Positive opening indicated for Indian stocks: Thursday Market Preview

Markets across the world cheered the Greek government’s win of the first leg of the confidence vote

The market is likely to see a positive opening tracking the Asian pack which was trading with gains in early trade on Thursday on developments in Greece. The Greek government winning the fist stage of the confidence vote with 155 votes in favour and 138 against led Wall Street to close higher for the third day in a row. The SGX Nifty was 36.50 points up at 5,644.50 compared to its previous close of 5,608.

Back home, the government will announce weekly food inflation data around noon and the Cabinet Committee on Economic Affairs is expected to take up the Cairn-Vedanta deal today.

The Nifty closed in the positive for the seventh day in a row and the Sensex finished higher for the fifth straight day yesterday on positive developments in Europe and across-the-board buying by foreign institutional investors. Both benchmarks closed at their highest levels in nearly two months. On Tuesday we had said that if the index closes above 5,560, the up-move will gain more strength to reach up to 5,650. The Nifty traded above 5,560 for the entire session. The index has to stay above 5,608 to keep the momentum going.

Earlier the Nifty opened 22 points higher at 5,567 and the Sensex started the day at 18,552, up 60 points from its previous close. The day's opening figures were also the intra-day lows today. The market continued its northward journey in subsequent trade, on all-round buying support, amid some choppiness. Gains in post-noon trade were also boosted by a firming up in the key European bourses, which opened in the green on confidence that Greece will be able to avoid a default on its debt. All sectoral indices were positive.

The indices touched their intra-day highs at around 2.30pm, with the Nifty adding 64 points to 5,609 and the Sensex climbing 223 points to touch 18,715. Finally, the Nifty finished 55 points higher at 5,600 and the Sensex jumped 201 points to close at 18,694. The closing on both the Nifty and the Sensex are the highest since 3rd May.

The US markets settled in the green for the third day in a row overnight as the Greek government won the first leg of the confidence vote. Greek Prime Minister George Papandreou must today win a second vote to execute measures ranging from tax increases to asset sales.

In US economic news, the National Association of Realtors’ Pending Home Sales Index increased 8.2% to 88.8, bouncing back from April’s seven-month low. Economists had expected home resale contracts to rise only 3.8% after a revised 11% fall in April.

The Federal Reserve on Wednesday moved to set a less-severe limit on debit-card swipe fees than previously proposed. Visa Inc and MasterCard Inc, the biggest consumer-payment networks, jumped more than 11%, as the Fed moved to cap debit-card transaction fees at 21 cents.

The Dow closed 72.73 points (0.60% higher at 12,261.42, the blue-chip index’s biggest three-day gain since March.  The S&P 500 gained 10.74 points (0.83%) at 1,307.41, also the biggest three-day gain since March. The Nasdaq added 11.18 points (0.41%) at 2,740.49.

Markets in Asia, which opened with marginal gains, were struggling to move higher in early trade today. The regional bourses joined other world markets in cheering the Greek confidence vote. Meanwhile, the Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 50.7 in June from 51.3 in May. However, the index remained above the 50 threshold that separates contraction from expansion for a second straight month.

In another development, South Korea said yesterday it would require banks to raise risk weightings in their capital ratios for heavy borrowers as part of measures to prevent heavy household debts from causing a fresh financial crisis.

Oil jumped as much as 3% on Wednesday, ending at the highest level in a week, on sharp drawdowns in US crude and gasoline stocks. ICE Brent crude for August jumped $3.62, or 3.3%, settling at $112.40 a barrel, its highest close since 22nd June. US August crude settled at $94.77, gaining $1.88, or 2.02%, also the highest finish since 22nd June.

The Shanghai Composite surged 1.20%, the Hang Seng jumped 1.81%, the Jakarta Composite gained 1.09%, the Straits Times climbed 0.83%, the Seoul Composite added 0.08% and the Taiwan Weighted rose 0.25%. On the other hand, the KLSE Composite lost 0.08% and the Nikkei 225 shed 0.01%.

Back home,  former RBI governor Bimal Jalan yesterday said credible action should be taken to tame inflation and suggested reducing import duties on food items. He said the effectiveness of monetary and fiscal tools depends on the ability to convince people that inflationary expectation has subdued.


Does the family floater discriminate against a woman’s parents?

Call it gender discrimination or a technical rule, most family floater products don’t cover the parents of a married woman even if they are dependent on her

A young married woman, Bijal Kapadia, has complained to the Insurance Regulatory and Development Authority (IRDA) and finance minister about unfairness in the fact that her parents are not eligible to be covered under group insurance even though they are dependent on her.

She approached Bajaj Capital Insurance Broking to purchase a group mediclaim family floater policy of National Insurance for Rs3 lakh. After submitting the details of her family, she was shocked to hear that National Insurance will not accept such a policy from a married woman who wants to also cover her parents. But they will allow her husband to buy the policy and cover his parents. Is this fair and correct or is it really discriminatory? Cover for a married woman's parents seems to be a grey area for insurers and agents.

Moneylife spoke with a veteran insurance agent who felt that it is fair because according to Indian culture the wife's parents are a different family, with a different address, may be even in a different city. A banker familiar with insurance revealed that an insurance company will allow parents of a married woman only if they are dependent on her and living with her.

One insurance company told us that it is less to do with the interpretation of the definition of 'family' and more to do with the risk profile perceived by the underwriter. If the company feels they want to underwrite the case, they will consider a married woman's parents to be part of the same family floater. He added that group mediclaim policies can be easily tailored to allow parents-in-law, but if the policy wording clearly says that they can't be included, then it can be an issue.

According to Hemant Sharma, chief executive officer, Mediclaim Solutions, "Oriental Family Floater policy allows parents or parents-in-law (either of them only). Also, Max Bupa Heartbeat-Family First can cover up to 13 relationships, including parents, parents-in-law and so on." A health product from Bajaj Allianz life insurance called Family care first also allows parents and parents-in-law.

Family Floater Policies are an enhanced version of the mediclaim policy. The sum assured value floats among the family members. Most of the policies will cover husband, wife and couple of children, while some may cover parents too. The coverage for the entire family is up to the sum insured limit. The premium for family floater plans is typically less than that for separate insurance cover for each family member.

It is worth debating whether this is fair. What is your feedback or experience?


India's silence on US tax evasion cases says it all

The US is exerting more pressure on banks to cooperate with the authorities in tax evasion cases. While the Indian authorities knew about possible tax evasion in the money being remitted from abroad, they have kept silent fearing backlash from NRIs and PIOs

In yet another tax evasion case, the US justice department has indicted an Indian and a client of Hong Kong and Shanghai Banking Corp (HSBC) for hiding more than $8.7 million in offshore accounts and filing false income-tax returns. While the number of tax evasion cases are going up on the continuous pressure from the US authorities, there is complete silence from the Indian authorities.

According to a senior banker, who requested anonymity, everyone knows that a lot of money coming into India from non-resident Indians (NRIs) or from persons of Indian origin (PIOs) may not be accounted for tax purposes in the country of origin. However, the moment the Indian government initiates any action in this matter, the remittances from NRIs and PIOs would drop dramatically. This may be one reason, why the country is not too keen on signing any international treaties on tax evasion, the banker said.

It is also hard to imagine that the US will get serious co-operation from the Indian government for tracking its relatively small pool of tax-evaded money sitting in Indian banks, when it is doing nothing to bring back billions of dollars of money stashed overseas by the richest Indian businessmen, politicians and bureaucrats. (Read more Tax evasion: Broken trail

On Tuesday, the US Justice Department indicted Arvind Ahuja, a neurosurgeon and US citizen on four counts of hiding the accounts, which held $8.7 million as of 2009, and four counts of filing false tax returns, failing to report more than $1.2 million in interest income, Reuters news agency reported.

The report quoted Dan Webb, Dr Ahuja's lawyer, as saying that the federal government had made a colossal mistake by taking this action and that they would fight these allegations. Mr Webb was quoted as saying that Dr Ahuja had interest-bearing accounts and the (HSBC) bank failed to issue documents that stated his interest income. Once Dr Ahuja became aware of the interest income that was not reported to him by the bank, he paid all taxes owed, plus interest and late payment penalties, the lawyer said.

Reacting to this case, a spokesperson for the bank said, "HSBC does not condone tax evasion and fully supports the US efforts to promote appropriate payment of taxes by the US taxpayers. While complying with the law in all the jurisdictions in which it operates, HSBC cooperates with requests from US authorities."

In April, the US department of justice said that HSBC Holdings Plc's subsidiary in India had helped US taxpayers stash funds abroad. The justice department also served a summons, commonly known as a 'John Doe summons', on the bank to hand over names of their US clients. A John Doe Summons is any summons where the name of the taxpayer under investigation is unknown and therefore not specifically identified.

According to a report by Bloomberg, more than 200 participants in the US Internal Revenue Service (IRS) Voluntary Disclosure Program have been approached by IRS-CI and the DOJ for information about their offshore bank accounts. The report says that investigators are focusing on offshore accounts held at Swiss banks (HSBC, Credit Suisse, Julius Baer, and small cantonal banks) and Israeli banks (Bank Hapoalim and Bank Leumi le-Israel).

Two years back, UBS AG was criminally charged for helping Americans evade taxes. In February 2009, the bank avoided prosecution by paying $780 million, admitting it fostered tax evasion, and agreed to give data to the IRS on more than 250 accounts. UBS later handed over data on an additional 4,400 accounts to resolve a civil suit by the IRS.

Since 2007, when the investigations into offshore tax evasion began, the US has criminally charged at least two dozen UBS clients with tax crimes, as well as four UBS bankers, two HSBC clients, and four other offshore enablers, Bloomberg reported.


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