The impact of Trump Win on India
Bucking media opposition, popular perception and Hillary Clinton’s campaign, Donald Trump has emerged as the 45th president of the United States of America. With Trump in the White House now, his agendas which formed basis for his win will have implications on India. These would result from his New Tax Plan, plans to bring jobs back to America, the Energy plan and his views on terrorism.
The most prominent impact would be felt by the India IT companies as major portion of these companies’ revenues come from the outsourcing and onsite business.
Impact on the Indian Information Technology (IT) Companies
According to Trump the H-1B visas grant and outsourcing IT processes are reducing employment opportunities to US as this leads to onsite jobs being transferred to non-US workforce and processes being transferred to IT hubs like India. This is a clear threat for the Indian IT companies and will impact their financial performance. The IT revenue streams most sensitive to Trump’s policies would be the Onsite revenues and outsourcing revenue.
Below mentioned are some of the IT companies that may be adversely impacted by Trump’s win.
Revenue contribution from the United States (US)
|HCL Technologies Ltd||58%|
|Tata Consultancy Services Ltd (TCS)||54%|
|Tech Mahindra Ltd||48%|
Infosys Ltd Infosys is the second largest IT Company in India. Geographically, it derives 63% of the revenue from North America. Infosys earns 56% of the revenue from the onsite business.
HCL Technologies Ltd HCL Tech is the fifth largest IT Company in India with over 450 clients. Recently, the company acquired Geometric software. HCL derives 58% of its total revenue from the US market.
Tata Consultancy Services Ltd- TCS is Asia's largest IT services provider and is amongst the top 10 technology firms in the world. It derives 54% of its revenue from the US market. A major headcount of the company works on visa.
Wipro Ltd- Wipro is the fourth largest IT player in the country derives 53% of its revenue from US and ~50% of the revenue comes from onsite projects.
Tech Mahindra Ltd- Tech Mahindra is a part of the USD 16 billion Mahindra Group. Almost ~62% of the revenue comes from onsite projects. US contributes 48% to the total revenue of the company.
Impact on the Indian Equity Market
The above chart shows that Sensex declined ~6.5% to 25,902 lows in the early morning trade on 9th November, 2016 from the previous close of 27,591 factoring in the unexpected Discontinuance of high denomination INR notes and the uncertainty around the US Presidential Elections. It recovered from the lows in the late morning trading session. Sensex continued the surge once Donald Trump was elected as the President of the United States. The Sensex today opened at 27,605, 350 points or 1.2% above yesterdays’ close.
In the short term, Trump’s win will instigate uncertainty over the emerging market economies until pursuit of his agendas and their very implementation brings further clarity. This will pave way for changes in the US economic environment and accordingly, have ripple effects on global financial markets. Indian Markets for now, with clarity on the Election results, will see the focus shift towards the domestic sphere.
In the long term, we may see our domestic markets surge higher on grounds of stronger macro fundamentals compared to other emerging markets. Furthermore, after assessing the political situation, if the Fed Hikes rates in December 2016 it may result in a temporary outflow of FII funds from Indian Markets. However, in India, the current scenario of declining inflation in conjunction with the replacement process of high denomination INR notes is expected to ease inflation further. Resultantly, RBI may further cut Interest Rates which will support growth prospects going ahead. Thereby, Trump’s win may have short term ripples on the Indian Markets in line with other emerging economies. But, in the long run, Indian markets are expected to contemplate more on improving domestic fundamental dynamics.
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Housewives!! Best Time to put your Hidden Savings to Work!
Attention! All the husbands in India are the happiest people since the last two days. After the news broke out that the denominations of Rs. 500 and Rs. 1,000 will no longer be considered as a legal tender, husbands can finally get to know about all the money their wives have hidden from them and saved over the years. Now, this is something very special about India. No matter what your age is, Indian women have this habit of saving money, not in bank accounts or mutual funds, but in their cupboards!
As soon as we saw this announcement on the television, the first question that my father asked my mother was, ‘Kitne paise hai humare cupboard mein?’. Though all of this may sound funny, the truth is that all this money will now be infused into the banking system or will be invested in the right direction.
The Government has clarified that it will take a note of deposits in bank accounts over Rs. 2.5 lakh. Any deposits lower than Rs. 2.5 lakh will not come into scrutiny. So, women who have up to Rs. 2.5 lakh of savings have an option to deposit their money in the bank. However, women who have saved over the years and have more than Rs. 2.5 lakh will have to divert their money in the right direction. This money can be invested in equity mutual funds and liquid funds. Equity mutual funds depend upon the performance of the equity market. In the past, equity mutual funds have given returns of 12-14%. Liquid funds are debt mutual funds that invest in very short-term instruments — commercial papers, treasury bills, certificates of deposit, and so on for a tenure of 91 days. The return given by liquid funds is 7-8%. On the other hand, a savings bank account gives a return of 4%. Clearly, there is not point parking your money in the savings account. It is always better to park your money where you get a good rate of return.
Its time that housewives move over the traditional way of saving money in their cupboards and make their money earn some good return for them in a smarter way!
All About Sovereign Gold Bond Scheme
If you are one of them who consider gold as a necessary investment, gold bond is for you. Gold bonds have all the qualities of gold investment except for shine of gold. These are backed by the government of India and undoubtedly are very secure.
What Are Sovereign Gold Bonds?
Sovereign Gold Bonds (SGB) are substitutes for holding physical gold. These are issued by Reserve Bank Of India (RBI) on behalf of government of India. When people invest in gold bonds, they get a paper against their investment instead of a gold coin or a gold bar. Sovereign Gold Bonds are also available in digital and demat form, and can be used as collateral for loans and can be sold or traded on stock exchanges.
Next Tranche Of Sovereign Gold Bonds From October 24
Government of India is launching Sovereign Gold Bonds 2016-17 - Series III from October 24 - November 2, 2016 for subscription. The bonds will be issued on November 17, 2016. In the sixth tranche of the gold bond, people can buy securities worth up to 500 grams.
The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and stock exchanges; NSE and BSE.
Features Of Sovereign Gold Bonds 2016-17 - Series III:
The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
Eligibility For Investment:
Gold bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.
The tenure of the bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
Price of bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold Bonds will be ' 50 per gram less than the nominal value.
Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.
The redemption price will be in Indian Rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
The investors will be compensated at a fixed rate of 2.50%/annum payable semi-annually on the nominal value of investment.
Benefits Of Investing In Gold Bonds:
Available both in demat and paper form
Value of your investment in gold bond increases with the increase in gold prices
Gold bond gives a better return than the physical gold as it gives interest as well
No worries about safekeeping as a gold bond can be kept in digital form
No expense of locker as gold bond can be kept in house or demat account
Nil chances of cheating or impurities in gold bond. Investors would always get 100% pure gold bond, which may 100% value
Bonds can be used as collateral for loans
Liquid Funds Or Savings Bank Accounts? Where To Park Your Surplus Funds!
Both savings bank account and a mutual fund liquid account are considered as ideal routes to park money for a short period of time. Each one of us want some amount of idle money for our day-to-day expenses. But it is critical to determine how much money is sufficient to meet our short-term needs to enable our idle money to earn returns for us. Without a proper analysis, both liquid funds and savings accounts might look alike. But if looked closely, there can be a number of significant differences between the two that may give you solid reasons to choose one over the other.
The first step towards evaluating these two is to understand what exactly they are.
What Are Liquid Funds?
Liquid funds are debt mutual funds that invest in very short-term instruments — commercial papers, treasury bills, certificates of deposit, and so on for a tenure of 91 days. As the term implies, liquid funds are highly liquid. A person can invest today in liquid funds and can redeem the money tomorrow. There may not be any exit load and the amount will be transferred into his bank account.
What Are Savings Accounts?
These accounts are one of the most favored money saving instruments among Indians. People park money in a savings account for short-term in order to use it for day to day needs. Savings accounts are maintained by banks and post offices where people have the flexibility to deposit and withdraw money at any time.
A Relative Comparison Between Savings Accounts And Liquid Funds -
|Factors||Liquid Funds||Savings Funds|
|Rate of Return||7-8%||4%|
|Tax Implication||Short-term capital gains tax is levied based on investors’ applicable income tax slab tax rate||Interest earned are taxable as per investors’ applicable income tax slab|
|Ease Of Operation||No need to go to a bank to get cash. If there is some amount that needs to be paid, it can be done online||Money gets deposited to bank account first|
|Suitable For||Who want to invest their surplus to earn higher return than saving account rates, but seek high liquidity||Who want to just have a storage to park money|
Conclusion - While it entirely depends on investors’ preference whether to go for liquid funds or sticking to their savings bank accounts, shifting their idle money in savings account to higher returns yielding liquid funds can always be a smart decision.
Top 2 ELSS Mutual Funds to Invest This Diwali
The auspicious festival of Diwali is round the corner. This Diwali, we give you top 2 ELSS mutual fund schemes to invest in, which will help you save a lot of tax.
Axis Long term Equity Fund
Axis Long Term Equity Fund aims to generate long term capital growth from a diversified portfolio of equity and equity related securities. The scheme invests in companies with strong growth and a sustainable business model. The fund is managed by Jinesh Gopani since April 2011. The fund has given returns of 19.09% since launch. The fund has a total of 39 stocks in its portfolio. There is no exit load associated with this fund. The fund has outperformed its category returns over a 2-year and 3-year time frame.
|Trailing Returns (%)|
Birla Sun Life Tax Relief 96
Birla Sun Life Tax Relief 96 seeks long-term capital growth and invests approximately 80% of its assets in equity, while the balance would be invested in debt and money market instruments. The fund is managed by Ajay Garg since October 2006. The fund has given returns of 25.97% since launch. Moreover, if an investor chooses to redeem his investments, there is no exit load that he has to bear. The fund has outperformed its category returns over a 2-year and 3-year time frame. The fund has a total of 51 stocks in its portfolio.
|Trailing Returns (%)|
Axis Long Term Equity Fund and Birla Sun Life Tax Relief 96 have the capability of generating higher returns over a 3-year period. We wish you a very Happy Diwali & Prosperous New Year!
Different types of trends in Technical Analysis charts and Their Uses
Trends can be classified into three types:
- Sideways/Horizontal trend
Uptrend In Technical Analysis Chart:
When a particular stock is making higher highs & higher lows, that stock is considered to be in uptrend. Higher highs indicate that the stock is making consecutive peaks than previous highs. Higher lows indicate that bottom is higher than the previous lows.
When stock is in uptrend, it is advisable to buy on dips. The optimism is that the stock may rise further. The uptrend may last as short as few weeks or as long as few years.
As you can see from following chart, Nifty was in uptrend from Feb 2016 to Sept 2016
Technical Analysis Chart- Uptrend
The line which is connecting higher high & higher low is called Trend line. The higher high trend line is called resistance line and higher low trend line is called support line.
Downtrend In Technical Analysis Chart:
When the stock is making lower highs & lower lows, it is considered to be in downtrend. Lower highs mean that previous peak is higher than the current peak. Lower lows mean the current bottom is lower than the previous bottom.
When the stock is in downtrend, it is advisable to sell on bounces as there is pessimism that stock could fall further.
As you can see from following chart, JUSTDIAL was in complete downtrend since August 2014 to March 2016
Technical Analysis Chart- Downtrend
Sideways Trend in Technical Analysis Chart
When the sstock trades in a range, it is called sideways trend. Sideways trend occurs when the force of demand & supply are nearly equal. A sideways trend is also called ‘horizontal trend’
As you can see from the following chart TATACOFFEE was in sideways trend since July 2013 to July 2016
Technical Analysis Chart- Sideways trend