Ted Spread is a measure of 'liquidity' in the US economy. The higher the value of ted spread, the lower are the banks willing to lend to each other. High value of Ted spread is an indicator of fear of defaults, also called as counter party risks. Typical value of Ted spread is between 0.5% to 1%.

Currently, as of today the value of Ted spread is near 3.2% ! The only other time when Ted spread was above 3% was after the 1987 stock market crash. The above graph is from Econbrowser based on data from Bloomberg. It shows that the liquidity crisis is now much worse than during the first phase of subprime crisis 2007-2008. I remember reading opinions of "experts" around or before May 2008 sounding like "worst of credit crisis may be over". Well, the above graph also shows that either experts tend to be too optimistic, or the media tends to be attracted more by the optimistic experts.

Since US economy is one of the largest in the world (at least as of today :) ) and this current credit crunch is by definition is all about lack of liquidity, we in India and the rest of the world need to worry about Ted spread.

You can find Latest value of Ted spread here.

Ted spread is defined to be the difference between 3-month Treasury bills (or T-bills) and 3-month LIBOR (London Inter Banking Offered Rate). To read more about "how is ted spread calculated?", "what is LIBOR?", "What is T-Bill?", etc. read the Wikipedia article on TED SPREAD.

Related posts:

• Preparing for the coming recession
  

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Recession is a harsh fact of life. History has taught us that economies tend go in cycles of growth followed by contraction (of GDP, etc.). Although these business cycles are not completely avoidable there is a lot that can and should be done to soften the blow of a recession, or to avoid a prolonged and deep recession.

So what is it that we can do to minimize the effect of recession on us? How to prepare for the recession that you see is obviously coming? This is a funny question because the answer that is good for an individual is not good for the economy as a whole. For example, times are recession are hard, so for individuals it is best to try to save money and reduce spending for the hard times. While for the economy, this is exactly what causes to deepen and prolong the effects of recession. Here are some tips to keep in mind.

• Be very very choosy and cautious about investing in stock markets. Real Estate, Banks / Banking stocks, Steel and metal are some of the sectors that must be put on high alert or 'high risk'. Fast Moving Consumer Goods (FMCG) (like toothpaste, soaps, footwear, etc.) or Pharma stocks are relatively less affected and if you think you really have to invest in the stock market, these are the two sectors that you would like to have on your portfolio. After all, even if there is a recession, people wont stop buying toothpaste and medicines, or rarely try to use 'less soap', would they?
  
• In a situation of recession + inflation, usually one sees a drop in property or real estate prices. So it is best to postpone investing in real estate if possible.
• Buying Gold has historically been a good hedge against recession, especially in stagflation - economic stagnation + inflation.
  
• Pay attention to your job. The risk of job lay offs during times of recession is very high. For example you are in an IT industry in India, you could try very hard to always remain on some project in order to avoid becoming a 'lay off' victim.
  

As I said, some of the suggestions above like "save money" or "wait for real estate prices to drop" are a bit funny, because it is exactly these types of measures people take that deepen the effect. Had my blog been more popular, out of moral responsibility i would have been very cautious of making such suggestions.

Related Posts:

• What is TED SPREAD? Why bother?
  

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Just read this article on Calculated risk. The external debt of US has now approached $10 trillion.

Just to give you an idea of what 1 trillion dollar means. It is roughly equal to the entire GDP of India ! Thus US foreign debt is now ten times higher than Indian GDP.

Here are some more numbers (approximate).

Country	GDP ($trillion)	External Debt ($trillion)	Debt/GDP
US	13.8	10	0.72
China	3.3	0.36	0.11
India	1.1	0.13	0.12
Japan	4.4	1.5	0.34
UK	2.7	10	3.7

So overall, compared to GDP (Gross Domestic product), UK has the highest external or foreign debt. Followed by the United states and then Japan. Thankfully, India is way behind !

It is standard theory that a high external debt affects economic growth. I have been trying to read exactly how and how fast does this happen, and how much external debt can one consider sustainable etc. If anyone of you reading this have an idea, and would like to share, please post a comment.

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A blogger like me struggles to actually bring his imagination about layout into reality by modifying the html code. I had always wanted to 'justify' the posts in my blog. I have been using a custom pre-post template for that which is a bit tedious. I just discovered the possibility of doing it by simply modifying or actually adding a small line in the html code of the template. I added

text-align: justify;

in the code of the main wrapper. Let me check hot is works.

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I personally find buying GOLD a very amusing investment option. The reason for this is that apart from the small amount of GOLD required in industry, this commodity or metal is not really that useful for the economic devlopment. The majority of demand for GOLD comes from people hoarding GOLD either as an investment or for jewellery. This makes me wonder - Demand for things like jewellery/clothes depend a lot on latest fashion. If suddenly GOLD jewellery goes out of fashion, and something else, like say jewellery of some superb synthetic material comes into fashion, will cause GOLD prices to plummet?

At this point of time however, may be because of the status associated with GOLD jewellery, this may not be a cause for immediate concern although i would always feel uncomrtable to put all my money into GOLD. Nevertheless GOLD is a very useful investment option and having GOLD in your portfolio can certainly make your portfolio more robust. To understand that let us first understand the factors affecting GOLD prices.

• High Inflation: In times of high inflation, people tend to invest in commodities, GOLD being the most popular among all commodities. This is also the time when the economy and stock market or mutual fund investments do not do well and GOLD investments can provide a good hedge for your investment portfolio.
• Low interest rates: This is somewhat similar to the above factor. When the interest rates are low (as compared to the inflation), especially less than the inflation, then the demand for GOLD increases.
  
• Human sentiment: This is an irrational but significant and the most difficult to predict factor which can influence the price of gold. Because of this factor it is also easier to have 'temporary GOLD bubble'.

Related posts :

• GOLD ETF and GOLD Mutual Funds
  

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• Lehman Brothers goes bankrupt.
• AIG, toubled US Insurer rescued by Fed : Fed to inject upto $85 billion, and retain around 80% stake in AIG.
• Merrill Lynch bought by Bank of America. This deal thought to be brokered by the Fed in order to save Merrill Lynch.
  
• FNM, FRE rescued by Fed. The plan is that the US govt will keep injecting money in order to maintain the networth of these GSE's positive.
  
• Rupee continues downfall versus dollar. Ends up at two year low. FII's continue to pull money out of Indian Markets. Interestingly the Domestic Institutions (DII) have started buying equities (i.e. they have been net buyers of equities in the past couple of days).
  
• Oil drops to below $95. However oil drop fails to cheer world markets.
  

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Rupee dollar rate is governed by supply demand principle, just like any other thing in the market. For simplicity let us just focus on the two currenices rupee and dollar, while ignoring other currencies. The following are list of people who would buy / sell rupee.

• Importers will buy dollar in order to 'buy' commodities from the US (or other commodities like oil priced in dollar). Thus importers tend to push the value of rupee downwards.
  
• Exporters, on the other hand tend to push the value of rupee upwards, because either the exporters or those to whom they export will have to buy rupee.
• People / FII's who invest in India buy rupee.
• People /FII's who sell their investments in India and want to take their money out sell rupee.

The above are among the primary forces which govern the rupee dollar rate. Ofcourse there are other types of forces, for example, the importers or exporters might buy/sell rupee for hedging purpose, like almost all IT industries currently do.

In the past few days, FII's have been net sellers in Indian stock market. For example on Sep16, the net amount of equities sold by FII's was approximately 1400 crore rupees, i.e. roughly 3 billion dollars. On 15th September this figure was close to 1000 crore rupees or roughly 2 billion dollars. These figures look significant enough to influence the rupee dollar equation. In addition to high Indian inflation, this may partly explain the consistent fall of rupee in the past couple of weeks.

Inflation can have a severe effect on currency rates. Suppose the expected annual inflation in US is around 4% and that in India is around 12%. Then as far as purchasing power is concerned, the dollar will have 4% lesser value after one year, while the rupee will have 12% lesser value. Naturally, this would lead to a rupee decline. Moreover, high inflation would also affect growth and the foreign inflow of investments and further contribute to declining rupee.

Is the current steep rise of dollar versus rupee sustainable?
To me the answer looks no, unless Indian inflation gets out of control, or the claims of RBI / Indian Governemnt on inflation moderation by March are way off. Look at the current financial crisis of US. Lehman Brothers is dead, AIG is in ICU. Many more banks, especially those having high exposure to real estate are bound to collapse. Growth prospects in the US seem to be getting worst. In the long run, although India will also be affected, US Economy looks to be heading towards a much greater downfall. I wont be surprised if the rupee bounces back by 10% or so, as soon as there are convincing signs of inflation moderation in India, say by end of current calendar year. The growth prospects of India, at least as of today are much better than that in the US. Anything positive is greater than any negative number, as simple as that.

Disclaimer : I am not an expert in this topic. These are just my own thoughts for improving my own understanding.

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Lehman brothers, another big US financial institution going down.

• Lehman Brothers Holdings (LEH) had a large exposure to commercial real estate. So falling real estate prices have ####ed up Lehman brothers.
• A lot of other banks worldwide are going to get affected (read this BBC article) because of their complex derivatives contract with Lehman. I have no idea whether a chain reaction will screw more banks.
  
• According to this article "subsidiaries of Lehman will remain solvent while the firm liquidates its holdings." So what about the investments Lehman has in Indian markets? will Lehman liquidate its holdings in India too?

But the Asian markets today dont seem to be very worried about Lehman. Japans market is up by 1% (cheering oil falling below $100) and Chinese Shanghai stock exchange is flat (+0.03%).

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Compare the article Financial compatibility and marriage which starts with "Marrying a person who shares your attitudes about money might just be the smartest financial decision you will ever make.." This article appeared after The Key to Wedded Bliss? Money Matters in New York times. Coincidence? I dont think so.

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Why is Tata steel trading at so low P/E? Currently the P/E ratio of Tata steel, at its current price of Rs. 523 is only 4. Let us compare it with other steel manufacturing companies. At its current price of Rs. 140, the P/E ratio of SAIL is about 8.4. So why is P/E ratio of tata steel so low? Let us look at another international company, Arcelor Mittal, currently trading at a P/E of 6.8.

update: For latest P/E ratio of Tata Steel go to finance.google.com

One thing that comes to my mind is debt. While evaluating a company, one has to not only look at P/E and growth, but also the debt of that company. Here is a table comparing P/E ratios and debt equity ratios of Tata Steel, Sail and Arcelor Mittal.

Company	P/E ratio	Debt Equity Ratio
Tata Steel	4.0	0.68
Arcelor Mittal	6.8	0.47
SAIL	8.4	0.24

But is the above table enough to explain the low P/E ratio of Tata steel? Especially given the fact that the net consolidated profits of Tata steel have grown by a whopping 200% last year? Yes, agreed, Steel is required everywhere. So the slowdown is going to take a big toll on the steel sector. I am going to pounce on Tata Steel once i see any "convincing" signs of improvement in global economy.

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A couple of US Stocks are plummeting : Fannie Mae and Freddie mac, they lost around 85% in a single day. And this is after having shed a substantial value contiuously over past few months. Now its turn of Lehman Brothers. Lehman brothers shares dropped by over 40% after it reported a loss of $3.9 billion. Today they again dropped by another 40%!.

There is a lesson to be learned from this. It is so important to diversify your portfolio rather than just buying one or two stocks if you want to minise risk.

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Just read the news
that Ansal brothers (sushil ansal and gopal ansal) are probably surrendering today on charges of destroying court evidence Uphaar tragedy case. If convicted they face jail term upto 7 years. Ansalinfra down by 7% in morning trade on NSE. I dont know how much of this news has got to do with it. Other real estate companies, e.g. DLF are also down by over 3%.

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The rupee is falling almost as fast as the oil prices are falling. In the past 6 months, rupee has fallen by 12% against the dollar, effectively making oil 12% more expensive for India because oil is priced in dollar. So dont get too excited by the oil fall, unless the rupee stops falling. Lets fasten our seat belts for possibly more bad news on inflation triggered by the falling rupee in the coming months.

Falling rupee is also bad for the markets, or rather for investors. A low rupee value discourages foreign inflow of cash into Indian stock markets.

Despite this, I have observed a large call build up yesterday. The nifty is likely to be in for a short rally today in the absence of any more shaking news. Thats what the put call outlook tells me.

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Fannie Mae and Freddie Mac, the giant mortgage firms have tumbled down by around 90% and 83% respectively after decision of government take over.

I dont see any chance of a bounce back or recovery in these stocks. The July housing news have been quite bad and these firms are likely to report horrible results in the coming quarter. The Fed has decided to keep putting money in these GSE's (Government sponsored enterprises) periodically so as to keep their networth positive. These firms will surely keep making losses for the coming couple of quarters and the Treasury will have to keep putting money. This will keep eating the shareholders share in the company and the prices will likely keep dropping further. If you hold this, exit now and recover your brokerage charges :)

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Here you will find easy to read information income tax system in india for the latest financial year 2008-2009. The following topics are discussed in this post and you may scroll down directly to the topic you are looking for.

• Income Tax Slabs.
• Exemptions/Deductions : 80C, 80D, 80DD, 80DDB, 80E, interest on housing loans.
• Tax on Bank Interest and Capital Gains.
• Three more types of taxes which every investor must know.
• Tips for saving income tax.
  
• Which Income tax return form should I use ? (download forms and instructions)
  
• Latest Income Tax Calculator - India (2008/2009) : Excel spreadsheet available for free preview and download.
  

You may also read my latest posts on Indian Income Tax Act - Tax deductions under various sections OR Section 80C: How to save upto Rs. 33000?

If you are interested in knowing how to pay your income tax online, click on How to pay your income tax online.

Income Tax Slabs - India (2008/2009)

For Men

upto 1.5 lacs	NO TAX
1.5 lacs to 3 lacs	10 %
3 lacs to 5 lacs	20 %
above 5 lacs	30 %

For Women

upto 1.8 lacs	NO TAX
1.8 lacs to 3 lacs	10 %
3 lacs to 5 lacs	20 %
above 5 lacs	30 %

For Senior Citizen

upto 2.25 lacs	NO TAX
2.25 lacs to 3 lacs	10 %
3 lacs to 5 lacs	20 %
above 5 lacs	30 %

In addition to above, a 3% of Education cess will be charged on the total Income tax paid (not on the total taxable income). If the taxable income exceeds Rs. 10 lacs, a 10% surcharge on the total income tax (not on the total taxable income) is also charged.


Exemptions / Deductions for Income Tax 2008/2009

Type of Exemption / Deduction	Maximum allowed deduction
Deduction under section 80C: Pension + Provident Fund + ELSS (tax saving mutual funds) + Life Insurance	Maximum: Rs. 1,00,000
Deduction under section 80D: Medical Insurance or Mediclaim policies	Maximum: Rs. 15,000 For senior citizen, Maximum : Rs. 20,000.
Deduction under section 80DD:Medical expenditure, insurance for treatment of a disabled dependant.	Maximum: Rs. 50,000 If disability is server (>80%) then Rs. 75,000.
Deduction under section 80DDB: Medical treatment of spouse, parents, sibblings, dependants.	Maximum: Rs. 40,000.
Deduction under section 80E: Interest on loan taken for higher education.	Maximum: Rs. 40,000.
Interest paid on Housing Loan	Maximum: Rs. 1,50,000 per year.

Income tax on Interest earned on Fixed deposits- 2008/2009

It is mandatory to pay income tax on interest earned on fixed deposits. To calculate your income tax, simply add the amount of interest earned to your total annual income and use the above tax slabs to calculate your tax. If the interest earned on a fixed deposit exceeds Rs.10,000/- then income tax will be deducted at source. It is possible to avoid TDS (TDS means Tax deducted at source) by splitting the amount in a number of fixed deposits. However, one will still have to pay tax.


Capital Gains Tax 2008/2009
Long term capital gain: Gain or Profit that you make after holding (i.e. buying and then without doing any trade) shares, equity, Futures and Options(F&O), bonds, mutual funds for more than one year. Currently you do not have to pay income tax on Long term capital gain.

Short term capital gain: Gain or Profit that results from trading equities, F&O, mutual funds, etc. within a span of less than one year. (i.e. profits which dont qualify for long term capital gains come under short term capital gains. Currently, i.e. in 2008/2009, short term capital gain tax is 15%.

Click here to read more about Capital Gains and Capital gain tax.


Other Types of Taxes for Investors - 2008/2009

Type of Tax / Description	Limit / Details
STT: Securities Transaction Tax : Tax charged while trading securities like equities, options, etc. (stt is directly charged by your broker)	Equities: 0.02% of the transaction amount Options premium: 0.017% , charged to the seller
Service Tax: Charged on brokerage amount directly by the broker.	12.5% of the brokerage amount.
DDT: Dividend Distribution Tax : Tax charged to institutions distributing dividend (Investor's do not pay DDT)	Equity Funds: 0% (no DDT) Money market and Liquid Funds: 25% Debt Funds: 12.5%

Tax Saving Tips to minimize your Income Tax

• Take full advantage of deductions allowed under 80C : If you find it hard to balance between savings for avoiding tax and your current expenses, try to invest in ELSS (Equity Linked Savings Scheme) Mutual Funds (or tax saving mutual funds) with dividend pay out option. With dividend option, you will also get part of your money back. For example, if you invest Rs.50,000 and get Rs.10,000 back at dividend, then effectively you invest only Rs.40,000 but get full tax benefit for 50,000/-. The dividend paid out is also currently tax free. However mutual fund investments carry a risk factor.

• Use deductions allowed under 80DDB, 80E, 80DD whenever applicable.
  

• Invest part of your Liquid cash in Liquid Funds: Liquid funds offer tax advantage over short term fixed deposits, especially when your total taxable income is in the highest bracket. The income tax one would have to pay on interest earned on short term in this case would be roughly 33% while the dividends paid out Liquid funds are subject to only 25% of DDT (Dividend distribution tax). This tax is paid by the fund itself before distributing the dividend and the dividends in the hands of the Investor are tax free.

• Plan for a Housing Loan: It makes sense to take a housing loan even if you have the money to buy a house. A simple calculation would show that once your taxable income is in the highest bracket, this strategy is beneficial.
  

• Cutting down Short term Capital Gain Tax: I will mention one standard and well known method for traders to cut down your short term capital gain tax. For example, if a company declares a dividend, you can buy its shares just early enough to get the dividend and immediately sell the shares after the dividend is declared. Since price of the share would fall after the dividend, that would show as a loss of capital and reduce the amount of your capital gain. The dividend you get will be tax free. This strategy would work best in a stable market and the risk involved would considerably increase if the markets are volatile.

• Leave travel allowance (LTA): This is one more way of getting tax exemption on part of your income. I will add more about LTA later in this post.
  

Which form should I use for filing IT returns?

Form	Description
ITR1 (most popular) (download ITR1, download instructions)	for Individuals having income from Salary, Interest (e.g. Fixed Deposits), Pension, Agricultural Income
ITR2 (download ITR2, download instructions)	for Individuals and HUF* having income from above sources and/or House Property, Capital Gains but not having income from business.
ITR3 (download ITR3, download instructions)	for Individuals and HUF who are partners in firms but not carrying out any business of profession under propreitorship.
ITR4 (download ITR4, download instructions)	for Propreitary Business Owners

*HUF=Hindu Undivided Family.

This single page post has answer to all your questions : What are the latest income tax slabs for 2008/2009? What the the latest income tax rates? How can I take benefit under different types of income tax deductions and exemptions in India? What are tips for income tax planning in order to save or minimize income tax? Which forms should I use to file my income tax returns? What are different types of taxes like STT, DDT, Capital Gains tax? Where can I download Income Tax returns forms and instructions?

If you have any other questions regarding Income tax in India or tax planning, deductions etc. plesae ask your questions in the comments section.

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In this post I am going to make a list of sites which show financial data of Indian companies. Follow any one the links below to find key financial indicators like P/E, EPS (Earning per Share), B/V (Book Value), etc.

• Google Finance : You can find quotes, P/E, EPS of all major companies all around the world.
  
• Rediff Finance : Pleasant site with minimal ads.
  
• Moneycontrol : Very annoying site with lots of ads. However contains lots of useful data.
  
• Stockhive : Relatively new. Prices not updated real time, but the site is quite pleasant with minimal ads. Requires a quick registration process.

For example.

• Tata Steel : Click here to find P/E, EPS, Market Capitalization, number of shares etc.

Related posts :

• Consolidated results versus Standalone results
  

Read more ...

Finally, we're almost there. With NSG waiver, the main hurdle is done. However like every stage of this deal, there are still some questions about whether the US congress has enough time to pass the deal, but that is certainly not such a worrying point as the NSG waiver was. Here are some highlights and remarks

• Convincing Austria and others was not a free cake. India had to give an official statement that it would observe the voluntary or self-imposed ban on nuclear tests and sharing sensitive technology.
  
• Now that India has NSG waiver, it is free to clinch similar deals with other countries like Russia, France etc. on Civil Nuclear Cooperation.
  

Now the big question is what if India conducts tests ? Again here are the highlights or main things we have to keep in mind.

• Buying 'civil nuclear technology' and then finding ourselves in a situation with no nuclear fuel is going to turn out to be too expensive.
• Article (6) of US constitution seems to imply that the 123 agreement, since passed later would override Hyde Act. But please remember. The US is completely capable of taking a decision to halt civil nuclear cooperation irrespective of what the Hyde Act says.
  
• The Nuclear Deal allows India to stockpile nuclear fuel for the life time of a reactor. Typical life time of a reactor is 30 to 50 years. (For example it would be stupid and impractical to think of stockpiling coal for the life time of a thermal power plant, but come on, this is 'nuclear fuel', its possible.)
• Even after tests there would be some negotiations and the halt of nuclear cooperation would not be automatic, there would be room for negotiations.
  

Under what circumstances would India want to perform a new nuclear test ? Will the circumstance be enough to justify the violation of our self imposed test-ban? This is actually the most relevant question which for obvious reasons was never discussed openly.

• Note that India has already performed two nuclear tests, Pokhran I and II, so the fact that we are 'agreeing' to self imposed test ban means that further tests are not crucial to test current nuclear technology.
• One of the circumstance which would make India hungry for a new test would be to test a drastically new Nuclear technology which some other advanced countries have but India does not have. But you see, for other country to acquire such a technology would require it to first conduct its own tests. That would be easy excuse for India to justify violating its own self-imposed test ban.
• Another circumstance which would create a situation for further nuclear test would be a cold war type of situation where Indian rivals conduct tests just to 'make a statement'. I think this is not that demanding a situation for India to conduct further tests, but any such situation would be even easier for India to justify test ban violation.
  

Overall its a win-win situation for India. Indian critics of this deal should not forget that we have the flexibility of stockpiling nuclear fuel before making any 'stupid move' like another test, if they think a nuclear test is so important from India's viewpoint. My personal viewpoint is, economic power of a nation is more important than acquiring a nuclear bomb, especially when we already have some. There is not so much to worry about nuclear tests and let us completely focus on economic development.

Related posts :

• Holding on to Nuclear Deal

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Here is an idea which is still in experimental stage.

Watch the numbers in the derivatives market closely. Data which is watched is

• futures premium
• options interests of 3 most active calls and 3 most active puts
• implied volatility of the above options
• change in open interest of the above options

Then using the above data, generate two numbers. One which indicates medium term expectation and one which indicates short term expectation of the market. I wont reveal the exact formulas but it is not hard to make your own. For finding the magic formula, some trial error and testing would be needed. This method provide one of the nice ways of algorithmic or system trading of nifty futures. anyway, for the moment let me keep it simple.

Here are today's numbers :

• Medium # : -2.6
• Short # : +9.8

The rough idea about the values of the numbers is self explanatory. For example, a very negative (less than -10 for example) Medium # would indicate that soon the market expects "itself" to go down son. A positive Short # would indicate expectations of a rally. This rally could be very short lived, e.g. just an intraday rally. These numbers would themselves keep changing throughout the market hours. Both positive numbers, and i'll go long, and both negative numbers and i'll go short. If there is an imbalance, like today, I will usually avoid trading.

Currently i wont be updating these numbers everyday, only when i have time to trade or experiement. but later on i plan to do regular updates.

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Here is a picture i found on Calculated Risk. China's index has been falling and doesn't show any sign of stopping. People who must have invested near the peak, and especially those who did not respect their stop losses must have seen half of their investment just vanish. For me, this is an eyeopener experience.

You can look at latest data on chinese stock market exchange on Shanghai Stock Exchange

Meanwhile, for those of you interested in economic developments in the US, calculated risk is an excellent blog, very frequently updated, and maintained by two experienced finance professionals. Definitely worth having a look.

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Will the Nuclear deal go through?

From every angle, the nuclear deal has been a clear sign of diplomatic triumph of India an in particular of the Manmohan Singh Government. From complete isolation until a couple of years ago, we have now reached a point where we can think of negotiating on importing uranium and technology for nuclear reactors- and that too being adamnat on "we won't sign NPT". I am impressed.

Those of you who have been following developments on Nuclear deal will clearly remember that until May or June this deal was thought to be unlikely to even pass domestic hurdles. But the way Congress planned for distanting Mayawati starting January, which was important for their current opportunistic friendship with the Samajawadi Party, and then withstanding the shock of Left's adamant viewpoints and withdrawal of support, was a sheer display of pure political expertise. I am again impressed.

Alas, this was only the starting point of the Journey. New Zealand, Switzerland, Ireland and Austria do have the potential for playing a spoil sport (from India's point of view). I'm watching, like other billion indians, with my fingers crossed.

Related posts :

• Holding on to Nuclear Deal
  

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The topics covered in this post are : What is a Demat account ? How to open a Demat account? What are the benefits of opening a Demat account ?

What is a DeMAT or Dmat account ?

A DMAT or DEMAT account is an account which you need for buying or selling shares of a company or stocks and other equities (like exchange traded funds - Liquid Bees, gold etfs etc.). Just as bank accounts hold money, demat accounts hold equities. Demat stands for Dematerialisation. Earlier investors used to hold shares in paper format, Nowadays they are stored electronically in your Demat account. You cannot put money in demat account, only equities.

How to open a Demat account ?

• Documents required to open a Demat account may include (i) copy of PAN card (ii) valid identification and address proof. (iii) Bank details (for e.g. photocopy of your bank account passbook). (iv) Copies of your recent photograph.
  
• A DP (or a Depository Participant) is an institution or agent which offers the service of demat account. There are several DP's in India, for e.g. SBI, ICICIdirect, UTI, HDFC, Sharekhan, Reliance Money, Motilal Oswal, etc. Go to a DP with the required documents to open a Demat account.
  

Comparison of Demat account charges:

Typical account maintenance charges for Demat accounts are a couple of hundred rupees per anum. I have a Demat account with State Bank of India and I pay Rs. 400/- p.a. Here is a table comparing account opening and account maintenance charges of demat accounts charged by various institutions (for individuals).

Click here for a even more detailed comparison of demat charges

Institution	Account Opening Charges	Account Maintenance Charges
ICICI Demat Account	NIL	Rs. 500/- per year.
SBI Demat Account	NIL	Rs. 400/- per year. (Rs.350/- if you recieve email statements)
Kotak Demat Account	NIL	Rs. 30/- per month.
Reliance Money Demat Account	NIL	Rs. 50/- per month.
Sharekhan Demat Account	NIL	Rs. 300/- per year.
CitiBank Demat Account	NIL	NIL

Discover the power of Dmat+Online trading account:

It is highly recommended that you also open a online trading account (if possible) when you open a Dmat account. Here is a list of things that you can do with a few clicks once you have a Dmat account and an online trading account linked to it.

• Buy shares and stocks of any company on BSE and NSE.
  
• Invest in Mutual funds online (no paper work !) (as such to simply buy mutual funds you do not need a demat account)
  
• Invest in Gold through Gold ETFs.
  
• Apply for IPOs (Initial Public Offer) online.
• Trade in Futures and Options (these are not recommended for beginners)
  
• Invest in Liquid BeEs (Liquid ETF) - this is "like making" a quick short term fixed deposit.
  

SBI DEMAT or DMAT account
how to operate a demat account?

The main purpose of a demat account is to record or 'store' all your shares and equities. I have a demat account with SBI (State bank of India). It is linked with the online trading account with SBICAP Securities. Here is a picture which gives an idea of how one can operate or see details of your demat account online.

You will have to read my other blog posts below (or similar pages on the internet) to understand more about investments mentioned above.

Related posts :

• Introduction to Mutual Funds
• Exchange Traded Funds - All those "BeES" on NSE
• GOLD ETF - Invest in gold without buying gold
• Liquid Funds : What, Why, How, etc.
• My own experience with Systematic Investment Plan (SIP)
• Tips for selecting a mutual fund

Dmat Accounts, Online Trading Accounts in India Compare Brokerage Charges in India Dmat Account : Think Beyond Savings Account Compare Demat Accounts How to buy shares using demat account? How to Open a Demat Account? How to choose the best Demat Account? How to transfer shares between Demat Accounts? Demat + Trading Account CitiBank Demat Account Charges HDFC Demat Account Charges SBI Demat Account Charges Sharekhan Demat Account Charges

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Here is a list of NSE BSE trading holidays for the calendar year 2009.

List of NSE BSE Trading Holidays- 2009.

	Holidays	Date	Day
1	Moharram	8th January 2009	Thursday
2	Republic Day	26th January 2009	Monday
3	Mahashivratri	23rd February 2009	Monday
4	Id-E-Milad	10th March 2009	Tuesday
5	Holi	11th March 2009	Wednesday
6	Ram Navmi	3rd April 2009	Friday
7	Mahavir Jayanti	7th April 2009	Tuesday
8	Good Friday	10th April 2009	Friday
9	Dr. Ambedkar Jayanti	14th April 2009	Tuesday
10	Maharashtra Day	1st May 2009	Friday
11	Ramzan Id	21st September 2009	Monday
12	Dasera	28th September 2009	Monday
13	Gandhi Jayanti	2nd October 2009	Friday
14	Diwali ( Bhaubeez)	19th October 2009	Monday
15	Gurunanak Jayanti	2nd November 2009	Monday
16	Christmas	25th December 2009	Friday
17	Moharram	28th December 2009	Monday

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Exchange Traded Fund (ETF) :

Exchange traded funds are mutual funds which you can buy and sell in the stock market, just like any other stocks or shares ! This as far as investment is concerned an exchange traded fund is just a mutual fund and as far as buying or selling the mutual fund is concenred, an exchange traded fund is just like a stock or equity which you can trade on stock exchange like NSE. Below you will find a list of all exchange traded funds in India which are listed on NSE and their description.

How to buy or invest an Exchange Traded Fund?

Just as you buy a company share or a stock. You need a Demat account. The units of ETF or Exchange traded fund you buy will appear in your portfolio in your Demat account.

Why invest in Exchange Traded Funds (ETFs) ?:

Here is a list of advantages of investing in Exchange Traded Funds (ETF) :

• Absolutely no paper work : easiest method to buy / sell mutual fund.
  
• ETF like NIFTY BeEs provides the most affordable (unleveraged) way of 'buying Nifty'.
  
• Gold ETFs like GOLDBEES are the best way of investing in gold. No need to physically buy gold. Provides affordable way of investing in small amounts of gold, as compared to trading gold on commodities exchange. Also much better and hassle free than physically buying gold from the market and worrying about its purity, security etc.
  
• Real time NAV calculation. Essentially the price of the ETF can be thought of its NAV and it keeps changing real time. So the performance of ETF is much more transparent and easy to judge.
  

List of Exchange Traded Funds or ETFs traded on NSE India :

ETFs - Index Funds (Nifty, Junior Nifty, etc.)

• Nifty BeES (Index ETF)
  
• Junior Nifty BeES (Index ETF)
  
• QNIFTY (Index ETF)
  
• S&P CNX Nifty UTI Notional Depository Reciepts Scheme (SUNDER) (Index ETF)
  

ETFs - Banks / Banking stocks

• Bank BeES (ETF)
  
• PSUBNKBEES (ETF)
  
• KOTAKPSUBK (ETF)
  
• RELBANK (ETF)
  

Gold Exchange traded Funds

• GOLDBEES (GOLD ETF)
  
• KOTAKGOLD (GOLD ETF)
  
• GOLDSHARE (GOLD ETF)
  
• RELGOLD (GOLD ETF)
  
• QUANTUMGOLD (GOLD ETF)
  

To know more about Gold ETFs, please read my detailed post on

Gold mutual funds and Gold exchange traded funds

ETF - Liquid Funds

• Liquid Benchmark Exchange Traded Scheme (Liquid BeES)

Related posts :

• GOLD ETF - Invest in gold without buying gold
• Liquid Funds : What, Why, How, etc.
• Introduction to Mutual Funds

Read more ...

Sixth pay commision is going to have an impact on inflation and YOU even if you are not a government employee !

There are around 19 million (or 2 crore) Indian Government employees. This is slightly less than 2% of the total Indian population. These 2% people are suddenly going to see their monthly income rise by around 20% to 25%. Not only that, they are also supposed to get arrears totalling more than 18,000 crore rupees. Remember the CRR hike of 25 basis points by RBI a few weeks ago was supposed to suck around 16,000 crore rupees from the system ? By the way i like this phrase "suck money out of the system". It gives one the impression that CRR hike is actually going to have some effect :)

Thus the effect of the sixth pay commission, or rather, merely the effect of the arrears paid out by sixth pay commission will be more on inflation over the period of one year than the recent CRR hike by RBI. The impact would also be more direct on inflation, I think. And I am not even considering the impact of salary hike, merely arrears. I think the impact of salary hike will be even greater.

So is the sixth pay commission fair ? All i would like to say is that is a different debate. You cannot say it is unfair just because it is going to have an impact on inflation. The salary hikes that IT people or all private sector people have been gettting so consistently over the past decades surely also has had a comparable effect.


Related posts :

• Sixth pay commission : Calculate your new pay and smile :)
  

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What is a Gold Mutual Fund ?

A gold mutual fund is a mutual fund which invests in gold. When you buy or invest in a gold mutual fund, the fund managers invest your money in gold. Typically, when prices of gold increase, the gold mutual fund performs well. The exact performance and the returns you get depend on how the fund managers manage your money, when do they buy and/or sell, etc. You will be charged a small fee called entry load, typically around 2.5% at the time when you invest.

What is NAV of a Gold Mutual Fund?

Just like any other mutual fund, when you invest in a gold mutual fund, you buy units of that mutual fund. The price of one unit is called NAV or Net asset value. When the mutual fund makes profit, the NAV increases. If it makes loss the NAV decreases and so on. If you want to invest more, you buy more units. If you want to get part or whole of your cash you have invested back, you can sell some or all of the mutual fund units you have. The NAV can also be used to compare the performance of different gold mutual funds.

What is a GOLD ETF ?

GOLD ETF or GOLD Exchange Traded Fund is a Gold Mutual Fund which can be bought and/or sold in the stock market like any other shares or equities. Click on ETF to know more about Exchange traded funds.

List of Gold Mutual Funds and Gold ETFs in India-
Examples, Latest NAV and Comparison:

The following table gives a list of some of the popular Gold Mutual Funds in India. Clicking on the links below will take you to their Moneycontrol.com page where you can find their latest NAV's. You may use these links to compare the NAV and past performance of the gold mutual funds.

Gold Mutual Fund	Returns in 1 year	Latest NAV	Entry Load	Exit Load
AIG World Gold Fund	-	LATEST NAV	2.25%	1%
DSP ML World Gold Fund	-0.85%	LATEST NAV	2.25%	NIL
Kotak Gold ETF	16.7%	LATEST NAV	1.5%	NIL
Benchmark Gold ETF	16.7%	LATEST NAV	NIL	NIL
UTI Gold ETF	16.8%	LATEST NAV	2.5%	NIL
RELIANCE GOLD ETF	-	LATEST NAV	NIL	NIL
QUANTUM GOLD ETF	-	LATEST NAV	NIL	0.5%

*I have only compared mutual funds with growth options. All the above mutual funds also have dividend options. However, in order to compare the above gold mutual funds, it would be enough to compare either of the growth or dividend options.
*AIG Gold Fund, Reliance Gold ETF and Quantum Gold ETF have not completed one year.

DSP ML Gold mutual fund seems to have performed horribly. Its returns in the past 6 months are -40% which is bad by any standards, even though gold prices have dropped. So of the above gold mutual funds, avoid DSP ML Gold Mutual Fund and go for Kotak Gold ETF, Benchmark Gold ETF, or UTI Gold ETF. Benchmark Gold ETF has the added advantage that if you invest with them directly, you have no entry or exit load. This is a huge bonus.

Advantages of Investing in a GOLD MUTUAL FUND and GOLD ETF :

• It is much more hassle free and safe as compared to buying physical gold. If you buy physical gold, you have to worry about its purity, storage, security etc. Moreover buying / selling gold from the market takes much more effort and time.
  

• More affordable for small investors than buying gold futures on commodities exchange. Gold futures are typically in lots of 1kg, while the price of a Gold ETF is typically 1 gram (sometimes even 1/2 gram) of gold.
  

• Trading and investing in Gold ETFs is a matter of a few clicks once you have a DEMAT account and an online trading account.

List of Gold ETFs on NSE :

Following table summarizes the list of GOLD ETFs traded on NSE India, and their relative turnover (i.e. traded quantity) on NSE.

NSE Symbol	Gold Mutual Fund	Turnover
GOLDBEES (BENCHMARK GOLD ETF)	Benchmark Gold Mutual Fund	high
KOTAKGOLD KOTAK GOLD ETF	Kotak Gold Mutual Fund	medium
GOLDSHARE UTI GOLD ETF	UTI Gold Mutual Fund	medium
RELGOLD RELIANCE GOLD ETF	Reliance Gold Mutual Fund	medium
QGOLDHALF QUANTUM GOLD ETF	Quantum Gold Mutual Fund	low

* The price of all the above GOLD ETFs, except QGOLDHALF, is roughly equal to the current price of 1 gram of gold. The price of QGOLDHALF is roughly equal to the current price of 1/2 gram of gold.
* Clicking on the name of the GOLD ETF above will take you to the corresponding page of NSE's website


Related posts :

• ETFs in India - All those "BeES" on NSE
• Liquid Funds : What, Why, How, etc.
  
• Introduction to Mutual Funds

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Are you one of those who will be benefited by sixth pay commission ? You can calculate your new pay. Click on sixth pay commission calculator to find out how much you have benefited. This calculator is going to bring more smiles than any other calculator has every brought :)


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• Indian Income tax Calculator : Excel Spreadsheet
  

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wow ! crude oil prices are near $105 ! They touced $118 in the past two days so have fallen by over 10%. The Gustav storm has already hit, caused damaged, killed 94 people and blah blah... In fact all the oil facilities in Mexico have been shut. Despite this, the crude oil has fallen sharply.

What does this indicate? I think it means that factors of demand destruction which are pulling down the oil prices are quite strong. I have been writing about it, and it does not take much of an expert today to predict crude is going to fall below $100. Let me recall an argument from my previous post in the form of an open question to all.

Today's crude oil demand is comparable to the demand in June 2007. So not much increase in demand. The around 5% drop in crude-oil demand in US seems to more than offset the demand increase in the rest of the world. Does that mean crude oil prices will fall to the level of those in June 2007 ? i.e. touch $80 a barrel ? Remember the supply has increased after the Saudi's pumping in a few hundred thousand barrels more each day.

A small hint for myself : Wait for another sharp fall, buy a suitable Nifty put. Because October-November period is going to be bad ! Currently Nifty is trading over 4500. Another fall, another rise will take Nifty above 4700. I dont see how it can remain there for long.

Related posts :

• When will crude drop below 100 ?
  

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What are Liquid Funds ? What are the advantages of investing in a liquid fund ? How to invest in liquid funds in India ? How to find their latest NAV's and historic performance ?

The word "liquid" or "liquidity" is usually associated with availability of free cash. Thus liquidity of an investment measures the ability of that investment to be quickly converted to cash. For example an investment in short term bank deposit is a liquid investment as compared to investment in a mutual fund having a lock-in period of 3 years or an investment in real estate.

What are liquid funds ?
Liquid Funds are one of the best available options you have to park your liquid cash and earn 'tax-free' dividends on it. You can simply think of liquid funds as an alternative investment options to short term fixed deposits. Liquid funds invest with minimal risk and their portfolio usually consists of short term deposits, short term government securities, Money Market Instruments, and I have also once seen a small exposure to leasing and real estate. From an external point of view, liquid funds function just like mutual funds - when you invest money you buy 'units' of the fund, they also have NAV , come in growth and dividend options.

Liquid Funds and Dividend Options:
For liquid funds with dividend options, the dividend is either Monthly dividend (MD) or Weekly dividend (WD) or even Daily dividend (DD) !. Yearly dividend would not be a popular in something that you expect to be 'liquid' like a short term deposit, would it?

Are Dividends on Liquid Funds Taxable ? (Liquid funds versus fixed deposits)
The dividends paid out by Liquid funds "in the hands of the investor" are currently tax free (in India), just like dividends paid out by Mutual Funds. However the Liquid Fund itself has to pay Dividend distribution tax and a surcharge of 3%. Currently the Dividend Distribution Tax (DDT) levied on Liquid Funds is 25%. Thus, DDT+surcharge comes out to be around 25.75%. This is however still less than 30% tax one would have to pay on interest from savings account (assuming the taxable income enters the 30% bracket). Moreover, including the 3% education cess, if 10% surcharge becomes applicable (i.e. when the taxable income of that person is greater than 10 lacs) then the total tax one would pay on interest in savings account or fixed deposit would be over 33% as compared to 25.75% for Liquid Funds. Thus there is a clear cut tax advantage for choosing Liquid Funds over short term fixed deposits.

How to invest in liquid funds in India ?
As I have already mentioned, the external functioning of the Liquid fund is very much like a mutual fund. Find a suitable liquid fund and invest in it as you would invest in a mutual fund. If you are located in India, you will probably need a PAN card to invest in a liquid funds.

Where can you find a list of liquid funds in India ?
Let me give few names / examples of Liquid Funds in India to really convince you of their existence :) These are not necessarily well chosen or well performing funds. Just random examples. In fact at the time of writing this blog entry, some of them have also given negative returns in the past few months. Later I may research and upload a list of funds which I personally find preferable.

• HDFC Liquid Fund - Dividend Daily
  
• ICICI Prudential Liquid Plan - Dividend-Quarterly
• Mirae Asset Liquid Plus Fund - Dividend-Weekly
• Reliance Liquid Fund - Cash Plan - Growth

For a comprehensive list of Liquid funds in India, choose one of the following options.

• Click here to get a list of liquid funds list of Moneycontrol.com.
• Go to finance.rediff.com , Search "Liquid Fund" and get a long list.

Liquid Funds, finding NAV and past / historical performance :
This again you can get on the finance.rediff.com or Moneycontrol.com or maybe even dozens of other financial websites, sometimes including the website of the fund itself. When you get a list of liquid funds in the above mentioned manner, just click on each to get details of NAV, historic NAV etc.

Exchange traded Liquid Funds - Liquid BeEs :
Liquid BeEs (or LIQUIDBEES) is a liquid fund which can be traded on NSE. This is currently the only ETF which is a Liquid Fund. The NAV, or the Price of Liquid BeEs is currently around Rs. 1000.

Other types of low risk Funds :
Arbitrage Funds, like Liquid Funds are also provide low risk investment options. However, in case of a good liquid fund one can normally expect returns comparable or better than the short term fixed desposit interest rate. In case of Arbitrage funds there is no such 'base-line' expectation. Moreover, now SEBI is planning to allow direct system or algorithmic trading. This will increase the efficiency of arbitrage funds, but will also be easy for people to set up more arbitrage funds.

Related Posts :

• Gold ETF and Gold Mutual Funds
• ETFs in India
  
• Introduction to Mutual Funds

Read more ...