Reliance Capital has announced that it will stop selling gold coins including the sale through India Post. The company’s commercial finance division will also stop lending against gold as security. Further, it has announced that Reliance Capital Asset Management will suspend new subscriptions in Reliance Gold Savings Fund — a gold-backed exchange traded fund. Existing SIP investors will not, however, be affected by this decision. The company says the move is intended to help the government battle the current account deficit by reducing gold imports. It is subject to regulatory approvals.
New offer period for RGESS extended to 30 days
All new funds offered by mutual fund houses under the Rajiv Gandhi Equity Saving Scheme will now be open for 30 days unlike the earlier funds that were open for subscription just for 15 days. This move by the market regulator SEBI is intended to bring in more retail participation, say market observers.
Karvy’s new hedge fund
Karvy Capital has launched Systematic Edge Fund, an open-ended hedge fund that will invest in futures and options of equity stocks and indices, taking both long and short positions, thus reducing dependence on overall market direction. The fund targets to deliver positive returns across all equity market scenarios. The securities market regulator last year approved several players, including Karvy, to launch hedge funds as it built the framework for regulating such investment vehicles through the Alternative Funds Investment regulation.
Government bond yields rise
As the rupee plunged and hit an all-time low of 59.98 against the US dollar on Thursday, India’s 10-year government bond yield rose ten basis points to hit 7.38 per cent. On Friday, as bond prices fell further, the yield rose to 7.44 per cent. The fear that the sliding rupee will see foreign institutional investors fleeing the domestic debt market, did the damage. So far in June, FIIs have pulled out Rs 21,103 crore from the debt market. Also contributing to the falling yield were concerns that the RBI may now delay cutting interest rates, as imports get costlier and stoke inflation.
Commodity Transaction Tax from July 1
Commodity Transaction Tax (CTT), proposed in this year’s Budget will come into effect from July 1. The Ministry of Finance notified the tax on Thursday. There will be a levy of 0.01 per cent on the transaction value (sell side) in futures trading of many non-agricultural commodities. This includes gold, copper and crude oil. All processed agri commodities such as edible oils and sugar will also be taxed. With over 90 per cent of volumes in the registered commodity exchanges happening in the non-farm category, the tax will dissuade traders, say market observers. From July 1, selling of a gold contract (1 kg) at current prices will entail the trader coughing up an additional Rs 269 besides paying the service tax, exchange levy and stamp duty.
Trade deficit soars in May
Slowing exports and rising imports in May led to a trade deficit (the difference between merchandise exports and imports), of $ 20.1 billion, the highest in the last seven months. India's exports contracted 1.1 per cent in May. This, some observers attribute to the government’s order to suspend gold trading in special economic zones. Imports rose 7.7 per cent in the period to $44.65 billion. Gold and silver imports in May surged 89 per cent over the same month last year to $8.4 billion. Import of petroleum products was up 3 per cent at $15 billion.