Gold costlier

Tempted to buy gold, silver or platinum now? Well, you might need deeper pockets. To help the falling rupee and plug a part of the current account deficit, the government hiked import duty on these precious metals earlier this week. From 8 per cent, the duty on gold has increased to 10 per cent now. This is the fifth round of duty hikes for gold since January 2012. With the latest round of hikes, the import duty on platinum and silver has also inched up to 10 per cent.

This was not the only measure to wean interest away from gold. Additional customs duty and excise duties on gold and silver bars were also raised. Besides, the Reserve Bank (RBI) banned the import of gold coins as well. But close on the heels of these measures, strong demand from stockists ahead of the festival season due to fear of tightened supply made gold prices shoot higher. On Friday, the price per 10 gm crossed the Rs 30,000 mark. In New Delhi, it moved to just over Rs 31,000, a level last seen in November 2012.

Lower overseas remittances

To restrict dollar demand, the RBI has reduced the limit on remittances abroad by resident individuals. The limit, given under the ‘Liberalised Remittance Scheme’ has been brought down from $200,000 to $75,000 per financial year.

This scheme is available for acquiring shares, debt instruments or any other assets outside India. Individuals can also hold foreign currency accounts in banks outside India.

Besides reduction in the sum allowed, the only new restriction that has been imposed right now is that resident individuals cannot use this scheme to directly or indirectly acquire immovable property. Other restrictions such as prohibition for use in margin trading, lottery, etc., would continue.

Fixed deposit rates move up

Given the volatility in the equity and bond markets, are you looking for safe investment options? Bank fixed deposits may not be a bad idea, especially if you have shorter timeframes in mind. Thanks to the RBI measures to curb liquidity, several banks are raising deposits rates right now to muster funds.

While private banks such as HDFC Bank, Axis Bank and Yes Bank were the early birds, many others, be it PSU, private or foreign banks, have followed suit.

ICICI Bank has raised interest rates by 0.25-0.75 per cent across various maturities.

The hikes are the maximum for shorter timeframes of up to one year. Karnataka Bank is offering 25 to 50 basis points more on its fixed deposits. IDBI Bank will now offer 8.5 per cent for deposits of 46-200 days, compared with 7-7.25 per cent earlier. Deutsche Bank and Oriental Bank of Commerce too have raised interest rates by up to 1.5 per cent. Punjab National Bank has raised NRI deposit rates by 1 per cent.

NSEL woes deepen

As if the battering at the stock markets was not enough, more bad news came from the spot markets. To settle its Rs 5,574 crore dues to investors, the NSEL (National Spot Exchange) sought seven months, instead of the five months asked for earlier. While the first pay-in happened on August 16, the first pay-out will be done on August 20.

Bond yields surge

The uninviting macro economic situation — record lows by the rupee despite measures to curb the current account deficit, coupled with higher inflation numbers — saw 10-year bond yields jump this week. They moved up by 40-50 basis points on Friday, ending the week at around 8.9 per cent. This is closer to the levels seen towards the end of 2011. The surge is good news for those invested in funds which, in turn, have holdings in securities with a shorter-term duration of 12-18 months.

(This article was published on August 17, 2013)
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