Today’s Important Updates

Today’s News – Certicom Updates

Economy
  • The Govt announced the guidelines and tax refund rates for the export boosting scheme Remission of Duties and Taxes on Export Products for 8,555 items. The outlay for the scheme is Rs 12,454 crore in the current fiscal.

  • India is expected to withdraw sugar export subsidies from the new season beginning October as a sharp rise in global prices makes it easier for Indian mills to sell the sweetener in world markets.

  • Retail, recreation visits hit pre-lockdown levels. Power generation also registers a surge; 20% higher than in 2019.

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Finance
  • In a partial relief to HDFC Bank, the RBI has allowed the lender to issue new credit cards.
Current Affairs
  • With 8,813,919 more Covid-19 vaccine doses being administered on Monday, India’s total count of vaccine shots reached 55.47 crores.

  • 80% fee cut for recognised institutes applying for patents. In the past, they were available only to recognised educational institutions owned by the govt.
Recent Posts

Investors should take advantage of price corrections to increase their gold exposure – According to analysts

Investors should use correction to build exposure to gold: Analysts

Gold closed at Rs 46,339 per 10 grams on Monday. Its one-year return is currently minus 17.1 per cent. If one examines the one-year return rolled daily over the past 15 years, the lowest one-year return was minus 17.6 per cent on November 14, 2014. Gold is almost at par with that mark.

Investor sentiment towards an asset class tends to be affected by past returns. With returns appearing bleak, should you avoid the yellow metal, or make a contrarian bet?

The question assumes immediate significance for investors planning to invest in the fifth tranche of sovereign gold bonds, open for subscription till August 13.
Improved sentiment negative for gold

After touching a peak of Rs 55,922 per 10 grams on August 7, 2020, gold began to correct. Once vaccines became available, uncertainty diminished and economic optimism rose. Massive fiscal and monetary stimulus by governments and central banks fuelled the recovery.

“The need for a safe-haven asset declined as growth returned and confidence improved, so gold took a beating,” says Kishore Narne, head–commodity and currency, Motilal Oswal Financial Services. The recovery of the US economy – the prime mover of gold prices – has been strong.

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In such an environment, risky assets like equities became more attractive and investment flows moved from gold to equities. Phenomenal returns by these assets led to more flows. Over the past year, the Nifty50 has given a return of 44.9 per cent, the Nifty Midcap 150 Index has yielded 73.4 per cent, and the Nifty Smallcap 250 has given a 99.4-per cent return.

Can gold’s prospects improve?

One factor that could revive the yellow metal’s fortune is inflation.

“It could pose a problem over the next 18 months or so. Though central banks will try to control it, they are likely to fall behind the curve. If inflationary pressure is strong, there could be currency depreciation and gold would receive fresh impetus,” says Narne.

Investors should also keep a close eye on economic data in the developed world, especially the US.

“If growth falters and it leads to more action by central banks, gold’s prospects could improve,” says Chirag Mehta, senior fund manager-alternative investments, Quantum Mutual Fund.

The Finance Ministry has released Rs 9,871 crore as a grant to 17 states.

As for whether there are any signs that US economic growth could falter, Mehta says: “The economic data of late has been a mixed bag. Consumption, which has been the primary driver of recovery, has been fuelled by government handouts. Once they stop, the sustainability of recovery will get tested.”

The dollar may weaken over the long term. The US government’s fiscal deficit is expected to remain elevated for a long time, and that would lead to currency weakness. A weak dollar is positive for the yellow metal.

What you should do investors need to hedge for the risk that growth could falter or inflationary pressure could be strong. Gold can provide that hedge. Experts say gold is undervalued currently.

“If you look at the long-term graph of money supply versus gold, it shows that gold is undervalued today,” says Mehta.

As the money supply increases, the paper currency gets debased. Gold is a monetary asset that can’t be debased. So, an increase in the money supply should be accompanied by an increase in the price of gold, which has not happened.

Investors who don’t have at least a 10-15 per cent allocation to gold in their portfolio should use the current correction to build this allocation. According to Kedia, any investor entering gold now should do so with at least a three-year horizon.

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GDP grows 1.6% in Q4, but contracts 7.3% in FY21

GDP grows 1.6% in Q4, but contracts 7.3% in FY21

India’s gross domestic product (GDP) increased by 1.6% in the January-March quarter of fiscal year 2020-21, but contracted by 7.3% for the entire fiscal year, according to government figures released on Monday.

Since 1979-80, when the Indian economy shrank by 5.2%, this is the first full-year contraction in the last four decades. This is also India’s second consecutive quarter of growth since emerging from a rare recession.

India’s GDP increased by 3% in the fourth quarter of FY20, bringing the overall growth rate to 4%, an 11-year low.

The manufacturing sector’s gross value added (GVA) growth surged to 6.9% in the fourth quarter of 2020-21, compared to a decrease of 4.2% a year ago, according to statistics from the National Statistical Office.

GVA growth in the agricultural industry was 3.1% in 2019-20, compared to 6.8% in the previous year.

GVA in the construction sector increased by 14.5 %, up from 0.7 % previously. The mining industry shrank by 5.7%, compared to 0.9% a year ago.

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In the fourth quarter, the electricity, gas, water supply, and other utility services segment expanded by 9.1%, compared to 2.6% growth a year ago.

Similarly, after growing by 5.7% in the previous quarter, trade, hotel, transportation, communication, and broadcasting services shrank by 2.3% in the fourth quarter.

Financial, real estate, and professional services expanded by 5.4 percent in the fourth quarter of FY21, up from 4.9 percent in the previous quarter.

Growth in public administration, defence, and other services fell to 2.3 percent in the current quarter, down from 9.6 percent a year ago.

“Real GDP, or Gross Domestic Product (GDP) at Constant (2011-12) Prices, is now expected to reach 135.13 trillion in 2020-21, compared to 145.69 trillion in the First Revised Estimate of GDP for 2019-20, announced on January 29, 2021. GDP growth in 2020-21 is expected to be -7.3 percent, down from 4.0 percent in 2019-20 “In a statement, the Ministry of Statistics and Programme Implementation said.

gdp

“GDP at constant (2011-12) prices is anticipated to be Rs 38.96 trillion in Q4 2020-21, up from Rs 38.33 trillion in Q4 2019-20, indicating a 1.6 percent increase.”

The government’s efforts to stem the pandemic’s spread, according to the statement, have had an impact on economic activity as well as data collection procedures.
The economy will need to grow by 10-11 percent in the current fiscal year 2021-22 to regain its Rs 145 trillion size, but the outbreak of the second wave of COVID infections last month has disrupted economic activity, and many analysts believe the GDP will not reach double digits despite the low base.

GDP is calculated as the sum of gross value added (GVA) at basic prices plus all product taxes minus all product subsidies. Non-GST and GST revenue are included in the overall tax revenue used to calculate GDP.

The GST compensation amount for FY22 at the Centre should be greater than the anticipated Rs 1.58 lakh crore: Opp-ruled states

As of Monday, India had registered 28 million COVID-19 infections, second only to the United States, and 329,100 deaths, albeit the rate of increase, has slowed.

Manufacturing, construction and finance, real estate, and other sectors showed signs of improvement in Q4FY21, indicating that the economy is on the mend for FY22. However, growth may be stifled if the second wave results in the closure of the services sector in particular.