 16.35% in the previous week. There is little choice left for the Reserve Bank of India (RBI) but to increase interest rates. The fuel price index rose by an annual 12.71% which is below the annual rise of 12.75% in the previous week. The RBI said that credit growth in India will be at 20% in FY11. Finance minister Pranab Mukherjee projected growth rate in FY11 to be at 8.75% in the twelve months from March reiterating a February finance ministry forecast. The finance ministry has suggested the simplification of the rules for calculating foreign investment in India. The proposed rule which takes out the sundry entries of indirect investment will be beneficial for companies with high foreign investments. The government initiative towards the GST (Goods & Services Tax) regime has started, with the Centre seeking opinion from the Supreme Court on the proposed amendments to the Constitution for implementation of the tax. Grain stocks as on 1st April stood at 42.8 million tonnes (MT), a figure well above the target. While wheat stocks were at 16.1MT against a target of 4MT, rice stocks were at 26.7MT, more than double the targeted 12.2MT.
US treasury secretary Timothy Geithner has said that India and the US should work together on “rebalancing” the world economy. In bilateral economic partnership talks, he said that cooperation by both parties will help to make the economy more stable. Rating agency CRISIL said that more Indian companies will be upgraded rather than downgraded in FY 2010-11. However, CRISIL said key risks that could affect credit quality include a global credit event on sovereign debt, impact of inflationary expectations on interest rates, and exchange rate volatility. The service industry grew at a slower rate in March after it touched a 17-month high in February. The HSBC Markit Business Activity Index, based on a survey of 400 firms, fell to 58.1 in March from 60.9 in February, which was its highest level since September 2008. The IMF agreed that the world economy’s recovery was at a faster pace than estimated, but it was still not out of danger.
The major part of the recovery is attributed to public support rather than private demand which is more important for sustained growth. The US Federal Reserve’s comment on the tightening of the interest rate regime to prevent an impending asset bubble took the US markets down on Wednesday. However, the Fed’s firm point on the need on extending the existing interest rate regime to help economic recovery brought the market back on track on Thursday. The World Bank’s buoyant sentiment about the East Asian economy was reflected in its forecast for economic growth in this region. In a semi-annual economic update, the World Bank said that East Asia will grow by 8.7% in 2010. This is an upward revision from the 7.8% growth it had estimated in November last year.
Some major tweaks to the NPS in addition to the planned government contribution of Rs1,000 per account are set to provide a much needed leg-up to the nascent pension scheme
The Centre is planning some additional tweaks to the still-nascent New Pension Scheme (NPS) to attract the investing public. Sources from the regulator, the Pension Fund Regulatory and Development Authority (PFRDA), tell Moneylife that these changes will provide a significant boost to the struggling pension plan initiative from the government.
The PFRDA is apparently in talks with the central record-keeping agency, the National Securities Depository Limited (NSDL) to reduce the cost of record-keeping. If NSDL obliges, it would significantly drive down the cost of maintaining an NPS account, which would enable thousands of low-income category people to start their own accounts.
An official from PFRDA revealed some of the initiatives being taken up. Deepa Kotnis, general manager, PFRDA said, “We are working on reducing the cost. For a very low-income person, the current cost might be a lot, even though it is the cheapest product available. We are also trying to incentivise enrolment by attaching some promotional incentive to it.”
Already, the NPS is among the least expensive investment products in the offering. With such low expenses, it is a product tailor-made for the requirements of the masses.
To encourage people to save in the NPS, the recent Budget had announced the government’s intention to contribute Rs1,000 per year to every new NPS account opened this year. The scheme, ‘Swavalamban’, will be extended to those who join NPS with a minimum contribution of Rs1,000 and a maximum contribution of Rs12,000 per year during financial year 2010-11.
Speaking to Moneylife, Ms Kotnis said, “This is a direct subsidy for investors. The finance minister has set aside Rs100 crore for this project. We are hoping that this would benefit lakhs of investors. There are a lot of low-income people in the unorganised sector who would be very keen to get this Rs1,000 benefit.
Ultimately, it would add up to Rs4,000 as the scheme is extended for three more years. So not only is this a much cheaper product, but there is a direct subsidy coming into the investor’s account. The onus is now on all the points of presence (POPs) to popularise this initiative and get people on board during this financial year.”
Interestingly, the PFRDA is also thinking of extending this benefit to all the existing subscribers who have invested prior to this financial year. Ms Kotnis said, “We do not want to leave out people who have joined the scheme last year. So we are working on how to ensure that these investors are also included. After working out who all would be eligible for this benefit, we will see to it that these people are also given the benefit.”
Finance minister Pranab Mukherjee had also urged State governments to make a matching contribution to these NPS accounts. Some States like Haryana and Karnataka have already started offering the added contribution of Rs1,000 per year. This has taken the total government contribution to Rs2,000 per year.
With these initiatives on their agenda, the government and the regulator are indeed taking the pains to ensure that the NPS finds its rightful space in the minds of the investing public.
With two warehouses already operational, Allcargo plans three more warehouses which will be coupled with third party logistics services
Allcargo Global Logistics Ltd plans to have three more warehouses operational in the next 18 to 20 months. The company recently entered the warehousing space, with two warehouses already operational.
“In the next 18 to 20 months, we would see two to three more warehouses up and operational,” said Ashit Desai, director of corporate affairs, Allcargo Global Logistics Ltd.
Last year, the company had announced its plans to set up more warehouses in various parts of India. The logistics company has land banks across Nagpur, Indore, Hyderabad and Bengaluru. It plans the warehousing and third-party logistics projects in Bengaluru, Nagpur and Indore.
“We have been acquiring land now for the past three to four years, and now we have a sizeable amount of land in hand of about 250 acres at all these locations across India put together,” said Mr Desai.
The total investment in each warehouse planned has been pegged at around Rs5 crore to Rs10 crore.
Along with the planned warehouses, the company will also have its Inland Container Depots (ICDs) operational in the next 18 to 20 months.
“In the ICD business, as we have land in Nagpur, Hyderabad and Bengaluru, we will plan ICDs in these places,” said Mr Desai.
Allcargo already has two warehouses operational in Goa and Mumbai. “In the Goa warehouse, we are offering third-party logistics services to one of our customers in the white goods sector. The project has been operational for a year’s time now and is doing quite well,” said Mr Desai.