AAHA EEMI RUCHI...

vadavadala hanumannaAAHA EEMI RUCHI...

CIGARETTE BLUES...

Increasing cigarette prices by 50 per cent would help avoid over 40 lakh tobacco related deaths in India, said a report released by multilateral funding agency Asian Development Bank (ADB). "A 50 per cent price increase in cigarettes avoids about 27 million (or 2.70 crore) tobacco-attributable deaths, most of which are in the two most populous countries in the world. China would avoids nearly 20 million tobacco deaths, and India over 4 million tobacco deaths," said the report. For India, it said, the 50 per cent rise in cigarette prices corresponds to increase of 70-122 per cent rise in tax increase. As per the report, China, India, Philippines, Thailand and Vietnam in Asia are among the top five of the 15 tobacco using countries that account for two-third of the world tobacco consumption. For each of the five most tobacco consuming countries in Asia, "increasing taxes on cigarettes would result in substantially fewer long-term smokers and a reduction in premature deaths from tobacco-related diseases, while increasing tax revenues." In India, the report said that bidi is the most common type of smoked tobacco. It remains largely untaxed and their taxation strategies differ from the established patterns of taxation of cigarettes, which are administratively easier to tax than are bidis or other types of tobacco. "Moreover, cigarette smoking is steadily displacing bidi smoking in India. Thus, it makes sense for governments to focus on taxation strategies for cigarettes while expanding efforts to tax tobacco products more broadly," it said. The poorest socioeconomic groups in each country bear only a relatively small part of the extra tax burdens, but reap a substantial proportion of the health benefits of reduced smoking. The ratio of health benefits accrued to the poor to the extra taxes borne by the poor ranges from 1.4 to 9.5. "Thus, large increases in the cigarette tax in all of these countries are unusually attractive for public health and public finance, and are pro-poor in their health benefits." The report further said that Indian male smokers can expect to lose a full decade of life and most lives are lost are at the most productive age of 30-69 years, rather than advanced age. As per its estimates there are 4.45 crore male while 32.6 lakh females smokers in the country. "In India, the low SES (socioeconomic status) group would account for 30 per cent of marginal taxes paid, but 47 per cent of smoking deaths averted," it said.

INDIA GROWS FASTEST...BUT INDIANS REMAIN POOR

Indian economy is set to expand at the world's fastest rate over the next 50 years to emerge as a major force globally, but it would still rank as the second worst in terms of prosperity of its citizens. Over the 50-year period between 2011-2060, India will register an annual economic growth rate of 4.9 per cent, as per a latest report by Paris-based international grouping of the world's leading economies, the Organisation for Economic Cooperation and Development (OECD).
India's per-person GDP (measure of well-being of a country's citizens) will also grow more than 7-fold during this period, but the country will still rank at second place from the bottom by 2060 in absolute terms, said the report.
India was ranked lowest in terms of per-person GDP in 2011 and its position would change only marginally to second lowest after Indonesia in 2060, while China's position will improve considerably from third-worst to 16th from the down.
On the top, the US would be followed by Switzerland, Australia, Norway and Luxembourg. Switzerland is projected to be at the top in terms of well-being of its citizens. As per the report titled 'Looking to 2060: Long-Term Global Growth Prospects', China would also grow significantly during this period with the third-highest growth rate after India and Indonesia. "Income per capita in the poorest economies will more than quadruple by 2060, and China and India will experience more than a seven-fold increase, but living standards in these countries and some other emerging countries will still only be one-quarter to 60 per cent of the level in the leading countries in 2060," OECD said.
"The extent of the catch-up (in terms of living standards) is more pronounced in China reflecting the momentum of particularly strong productivity growth and rising capital intensity over the last decade. "This will bring China 25 per cent above the current income level of the US, while income per capita in India will reach only around half the current US level," it added. China would be on the top in terms of MFP (Multi-Factor Productivity that measures combined productivity of inputs into production) with a growth rate of 3.7 per cent, followed by Indonesia's 3.2 per cent and India's 3 per cent. The overall economic growth rate in China (3.9 per cent) between 2011-2060 would be third-largest after India's 4.9 per cent and Indonesia's 4.1 per cent. On the other hand, major economies like the US and the UK would witness growth rates of 2.1 per cent and 2.0 per cent respectively, OECD said. China will have the highest growth rate until 2020, but it will be surpassed by India and Indonesia thereafter, OECD said.
"This partly reflects a more rapid decline in working-age population, and consequently in labour force participation, in China than in India and Indonesia," OECD said. The annual human capital growth rate would be the highest in India at 0.8 per cent for this period, as against 0.6 per cent in case of China and 0.2 per cent for the US and the UK. OECD said that India economy is expected to be bigger than the US by 2060, while neighbouring China would emerge as the world's largest economy by as early as 2016. "The United States is expected to cede its place as the world's largest economy to China, as early as 2016. India's GDP is also expected to pass that of the United States over the long term. Combined, the two Asian giants will soon surpass the collective economy of the G-7 nations," OECD said.
Currently, Indian economy is worth over USD 1 trillion. As per OECD, the fast-ageing economic heavyweights, such as Japan and the Euro area, will gradually lose ground on the global GDP table to countries with a younger population such as Indonesia and Brazil. "The next 50 years will see major changes in country shares in global GDP... China is projected to surpass the Euro Area in 2012 and the US in a few more years, to become the largest economy in the world, and India is about now surpassing Japan and is expected to surpass the Euro area in about 20 years. "The faster growth rates of China and India imply that their combined GDP will exceed that of the major seven (G-7) economies by around 2025 and by 2060 it will be more than one-and-half times larger, whereas in 2010 China and India accounted for less than one half of G-7 GDP. "Strikingly in 2060, the combined GDP of these two countries will be larger than that of entire OECD area, while it currently amounts to only one-third of it," OECD said.
In 2011, India accounted for 7 per cent of global GDP, which is likely to grow to 11 per cent by 2030 and then to 18 per cent by 2060. Still, the large cross-country differences in living standards will persist in 2060 and India's per capita income will only be about 25 per cent of that in advanced countries, despite a robust growth. OECD is a block of 34 countries, which includes many of the world's most advanced economies such as the US, Japan, UK, Germany, France, Australia and Netherlands.

PER CAPITA INCOME OF STATES - INDIA

India has become the fourth largest economy in the world, yet it lags behind several nations in per capita income. Goa has the highest per capita income in India while Bihar has the lowest of only Rs 24,681.

Take a look at 20 states that lead in per capita income...

1. Goa : Rs 1,92,652 (2011-2012)  Rs 1,68,572 (2010-2011)

2. Delhi : Rs 1,75,812 (2011-2012)  Rs 1,50,653 (2010-2011)

3. Haryana : Rs 1,09,227 (2011-2012)  Rs 94,680 (2010-2011)

4. Tamil Nadu : Rs 84,058 (2011-2012)  Rs72,993 (2010-2011)

5. Kerala : Rs 83,725 (2011-2012) Rs 71,434 (2010-2011)

6. Maharashtra : Rs 83,471 (2010-2011)

7. Sikkim : Rs 81,159 (2010-2011)

8. Punjab : Rs 78,171  (2011-2012) Rs 69,737 (2010-2011)

9. Uttarakhand : Rs 75,604 (2011-2012) Rs 66,368 (2010-2011)

10. Gujarat : Rs 75,115 (2010-2011) 

11. Himachal Pradesh : Rs 73,608  (2011-2012) Rs 65,535 (2010-2011)

12. Andhra Pradesh : Rs 71,540 (2011-2012) Rs 62,912 (2010-2011)

13. Karnataka : Rs 69,493 (2011-2012) Rs 60,946 (2010-2011)

14. Arunachal Pradesh : Rs 62,213 (2011-2012) Rs 55,789 (2010-2011)

15. Meghalaya Rs 56,643 (2011-2012) Rs 50,427 (2010-2011)

16. Nagaland : Rs 56,116 (2011-2012) Rs 52,643 (2010-2011)

17. West Bengal : Rs 55,864 (2011-2012) Rs 48,536 (2010-2011)

18. Tripura : Rs 50,750 (2011-2012) Rs 44,965 (2010-2011)

19. Mizoram : Rs 48,591  (2010-2011)

20. Chattisgarh : Rs 46,573 (2011-2012) Rs 41,167 (2010-2011)

INDIA WEALTH

The wealth of individuals in the country is expected to double to Rs 179 lakh crore (rpt) Rs 179 lakh crore in the next four years, according to a report by Karvy Wealth. "The wealth in the hands of Indian individuals continues to grow at a decent pace," financial services company Karvy's Chief Executive and Group Head (Wealth Management) Hrishikesh Parandekar told reporters here. The report says the individual wealth in the country grew to Rs 92,26,090 crore as on March, 2012 from the year-ago's Rs 86,49,764 crore. It will almost double to Rs 179 lakh crore (rpt) Rs 179 lakh crore in the next four years and grow to Rs 214 lakh crore (rpt) Rs 214 lakh crore in the next year, the report said. Direct equity will continue to be the largest asset class, while insurance and fixed deposits and bonds will be joint second, it said. By FY'17-end, direct equity will form 28.7 per cent of total assets, up from 25.4 per cent in FY'12, which reflects the increase in confidence of investors, the report said. In the year gone by, the proportion of debt as an asset class for investments grew sizeably due to the volatile equity markets, it said, adding that debt instruments constituted for 72.3 per cent of the investments from 67.9 per cent a year-ago. This was primarily driven by reduction in equity from 31.8 per cent to 27.4 per cent, it said. Within debt, bank fixed deposits constituted the highest component at 94.42 per cent or Rs 21,82,666 crore invested in FY'12, it said.

WHO WILL BE THE WINNER...

President Barack Obama and Mitt Romney enter the final sprint before Election Day essentially deadlocked nationally in what looks set to be one of the closest presidential elections in U.S. history.

Polls on the state and national level have been, in many cases, razor close. What happens if the candidates tie in the popular vote? In the electoral vote? WSJ's Neil King and Professor of Government Linda Fowler join the News Hub. Photo: AP Images.

A new Wall Street Journal/NBC News poll of likely voters finds Mr. Obama leading his rival by a nose, 48% to 47%, as the two men crisscross the country to rally supporters in the states most likely to decide the outcome.
Final polls in many of those states, from Virginia and Ohio to New Hampshire, Colorado and Wisconsin, also find the race too close to call.
Full results of the Journal poll will be published later Sunday.
The two candidates enter the final stage with firm advantages they had from the start. Mr. Obama derives his tiny lead by holding a slightly larger base of support, 51% to 43%, among women voters than Mr. Romney has among men, the poll finds.
The former Massachusetts governor has the support of 51% of men, compared to 44% who back the president.
The poll of 1,475 likely voters across the country has a margin of error of plus or minus 2.55 percentage points.
The candidates are packing their final Sunday before the vote with events across the country. Mr. Obama begins the day in New Hampshire before jumping to Florida, Ohio and Colorado. Mr. Romney will kick off his day in Iowa before hopping to Ohio, Pennsylvania and Virginia.
With state polls continuing to show Mr. Romney lagging behind in the critical state of Ohio, his campaign is making a concerted, last-minute push to try to seize Pennsylvania, a win that would scramble the electoral map and negate a potential loss by the GOP nominee in Ohio.
A running average of all national polls maintained by Real Clear Politics now has the two men within 0.2% of one another. The average doesn't include the new Journal poll.
In the similarly down-to-the-wire 2004 clash between President George W. Bush and Sen. John Kerry, Mr. Bush actually entered the final stretch with a lead slightly above 2%—comfortable, by the look of this year's election.
President Obama got high marks in the poll for his handling of the aftermath of Sandy, the storm that lashed the Northeast last week. Nearly seven in 10 voters approved of how he dealt with Sandy, compared to 15% who disapproved. His approval was higher, 75%, among voters in the Northeast.

GOLD HAT-TRICK

With Diwali round the corner, gold investors with their fat 15 per cent gain since last Diwali appear to be headed for a hat-trick of better returns than stock markets. The returns from stock markets, as measured by its benchmark index Sensex, has been a fixed deposit-like gain of about 8.5 per cent for the same period. With the precious metal rising from Rs 26,700 levels on last Diwali to Rs 30,700 at present, an investment of Rs 10 lakh has appreciated to close to Rs 11.50 lakh now. The total gains by Diwali day next week could be even better as some experts predict that gold may breach its record price of over Rs 32,000 as demand outstrips supply on days of Dhanteras (November 12) and Diwali (November 13). While stock markets have also given positive returns since last Diwali, the performance has not been as robust as the yellow metal. The BSE benchmark Sensex has risen from near 17,300 levels to 18,755 since last Diwali -- resulting into an appreciation of Rs 10 lakh investment to close to Rs 10.85 lakh now. While stocks are still looked upon as a risky asset despite attempts to inculcate an equity culture in the country, gold has always been an integral part for its use as gifts and auspicious purchase during festivals. This will be the third instance in a row when the precious metal would outshine stock markets returns on year-on-year basis this Diwali, even as gold continues to be called an 'idle asset' for investment purposes. While Sensex fell over 17 per cent in one-year period till last Diwali (in 2011), gold came to the rescue of hapless investors with a 36 per cent rally for the same period. Prior to that, the gold had delivered a stellar 24.5 per cent one-year gain on Diwali day in 2010 -- still better than a little over 21 per cent gain for the Sensex in the same time. However, the stock market had outperformed gold on year-on-year basis on Diwali day in 2009, when the Sensex had seen a staggering 92 per cent rally in comparison to a relatively modest 34 per cent gain of the gold. Prior to that the investors had lost over half of their stock market wealth between 2007 and 2008 Diwalis, while the safe-haven demand for gold had helped it notch up a 11 per cent positive return.

SERVICES THE DRIVER FOR OFFICE SPACE

At a time when the real estate sector is slowing down, the services sector is expected to keep good the demand for office space with an estimated absorption of 28-30 million sq ft by the year-end, industry experts say. Being the largest contributor to the GDP (nearly 63 per cent), the services sector is likely to drive demand for commercial real estate, Jones Lang LaSalle India Senior Research Manager Subash Bhola said. "An 8.5 per cent growth in the services sector in FY12 is an indicator that a major slowdown in office real estate demand is not likely to occur as it generates the highest demand for office space," Bhola said. The service sector comprises banking, financial services and insurance (BFSI), information technology, consulting, trade and communication. The absorption is likely to be stable in short-to-medium- term, mainly on the back of ready or near-ready supply, Cushman & Wakefield South Asia Executive Managing Director Sanjay Dutt said. 

"The domestic office market is expected to remain stable in the short to medium-term and we hope to see stable absorptions to the tune of 28-30 million sq ft by 2012-end," Dutt said. According to a survey, around 21 million sq ft of office space was absorbed in Delhi NCR, Mumbai, Bangalore, Hyderabad, Ahmedabad, Kolkata, Chennai and Pune in the January-September period. "Even while IT/ITeS sector remains the largest in terms of volume in office space demand, the real drivers will be the BSFI sectors coupled with telecom, consulting, etc, that will keep the momentum upbeat in the next few months," he added. Dutt said office space is being looked at as attractive investment options at current values by both domestic as well as multinational companies, who are making strategic asset purchases here on the back of slight dip in prices.

FOOD SECTOR EMPLOYEES CONSUME COFFEE HEAVILY

People working in the food sector top the list of employees who need coffee the most at work, while journalists and PR professionals also figure among the top 10, a new survey has said. As per the survey conducted by global coffee and baked products major Dunkin' Donuts and human resource solutions provider CareerBuilder, professionals in food preparation and service businesses need coffee the most, followed by the scientists and sales representatives.
These are followed by marketing/public relations professionals (fourth), nurses (fifth), editors/writers/media workers (sixth), business executives (seventh), teachers/ instructors (eighth), engineering technicians/support staff (ninth) and IT managers/network administrators (10th). The survey results also showed that "coffee plays a major role in helping professionals perk up at work, as 43 per cent of those who drink coffee claim they are less productive without a cup of Joe."

The survey was conducted among more than 4,000 workers in the US by research firm Harris Interactive on behalf of Dunkin' Donuts and CareerBuilder on the occasion of the National Coffee Day on September 29.
As per the survey, 63 per cent of employees who drink coffee actually drink two cups or more each workday, while 28 per cent drink three cups or more.
The majority of younger workers need coffee for energy and motivation, as 62 per cent of workers aged 18-24 years said they are less productive without coffee, with 58 per cent of workers aged 25-34 made the same claim.
The survey also showed that coffee provided higher productivity boost for women workers. Overall, 43 per cent of workers who drink coffee claim they are less productive without their cup, while 47 per cent of female employees claimed they are less productive without coffee, compared to 40 per cent of male workers.

GOLD IS GOLD

Investments in gold have yielded higher returns compared to those in equity and real estate in India during the last three years, according to a study. Those who invested in gold between September 2009 and September 2012, have received double returns as the yellow metal has been their first choice for investment, a study released by industry body Assocham said. Presently, price of gold is over Rs 32,000 per 10 grams against around Rs 15,000 per 10 grams about three years ago. Hence, giving more than double the returns on investments, it said.
"Gold has really outdone other asset classes and it is likely to remain an attractive bet as long as uncertainty over the global economy stays" Assocham Secretary General D S Rawat said. He added that gold is the safest bet for investments amid uncertainty in other investment avenues. The prices of yellow metal saw a huge jump due to high prices of gold across the world and a weakening rupee. The study said those who invested in property have also seen good returns. However, these are comparatively lower than returns from gold. Investments in real estate have yielded almost double returns in cities such as Delhi, Mumbai, Chennai and Gurgaon in the last three years, it said. However, the study said the equity market has been the "worst performer", with investors witnessing erosion in wealth during the period under review.

IS IT ACHIEVABLE...

Leading US brokerage Morgan Stanley today said the BSE benchmark Sensex is likely to surge 25 per cent to cross the 23,000-mark by December, 2013. The 30-share barometer hit all-time high of 21,206.77 on January 10, 2008. The index would be trading at 14.9 times the estimated earnings of FY2013-14 to touch an all-time high of 23,069 by next year-end, the investment banker said in a statement, adding, the rally is likely to be driven by the cyclicals which are nearing ultra-cheap valuations. "Conditions for a new bull-market are getting slowly satisfied. The yield curve has stopped flattening, liquidity is improving, valuations appear supportive and profit margin expansion is a growing possibility in the coming months," the global financial services firm said in a note. Predicting a near 25-percentage points upside to the Sensex by the end of December 2013 (from Friday's close of 18,464.27), the firm said it is expecting the index earnings growth at 10 per cent this fiscal and a whopping 19 per cent in 2013-14, driven by ultra cheap cyclicals and energy and materials on which it is "overweight". The brokerage said, it is "underweight" on consumer staples, and "neutral" on industrials even as it has cut its technology exposure by 100 basis points. Attributing the bullishness to the new-found resolve from the government on the reform front, a Morgan Stanley said, "The decisive policy action at home (reduction in subsidies and opening up of FDI) and, more crucially, concerted action by the European and the US central banks have reduced the country's tail-risk linked to poor macro stability (the twin deficits on the fiscal and current account fronts)". "We are also trimming technology by 100 bps (1 per cent). Consequently, our average sector position has expanded, and we see this as our emerging strategy, as the average correlations of stocks to the market appear to be falling and no longer merits extreme focus on stock picking," it said. On the rationale for its portfolio picks, it said, "Our preference for quality cyclicals was already expressed last month. We now put money to work on cyclicals in our sector model portfolio. Accordingly, we go underweight on consumer staples and raise energy and materials to overweight, as well as taking industrials to neutral. Noting that the broad market earnings may have troughed or could trough in the current quarter, the note said "we have seen M1 growth put in a firm base and revenue growth should slowly accelerate in the coming months. Margins could rise in the coming months with a favorable base effect driven by the relative movement in the current and fiscal deficit. "Interest rates are already down y-o-y, and that should stem the steep rise witnessed in interest costs in the previous 12 months. The risk to earnings is that the investment rate collapses, although recent signals suggest that the public sector is starting to spend money," it said.

OVERSEAS INDIANS DISARRAY

As they confront a slowing economy and political gridlock, three-fifth of Indians are dissatisfied with the ways things are working in their country, a 13 percentage point decline in satisfaction since last year, a survey by a US-based research centre has said. The 13 percentage point decline in satisfaction is one of the greatest drops among the 17 nations surveyed by the Pew Research Center in both 2011 and 2012. "Nearly six-in-ten Indians (59 per cent) say they are dissatisfied with India's direction; only 38 per cent are satisfied," the findings of the poll said. It said Indians are increasingly gloomy about the economic future, and also worried about their children's economic prospects. Indian satisfaction now trails that in China (82 per cent), Germany (53 per cent) and Brazil (43 per cent), but still exceeds that in the United States (29 per cent), it said. Pew said falling satisfaction is coupled with widespread concern about the economy, especially unemployment and rising prices, which roughly eight-in-ten Indians say are very big problems. Nearly half of Indians (49 per cent) think current economic conditions are good, but such sentiment is down seven percentage points from 2011. Not surprisingly, Indians with relatively higher incomes are far more likely than those with low incomes to see the economy in a positive light, it said. According to the Pew poll, the Indian public is also pessimistic about the economy's future. Just 45 per cent of Indians think the economy will improve over the next 12 months, down from 60 per cent in 2011. "Again, richer Indians are much more likely than poorer Indians to be optimistic. The public outlook in India is far more circumspect than that of India's emerging market rivals, Brazil (where 84 per cent foresee economic improvement) or China (83 per cent)," it said. But such pessimism is consistent with a consensus view outside India that recent heady economic gains are now a thing of the past, it said. In July, 2012, the International Monetary Fund forecast only 6.1 per cent growth in 2012 for India and a 6.5 per cent expansion in 2013. Both forecasts reflect downgraded expectations just since April, 2012, Pew said. The Indian public is still upbeat about personal finances. Nearly two-thirds (64 per cent) think their own economic situation is good. Despite their increased economic gloom and doubts about their children's prospects, half of Indians say they are better off than they were five years ago, possibly reflecting a one-third increase in gross national income per capita over the same period, the survey results said.

I have become an antique piece

President Pranab Mukherjee joked about his transition from an active political life to the Rashtrapati Bhavan. "....of course, it (being the President) has the other side of the picture that perhaps I have become an antique piece in the theatre of the Indian economic activities...," Mukerjee, who was elected President in July after he resigned as the country's Finance Minister, said at a felicitation programme organised by CII in his honour. Observers wondered whether Mukherjee was alluding to the government move to review his controversial retrospective tax proposals. "I am addressing in a different capacity where I have one advantage and one great disadvantage. Advantage is that I can speak freely in the form of advice but disadvantage is I cannot implement what I speak and what I believe should be done," Mukherjee said. The President also showed shades of his much-appreciated sense of humour when he recalled his last speech in Parliament as the Finance Minister. "... In the last speech in Lok Sabha, I did not contemplate that perhaps it will become the last speech in Lok Sabha because I will be debarred from that premises...," Mukherjee said, amid laughter and applause. Mukherjee also maintained that it is time for the younger generation to take over in politics. "The older generation (in politics)- those who we are- still occupying the space... perhaps some of us should vacate the space for the younger people...," he said.

HYDERABAD REALTY DOWN

New residential project launches in the city declined by nearly 75 per cent to 1,500 units in the first half of 2012 over the year-ago period, according to a report by real estate consultant Cushman & Wakefield (C&W).
"The total number of new residential units launched was approximately 1,500 units in first half of 2012 compared to over 6,000 new project launches during the same period last year in Hyderabad," a C&W research report said.
"The drop in new launches was largely due to the to ambiguity in the governmental policy," it added.
It, however, added Hyderabad is likely to see around 40,000 residential units entering the market in the next three years, of which nearly 60 per cent will cater to the mid-segment category.
"Relaxation in land reservation regulation will positively impact the residential markets with increased new launches in future.
"There are approximately 4,000 units in pre-launch stage in prime and upcoming locations of the city," C&W Executive Managing Director South Asia Sanjay Dutt told reporters here today.
Majority of under construction projects are concentrated in Western and North Western markets.
Western areas of Madhapur, Gachibowli, Tellapur, Kondapur are expected to see 42 per cent (16,800 units) of the estimated supply followed by north-western locations such as Kukatpally, Miyapur, Nizampet which would witness 8,000 units, he said.
C&W expects an increase of 48 per cent over last year in pre-commitments of office space, estimated to be 2 million square feet by the end of this year, which indicates a positive demand trend for the city.
The demand for commercial office space in Hyderabad is expected to increase moderately from next year onwards as economic conditions improve, Dutt said.

EQUITY MF'S VERY WEEK

Majority of equity mutual funds in the country have underperformed against their respective benchmark indices over the last five years, according to a report by S&P Dow Jones Indices and Crisil released today. "The underperformance of actively managed funds in comparison to the benchmarks over the latest five-year period demonstrates once again the difficulty for fund managers to consistently outperform the benchmark," S&P Indices Director Simon Karaban said. A benchmark is a standard against which the performance of mutual fund scheme can be measured. The agency used the S&P Indices Versus Active Funds (SPIVA) scorecard to come to the conclusion. The scorecard reveals a majority of large cap equity funds failed to beat the S&P CNX Nifty, the benchmark for large caps, with 53.33 per cent underperforming their benchmark over the last five years, 57.14 per cent over the last three years and 52.63 per cent over the last year. The percentage of actively managed equity funds underperforming the benchmark indices has seen a declining trend since December 2010. However, their number still exceeds those outperforming the indices, a Crisil statement said. However, data from the diversified funds and equity linked saving schemes (ELSS) suggests percentage of funds outperforming the benchmark in both one-year and three-year period is stable as compared to five-year period, the statement said. Active managers of equity-oriented hybrid funds have also fallen behind benchmarks over both the one-year and five-year time frames, it said. In contrast, the majority of active managers of debt oriented hybrid funds or Monthly Income Plans (MIPs) outperformed the benchmark CRISIL MIP Blended Fund Index over the three and five-year time frames, it added. In the one-year period ended June 2012, the majority of gilt and balanced funds underperformed, while the majority of debt, ELSS and diversified funds beat their benchmarks.

Jiju Vidyadharan, Director for funds and fixed income research at Crisil Research, said the MF industry in the country has been undergoing multiple changes given various regulatory announcements and the rather flat capital markets. "Given the environment, the number of new launches has been low and mutual funds have been in a consolidation phase." "Of the different fund categories, the survivorship has been the lowest when it comes to diversified equity funds across categories and time. Whereas balanced funds, hybrid funds, gilt funds and debt funds had a 100 per cent survivorship in the one-year period," he further said. Continuing the trend observed in the previous editions of SPIVA, the latest scorecard maintains that asset-weighted returns are higher than equal-weighted returns across categories (except for gilt funds) over the five-year time frame. Asset-weighted large cap equity funds have returned 5.86 per cent over the past five years compared to 4.61 per cent for their equal-weighted equivalents. This indicates that funds with better performance over longer time frames had larger assets under management, the report added.

Subbarao cracks a joke

RBI Governor D Subbarao today "announced" the formation of a committee with K C Chakrabarty and Pratip Chaudhuri to look into the issue of Cash Reserve Ratio (CRR) but only to retract shortly later on the "joke".
"Late last night I signed off a paper forming a committee. The terms of reference for the committee are whether we should continue with CRR or not," he said at the annual Ficci-IBA banking conference here.
For a while the audience took the announcement seriously and some journalists "flashed" the news.
The announcement was made in the presence of his deputy Chakrabarty and SBI chief Chaudhuri, who have been engaged in a spat on the issue.
"Members of the committee are Dr Chakabarty and Shri Pratip Chaudhuri. Process of the committee will be that both of them will be locked up in a room until they reach a conclusion and the time frame is that they will not submit their report till my term as Governor is over," Subbarao told the audience that burst into laughter on realising the joke.
After the speech, when asked if he was serious or joking, Subbarao retorted: "What do you think?"

OWN HOUSE A GOOD INVESTMENT OR NOT...

Only 56 salaried individuals surveyed in the country own a house despite earning more than Rs 10 lakh annually indicating that very few people recognise owning a house as a good investment and tax planning option, according to the latest study. As per the findings of the 'India Tax Ratio 2012' report by TaxSpanner, an online income tax return filing portal, 56 per cent of employees own a house with an annual income of more than Rs 10 lakh and amongst those having an earning below Rs 10 lakh annually, only 13 per cent own a house. Among those with the income of less than Rs 5 lakh only, 6.8 per cent of respondents own a house. The study covered employees from over 500 corporates in major cities, including the Delhi, NCR, Mumbai, Chennai, Bangalore and Hyderabad. "The figures clearly indicate that there are only a few people who recognise owning a house as a smart investment and tax planning option in the beginning of their career. The deductions available to individuals as a home owner can reduce their tax bill substantially," TaxSpanner CEO Ankur Sharma said. The study added that at 40 per cent Bangalore has the highest number of house owners followed by Hyderabad at 17 per cent and Mumbai and Chennai at 13 per cent each. About 60 per cent of home owners surveyed having income more than Rs 10 lakh are also claiming House Rent Allowance (HRA) exemption and hence taking benefit of both home loan deduction as well as HRA exemption. The study showed that the largest percentage of house owners is in the age bracket of 31-35 years at 42 per cent, with the percentage of house owners in the age group 21-30 years is 20 per cent and house owners in the age group 21-25 years contributing only 1 per cent.