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Money Jan 1, 2013

Will it be a Happy New Year for your money?

By Bindisha Sarang

Each new year brings with it hopes. And also fears as to whether the days to come will really be better for your money. Whether the markets will be as hot and sizzling? Will the real GDP growth improve? While the bigger numbers like GDP, WPI, IIP and the like are important, what really matters is their impact on our daily life and our money. Here's an outlook for your money in 2013.

Ask any expert and they will say interest rate is at its peak now. And, as the Reserve Bank of India stated in its latest review of monetary policy, the rates are likely to move southward. In fact, many believe this will happen this month itself. "Considering the fact that high cost of funds has been chocking growth, we expect around 150 basis points reduction in interest rates in 2013," said Sudip Bandyopadhyay , MD and CEO, Destimoney Securities.

With overall interest rates expected to fall, it's bound to impact both guilt funds and long-term debt funds. Reuters

Loans and FD: "A downward movement in overall interest rates will first see banks cut their rates on fixed deposits. Only after that will we see lending rates fall," Harsh Roongta, CEO,, told Firspost.

Not a very cheerful move for pensioners and senior citizens. However, the southward move in interest rates is expected to bring down lending rates. The initial few months though will see only nominal base rate cut by banks. In fact, just yesterday HDFC Bank Ltd cut its base rate by 10 basis points, making loans slightly cheaper for existing borrowers.

Mutual Funds: With overall interest rates expected to fall, it's bound to impact both guilt funds and long-term debt funds. However, as far as short-term debt funds and liquid, cash funds are concerned, the impact will be less positive.

"Investors, who have either invested in long-term debt funds/ gilt funds or are planning to enter these funds, are expected to make 15 percent plus returns in 2013," said Bandyopadhyay. But, that's about debt funds, what about equity funds? Experts expect that 2013 will be a favourable year for the equity markets. "Global liquidity will keep market buoyant and positive. Expected GDP growth of around 7 percent coupled with similar inflation expectation will imply in nominal growth of around 14 percent calendar year 2013. This should translate into 15 percent plus growth of the capital market," said Bandyopadhyay.

Insurance: The Insurance Regulatory and Development Authority (IRDA) has also promised some action. "Life insurance companies would be pinning their hopes on an easy and peaceful passing of one its long-standing demands of an increase in FDI cap to 49 percent and also looking towards the finance ministry to extend tax breaks especially for the first premium paid by consumers, which could help bring in more revenues," said Akshay Mehrotra, CMO, That's not all, other changes expected with your insurance are in the space of addition of insurer led pension products under the gambit of the National Pension Scheme (NPS).

This will work well for those who looking for options in building the retirement corpus. With new IRDA norms for pension products coming in, more and competitive products are expected to be launch this year, giving you more options as a consumer. "Annuity plans offer by life insurers from service tax in line with NPS and may reduce the levy on single premium products," said Mehrotra.

Tax: There is no point in speculating about the likely Income Tax changes for 2013. One would come to know from the Union Budget for 2013-14. But there is a thing or two experts can surely warn us about. "Tax evaders are not going to be safe anymore in 2013.

The income tax department has started obtaining the details of person doing high value transaction from banks, stock exchange, registrar of properties, mutual fund and credit card companies," said Sudhir Kaushik, Co-founder, Chartered Accountant and Co-founder, Kaushik added that nowadays the income tax department is well equipped with technology to match, scrutinise the data and serve notices at much faster speed and accuracy. So, as a far as income tax goes, you will have to be extra cautious, that you declare all your incomes and also ensure that you do your tax planning efficiently.

Gold: As far as gold goes, looks like the whole world's central banks are replacing their paper currency reserves with gold in a phased manner. So, even the RBI is expected to buy gold, hence will give an upward bias in gold throughout 2013. "I expect gold prices to gradually move up in 2013. Price movement of gold will not be spectacular like earlier years. However, the bias will continue to remain upward," said Bandyopadhyay. Simply put, continuation of 'safe haven' investment in gold even in 2013.

This is how your money is expected to fare in 2013. Do you think it is a happy year ahead for your money? Let us know.

by Bindisha Sarang

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