The Navhind Times I Monday July 11, 2016

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Brexit is being seen as a major trigger for slowing down

the global growth rates

Which way interest rates?

By Adv. Jatin Ramaiya

eleia Dias, a 20
year old, student
from Colvale approached the
Consumer Disputes
Redressal Forum, North Goa,
complaining against mobile
manufacturer Samsung India,
Impact M-Tech Services and
Super Cellular
Dias had stated in her complaint that within the period of
the warranty of the handset it
started hanging and therefore
she had to deliver the phone
to Impact M-Tech Services for
repairs. Impact Services according to Dias was a authorized customer care centre.
She alleged that on July 2 2015 she received a message from Impact
Services that the mobile was repaired and she could collect it. When she
went to collect the mobile she was told that the mobile was liquid logged
and she has to pay an amount of Rs 4, 000 if it had to be repaired.
Dias stated that the mobile was in working condition and it was only
hanging and there was no other problem with the mobile and also it was
within the warranty period of 12 months. She contended that Impact
Services gave lame excuses that mobile liquid logged when it never
came in contact with any liquid anytime. She added that the mobile was
still with Impact Services
and she was entitled to
receive the cost of the
mobile from the manufacturer, customer care
of the manufacturer and
the retailer who sold the
handset.
On receiving the
complaint members of
the Consumer Forum
issued notices to the
Samsung India, Impact
Services and Super Cellular. However all of
them failed to put forth their appearance and defend themselves before
the Forum.
The Members of the Forum, after considering the entire material on
record and affidavit in evidence filed by Dias, observed that, the mobile
of the complainant started hanging soon after the purchase of the mobile
within the warranty period and when given for repairs to opposite party
2, she was asked to pay Rs 4,000 as the mobile was liquid logged. Even
assuming that the mobile came in contact with liquid, the opposite party
failed to prove it as they never appeared before this Forum to defend
themselves. This proves that they admit that there is deficiency in service on their part.
It was further held by members of the Forum that the behavior of the
manufacturer, retailer and the customer care unit was irresponsible and
negligent. In view of which the Forum directed that Dias be paid a refund
of Rs 10,100 with interest @12
per cent p.a. from June 25 2014
Key Indicators
Latest
till final payment being the purchase price of the said mobile
BSE Sensex
27126.90
and further a sum of Rs 10,000
Nifty
8,323.20
towards compensation and cost
of Rs 7,500 along with interest
Re/ US $
65.20
if the same was not paid within
Rs/
UK
Pound
99.20
stipulated period of time.

farm produce prices

Vegetables Retail rates at Goa State
Horticulture Corporation Ltd. outlets (Rs per kg)
hLadyfinger 30.00
h

hCauliflower
h
(piece)

30.60

hCabbage
h

36.00

hChilly 51.80
h

hCluster
h
Beans

32.00

hOnion
h

hFrench
h
Beans

52.00

hPotato 27.70
h

hCarrot
h

43.00

hTomato 42.80
h

17.85

*Rate as on July 9, 2016

By Tensing Rodrigues

ith Rexit and then

Brexit many eyes
in India have been
set on the interest
rates. Will they go
down or will they remain where
they are? Interest rates matter
very much to investors in debt
schemes of mutual funds. If the
interest rates go down, or look
likely to go down, the NAV s of
these schemes will go up and
vice versa. Equity investors are
impacted by interest rates differently as with lower interest rates
there is a higher probability of
returns from equity funds going
up. Higher profit margins, more
capital investment and even more
liquidity in the stock market will
drive up the equity share prices.
Let me first explain the Rexit
and Brexit context of the interest rates. The entire controversy
about Raghuram Rajan as the RBI
Governor, apart from personal
animosities, was his stubborn
resolve to hold the interest rates.
He refused to yield to the argument that lowering interest rates
could infuse growth into the
economy. Brexit is being seen as
a major trigger for slowing down
the global growth rates. The
obvious prescription according
to many is to lower the interest rates, and thereby making it
cheaper to invest.
Both the arguments take for
granted that lower interest rates
induce investment and thereby

promote growth. They lead to

more employment, more income.
Question is, do they? Do lower interest rates always lead to higher
investment?
There are two schools of
thought about the way interest
rates and investment interact.
Frankly there are no two ways;
it is only the difference in focus.
Some look at one side of the
equation assuming the other side
to be given while some look at
the other side. Investment requires capital which comes with
a cost, viz. interest. If the interest
rate is low the capital costs less
so given the profitability of a
business, obviously more capital
will be invested in that business
when interest rate is low.
But this argument overlooks
the fact that the
cost of capital
(interest rate) is
compared with the
gain from capital (profits) while
deciding to invest
capital. So however low the interest
rate goes if the
rate of gain from capital (marginal efficiency of capital or MEC)
is lower investment may not be
forthcoming.
The rate of gain from capital
or MEC depends on several factors like technological change,
state of business confidence and
demand for goods. Technological
change comes about slowly and

follows its own path. The two factors which usually play spoilsport
as in the recent times in US and
Europe are the other two- demand and business confidence.
Both the factors are closely related. If the people in
business are optimistic
about the future they
will be willing to invest
in expectation of higher profits. In recession
they become pessimistic so even lower interest rates dont encourage investment.
So too the consumers.If they see a bleak
future of falling employment and
income they tend to be tight with
their purse and restrain demand.
Its a vicious circle of consumers
despondency affecting the producers, and the producer slowing
down of production and investment. In such a situation interest
rates tend to be sterile. Technical
people call it the liquidity trap.

In India, this is not exactly

the situation. Hope is still alive.
The level of business confidence
is relatively high. But there are
strong dampeners coming in
from the global scenario. At the
moment the signals from the
developed world are not at all
positive. Europe seems to be
on the brink of crumbling, US
seems to be direction less. The
political situation in both is very
much fluid. Japan has its own
problems and China is slowly
but surely losing the steam. But
rather than the real slowdown
in China, the disillusion and loss
of trust is more depressing. In
fact, the global eyes are set on
India now. Will India rise to the
occasion? Definitely not in the
manner the world requires it to
do. We are what we are an elephant heaving its weight along at
a slow but sure pace. I am not of
the opinion that it should change
its pace; I feel that is what we
need to be.
But this is my perception.
Which way the interest rates
will move, depends on how our
monetary authorities perceive the
situation. If they feel confident
that a cut in interest rates can
kick start the economy they may
bring down the rates. Or else,
status quo prosequitur.

*The author is an investment consultant. Readers

can send their comments and
queries to investment.ideas.
shop@gmail.com

Domestic airline traffic in India grows 21% in May

global airlines association has

reported that Indias domestic passenger traffic grew by 21 per cent
in May 2016.
The International Air Transport
Association (IATA) pointed out that for May,
Indias domestic revenue passenger kilometres (RPK) and available seat kilometres (ASK)
were the highest amongst the major aviation
markets such as Australia, Brazil, China, Japan, the Russian Federation and the US.
According to IATA, domestic RPK that measures actual passenger traffic rose by 21 per
cent in May compared to the corresponding
month of the previous year. The passenger
traffic surpassed China where the increase
was 9.8 per cent, the US (4.4 per cent) and
Australia (0.8 per cent.) However, Brazil reported a decline in their domestic passenger
traffic at 7.7 per cent, followed by Japan at
4.2 per cent and the Russian Federation at 3.5
per cent.
The domestic ASK, which measures available passenger capacity, surged by 21.9 per
cent in the month under review, followed by
that of China at 9.8 per cent and the US at 4.3
per cent.
Earlier in the week, the global airlines association said in its World Air Transport
Statistics that India had achieved the fastest
domestic passenger growth in 2015 with an
annual growth of 18.8 per cent in a market of

80 million domestic passengers.

For the month under review, the association
added that the global RPK in May had risen
by 4.6 per cent while the ASK climbed by 5.5
per cent. Further, the data for May revealed
that the demand for global domestic traffic
rose by 5.1 per cent, against the international
demand growth of 4.3 per cent.
After a very strong start to the year, demand growth is slipping back toward more

historic levels. A combination of factors are

likely behind this more moderated pace of
demand growth, said Tony Tyler, director
general and chief executive, IATA.
These include continuing terrorist activity
and the fragile state of the global economy.
Neither bode well for travel demand. And the
shocks of Istanbul and the economic fallout
of the Brexit vote make it difficult to see an
early uptick, he said. IANS

investors guide
Rally expected in share prices

omestic bourses ended on a flat note in a holiday shortened

week. The stock market failed to witness any major direction in trade after registering a low and high of 8,288 and
8,398 mark respectively. By sector it was a mixed week of trade
with IT index emerging as top loser down while on other hand,
pharma and metal index emerged as top gainers.
In line with expectations, NIFTY50 comfortably moved past
8,000 mark after taking good support around 7,700 mark on the
downside. The current breakout was backed by strong volumes
and buying across the sectors especially the large caps. Although
one should note that midcaps and small-caps have
outperformed by a large
margin during past few
trading sessions with high
beta remaining in lime light
as compared to the heavyweights.
Outlook for this week is positive and indications are of a rally
and momentous up move in share prices. Short term support
for the index is placed around level of 8,240 on downside that
should act as strict stop loss for long position on closing basis.
In line with our anticipation, the NIFTY bank index moved to
the targeted range of 18,000 post breakout at 16,250 mark. The
outlook for NIFTY bank continues to remain positive. A close of
above 18,250 level could see extension of current up and will
even open gates for fresh highs. On downside, crucial support is
seen around level of 16,800.
On fundamental factors, traders will be watching out for start
of earnings season and progress of monsoon.
Reliance Securities

weekly
market
outlook

sector watch

scrip tip

Tractors & MCVH

Niche player

he tractor segment recorded robust performance while medium and heavy commercial vehicles (M&HCV) displayed lacklustre
show. Riding on expectations of good monsoons tractor dispatches were very strong.
Companies like M&M and Escorts registered
20.5 per cent and 12.2 per cent increase in
domestic tractor volumes.
On the other hand M&HCV companies
clocked in modest increase in sales of eight
per cent. Longer term outlook for M&HCV is
strong on the back of the 7th Pay Commission which is expected to increase
household incomes
of government
employees. It will
gradually increase the demand for consumer
vehicles. LCV demand is also expected to pick
up due to improved consumption demand and
ease of financing. As consumption expenditure picks up and availability of redistribution
freight improves, M&HCV sales are likely to
notch double-digit growth. Tipper trucks will
get a boost with the focus on infrastructure
growth and improved spend on national highways, rise in iron ore and coal mining output
as well as lifting of the sand mining ban in
various regions.

Long term bet

BUY

garashi Motors specializes in the design and manufacture of

small, permanent magnet DC motors and gear motors. For
over half a century, Igarashi Motors has been dedicated to
providing quality product and service to their customers. Since
their establishment in 1952, they have grown to include a large
variety of DC motors, Armatures, High voltage motors, Gear motors to supply a complete range of products to best meet their
customers needs. Motors are designed for a wide range of commercial and industrial applications, including power tools, home
appliances, automotive, and business equipment products.

Target Price

` 775.00
Current Price

` 693.70

Igarashi Motors

Dynamic Levels

Long reach

ower Grid is one of the most interesting plays in the power transmission and distribution sector. The last quarter
earnings the management gave a commentary that they
are looking to invest more into the capacity that they already
have. The company earns not only via transmission of power
and distribution of power but they earns from leasing out
transmission and distribution lines in the interstate and interregional category. Given the kind of governments initiatives and
more power capacities coming up, the likelihood of Power Grid
becoming one of the greatest beneficiaries of the governments
power initiatives is strong.
Geojit BNP Paribas

HOLD
Target Price

` 185.00
Current Price

` 164.00

Power Grid Corporation