Market Update: Inflation – 18 month low; India’s growth in real GDP during FY2022-23 is estimated at 7.2%; Gold at an all time high
MARKET UPDATE
Inflation – 18 month low; India’s growth in real GDP during FY2022-23 is estimated at 7.2%; Gold at an all time high
Inflation : An 18 month low As per data released by the National Statistical Office (NSO) retail inflation eases in the month of April to 4.70 percent. For the second consecutive month, the country’s headline inflation remained within the tolerance range of the RBI. In March, India’s headline inflation stood at 5.66 percent. In addition, the consumer food price index (CFPI) eased to 3.84 percent in April, versus 4.79 percent in March.
GDP is estimated at 7.2% FY2022-23
INDIA’S GROSS Domestic Product (GDP) clocked a higherthan-expected growth rate of 6.1 per cent in JanuaryMarch 2023, in turn pushing up the growth estimate for full year 2022-23 to 7.2 per cent, according to data released by the National Statistical Office (NSO). This is higher than NSO’s advance estimates of 7 per cent for 2022-23.
Services sector pushes GDP growth to 6.1% in Q4
A pickup in services sector growth led by construction, and trade, hotels, transport sectors along with higher investment supported growth even as private final consumption expenditure registered a muted growth. Beating analyst estimates, India’s gross domestic product (GDP) grew at 6.1 % in the last quarter of the previous fiscal. Further, the Centre now estimates the overall growth rate of FY23 to be 7.2%. The Indian economy has emerged as an outlier after maintaining its growth rate as among the highest in comparison to the other major nations following the breakout of the Covid-19 pandemic. Ratings agency S&P Global recently said that the Indian economy is set for real GDP growth of about 6 per cent in 2023, which compares favourably with emerging market peers amid a broad global slowdown. Investment and consumer momentum will underpin solid growth prospects over the next 3-4 years.
Gold touches all time high
Gold prices rally to Rs 940 to lifetime high of 62,020/10 gram following strong global trends. After the US Fed signaled a pause in policy tightening from the next meeting after hiking the benchmark interest rate by 25 basis points, dollar and bond yields dropped – resulting in gold prices trading up.
SECTOR ANALYSIS
INFRASTRUCTURE
FDI in Infrastructure in India
Foreign Direct Investment (FDI) in the construction development (townships, housing, built-up infrastructure, and construction development projects) and construction (infrastructure) activity sectors stood at US$ 26.17 billion and US$ 26.30 billion, respectively, from April 2000 – Dec 2021, according to the Department for Promotion of Industry and Internal Trade (DPIIT). Infrastructure-related operations made about 13% of the US$ 81.72 billion total FDI inflows in the financial year (FY) 2021. India’s infrastructure is anticipated to 81.72 billion total FDI inflows in the financial year (FY) 2021. India’s infrastructure is anticipated to expand to expand at a compound annual growth rate (CAGR) of almost 7% during the forecast period (2019-2028). The government-sponsored National Investment and Infrastructure Fund (NIIF) received a funding commitment of US$ 100 million from the multilateral Asian Development Bank (ADB) in 2020. Between the financial years (FY) 2000 and (FY) 2019, inflows in the verticals of townships, construction development projects, and housing were estimated at US$ 25.5 billion. The “Smart Cities Mission” and “Housing for All” programmes have benefited from these initiatives. Saudi Arabia seeks to spend up to US$ 100 billion in India in energy, petrochemicals, refinery, infrastructure, agriculture, minerals, and mining.
INFRASTRUCTURE…
Roadmap for the future
As per the Department for Promotion of Industry and Internal Trade (DPIIT), FDIs in the construction development and construction sector stood at US$ 26.17 billion and US$ 26.30 billion, respectively, between the period of April 2000 and December 2021. The logistics sector in India is rising at a CAGR of 10.5% annually which shows that both in terms of investments and revenue the infra game is going strong. India is now at a juncture where a huge investment in R&D for energy-efficient and green fuel is much-needed. Thus, boosting the overall infrastructure.
Types of Investment opportunities in the infrastructure sector through mutual Funds:
DSP Tiger Fund
Ivesco India Infrastructure Fund
ICICI Prudential Infrastructure Fund
Below are the returns in (%)
| 1 year | 2 year | 3 year | 5 year | 10 year | |
|---|---|---|---|---|---|
| DSP Tiger Fund | 25.41 | 20.15 | 40.07 | 12.95 | 15.02 |
| Ivesco India Infrastructure Fund | 21.62 | 17.07 | 33.03 | 14.56 | 17.41 |
| ICICI Prudential Infrastructure Fund | 31.29 | 26.07 | 45.43 | 15.67 | 15.53 |
SIPs vs. FDs? Choosing the right path for your financial growth
When it comes to investing one’s hard earned money, individuals often find themselves torn between two popular options: Systematic Investment Plans (SIPs) and Fixed Deposits (FDs). Both offer unique benefits and suit different financial goals. Here’s information to compare SIPs and fixed deposits, helping you make an informed decision that aligns with your financial aspirations.
SIP Investments: The power of consistency
Simplicity and flexibility. SIP’s are a form of investment where investors regularly contribute a fixed sum of money info mutual funds or exchange-traded funds (EFTs).
One of the key advantages of SIPs is the power of compounding. As investors consistently invest over a long period, their money has the potential to grow significantly. Additionally, SIPs provide the benefit of the rupee cost averaging, where the investors can buy more units when the prices are lower and fewer units when prices are high. This strategy helps minimize the impact of market volatility. Furthermore, SIPs offer flexibility in terms of investment amount and frequency, allowing investors to start with small amounts and increase their investment gradually. This makes it an ideal choice for individuals who may not have a lump sum amount to invest initially. SIP investments do come with certain disadvantages – the value of mutual funds can be subject to market risks and fluctuations. However, if the investment goal or horizon is long enough, say 5 years or more, SIPs could offer a good return to beat inflation. SIPs are taxed as capital gains. Any gains made on the SIP returns less than 1 year would be taxed for short term capital appreciation and will attract 15% tax on the gain amount.. Any gains above 1 year period would be taxed for longterm capital appreciation @10%. Also in long term gains, you will not be taxed on any gains up to INR 1 lakh. But a 10% tax will be imposed on any gains above INR 1 lakh.
Fixed Deposits: Stability and guaranteed returns
Investing in FDs, individuals deposit a specific sum of money with a bank or financial institution for a fixed period at a predetermined interest rate.
FDs also a wide range of tenures, allowing investors to choose the period that suits their financial needs. Additionally, some FDs provide the option of periodic interest pay-outs, which can be beneficial for individuals seeking a regular income. However, FDs also have their drawbacks. The interest rates offered by FDs maybe lower compared to other investment options, which can impact the overall returns. Additionally, the interest earned on FDs is taxable, reducing effective returns. Moreover, FDs lack the potential for long-term wealth creation that SIP investments offer through the power of compounding.
| Example | Value after 10 Years | |
|---|---|---|
| FD | 120000 per annum | 2.5 lakhs appx |
| SIP | 10000 per month | 20 lakhs appx |
Choosing the right path for you
Deciding between SIP investments and fixed deposits ultimately depends on your financial goals, risk tolerance, and investment horizon. SIPs are suitable for those seeking long-term wealth creation and are comfortable with market volatility, while FDs are ideal for risk-averse individuals looking for stable returns. It is important to understand your risk appetite and financial goals to make an informed decision that works for you.
REGULATORY/POLICY UPDATE
RBI Monetary Policy Update
MPC keeps repo rate unchanged at 6.5%; FY24 GDP growth forecast retained at 6.5%
The RBI revised the FY24 CPI inflation projection a tad lower at 5.1 per cent from the earlier projection of 5.2 per cent even as it kept the FY24 GDP growth projection at 6.5 per cent unchanged.
Investments in the name of minors
SEBI green lights investments in the name of minors through their parent/legal guardian account or joint account, but redemption proceeds have to be diverted to the minors verified bank account only.
Credit Card Spends in foreign currency to attract 20% TCS
The Finance Ministry has clarified that foreign currency payments such as digital subscriptions to publications or goods bought on foreign e-commerce sites through international credit cards will count towards an individual’s Liberalized Remittance Scheme (LRS) account and attract 20% tax collected at source (TCS). More on this in Kanika’s Korner.
KANIKA’S KORNER
In recent years, I have had several requests from my Clients, to provide a snapshot or summary of key happenings in the financial world, as it relates to their current and future investments. I am proud to launch a monthly newsletter to fulfill this request. I hope you find this medium informative and helpful as we continue to navigate optimizing your investments and achieving your financial goals together. If you would like to see an additional topic or have a particular question that you would like to have featured in the Q&A section, please let me know. After all, this is newsletter is for you.
Some more on CC spends in foreign currency to attract 20% TCS
The government announced that any transactions made by an individual using their International Debit or Credit cards, up to Rs 7 lakh per financial year, will be exempted from the LRS (Liberalized Remittance Scheme) limits and will not be subject to any Tax Collected at Source (TCS) charges.
For transactions exceeding Rs 7 lakh on an international credit card abroad, the TCS rate will be 5 percent until June 30. However, starting from July 1, any money spent beyond the threshold will attract TCS at a higher rate of 20 percent. It Is important to note that the finance ministry has clarified that there are no changes to the existing policy for educational or medical expenses abroad.
