FDI IN MULTI BRAND RETAIL

The Government decided (now on hold till further communication) to allow Foreign Direct Investment (FDI) upto 51% in multi brand retail. Till now FDI was not allowed in multi brand retail but now they can setup stores in the country with the local partner. 

 This decision is an enabling policy that will open up new windows of opportunity to modernize the retail sector particularly for agricultural products and the small-scale sector.

                                            

The benefits would be for all:

v     The farmer: will get a better price for their produce as middlemen will be removed   and retailers will buy directly from farmers.  Losses from wastages of perishable goods will come down.

v     The small scale sector: will be benefited with cheap and better quality source for their products and larger customers.

v     Consumers: The entry of global players will promote existing traders and retail outlets to upgrade and become more efficient, thereby providing better services at competitive price to the consumers as also better remuneration to the producers from whom they source their products.

This is also one of the most effective ways to tackle rise in food prices and inflation due to availability of food items on lower prices.

Today India is one of the largest producers of fruits and vegetables in the world. However 35-40% of food and vegetable products go waste due to lack of storage and cold chain facilities. This decision will bring in funds for investment to improve supply chain infrastructure such as cold storage, transportation and procurement along with bringing in investment for growth of the economy.

This will bring huge employment opportunities in agro-processing, sorting, marketing and the front end retail business.  As per some estimates upto 10-11 million jobs will be created in coming years. 

Government has provided safeguards to protect national interest such as:

Ø          Minimum investment by the global retailer will be $ 100 million and 50% of which will be in backend infrastructure that will control wastage and help local farmers. Backend infrastructure will be in or near villages and will be of immense value for rural economy.

Ø      It has been made mandatory that 30% sourcing will be done from Indian small industry. This will promote local manufacturing, as Indian small industries will feel encouraged to expand capacities in manufacturing thereby creating more employment and also strengthening the manufacturing base of the country.

Ø      These stores can be set up only in cities with the population of more than 10 lakh. This provision along with the requirement of master/zonal plans will make sure that small retailers are not affected. Moreover small retailers can benefit from sourcing their products from deep discount wholesale cash-and-carry big retailers.  This will improve quality of their product and reduce their cost.

Ø      In order to ensure supply to ration shops (PDS) government will have the first right to the procurement of agricultural products.  This is important from food security point of view also. 

Some people fear that big retailers will destroy small traders by keeping low prices initially (predatory pricing).  However, As the policy will be implemented in only 53 cities (with population over 10 lakhs) which will make it difficult for big retailers to crush competition.  Although, In many developing countries like China, Thailand, Indonesia, Brazil, Argentina, and Singapore, where 100% FDI is allowed, small retailers are successfully co-existing with big retailers.

Indian labour will continue to be protected by Indian labour law. It is an enabling policy framework.  States are free to adopt it or leave it. Those states that do not want to have FDI in retail are free not to allow them. This is done to maintain the freedom of states in federal structure. FDI policy does not override the existing laws governing, trade and commerce in the country.  The State Government laws and regulations in this regard would apply as much to the foreign players as to the establishment of any domestic businesses in the retail sector.

Nifty - Tuesday, 22 Dec 2011

Nifty:

Previous close - 4691.15
High - 4758.00
LOW - 4624.00
Close - 4733.85
Change - 40.70

Today
After the rebound trade of yesterday from 2 year low market further consolidated its gains.
The markets closed with consolidated profit with the Nifty closing at above its psychological 4720 marks . The Sensex closed at 15813, up 128 points from its previous close, and the Nifty closed at 4734, up 41 points. In today’s trade we saw the nifty's consolidated and after retest of 4620 point regain and to crossed the 4715-20-25 decisively at upper end. Today, lower end 4644-4633-23 where the market found support and rebound will act as a long term support after 4720-15-4700.

The forecast for Friday;

1) If the market opens between 4716 to 4733. Buy after the market has moved up passing the levels between 4733 – 44 and book profit between 4785 – 4810
2) If the market opens between 4775 – 95 and above, short with stop loss at 4830-43.
3) If the market opens besides the above, I do not know, up to you.

That is about all.

Have a nice trading day, guys.

Nifty - Tuesday, 20 Dec 2011

Nifty:

Previous close - 4613.10
High - 4637.25
LOW - 4531.15
Close – 4544.20
Change - (68.90)

Today
As shared yesterday, the markets closed below the support level of 4561, after recovery some points in the afternoon, the Nifty closing just above 4560 with Bank Stocks and Reliance contributing the most. The Sensex closed at 15175, down 204 points from its previous close, and the Nifty closed at 4544, down 68.90 points. In today’s trade we saw the Nifty's inability to cross the 4623-33-40 decisively at upper and broke lower end 4589-4574-60 giving indication of what I stated on 18th Dec’11 a long term bearish trend. Even though we are getting some short covering up move but same could not be hold with follow up buy.

The forecast for Tomorrow;

1) If the market opens between 4575 to 4597. Short after the market moved below 4575 and book profit between 4533 – 4500
2) If the market opens between 4485 – 4505 and above, go Long with stop loss at 4475-63 and book the profit around 4552-4562
3) If the market opens besides the above, use your best knowledge..

That is about all.

Have a nice trading day, guys.

The National Food Security Bill - India

The Indian Central Government Cabinet finalised the Food Security bill which is going to benefit 64% of the total population of India. If the passed and implemented, the food subsidy bill is expected to rise by Rs.28,000 crore at nearly Rs.1,15,000 crore, while foodgrains requirement would go up to 61 million tonnes from 55 million tonnes, as per the Cabinet proposal.
The National Food Security Bill is to provide for food and nutritional security, in human life cycle approach, by ensuring access to adequate quantity of quality food at affordable prices, for people to live a life with dignity.
Every person belonging to priority households and general households, identified under the definition of the bill, shall be entitled to receive every month from the State Government, under the Targeted Public Distribution System, such quantity of food grains at such prices as may be specified in bill.
With this bill, the government also bill planning to implement some reforms in the Agriculture, PDS/FPS (Public Distribution System or Fair Price Shop) and other storage and distribution mechanism. The government also going to use the benefit of “Aadhaar” for unique identification, with biometric information of entitled beneficiaries for proper targeting of benefits under this Act.

Who is going to benefit from the Bill

 Destitute Person - Person who has no resources, means and support required for dignified living.
 Homeless Persons - Persons who do not have homes and live as such on the roadside, pavements, or in such other places, or in the open, including persons living in shelters for homeless, beggars’ home etc
 Senior Citizen
 Persons under Priority Household – Identified & defined by Central Govt and provided Ration Card
 Persons under General Household – Identified & defined by Central Govt and provided Ration Card
All the above identified person or as identified and defined by the government are entitled to the below given benefits (indicative only)

> Pregnant Woman will get Free Meal during pregnancy and first six months after the child birth
> Free meal for children in the age group of Six Months - Six years through Anganwadi and thereafter upto age 14 years mid day meal through school on every working day
> All Destitute Person As per Govt policy will get One free meal every day
> All Homeless One free meal every day Free Meal through Community Kitchen
> Emergency & disaster affected persons Through state govt mechanism Two free meals upto three months Free Meal
> Person living in Starvation Through state govt mechanism Meals, two times a day, free of charge, for six months from the date of identification Free Meal
> Priority Household PDS Foodgrains at subsidised price Not exceeding Rs. 3,2 or
1 per kg for rice/wheat/coarse grains 7 Kg per person
> General Household PDS Foodgrains at subsidised price Not exceeding 50 per cent Of the minimum support price for wheat and coarse grains, and derived minimum support price for rice. 3 Kg per person


Allowance: In case of failure to supply the entitled quantities of food grains or meal to entitled persons, such persons shall be entitled to receive food security allowance from the concerned State Government, paid within such time and manner as may be prescribed by the Central Government.

How many people are going to get the benefit from the Bill:

 In Rural areas up to 75% of the total population subject to minimum of 46% population belonging to Priority household
 For Urban areas up to 50% of the total population subject to minimum of 28% population belonging to Priority household

Hope the objective listed in the Act realised and poor receive the benefit we see no news of death due to starvation and have healthy children.

Nifty - Monday, 19 Dec 2011

Nifty:

Previous close - 4651.60
High - 4623.15
LOW - 4555.90
Close - 4613.10
Change - (38.50)

Today
The markets closed with moderate loss, after recovery from day's low, with the Nifty closing just above 4600. The Sensex closed at 15379, down 112 points from its previous close, and the Nifty closed at 4613, down 38.5 points. In today’s trade we saw the nifty's inability to cross the 4623-33-40 decisively at upper end lower end 4589-4574-60 where the market found some support but may be only because short covering trade and may resume bearish look if the today's low is broken.

The forecast for Tomorrow;

1) If the market opens between 4600 to 4612. Buy after the market has moved up passing the levels between 4623 – 37 and book profit between 4685 – 4710
2) If the market opens between 4675 – 95 and above, short with stop loss at 4720-33.
3) If the market opens besides the above, I do not know, up to you.

That is about all.

Have a nice trading day, guys.

Nifty - Friday, 16 Dec 2011

Nifty:

Previous close - 4746.35
High - 4818.50
LOW - 4628.20
Close - 4651.60
Change - (94.75)

Today
In long run, the market is still bearish and so is the short term.
The markets closed with significant losses with the Nifty closing at its two year low. The Sensex closed at 15491, down 345 points from its previous close, and the Nifty closed at 4651, down 95 points. In today’s trade we again saw the nifty's inability to cross the 4827-33-40 decisively at upper end and just after slipping below 4700 market hitting the new two year low. Today, lower end 4644-4633-23 where the market found some support but may be only because not enough time left before day close to go lower.

The forecast for Monday;

1) If the market opens between 4600 to 4612. Buy after the market has moved up passing the levels between 4633 – 44 and book profit between 4685 – 4710
2) If the market opens between 4675 – 95 and above, short with stop loss at 4720-33.
3) If the market opens besides the above, I do not know, up to you.

That is about all.

Have a nice trading day, guys.

All you want to know before making investment in MUTUAL FUND

WHAT IS MUTUAL FUND

A Mutual Fund is a trust that pools the savings of a subscribed investors who share a common financial goal. Money collected is invested in capital & Debt market instruments such as shares, debentures, bonds and other securities. The revenue earned through these investments and the capital appreciation realised are shared by its unit holders for the units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an prospects to invest in a diversified, professionally managed basket of securities at a relatively low cost.


ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are:
 Professional investment management
 Diversification
 Service and convenience
 Return Potential
 Low Costs
 High Liquidity
 Transparency
 Well Regulated
 Choice of schemes
 Tax benefits
 Well regulated


DISADVANTAGE OF MUTUAL FUND
Mutual funds have disadvantages as well, which includes:
 Fees
 Less control over timing of recognition of gains
 Less predictable income

TYPE OF MUTUAL FUND SCHEMES
 Basis Liquidity Available – Open Ended Fund and Close Ended Fund
 Basis Risk Associated – Debt Fund, Equity Fund, Diversified Fund and Special Fund
 Basis Investment Purpose – Growth Fund and Dividend Fund

MUTUAL FUND EXPENSES

The Fund expenses are expenses that a fund charges to its schemes year after year also known as Expenses Ratio. These charges comprises of fund management fee, agent commission, registrar fees and the selling and promotion expenses.
Different funds have different expense ratios. However to keep things in check, the Securities & Exchange Board of India (SEBI) has stipulated an upper limit that a fund can charge. The limit stands at 2.50 per cent for equity funds and 2.25 per cent for debt funds.

Following are some of the major expenses

 The Management Fee consists of the Performance Fee, calculated as a percentage of the overall assets.
 The Administrative Fee is paid for the administrative services of the fund.
 The distribution fee charged for marketing, advertising, and distribution services, ranges from 0.25% to 1.0% of the fund’s assets.
 The brokerage cost is an expense that is not included in the expense ratio.
 The interest costs, which are incurred if the fund borrows money to buy securities, are also represented in a similar way.
 The Transaction fee charged to discourage the traders that might result in the unplanned trading of securities because of sudden change in cash.
 Account Maintenance fee is usually charged on small accounts.

Please note that an expense ratio is charged even when the fund’s returns are negative.
Before you invest in a mutual fund, it is imperative that you check out the fund’s expense ratio

Will share more detail on Mutual Fund in my next post
Please feel free to share your thoughts & feedback, would try to include those in my next post