TMS Ep240: Bank deposit rates, chip shortage, FD rates, Electricity Bill
hello and welcome to the business standard morning show i'm kanishka gupta and let's have a look at the stories for the day from state bank of india to banker barodam banks are rushing to woo depositors with attractive rates and these deposit rates may soar further as most economists believe that the repo rate will rise to 5.75 to 6 percent by the end of this calendar year so what is in the store for investors let's find out sbi bank of baroda canada bank icici hdfc access bank and several other lenders have height their deposit rates to attract funds it comes at a time when growth in bank loans has surpassed deposits sbi has launched a 75 day with self-deposit scheme which is offering 6.10 percent for fixed deposits senior citizens will get an additional 0.50 the offer is available to 30th of october bank of baroda has announced its baroda tiranga deposit scheme under it deposits are available in two buckets one offers 5.75 per annum for 444 days and another offers six percent for 555 days the scheme is available till the 31st of december it is for retail deposits below 2 crore rupees senior citizens will get an additional 0.5 percent non-callable deposits will get an additional 0.15 percent canada bank has also launched a 666 day deposit scheme offering 6 after the reserve bank of india's move to hike the repo rate by 50 basis points on the 5th of august a number of lenders have raised fixed deposit rates in various majorities experts had said that while ft rates had risen the pace had been slow overall the transmission of repo rate increase to fds has been much slower than the transmission to lending rates so given the situation will the rate increases be enough to benefit investors with fds also will the higher fd rates your away equity market investors so couple of points said first is that fixed deposits always struggle to beat inflation and that's something we have seen across input right so rates are rising but rates are rising because interstates are also rising right so inflation is also rising so that's not uncommon it keeps happening all the time so but if you are betting on fd increase in empty rates to beat nutrition you are banking on a lot of luck which may not come your way right so i think for that again it's a different topic but i think you you might need to look at some of the growth assets in your portfolio now for somebody who has to make a choice between a bank cafe and let's say a risky let's say stocks or equity markets like equity mutual funds i think a lot of people depend on a lot would depend on their outlook and of course their decent experience so i don't think every rates are that detected at this point in time where people will start uh you know moving out of this stock market investments every rates are uh between 5.5 to 6.57 percent
these are not very very very lucrative right uh so unless somebody has had a bad experience in the markets and they want to move out of the equity markets in general or unless somebody feels that equity markets are stretched at this point in time and let's let me save some money i don't think people will uh suddenly start taking out money from equity markets simply because empty interest rates have gone up by say 0.5 the three consecutive rate hikes mean further momentum for rising fixed deposit interest rates clearly the error of extremely low fd rates is over still avoid excessive reliance on fds when one accounts for both inflation and tax returns from bank fds are negative however you can opt for fds for short-term capital protection for example for parking emergency funds the benchmark repo rate now stands at 5.4 percent cumulatively the central bank has height the repo rate by 140 bps in this cycle going ahead most economists expect it to rise to five point seven five to six percent by the end of this calendar year so how should fixed deposit investors calibrate their strategies if you're starting with fds now you should opt for shorter than yours why so that you can roll them over into higher rate deposits when the former mature according to experts you should also avoid the auto renewable facility that will allow you to renew your fds at the best rates after taking into consideration your investment horizon and the highest available slab rate experts also say that you should create a ladder of maturities basically invest in fds maturing at different times doing so will minimize the risk of reinvestment also a laddering strategy will ensure cash flows at regular intervals the second point is uh if your premise is that the interests are going to grow up now that's the premise we don't know if that will happen or how that will happen what would be the phase for the pace of all this 40 trajectory but if as investors you feel that interest rates are going to go up i think then you must be you must open shorter term duration empties right so let's say instead of let's say opening five-year fd you you can you might want to open just one year empty right so look at look at uh look at the maturity points and the interests on the empty rates that the banks are offering you for those maturity points it's possible for the six months empty you are getting um four point five percent for one year you're getting five point five percent for too much to wear if you're getting again 5.75 right now the difference between uh six month and one one uh one year after is about one percentage for 100 business points between one year and two is uh 0.25 percent now in that case if the premises that rates are going to go up
you must uh you can look at shorter duration levels instead of longer longer duration remember guessing the best time to opt for long term fds is a risky proposition you might think that interest rates have peaked but they could increase further tools or investment ideas download 5 pesa now investing made easy and reporting with 5 investments in securities market are subject to market risks read all the related documents carefully before investing pandemic and subsequent supply chain disruption has not just pushed inflation it also led to shortage of semiconductor chips mercedes ceo ola shellanius recently said that the shortage of these chips will last throughout this year and into 2023 and now the face-off between china and taiwan is threatening to make the matter worse our next report tells why speaking of the mahindra mahdi's annual general meeting recently its shell and aaron mahindra said one of the key reasons for the long waiting period for delivery of vehicles is the supply chain disruption in his words the availability of semiconductors had slowed down to a trickle caused by pandemic supply chain disruption combined with stronger unexpected demand recovery the global chip shortage over the past two years is refusing to go away india's biggest car maker maruti suzuki said it could not produce 51 000 units in the april to june quarter because of this and according to the second largest car maker hyundai india which expects the semiconductor situation to improve only next year the demand is outstripping the supply in the april to june quarter the domestic passenger vehicle sales stood at 9.1 lakh units a 41 percent growth compared to 6.46 lakh units last year tv sales are on track to touch a new record this fiscal beating the fy 19 peak but the geopolitical fallout of a top u.s official's visit to chinese claimed thailand earlier this month is threatening to prolong the chip shortage u.s house speaker in long time china credit nancy pelosi's visit was the highest level u.s visit to the self-governing island democracy in 25 years her one-day trip worsened the tensions between china and thailand and outright china reacted by launching its biggest ever military drills in the seas around taiwan which is home to the world's biggest contract manufacturer of semiconductors tsmc and its peer unc they are major suppliers to global tech giants auto companies and producers of consumer electronics tsmc alone makes 80 of microcontrollers used in cars china's military exercises which include firing live missiles and deploying fighter jets bombers and warships around taiwan disrupted heat reading routes for cargo and commodities sailing around the world for the first time the chinese army practiced operations aiming at a blockade of the island china suspended exports of natural sand to taiwan and halted imports of fruit and fish products from the island sand a type of natural sand is an important raw material for chip manufacturing on august 10th china's military said exercises held around taiwan response to pelosi's visit had concluded while pledging to continue regular petrols near the island start of this current uh calendar year say early january february we started seeing some kind of ease out particularly with respect to the chips yes as we speak uh you know these are set of new challenges which have been uh built up it's largely uh you know the kind of intimidation or the power which one country would like to exercise on the other and it puts a larger amount of threat on the semiconductor manufacturing industry there are going to be multiple effects with respect to the supply chain ease of the semiconductors in the short to midterm when i say short to midterm our internal assessment says that it will take two to three quarters minimum for the things to get eased out does it mean that in india when it comes to automotive as a sector we'll keep on struggling my answer would be yes t with the upcoming festival season coming up a lot of these car makers or the oems would be kind of putting a lot of pressure on the dealers to stack the inventory so the backlog which we are seeing will get refilled in the subsequent months that's what our assessment says so that the people who had done their bookings say earlier or the or the demand which will come up during the festive season um is to a larger extent will get met out the backlog will continue to go up over the next two three quarters production capacity uh may not be optimally utilized the indian cellular and electronics association estimates that foundries in taiwan account for more than 75 of the chips that mobile devices made in india need the number is slightly lower at 60 if one considers all chips those of consumer electronics pcs laptops automobiles etc with the festive season coming up how are india smartphone manufacturers placed and with the latest geopolitical tensions taiwan is obviously very important for the world and even for india even for china china obviously knows that uh when they are trying to put the blockades and their their imports imports for these things will be heard there so i think they are aware of the fact quartz is a very important thing this can actually hinder some of the supplies and actually reduce some of the supplies it's going to be problematic if this goes on if there's no solution for the best next in the next three four weeks supply situation has been becoming quite okay in the past two three quarters uh to the extent that right now the ceiling is being put by the demand contraction not by the supply which was unlike for the past two years to that extent most of the brands are okay with supply of uh chipsets or the component leading up to the festival season uh and you have to remember that mo almost two thirds of the india smartphone market is still with the chinese they'll also lobby that we can't do that it's a loss of revenue from an important market like india as well will this be price increase absolutely it can be there because of uh the input cost increase the assembly cost increase in india so logistics as well fuel has gone up so price increase has been happening we are at the highest asp ever it's a catch 22 for the brands they were expecting actually to clear a lot of inventory which is lying in for some of the model they were expecting that lot of affordability schemes will come in for the smartphone industry a slowdown in demand is the bigger challenge india's smartphone shipments fell one person in the first half of 2022. world chip sales
growth has also been declining for six straight months semiconductor sales rose 13.3 in june down from 18 in may according to the world semiconductor industry association a chip shortage will however hover the automotive industry for a few more quarters having said that experts believe a blockade on taiwan's exports or widening of sanctions to cover semiconductors is unlikely as it is also not in the interest of china given its heavy reliance on taiwan for advanced chips foreign investments in securities market are subject to market risks read all the related documents carefully before investing xiaohijan the chief of china's top chipmaker smic last week said that rising geopolitical tension and high inflation are adding to industry panic in india though the central bank is on a firefighting mode it has been raising key rates to bring down inflation which in turn is making banks check up their deposit rates to fund loan demand will these rate hikes lure equity investors to safer bank assets we find out in our next report as credit growth picks up at a faster pace than deposits several national banks are resorting to raising deposit rates to meet loan demand as of july 29 aggregate growth in bank deposits was only 9.1 on a yearly basis versus 14.5 one year ago as per rbi's latest data against this backdrop the country's largest lender sbi recently launched a special 75-day deposit scheme offering 6.1 percent annual returns on fixed deposits with the tenor of 1000 days bank of badoda and canada bank have also unveiled similar schemes the rising rates on safer assets such as fixed deposits are however not enough for equity investors to park or diverge their funds according to experts djoko lingam founder and chief investment officer at economics research believes a majority of investors will not shift significantly towards fixed income instruments just because interest rates are 50 basis points or even 200 basis points higher historically equity market investors have seen strong double-digit interest rates offered by banks still allocated to equities they now expect a minimum of 15 percent annualized returns if not multi-baggers within a year he says over the past few years market returns have been much higher than that of bank deposits incidentally between 2019 and 2021 the sensex and nifty indices have returned between 14 and 22 each year while a one-year fd in a nationalized bank like spi has moved from 4.9 in 2019 to 5.3 in 2021
at the rates being offered by banks the overall return on investments is still negative if one considers the post tax return analyst said even if you go to eight percent interest rates if you take into consideration and tax you are still not making anything so i mean people will uh some of the i mean i'm not against fd even i have everything to be very honest with you personally speaking okay so as a principle of investment into you know any kind of an asset class it is always better to diversify but don't put large part of your investable you know capital into bankruptcy even if you take 10 return from where we are today you are staring at 65 000 plus you may get it more i'm talking about the lower side so i mean you are better off here i mean only thing is don't buy any nonsensical stock and expect to make return buy quality don't buy quantity narendra solanki of anandathi also has a similar opinion market valuation he said has become reasonable for investors to get in don't think there will be any immediate large shift from asset classes like kps into fts as you could just provide later alpha over fp rates in medium to long term and with recent fall convolutions have also become reasonable in some pockets at most there could be some shift from short-term based instruments or liquid based funds into ftc on thursday the markets will react to the minutes of the u.s federal reserve's july meeting back home stock specific action will continue are subject to market risks read all the related documents carefully before investing from the markets let us turn our focus to a bill through which the government wanted to usher in what is called much needed reforms in the power distribution sector but the electricity amendment bill 2022 met with stiff resistance watch our next segment to know both sides of the debate within hours of tabling it in the lok sabha on 8th of august the central sent the electricity amendment bill 2022 to a parliamentary standing committee for wider consultation with stakeholders the bill met with stiff opposition inside and outside the parliament so what the government wanted to do through these amendments through the changes in the law the government wanted to introduce the concept of open access which will allow consumers to choose their electricity provider regardless of who controls the physical infrastructure in their locality or state this would be similar to the way in which we select our mobile and internet service providers how will it do that the bill will allow multiple distribution licenses to function in an area having been cleared by the union cabinet the bill proposes to amend sections 42 and 14 of the electricity act thus it will enable competition in retail power distribution proposed amendment will allow the use of distribution networks by all licenses under provisions of non-discriminatory open access the freedom to choose will be provided through multiple distribution licenses on the same network according to business standard opinion successive governments since 2003 have sought to introduce this principle into india but each time poor drafting and strong opposition prevented its application the paper has argued that consumer rights must be respected through a principle like open access and that its application is overdue however consumer choice will mean that poorly performing state electricity utilities could end up being shunned in favor of their better performing counterparts the bill will also allow graded revision and tariff over a year it also says that an appropriate commission will fix the maximum ceiling and minimum tariff another amendment proposes to strengthen the regulators and the functions carried out by them however the centre has dropped the proposal of privatizing state-owned power distribution companies but why are opposition parties and farmer unions against it the opposition is alleging that the amendments will effectively curb the right of state governments to regulate tariff and distribution and are against india's federal structure they also allege that these amendments will lead to the indiscriminate privatization of the power distribution sector delhi chief minister arvind kejriwal described the bill as dangerous and claimed that it would only benefit a few power distribution companies meanwhile the central trade unions have also said that the bill aims to privatize electricity distribution one of the main concerns is that the bill will make electricity unaffordable for both ordinary power consumers and farmers by ending all subsidies trusted bank sbi the banker to every indian the government also wanted to enable regulators to fix a minimum tariff ceiling to discourage unhealthy price wars among distributors and also a maximum ceiling to protect consumers interest that is all for today for more news views and analysis log in to business hyphen standard dot com if you like this video share it and subscribe to business 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2022-08-20 18:58
