💰 Tax Saving Schemes, Fed Rate Cut & SIP Interest Rate

Orowealth Weekend Reads: February 23, 2020

LAST WEEK MARKET MOVES

TAX SAVING SCHEMES
It’s that time of the year when tax saving is on the top of your list. With only a few days left to make your investment declarations, you might be searching for options to save more on taxes. With dozens of products in the ELSS category, you can have a hard time selecting one. Save tax up to Rs 46,800 before 31st March by investing in the below schemes.

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NEWS WE HAVE BEEN FOLLOWING

#OilReserves
Unnamed officials have told media outlets that India is keen on benefitting from low crude oil prices by filling its strategic petroleum reserves (SPR) with oil from Saudi Arabia and the United Arab Emirates (UAE). Crude oil prices have tanked 40% in March not only because of a decline in demand because of the coronavirus pandemic but also because of rising supplies. Both Saudi Arabia and the UAE have decide to increase oil supply while reducing prices. An informed source has said that the oil ministry has asked the finance ministry to provide Rs 48 to 50 billion to build up SPRs. India has built three strategic storages to store up to 36.87 million barrels of oil or about 5 million tonnes to protect against supply disruption. Indian Strategic Petroleum Reserves Ltd, which has built the strategic storages, has agreements with Saudi Aramco and UAE’s Abu Dhabi National Oil Company. These allow them to store their oil in these facilities, some of which can be used for India’s strategic needs.

Takeaway-
India needs to import 80% of its crude oil requirements, making it the third-biggest importer of the commodity in the world. Shoring up its reserve capacity at a time when oil prices have been pummeled is a strategic move to cater to potential needs.

#FederalRateCut
In an unprecedented move, the US Federal Reserve slashed its interest rates to zero and launched a $700 billion quantitative easing program to protect the economy from a major health crisis. The federal funds rate now stands at 0% to 0.25% from 1% to 1.25%. It also reduced its rate of emergency lending at the discount window for banks by 125 basis points to 0.25% and lengthened the term of loans to 90 days. This window can be used by institutions for liquidity needs. The central bank also slashed reserve requirements for banks to zero. Other major central banks, like the Bank of England, the Bank of Japan, the European Central Bank, among others, coordinated with the Federal Reserve to increase dollar liquidity via existing dollar swap arrangements. These banks reduced the rate on swap line loans and increased the period of loans.

As far as the quantitative easing program is concerned, $500 billion will involve Treasuries and $200 billion for agency-backed mortgage securities.

Takeaway-
The market had a negative reaction to the Fed’s move because it instilled fears in participants about the economy. The Fed intends to practice patience with interest rates from here on.

FROM OUR BLOG SECTION

Diversified Mutual Funds
Diversified mutual funds are funds with absolute diversification amongst all sectors of the economy. Generally, a mutual fund targets a particular sector depending upon its cap-size and earn benefits from the rise of that particular sector.

SIP Interest Rate
SIP or Systematic Investment Plan allows one to invest a pre-determined amount at regular intervals. It not only promotes a disciplined approach towards investing but is also easy on the pocket. One can start investing in a mutual fund through a SIP of only Rs. 500.

QUOTE OF THE WEEK
“We turn not older with years, but newer every day.” – Emily Dickinson (an American poet)
Chosen by Krishma – Orowealth.