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Monday,
December 17, 2001, Chandigarh, India  
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Signs of recovery in economy, says Sinha
Lend and borrow shares
Mutual
funds are the best option |
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Market ignores industrial slowdown
Verdict to help pregnant mediclaim holders
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Signs of recovery in economy, says Sinha
Bangalore, December 16 “There have been some, however, incipient they are, signs of recovery in the economy”, Sinha said and indicated that the last quarter of the current fiscal was expected to do better. Speaking to reporters here, he said he would not hazard a guess on the growth rate for the current year and noted that the RBI and IMF had projected different rates of 4.5 per cent, 5.5 per cent and 5.75 per cent. But, he said, he was hopeful that the conditions were ripe for increase in demand and fresh investment. The government had stepped up investment on development, including on housing and national highway programmes, among others. Mr Sinha was confident that all this would lead to an increase in demand which would lead to greater economic activities. Noting that the slowing down had taken place as a result of the crash in the infotech sector stocks in the USA, increase in petroleum prices and unprecedented events both nationally and internationally, he said, “this year was a year of uncertainty nationally and internationally”. Asserting that the economy would continue to grow, he said “even at this slow rate, Indian economy will be one of the fastest growing economies of the world”. Referring to the fiscal deficit, Sinha said he did not rule out some slippages in the target set in the budget.
PTI
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FIIs net sellers in equities
Mumbai, December 16 FIIs remained absent from the debt market for the trading week ended December 14, according to data available with the SEBI. Since December 10, FIIs were net seller on three trading days continuously and on December 13 they pressed fresh sales due to adverse developments. Mutual funds, however, were very active in the equity market and were net buyers worth
Rs 212.02 crore. On December 13, they bought and sold shares worth Rs 177.32 crore and Rs 53.98 crore with net investments at Rs 123.34
crore. PTI
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Lend and borrow shares In securities lending, the legal title of a security is temporarily transferred from a lender to a borrower. The lender retains all the benefits of ownership, other than the voting rights. The borrower is entitled to utilise the securities as required but is liable to the lender for all benefits
(e.g dividends, interest or rights). Security lending began as a means to cover short sales (selling shares without possessing them), but has since evolved as a means of facilitating sophisticated trading strategies. Security lending occurs when a holder or his agent lends eligible securities to borrowers in return for a fee. The absence of a formal market for security lending had been felt for a while. Responding to market needs, SEBI introduced a scheme for security lending and borrowing in 1997. Why should one lend/borrow? A securities lending programme is used by the lenders to maximise yields on their portfolio. Borrowers use the securities lending programme to avoid settlement failures. Securities lending provides income opportunities for securities holders and creates liquidity to facilitate trading strategies for borrowers. Securities lending is particularly attractive for large institutional holders of securities, as it is an easy way of generating income to offset custody fees and requires little, if any, of their involvement or time. Securities lending gives borrowers access to lender portfolios, which provide the flexibility necessary when borrowing for strategic positioning and financing inventories. From the macro-view, stock lending and borrowing facilitates timely settlement, increases settlements, reduces market volatility and improves liquidity. What guarantee does the lender receive for his shares? The borrower has to deposit collateral securities, which could be cash, bank guarantees, government securities or certificates of deposit or other securities, with an approved intermediary. In case the borrower fails to return the securities, he is declared a defaulter. The approved intermediary will liquidate the collateral deposited with it. In the event of default, the approved intermediary is liable for making good the loss caused to the lender. The borrower cannot discharge his liabilities of returning the equivalent securities through payment in cash or kind. Who are the approved intermediaries? Till date, four entities have been registered with SEBI as approved intermediaries: National Securities Clearing Corporation Ltd (NSCCL), Stock Holding Corporation of India Ltd (SHCIL), Deutsche Bank and Reliance Capital. SHCIL is offering stock lending facility exclusively for securities only in demateralised form and is offering this facility even to small investors from its about 120 centres located throughout the country. SHCIL unique selling prepositions for borrowers:
SHCIL unique selling prepositions for lenders:
Who can participate in stock lending/borrowing? Clearing and trading members of stock exchanges,
corporates, financial institutions and foreign institutional investors, mutual funds, banks and individuals can participate. Depending upon the constituent’s own internal statutory guidelines and the eligibility criteria set by the approved intermediary for different schemes, all these entities may act as lenders, borrowers or both. What is the tax angle to stock lending/borrowing? Income from securities lending and borrowing are exempted from Capital Gain Tax vide CBDT Circular 751 dated February 10, 1997 which states: "The transaction of lending shares of some distinctive numbers and receiving back shares of some other distinctive numbers is not “exchange” of assets within the meaning of “transfer” as defined in section 2(47) of the Income Tax Act." The meaning of the word “exchange” necessarily involves exchange of two different assets. The assets received back in the aforesaid type of transaction is no different from what was lend so long as it represents the same fraction of the ownership of the company. At no stage, the lender or the borrower intended to “exchange” different assets. Hence, the transaction of lending of shares or any other security under the securities lending scheme would not result in “transfer” for the purpose of invoking the provisions related to capital gains under the Income Tax Act. My advise to investors is that they should avail of this unique facility of stock lending to generate funds without selling their shares.
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Mutual funds are the best option Mr Amandeep Singh, Vice-President, Indo Global Infonet has worked for ten years with Punwire and three years with Escorts as a design engineer. A judicious investor, Mutual Funds are the best investment choice, he says and for investing in the equity market one needs to have a thorough knowledge about it. While earlier he used to put even as much as 40 per cent of his savings in the equities, this percentage has now gone in favour of Mutual Funds and his investments in the share market are around 10 per cent only. Initial investments Equity market My strategy has been to decide the exit point the moment I buy a share. This has helped me considerably and today I can say that I have been a gainer in the share market. That apart, while deciding the share one has to buy, grapevine is the worst thing to rely upon. Good management, sustainable business model, market trends have to be studied before going in for a company. Annual report of the company is the best way to start with. One should also avail benefit from the Internet where one can get the best information about the market. I am hopeful about the IT and cement industries and I think they have a bright future. One’s investment in the share market depends upon the risk taking liability , which is higher during the initial years of one’s employment. That time I used to put even 40 per cent of my savings in the share market. But now, with my priorities having changed and the need to invest in various sectors including insurance, Provident Funds having increased, I invest only 10-15 per cent in shares. Mutual funds Insurance Banks Other investments Where to invest (As told to Shveta
Pathak-TNS) |
sti
by J.C. Anand Market ignores industrial slowdown There is hardly any doubt that the industrial growth is down. According to the latest data released by Central Statistical Organisation industrial growth has slumped to 1.9 per cent in October as against 6.8 per cent in the same month last year. In fact, the total growth rate for April-October this year is only 2.22 per cent. The growth rates are lower for all the three major sectors (manufacturing, mining and electricity) comprising the overall index are disappointingly low. In fact, electricity, which had recorded growth rate of 4.64 per cent in September 2001, is now negative growth rate of 0.57 per cent. The corporate sector has so been trying to maintain its profitability by cutting down costs of production, reduction, in staff and by managing extraordinary income by a sale of property or investments. This cannot go on for long. Now that China has become a member of WTO, competition from imports will grow. So far the only sector, which has been doing well, is that of the consumer goods, though the capital goods sector has also shown some minor improvement. Our exports have fallen by 7.39 per cent in October and the government is likely to revise its export growth rate target for the current fiscal year. Between April-October 2001, exports have fallen by 2.88 per cent while imports have gone up by 3.8 per cent pushing up the trade deficit to $ 6.16 billion. It may also be noted that some of the top software companies in the USA have indicated poor performance and cut in profits during the current working. There has also been a large reduction in the working staff. In India too some companies have decided to reduce their staff as well as to cut down the salaries and the commission of their top brass. GTL for instance has announced that its top brass has agreed to forego part of their pay and commission. The Managing Director as well as the Joint Managing Director of company will take voluntary cut of 25 per cent in pay as well as commission. The stock market has so far been ignoring the business recession and the stock market indices have been climbing up for the past eleven weeks. Even the recent terrorist attack on Parliament did not much affect the market. It is therefore necessary that the investors should be very cautious in making fresh long-term investments. Perhaps two factors have improved the market rates the collapse of Taliban in Afghanistan and the attractively low market rates of many blue chip companies in India. But now time has come to take a more realistic view. One of the sectors which is quoting at lower prices is that of multinational pharma. During the next three years, the present market rates should at least double particularly the attractive are Glaxo, Novartis and Wyeth. From April 1, 2005, the new Patent Law would be operative which would cover both process and product patents. Indian pharma companies will have to confine themselves largely to produce of patent generic products or operate as sub-contractors of multi-nationals for production of their patented products. |
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by R.N. Lakhotia Tax deduction Q:
I am retiree. My income-tax for the
F.Y. 2000-2001 worked out as Rs 5100. Since I am a senior citizen and exempt from I-Tax upto Rs 15,000 u/s 88B, so I submitted my return with I.Tax payable as ‘nil’. Later on I came to know from the bank that they have deducted Rs 1249/- from interest of my F.D.s under
T.D.S. scheme. What should I do now to take refund of this amount & what care should be taken for next return.
— R.N. Sharma, Chandigarh Ans: You may file your revised income-tax return and claim refund of excess income-tax deducted at
source.
ICICI bonds Q: I had invested Rs 25,000 in SBI Mutual Funds during 1997 and after redemption on 6/2001, Rs 28,875 have been received being final payment. Kindly advise whether whole amount has to be included in the income for 2001-02 or only interest part. What is the Cost Inflation Index for 99-00, 00-01 & 01-02. Also intimate whether principal amount of ICICI Tax Saving Bonds has also to be included in the income on maturity. — R.K. Sharma, Karsog Ans: The cost inflation index for the F.Y. 1999-2000 is 389, for the year 2000-2001 it is 406 and for the financial year 2001-2002 it is 426. On the facts stated by you, you should calculate the amount of capital gain by reference to cost inflation index or in the alternative you may pay income-tax @ 10 per cent on capital gains amount without deducting Cost Inflation Index. The principal amount of ICICI tax saving bonds is not to be included while calculating income of the year. Nomination pension Q: I am a government servant and paying Income-Tax. During the year 2000-2001 I have received Rs 26,000 on account of ‘Nomination Pension’ from the Provident Fund Commissioner in respect of my deceased son having no family. Please clarify whether the deduction u/s 57 of Income-Tax Act is admissible on ‘nomination pension’ also. — G. Singh,
Mohali Ans: On account of family pension received by you, you will be eligible to tax rebate u/s 57 of the Income-Tax Act,
1961.
PPF scheme Q:
I shall feel obliged if you kindly reply to my following queries: 1) For how many terms the 15 year PPF Scheme can be extended? 2) What will be the scheme of withdrawals during the extended terms? — P.P.
Jain, Ludhiana Ans: The PPF scheme can be extended by a block of 5 years, the scheme of withdrawals during the extended period continue to be the same. For full details please contact the Post Office or the State Bank of India. |
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by Pushpa Girimaji Verdict to help pregnant mediclaim holders Thanks to a woman who challenged the interpretation of an exclusion clause by insurer in her health insurance policy, today, other women placed in similar circumstances can get a fair deal from their insurers. The question in this case was whether emergency medical treatment provided for ruptured ectopic gestation came under the exclusion clause in the policy document referring to “treatment arising from or traceable to pregnancy”. While the insurer said it did, the policy holder said it was a case of misrepresentation of the exclusion clause. The verdict of the Insurance Ombudsman and his observations in this case (Nov 19, 2001) should not only help many other women, but also have a bearing on the way insurers write and interpret exclusion clauses. Holding the repudiation of Ms Meepakshi Anand’s claim to be unjust, the Insurance Ombudsman, Uttar Pradesh and Uttaranchal, told the National Insurance Company that “when a policy condition seeks to exclude something, it has to be very specific. If not, the ordinary meaning assigned to the word has to be accepted”. The case has its origin in the sudden emergency surgery that Ms Meepakshi
Anand, a mediclaim policy holder had to undergo in the summer of 2000. A resident of
Bareilly, Ms Anand was visiting her parents in Dehradun when suddenly she felt severe abdominal pain. A doctor was called in, but the treatment did not help. As her condition quickly deteriorated, she was admitted to a surgical clinic, where she underwent emergency surgical operation for ‘Ruptured ectopic gestation right with haemopertonium with shock and low GC”. Subsequently, she filed a claim for Rs 35,347 towards the medical expenses, but her claim was rejected by the insurance company on the ground that the treatment came under the exclusion clause. It was at this time that I had written about the unfair repudiation of Meepakshi’s claim and had received anxious enquiries from several women whose claim had been similarly rejected by insurers. Subsequently, Meepakshi decided to seek the help of the Insurance Ombudsman in Lucknow. The Ombudsman’s verdict should now help all these women and many more. The National Insurance Company’s contention before the Ombudsman was that exclusion clause 2.1.10 in the policy document saying “treatment arising from or traceable to pregnancy, childbirth, including Caesarian section” covered treatment for ectopic pregnancy or gestation too. The term “traceable” to pregnancy had a wide connotation and covered any disease whose origin was connected with any kind of pregnancy and included ectopic or extra-uterine pregnancy. The idea was to exclude all kinds of risks which may arise out of pregnancy, the insurance company said. The insured, Ms Meepakshi
Anand, on the other hand, argued that this interpretation was totally unacceptable. Quoting dictionaries and expert medical opinion, she said the term “pregnancy” referred to the growth of the fertilised ovum in the “uterus” which contains the nutrient rich tissues required to nurture it and also the space for it to grow. Ectopic gestation or extra-uterine pregnancy on the other hand was an aberration, a nature’s accident, where the fertilised ovum gets implanted outside the uterine cavity, the most common site being the fallopian tube. While the natural outcome of normal pregnancy would be the birth of a child, in case of ectopic pregnancy, which rarely lasts more than a few weeks, there is no possibility of child birth at all because the fertilise egg cannot develop into a viable foetus. Besides, since the fallopian tube is narrow, the growing ovum causes the tube to rupture, requiring immediate hospitalisation and surgery to save the woman, as otherwise she may collapse and die of haemorrhage. And to club such a condition that is neither expected nor anticipated, with normal pregnancy and deny the claim was unfair and unjust, Ms Anand said. Mr R.N.
Tripathi, Ombudsman, who heard them both, ordered the insurer to pay Ms Anand all the eligible expenses with interest at the rate of 12 per cent per annum from the date of repudiation till the date of payment. Pointing out that pregnancy denoted the development of a foetus in the uterus, the Ombudsman said ectopic gestation was not a ‘pregnancy’ in the sense that this term has been used in a normal course and as defined in dictionaries. Said the Ombudsman: “In an accidental fall of a pregnant lady if there is an injury and resultant miscarriage, the insurance company is liable to pay because the proximate cause was accident and not pregnancy. It can, however, be argued that the miscarriage was traceable to pregnancy. The circumstances of this case show that the complainant was not pregnant in the sense that the word has been used...”. He also pointed out that when an involuntary medical termination of pregnancy can be covered under the Mediclaim policy, he saw no reason why an emergency case such as the one undergone by the insured cannot be covered. |
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