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Realty Stocks Lead the Gains
Thu, 12 May 01:30 pm

After opening the day in the green, the Indian indices continued to trade on a positive note in the post-noon trading session. Sectoral indices are trading in the green with stocks from the realty, banking and consumer durables sectors leading the gains.

The BSE Sensex is trading up 100 points (up 0.4%) and the NSE Nifty is trading up 25 points (up 0.3%). The BSE Mid Cap index is trading up 0.4% while the BSE Small Cap index is trading up by 0.7%. Gold prices, per 10 grams, are trading at Rs 29,872 levels. Silver price, per kilogram is trading at Rs 41,177 levels. Crude oil is trading at Rs 3,080 per barrel. The rupee is trading at 66.61 to the US$.

As per a leading financial daily, the World Gold Council (WGC) has stated that India's gold demand could rise as much as 10% in 2016. The expected rise will be seen on the back of good monsoon and a sustained rally in gold prices seen lately that has boosted buying interest.

The council stated that this would be seen despite the demand falling 39% YoY in the first quarter of 2016. One shall note that a sharp rise in prices and expectations of a cut in duty hit demand of gold during the first quarter.

According to WGC data, jewellery demand for gold fell to its lowest levels in seven years in the first quarter of 2016 at 88.4 tonnes. Further, total demand during this period slumped 39% YoY to 116.5 tonnes. Most of the fall came on the back of dampened demand in rural India which had been affected by drought. Notably two-thirds of India's gold demand comes from villages, where jewellery is traditionally used as an investment vehicle.

However, the above-average monsoon forecast will aid the demand for gold in 2016. Further, WGC noted that falling interest rates and a better return from bullion so far in 2016 could lure more consumers. It was noted that Indian gold prices have risen 18% so far in 2016, while Indian equity markets have fallen 1% as measured by the Nifty index.

Rahul Shah, co-head of research at Equitymaster, recently shared his thoughts on the perennial debate of Sensex V/S Gold in one of the editions of The 5 Minute WrapUp. Also, Apurva Sheth, editor of Swing Trader, came up with a technique to optimize Gold and Sensex returns with a simple tool - Ratio Charts.

In another news update the Finance Ministry has termed the bankruptcy code is the biggest economic reform after proposed GST (Goods and Services Tax). The ministry stated that the new bankruptcy code will promote jobs, availability of credit and ensure timely resolution of financial distress of companies.

The Rajya Sabha today passed the much awaited Insolvency and Bankruptcy Code, 2016. The Lok Sabha had cleared the bill last week.

The Code has enabling provisions to deal with cross border insolvency. Further, an Insolvency and Bankruptcy Board of India would be established to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and information utilities. The objective of the new law is to promote entrepreneurship. This could possibly make India a more attractive destination as it would help the country move up in the Ease of Doing Business rankings.

Also, as per the new code, when a firm defaults on its debt, control shifts from the shareholders or promoters to a Committee of Creditors. The Committee would have 180 days in which to evaluate proposals from various players for reviving the company or taking it into liquidation.

Above all, the bankruptcy code will provide huge relief to banks. Marred by NPAs, Indian banks are in a sorry state. According to central bank data, stressed assets (which include gross bad loans, advances whose term has been restructured and written-off accounts) rose to 14.5% of the banking sector loans as of December 2015. The bill will enhance the banks' ability to recover the loans in a timely manner. This will free up the locked capital and will lower their NPA levels.

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