Flash Manufacturing PMI and Commodity Market Tips

Posted on September 23, 2014 by Sree Lakshmi Reddy

Mcx Gold commodity market trading slipped heavily last week where in we saw marginal recovery in prices yesterday while they trade steady as of early Asian trade today. Although the trend is still down but oversold nature of the prices is perhaps not letting prices to fall much from here. In the meanwhile, the USD index is holding tight at 84.66, neither falling much nor rising. So, we believe its good amount of short covering should have had driven prices slightly higher along with weaker equities. While, we look at the derivatives front, the trading volume and the open interests are managing higher indicating that price trend is still healthy and bearish. SPDR Holding too scaled modestly lower to fresh lows since 2008. We remain short in gold on higher levels for the day.

Global Market View: Global equities posted a negative close last day while this morning Asians are trading marginally higher and that should be possibly because of Chinese manufacturing number which came better that everyone’s expectation. HSBC/Markit Man PMI stood at 50.50, prior number was 50.20 against anticipation of a reading near 50. We believe today should be a steady day as no major heavy weight data are expected except the EU manufacturing number and US Markit manufacturing PMI followed by the Richmond Fed manufacturing index Both Gold and silver recorded high volatility yesterday with two opening lower on Monday though managed to cut losses in latter half with Gold closing 0.1percentage higher to $1218an ounce at Comex.Gold MCX in India too added 0.35percentage by closing time and Stood at Rs 26590 per 10 Gms

Mcx Silver commodity too is trading steady today most likely that yesterday’s rebound from near 4 year lows of $17.35 an ounce might be tested once again in coming sessions. Note that industrial metals too staged good recovery yesterday which too could be one of the reasons for the very strong short-covering in the commodity. For the day, we might see modest support to the commodity coming on the back of better Chinese Manufacturing PMI reading; though still note that overall trend stays down. On that front, we recommend selling the whitish metal on higher levels today. Silver December contract at Comex was a major dragger yesterday with the commodity opening lower by around 2percentage yesterday though finally marked a modest 0.35percentage closed by the end of trade. In India, Silver Dec MCX was better off as it settled lower by just 0.1percentage to Rs 39575 per Kg.

Commodity market Tips

Sell Gold Mcx Oct below 26700 SL 26800 Tgt 26450

Sell Silver mcx Dec below 39600 SL 39950 Tgt 38900

Existing Home Sales and Commodity Intraday Tips

Posted on September 22, 2014 by Sree Lakshmi Reddy

Mcx Crude oil commodity market prices in the US took negative clues from the inventory data wherein the DoE said crude supplies in the US rose 3.67 million barrels, marking its biggest weekly rise in five months which was backed by increasing imports and weak refinery utilization rate. In products, gasoline inventories fell at a better rate by 1.64 million barrels though distillate stocks increase moderately. If we look at the seasonal demand pattern in the US, summer driving season has officially ended wherein months of September-October usually are the lean seasons for oil products consumption. Thus we see overall implied demand for crude remaining weaker whereas seasonal decline is witnessed in gasoline during this period. With demand likely to stay weaker in the US in near-term; refinery utilization rate to continue declining and oil production staying higher; WTI prices should continue to trade subdued. The US DoE in its report also said crude production rose by 248,000 barrels a day to 8.838 MBPD during the week ended Sept he most since March 1986.

In the bright week, we are seeing WTI trading around 0.5percentage lower at opening meanwhile other commodities like, Bullion and Base metals too scaling lower currently. We may claim expectations over poor Chinese Manufacturing gauge is taking toll over commodities whereas broadly rising USD too hurt. This morning oil is seen trading at $91 down by 0.5percentage and looks like the same scenario may prolong in today’s trade. We recommend selling from higher levels on today’s trading session.

Global Market Snapshot: Obnoxious beginning of the week that everything is red this morning. We see Asian markets trading down with expectations over poor Chinese manufacturing number, Gold and silver trading at multi-months low, oil is trading down both at Brent and WTI and finally the non-ferrous metals are also down. At 7: 15 AM IST, the markets are trading at $1209, $17.40 for gold and silver. The WTI is at $91.38 and all the metals are down by around 1percentage this morning at LME.

Mcx Natural Gas commodity market trading held a cautious to moderately selling approach in the commodity last week though our intraday views were sometimes ruined by huge fluctuations over US weather forecasts. While volatility in the short-term is seen high, prices in intraday are expected to trade weak and we recommend selling on pullbacks today. Also we feel, traders need to be cautious for next two-three days as US CPC projects developments of huge warm temperatures in much of US East, South and Central region which if continues may infuse demand for coming days. In that case, buying from lower levels can also come in over next few days.

Commodity Intraday Tips

Sell Copper mcx Nov below 417.50 SL 420.50 Tgt 413.50

Sell Crude mcx Oct below 5630 SL 5660 Tgt 5550

Leading Index and Commodity market Tips

Posted on September 19, 2014 by Sree Lakshmi Reddy

Mcx Gold commodity market was trading good slide in yesterday trade and likely that weakness would continue today following better equity movement in Asia today. However, note that losses especially in gold might remain minimal today as there are no major economic cues to be watched from the US whereas the Greenback has fallen at a good rate and could provide some support to the yellow metal. There are no major changes seen over physical demand side or either the ETF side though it would not be surprising for us if we see some short-covering post the commodity slipped down to fresh 8 month lows in the week. We maintain selling view for small targets today.

Gold continued its downward spiral during the week with the metal trading lower by almost all of the day before managing modest pullback toward the end of the day.

Gold Comex Dec shut shop by 0.7percentage down to $1227 per ounce while also touched a low near $1215 during the day. Subdued US housing data may have prompted buying interest from lower levels though trend still stays down.

MCX Gold October finished lower by 0.9percentage to Rs 26650 per 10 Grams with Rupee likely to put further pressure today.

Global Market Snapshot: Asian equities trade on a mixed to positive note with Japanese Nikkei scaling higher as it currency tumbled to fresh multi-year lows against the USD. Elsewhere in the US and Europe, equities closed firmly in the green tracking continued set of optimism from FED and notwithstanding the subdued housing and permits number from the US. In the global currency space, US Dollar index slipped towards 84.25 marks, a near 0.5percentage correction as GBP stepped up ahead of anticipated positive the outcome of the Scotland-Independence vote. JPY too tumbled towards a 109 level against USD.

Silver commodity market is held in sell view as yesterday though with higher equities, rising in US Dollar and weaker industrial related data from China and EU too supporting bearishness. Likewise we said yesterday, silver may get extended pressure from losses in industrial metals today and thus on one side we maintain selling stance in both bullion commodities, our preferred pick would be silver over gold. Recommend no trade on Ratio in Intraday. On our weekly Ratio buy call, traders might have made moderate profits yesterday. Recommend holding the same with reduced stop loss whereas may look to book minimum profits today as we enter the weekend.

Silver followed Gold movement though weakness in metals and its high beta pushed the commodity further lower against gold yesterday.

Comex Dec contract closed 1.15percentage higher to $18.51 an ounce while in India we saw Silver same month shutting down by 1.1percentage to Rs 40935 per Kg.

Gold and Silver Comex Spot Ratio: No trade on Ratio in Intraday. On our weekly Ratio buy call, traders might have made moderate profits yesterday. Recommend holding the same with reduced stop loss whereas may look to book minimum profits today as we enter the weekend.

Commodity market tips

Sell Gold mcx Oct below 26770 SL 26900 TP 26550

Sell Silver mcx Dec below 41100 SL 41400 TP 40650

Continuing Claims and Commodity Trading Tips

Posted on September 18, 2014 by Sree Lakshmi Reddy

Crude oil commodity trading held a cautious approach yesterday wherein we advised traders to look for only momentary trades as on one side largely positive equities, cues from PBOC and OPEC supply cut comments were seen adding fresh increase in the commodity though we were expecting some weakness to be held due to negative expectations over inventory data.

As per the commodity stocks report from the DoE, crude inventories gained 3.67 million barrels against markets forecast of a fall in the range of 1.5 million, though we were anticipating as weaker reading. If we look into products gasoline stocks fell at a decent rate though could not provide any major support to prices which closed weaker by 0.5percentageyesterday. Gasoline inventories fell by 1.6 million barrels while distillate stock increased by 279,000 barrels.

As of early Asian trade, we are looking at a weaker WTI and Brent oil prices where both of them down by over 0.5percentage. For the day, weaker expectations over US housing and manufacturing related data, strong gains in US Dollar and dragging effect of the subdued US stocks report would keep the commodity under pressure wherein we recommend selling the same at the NYMEX and MCX commodity markets for small targets.

Global Market View: Dollar is turning out to be the emperor of the currency markets this year with the Index moving to multi-year highs to 84.65 marks after taking positive cues from the FOMC meeting. Euro fell whereas Japanese Yen too slid to multi-year lows. Though the US FOMC meeting outcome looked a bit hawkish at first glance, the FED continued to claim its commitment towards lower levels of interest rates for the foreseeable future and re-iterated its view over labor market wherein the same still need very good improvement over wages growth front. Asian markets are trading on a mixed to positive note following moderate positivity in US equities which closed higher.

Economic data: EU Targeted LTRO Update, US Building Permits, Housing Starts, Philly Fed Manufacturing Index and Weekly Jobless claims data

Natural gas commodity trading market prices continued to track positive short-term developments over warmer weather forecasts in the US West. We held a positive bias yesterday though today have a cautious view as the commodity may see good volatility due stocks report. Early estimates stand for a addition of around 90 BCF, similar a last week though we feel am modest chance for positivism can be there in inventory as US recorded good amount of cooler temperatures lately. For the day, we have a ranged view in the commodity. Still short-term view in the commodity still remains weak.

Commodity Trading Tips

Sell crude Sep mcx below 5755 SL 5810 TP 5680

Sell Silver Dec mcx below 41370 SL 41450 TP 40800

Crude Inventory and Commodity Market Tips

Posted on September 17, 2014 by Sree Lakshmi Reddy

Crude oil commodity market trading at the NYMEX advanced almost 2percentage yesterday to close firmly over the $94 per barrel mark against our view that the commodity might see bearish momentum continuing due to ease in global supplies and amidst weak demand in the US. OPEC comments of a probable supply cut in 2015 was conjugated with intraday slump in the US Dollar and rising equities which supported the uptick in oil though fundamentally, there has been no major changes seen. OPEC daily output target may fall by 500,000 barrels to 29.5 MBPD in 2015, Abdalla El-Badri said at OPEC’s secretariat in Vienna though curiously Brent November month contract did not gained much.

If we look at the API stocks data, crude stocks increased by 3.3 million barrels last week while gasoline supplies slid by 1.2 million, news reports showed. While Bloomberg survey project fall in both Crude and gasoline stocks for the DoE, there is scope of negativity which might weigh against any major gains in oil from here. However, while looking at broad market dynamics like equities, Chinese cues and moderate correction in USD; we may not see a big fall either.

Global Market View: Yesterday’s trade was filled with high volatility wherein almost all asset classes witnessed mercurial movements. The Dollar Index which is awaiting cues from the US FOMC meeting slipped during intraday trade to record its biggest fall since May month. Markets speculated that the Fed might refrain from providing any major time-line for reducing interest rates in the US and thus volatility in USD was seen. The effect was seen on US equities which advanced whereas in commodities Crude oil and Base metals seconded higher. Bullion registered decent volatility before closing little changed on a day to day comparison. In major developments from Asia, Chinese PBOC is planning to do liquidity injections by around 500 Bln Yuan ($81 Bln) into the nation’s leading banks, according to a government administrator well-known with the matter. This can also be seen as a major aspect behind positive movement in metals and energy prices yesterday.

Economic Support: EU and US CPI, Current Account, NAHB Housing Market Index and lastly but most importantly FOMC Meeting outcome which would be released post our markets closing.

Natural gas commodity trading once again advanced tracking positive developments over warmer weather forecasts in the US West and also some southern parts on the country. While the commodity is gaining for last two sessions and likely that modest positive bias might continue in today’s session as well. Nevertheless note that other weather related developments showed US Great Lakes and northeastern states will see pockets of cooler air over the next week. This might indirectly infused gradual weakening of warmer weather forecast and thus drive away near-term demand for heating which has been driving prices higher in last couple of day. We recommend buying the commodity today, though advice taking only intraday movements.

Commodity Market Tips

Sell Gold mcx Oct below 27015 SL 27110 Tgt 26900

Buy Crude mcx Sep above 5758 SL 5710 Tgt 5860

May WPI Inflation

Posted on June 17, 2013 by Sree Lakshmi Reddy

May WPI Inflation at 4.7% Vs 4.89% (MoM)

May WPI Core Inflation at 2.4% Vs 2.8% (MoM)

March WPI Inflation Rate Revised To 5.65% Vs 5.96%

Primary Articles Inflation at 6.65% Vs 5.75% (MoM)

Primary Articles Index up 0.6% (MoM)

Manufactured Pdts Inflation at 3.11% Vs 3.41% (MoM)

Manufactured Products Index up 0.3% (MoM)

Fuel & Power Group Inflation at 7.32% Vs 8.84% (MoM)

Fuel & Power Group Index down 1.3% (MoM)

Food Articles Inflation at 8.25% Vs 6.08% (MoM)

Food Articles Index up 1.5% (MoM)

Non-food Articles Index down 0.6% (MoM)

All Commodities Index up 0.1% (MoM)

Minerals Group Index down 2.4% (MoM)

Energy sector: Crude Oil Vs. Natural Gas

Posted on June 17, 2013 by Sree Lakshmi Reddy

The relation between the two major components of the Energy sector: Crude oil & Natural gas is currently perched above 25. A slow recovery in the ratio was seen, backed by simultaneous gains in crude oil and fall in natural gas prices. On the other hand, at MCX the ratio has declined from yearly high of 30 in February, as gains in natural gas prices (YTD 18%) are comparatively higher than crude oil future prices (YTD 11%). Climate conditions in the US, concerns of supply disturbances in the Middle-East and improving demand from the world’s major energy consumers have hold up the gain in crude oil and natural gas prices in the current year. A refuse in the storage level, combined with a slower pace of drilling activity in the US played a positive role for gas prices. Investors also took advantage of lower fuel prices and, gas prices slowly reached 3 years high.

In the petite run, we anticipate the demand for gasoline to increase during the summer driving season in the US. Recent economic indicators indicate improvement in the US economy which may lead to a rise in utilization, counting fuel. In May, US consumers bought 1.4 million vehicles, up by 8% from the same month a year ago. Consequently, an augment in the usage of gasoline will drive crude oil demand and support prices to remain high. At current, gasoline demand in the US is at 8.7 million barrels per day and may reach a high above Nine million barrels in the summer driving season.

The hurricane season in the US starts from June and ends in November. The National Oceanic and Atmospheric Administration’s (NOAA) estimated a 70% likelihood that 13 to 20 named storms will form within the Atlantic Basin over the next six months, including 7-11 hurricanes; 3 to 6 of which will be forceful. The tropical Storm Andrea, the first named storm of the season appeared in early June, although the first storm typically forms in July. According to the US Energy department analysis, there is a 58% probability of production shut-in volumes being equal to or larger than the production shut in during the 2012 hurricane season, which overall 14.3 million bbl of crude oil and 32.1 Bcf of natural gas. In 2013, storm-related production commotion in the Gulf of Mexico during the 2013 hurricane season is 19.3 million barrels (bbl) of crude oil and 46.4 billion cubic feet. (Bcf) of natural gas. For that reason, concerns of supply disturbances may continue to keep crude and natural gas prices higher.

Therefore, gains in gas prices may be limited in the short run as the demand for space cooling is expected to decline. According to the Energy Information Administration, the number of cooling degree days (CDD) are likely below last year’s summer season’s CDD. The summer 2013 average US residential electric bill will total $395 over the 3 months period of June, July, and August, which is $10 (2.5 %) lower than the average U.S. bill during the summer of 2012. Natural gas accounts for more than 29% of total uses in electric power generation and 34% each in residential and commercial purposes. Consequently, if weather conditions remain mild, the usage is expected to remain lower and may limit gains in gas prices. If we study the storage level, the working gas storage level is at present at 2252 Billion Cubic Feet (BCF); 69BCF lower from the last 5 years average at the same time. April to October is considered to be injection period in the US. With the rise in drilling activities, production may rise and result in a higher level of storage in the near term. This may act as negative factor for gas prices.

As a result, we anticipate the gains in crude oil prices to exceed natural gas in the short run, which will result in a rise in the ratio. For the short run, we suggest entering long positions in crude oil futures while taking short positions in natural gas contracts.

Fixed Deposit

Posted on June 5, 2013 by Sree Lakshmi Reddy

A bank deposit is also known as fixed or term deposit, which can be opened by account holder to earn better interest compared to the interest that the account balance earns in a savings bank account. This is a type of instrument in which a certain sum of money is placed with the bank for a specified time period at a fixed interest rate.

The interest rate offered by banks on such deposits depends on the number of days, weeks or months for which the deposit is maintained. There is great flexibility in the maturity period which ranges from 15 days to 10 years. The interest is higher in case of longer maturity periods and can be compounded quarterly, half-yearly or annually and varies across banks. The main draw for such deposits is guaranteed higher interest that deposits earn.

Capital Protection

The capital in a bank deposit is not fully protected. Till recently, all bank deposits were insured under the Deposit Insurance and Credit Guarantee Scheme of India, which now have been made optional exposing the deposits to risks if the bank is not insuring deposits.

Inflation Protection

The deposit is not inflation protected, which means whenever inflation is above the deposit interest rate; the deposit earns no real returns. However, when the interest rate is higher than inflation rate, it does manage a positive real rate of return.

Guarantees

The interest rate is fixed and guaranteed for the duration of the deposit at the commencement of the deposit.

Liquidity

The bank deposit is liquid, despite the lock-in during the tenure of the deposit. The liquidity is offered in the form of loans and withdrawals subject conditions.

Credit Rating

Bank deposits do not carry any credit rating.

Exit Option

Early closure of a deposit is permitted with a penalty.

Other risks

Interest rate changes pose risks to existing deposit holders; for instance, you may have locked-in at a lower interest rate but due to economic factors; the bank starts to offer a higher rate on deposits later.
If the bank where you have the deposit does not have deposit insurance and credit guarantee, you run the risk of losing the capital and the interest.

Tax Implications

The amount invested in deposits with a maturity period of 5 years in a scheduled bank is eligible for tax deduction under section 80C. However, the interest earned on the deposit is taxable.

Various Types of Bank Fixed Deposits

Fixed Deposit

In this type of deposit both tenure and the interest rate for the tenure is fixed.

Recurring Deposit

In this type of deposit, bank account holders deposit equal amount of money every month.
The interest rate is fixed for the deposit tenure and so is the number of monthly instalments.

Security Deposit

A few corporate organizations stipulate new employees to provide security deposit to check attrition.
This deposit is made by an employee and he cannot withdraw such fixed deposits without the consent of the employer.
The company has the right to the FD in the event of employee leaving the organization before certain stipulated period.

Tax-saver Fixed Deposit

Deposit with 5-year lock-in offer tax benefits under Section 80C.

Where to open a Deposit

You can open a deposit at any nationalized, private sector or foreign bank.

How to Open a Deposit

Select the bank to open the deposit.
Choose a nominee and get a witness signature.
Your existing bank account counts as being KYC compliant.

How to Operate Deposit

You can issue cheque to the bank through your existing savings bank account to start a deposit.
A deposit receipt or certificate is issued detailing the deposits features

Types of Transaction

Cheque
Money Transfer
Electronic Clearing Services {ECS}

Points to Ponder

Minimum sum to start a deposit
Penal provisions in case of partial or early foreclosure

Fixed Deposit Interest Rates of Various Banks in Percentage

Bank	6 Months-365 days	1-2 Years	2-3 Years	3-5 Years	Above 5 Years
Axis	7.50	8.50-8.75	8.75	8.75	8.50
Bank of Baroda	7.30-7.75	8.50-8.75	8.75	8.75-8.90	8.75
Bank of India	8.00	9.00	9.00	9.00	8.75-9.00
Bank of Maharashtra	7.50-8.50	9.00-9.10	9.00	9.00-9.10	9.00
Canara Bank	7.25-9.00	9.05	9.05	9.05	9.05
Central Bank of India	7.75	9.00-9.15	8.75	8.50	8.50
Corporation Bank	8.75-9.00	9.00	9.00	9.00	8.75
Dena Bank	8.50	9.00	8.75-9.25	9.00	8.75-9.00
Hdfc Bank	7.50-8.00	9.00-8.75	8.75	8.75	8.25
Icici Bank	7.00-7.25	7.50-9.00	8.75	8.75	8.50
Idbi Bank	8.65-8.75	8.75-9.00	9.00	9.00	8.50-8.75
Iob	8.50	9.00	9.00	9.00	9.00
Ing Vysya	8.70	9.25	9.25	9.00	8.50
State Bank of India	6.50	8.75	8.75	8.75	8.75
Syndicate Bank	7.75-8.00	8.50-9.00	8.00	8.00	8.00
Vijaya Bank	8.50	9.00	9.00	9.00	9.00

Features:

ELIGIBILITY

You need to be a Resident Indian with a savings bank account.

ENTRY AGE

You need to be over 18 years old
Minors can open a deposit with the natural guardian operating it

MINIMUM INVESTMENT [Rs]

Minimum: Rs. 1,000/-
Maximum: There was no upper limit
Deposits above Rs. 15 lakh upto Rs. 1 Crore qualify for special interest rates

INTEREST

Starts from 7.05 percent to 9.00 percent per annum
Depends on the tenure of the deposit and RBi changes {See table for Current Rates}

TENURE

Currently offered up to 10 years

ACCOUNT HOLDING

Individual
Joint
Minor through guardian
Companies or Associations or Trust
Hindu Undivided Families [HUF] not engaged in any trading business activity

NOMINATION

Facility is available

Click Here to Know more about Fixed Deposit investment growth rate from our expert.

Gold Can Slide More?

Posted on April 8, 2013 by Sree Lakshmi Reddy

Behind a strong rally in Bullion since 2008. Shell it comes to bear market as we seen world economy is slowly improving or boom will continues in Bullion?

In debits some analysis’s indicates gold tumbling to $1400 on vice-versa some indicates it cans gunfire up to $1800 mark.

Other than most investors and traders are under the awareness that gold is all set to enter the bear market as the US economy shows signs of global recovery. The major indication behind gold’s weakness this year has been the focus on global growth and that’s meant alternation out of defensive assets like gold.

Gold slipped this year after 12 straight annual gains as Federal Reserve policy makers debated the pace of stimulus. Gold hit a 10-month low below $1,540 an ounce on Thursday as the dollar strengthened ahead of a statement by European Central Bank chief Mario Draghi, after the bank left rates on hold as expected at its latest policy summit.

Spot gold chops as low as $1,539.75 an ounce, its lowest since May 30, and stand at $1,546.91

Gold is downhill around 7.5% this year as global equities trade about 2% below a more than four-year high. Bullion is set for the biggest weekly drop in seven months and is nearing a bear market even as the Bank of Japan yesterday increased bond purchases and European Central Bank President Mario Draghi warned that he sees risks to Europe’s recovery.

Gold slipped in on growing confidence that the global economy is strengthening and as investor’s awaited U.S. jobs data. Silver was near its lowest since July. The complete market was expecting a good payroll farms data and a low unemployment rate compared to the last report. News of recovery of the US economy pushed gold further. On the other hand, on Friday, when the data was released, it was a completely opposite picture.

The U.S. job creation engine sputtered in March as employers hired smaller amount workers than expected and a shrinking labor force helped push the unemployment rate down to the lowest in four years.

In Payrolls grew by 88,000 the smallest gain in nine months and less than the gloomiest forecast in a Bloomberg survey, after a revised 268,000 February increase, Labor Department data showed. The jobless rate fell to 7.6% from 7.7%. This report followed a filament of disappointing data this week on activity in the US manufacturing and services sectors and on private-sector hiring, raising concern the recent rally in equities has outrun economic fundamentals.

Taking into consideration that the great economic slowdown has still not shifted to the path of recovery, gold & silver once again came in to the limelight. The negative data report released on Friday, pushed up gold prices further.

Since far-off the Asian markets are considered, India awaits the beginning of the festive season next week and Chinese markets too will open up after a lengthy holiday.

Gold prices will additional move upwards as we perceive strong demand for gold in the Asian markets. Weddings will start in India, the world’s biggest buyer of gold and continue till early June. Festivals like Gudi Padwa, Akshaya Tritiya, Baisakhi etc are creased up too.

We anticipate entering into market at every dips in a low volumes is good opportunity.

Kisan Vikas Patra [KVPs] – A Small Savings Instrument

Posted on April 8, 2013 by Sree Lakshmi Reddy

The Kisan Vikas Patra [KVPs] was a popular and safe small savings instrument that doubles the invested money in 8 years and months. This scheme was backed by the government, which was discontinued by the government from 1 December’2011. However, existing investor in this scheme will continue to enjoy the earlier stated benefits.

Capital Protection:

The capital in the KVP was completely protected as the scheme was backed by the government of India, making it risk-free with guaranteed risk-free with guaranteed returns.

Inflation Protection:

The KVP was not inflation protected, which means whenever inflation was above the current guaranteed interest rate f 8.4%; the deposit earned no real returns. However, when inflation rate was under 8.4%, it did manage a positive real rate return.

Guarantees:

The interest rate in the KVP was guaranteed and was 8.4% compounded yearly at the time of discontinuation.

Liquidity:

The KVP had liquidity, despite the 8 years and 7 Months that it look to double the deposit. The liquidity was offered in the form of loans and with drawls subject to conditions. One could pledge the KVP to take a loan from any bank or financial institution.

Liquidity on premature withdrawal	Percentage of Face Value [%]	Amount Paid on Rs. 1,000/- on Face Value [Rs]
2 years 6 months or more but less than 3 years	1.05	1,170.51
3 years more but less than 3 years 6 months	20.79	1,207.95
3 years 6 months or more but less than 4 years	26.71	1,267.19
4 years or more but less than 4 years 6 months	31.08	1,310.80
4 years 6 months or more but less than 5 years	35.39	1,355.90
5 years or more but less than 5 years 6 months	43.56	1,435.83
5 years 6 months or more but less than 6 years	48.84	1,488.49
6 years or more but less than 6 years 6 months	54.33	1,54.30
6 years 6 months or more but less than 7 years	64.91	1,649.13
7 years or more but less than 7 years 6 months	71.38	1,731.82
7 years 6 months or more but less than 8 years	78.10	1,781.06
8 years or more but less than 8 years 7 months	85.09	1,850.93

Credit Rating:

As the KVP was backed by the government of India, it did not require any commercial rating. This holds good for existing investors as well.

Exit Option:

Premature withdrawal is permitted at a cost for existing investor.

Other Risks:

There is no risk associated with this investment at a cost for existing investors.

Tax Implications:

For existing investors there is no tax benefit on the deposit or the interest that it earns. The yearly interest accrued in the KVP is taken as “Income from other sources” to compute income tax. However, there is no TDS deducted.

Where to Buy:

Once you decided on the sum to invest
You had to fill the KVP application form available at the post office.
Original identity proof for verification at the time of buying was required.
You could buy the certificate with cash, cheque or demand draft drawn in favour of the post master of the post office from where the KVP was being bought.
You had to choose a nominee and get a witness signature to compete the formalities when buying this product.

Points to Ponder:

The KVP can be encashed at any post office in India provided one has obtained transfer of the certificate to the desired post office for existing investors in this instrument.
KVPs are transferable across post offices for existing investors.
Interest income is taxable but no TDS certificate issued.