What happens if you missed the deadline of 31st July to file income tax returns?  While an assessee has paid advance tax and TDS (ideally) by 31st March of every year, 31st July is the last date for filing income tax returns (ITR) as set by the Income Tax department. Let us see what happens if you miss the deadline and what penalties you might end up paying.

Before we look at the repercussions, let us quickly see how the years are referenced in income tax lingo. 2009-2010 is called the Previous Year (PY) as that is the year in which you earned your income while 2010-2011 is called the Assessment Year (AY) as you are assessing your income in 2010-2011 for the Previous Year 2009-2010. Right through this article, we will use PY and AY to mean 2009-2010 and 2010-2011 respectively.

If you missed the income tax return (ITR) filing deadline of 31st July, the income tax department gives a reprieve by allowing you to file it after 31st July without any penalty if and only if you file before March 31st 2011 and you have no tax liability to pay to the government. This means that you have all the 12 months of the Assessment Year to file your returns provided your tax liability is zero.

After the first year is over, you have to pay penalties to the tune of Rs 5,000/-. So for this Previous Year, if you do not file income tax returns by 31st March 2011, you will pay a flat penalty of Rs 5,000/-. This penalty can be waived if you have a genuine reason for not having filed your ITR.

So, in case of zero tax liability:

• income tax can be paid till end of the Assessment Year with no penalty
• income tax can be paid beyond Assessment Year with a penalty of Rs 5,000/-

What happens if you have a tax liability and have missed the income tax return filing deadline?

In such a case, you will have to  pay 1% per month on the amount of  liability starting from August. So, from August 2010, you will pay a penalty of 1% per month on your liability till the time you file your returns. Obviously, if you have a liability and are filing your ITR after the Assessment Year is over, you will pay 1% per month and Rs 5000/- as penalty.

So, in case of tax liability:

• income tax can be paid with a penalty of 1% per month on the outstanding tax liability
• income tax can be paid till end of the Assessment Year with no penalty (of Rs 5,000/-)
• income tax can be paid beyond Assessment Year with a penalty of Rs 5,000/-

Other caveats you need to be aware of if you are filing your ITR after the deadline of  31st July : 

Be aware of:

• You cannot carry over/forward losses that you have incurred in this year.
• In case of refund, interest will be calculated from the date you filed your return instead of 1st April.
• You will not be allowed to revise your return in case of mistake in original return.
• In fact, the returns can be filed within two years. So for this Previous Year (2009-2010), you have time till 31st  March 2012 to file your returns subject to penalties and some benefits that you lose. If you do not file within these 2 years, you might not be allowed to file it at all.

The conclusion is that, you are better off dead than to be late to file your income tax returns. Jokes apart, the benefits of filing your ITR are more than not. So, don't delay this important task for later. Do it now. Death and the taxman cometh! Both are inevitable.

Isaac Newton's contributions to physics and mathematics proved revolutionary. He didn't, however, prove to be as astute an investor, as evidenced by his losses during the South Sea bubble. The company ultimately imploded as it had over-promised on potential and under-performed in terms of actual showing. Newton traded frequently in the stock, making a small fortune which he proceeded to lose with a series of ill-timed trades. Traumatised by the event, he famously commented, "I can predict the movement of stars, but not the madness of men." His more famous three laws of motion can, however, prepare us better for the madness of markets.

The First Law

Newton's first law states that every object that is moving or at rest has a tendency to remain in that state unless an external force is applied to it. The basic idea this law conveys is that of inertia or the state where things show a great resistance to change unless some news or event of truly notable magnitude compels change. Have you ever picked a stock held up as the next hot company or a screaming value buy only to watch the stock move sideways? This law serves to drive home how perceptions of value, in cases ranging from an individual stock to a macroeconomic bet on a country, can turn out to be a double-edged sword. Investors pay a heavy price for holding to businesses whose 'intrinsic' value goes unacknowledged by markets for longer than certain investors can bear. As Keynes put it, "The markets can stay irrational longer than you can stay solvent".

Regardless of how splendid a business may perform, even the most exemplary management or business economics can do little to save a business that is saddled with a chequered past. This could be due to heavy competition, heavy-handed regulation or naughty promoters toying with their share prices. Such scenarios could result in the business trading at a perpetual discount relative to quality businesses of similar size and growth potential. Certain companies in the textile space, small-scale steel or commodity producers are a few whose alluring P/Es or P/Bs turns out to be too good to be true, considering the oft-dismal economics of the segments. Inertia in a stock can be an expensive lesson for an investor.

The Second Law

This law states that the greater the mass of an object, the more force you need to apply to move it at the same speed as a lighter object. Think of what kind of news it would take for a Reliance Industries to move up by over 10 per cent. It would have to be something as drastic as probably the company's retail arm becoming 10 times larger and more profitable than expected or crude oil and petrochemical prices spiking to $150! Basically it would take big news of the almost impossible-to-foresee variety to move a large entity.

But imagine this. Suppose an FII decides to mop up shares in a Rs 250-crore obscure tile maker from Gujarat or, say, there's a strong buzz pointing to an imminent share buyback plan by the company. The ensuing frenzy, in both the cases, is capable of sending stocks soaring (depending on individual circuits). The point to take home from the second law — always put in perspective the impact of potential news such as re-ratings from mergers or IPOs in the same segment, a significant strategic investor entering the fray and other such events. While it may not always be possible to ascribe a precise number to such events, taking stock helps put an investment in perspective. The law also highlights the importance of the magnitude of market consensus on a stock-specific event. Wipro is a recent example of a company whose price was battered by almost 10 per cent, reflecting lacklustre results and a management shake-up. However, fellow member of the IT pack, Infosys' share price has remained largely unchanged despite some healthy top and bottom line growth.

The Third Law

The third law states that for every action, there is an equal and opposite reaction. Equity markets behave like a rather complex living and breathing organism. They respond to a multitude of factors, ranging from interest rates, corporate results and self-appointed market gurus. To borrow Donald Rumsfeld's words, when dealing with uncertainty in equity markets there are the known unknowns and the unknown unknowns. The known unknowns can include expectations of poor upcoming quarterly results, upcoming legislation, which could hamper profitability or pricing power, structural changes in a sector such as increased capacity or competition or just anticipated inflation, which could result in higher interest rates. These can be vaguely foreseen but their quantification could be a fool's game with anywhere between a mild and severe market reaction based on how right or wrong the consensus opinion turns out be. But rest assured, a reaction does occur and is based on the magnitude of the news acting on the markets.

But the truly challenging market scenarios arise from the unknown-unknowns. The recent floods in Australia caused coal prices to spike by 30-40 per cent and disrupted global supplies, something that few market observers or even industry participants anticipated. The more infamous example is that of the market implosion during the sub-prime bust. Market history is littered with violent reaction, both good and bad, to news that few saw coming. The sheer vagueness of news that often shapes the lemming-like behaviour witnessed in equity markets serves to validate that every action, especially the unforeseen variety, often evokes a disproportionate reaction from the markets! The markets move in the opposite direction in cases including higher inflation levels and higher interest rates, among other scenarios.

Takeaways

Uncertainty has proved to be good hunting ground for the smart and prudent investors. However, they need to be forearmed, even if not with a precise explanation for uncertainty, at least with a vague framework to better deal with it. Dipping into Newton's laws provides a certain rationale when unexpected things happen.

Renowned investor Warren Buffett added another law of wisdom to Newton's three laws, a fourth which he believes Newton could have benefited from, "For investors as a whole, returns decrease as motion increases." Maybe doing nothing too could be an option sometimes!

"Last month I spent Rs 500 extra on vegetables. Onion and tomato alone ate into my movie budget," cried Sonu, a young man who works with an animation company. Rise in the prices of vegetables, cereals, milk and oil have been making headlines in newspapers for the last many months.

The headline inflation for December rose to 8.43 per cent. With this, the RBI and the government rolled up their sleeves to fight inflation. After all, how long can anyone ignore the common man? In its policy meet last week, the RBI increased the repo and reverse repo rates by 25 basis points each, after leaving them unchanged in the mid-quarter review in December.

Prices soar because of two reasons — one, supply shortage (following logistic problems and sometimes severe rain/drought) and, two, increase in money supply (when money supply increases, consumption demand soars). In times such as the present, when little can be done to resolve supply-side issues, the RBI takes monetary tools to battle inflation. Recently, with growth in credit offtake (outpacing deposit growth), the case for monetary tightening by the RBI has become stronger. We explain below the RBI's tools that help curb liquidity (money supply) in the market.

Repo rate

Similar to the way we borrow from banks, the banks borrow funds from the central bank, the RBI. The rate at which the RBI lends to banks is called the repo rate. In the recent policy meet, the RBI increased the repo rate to 6.5 per cent from the earlier 6.25 per cent. While this will eventually translate to higher borrowing rate for you and me, it will also deter banks from borrowing from the RBI to an extent and, thereby, reduce money flow into the market.

Reverse repo rate

Reverse repo is the rate at which banks get paid for parking their surplus funds with the RBI. This rate has been hiked to 5.5 per cent from 5.25 per cent initially (was as low as 3.5 per cent in April 2009). It is an indirect incentive to banks to deposit money with the RBI.

Cash Reserve Ratio (CRR)

The proportion of total deposits that banks park with the RBI is called the cash reserve ratio. Last January, when there was concern over the rising inflationary trend, the RBI increased CRR sharply by 75 basis points to rein in money supply in the market. This time, however, CRR has been left untouched at 6 per cent.

Statutory Liquidity Ratio (SLR)

SLR is the proportion of total deposits that banks invest in approved government securities. Despite request from bankers to reduce the SLR in the pre-policy meet, the RBI kept this rate unchanged at 24 per cent this time.

Market Stabilisation Scheme (MSS)

At times, when there is a significant increase of money flow (say, because of the RBI's dollar purchase in the market to strengthen rupee) in the country, the RBI issues treasury bills and government securities to suck liquidity and this is what is termed Market Stabilisation Scheme. The RBI may also resort to buying back the above securities when there is liquidity constraint.

Interest income/expense

All these measures of monetary tightening end with the consumer. When the RBI increased the CRR and repo rates in June 2008 by 50 basis points each, within a week's time, the banks came out with a 50-75 basis points increase in lending rates. This time again such a reaction is expected.

Mr Paresh Sukthankar, Executive Director, HDFC Bank, said in a conference call last week that ''there will be an increase in lending rates, both in retail and corporate sides''. He said that he expected most retail products, including auto loans, to increase in the next few days. Home loan EMIs, monthly instalments on car and personal loans, therefore, can be expected to rise, going ahead.

Fixed deposit investors can, however, cheer. When cost of funds increase, banks increase the deposit rates too. If you are looking for a FD product, waiting for some time may give you more attractive rates. As banks are looking to mobilise deposits, it looks like deposit rates may be the first to go up before lending rates increase.

Sneha Padiyath Mumbai, Jan. 25

Indian mutual fund houses have seen a higher drop in their AUMs this fiscal to date, than the foreign fund houses have, according to data available on the SEBI Web site.

As of December-end 2010, Indian mutual fund houses' average assets under management (AUM) fell by 10.4 per cent while that of foreign fund houses fell by 2.6 per cent. The industry average AUM, which stood at Rs. 6.74 lakh crore, for the same period saw a drop of 9.6 per cent.

Foreign fund houses account for about 11 per cent of the average AUM of the industry, and domestic fund houses 89 per cent. The proportion in terms of number of folios is also the same.

The foreign fund houses' average AUM totalled Rs 72,494.54 crore and that of the Indian fund houses Rs 60,1905.88 crore, both as at December end, 2010.

Of the 43 fund houses, 11 are foreign fund houses.

One reason for the difference in AUM fall between the two categories of fund houses is the liquidity tightness that this fiscal experienced. "Generally, foreign fund houses have more exposure to the equity side of the market than to the liquid side. This is why they saw a lesser drop in their AUMs as the equity markets performed better than the debt and money markets," said Mr Surajit Misra, Executive Vice-President and National Head-Mutual Funds, Bajaj Capital.

The average AUM of Franklin Templeton - the largest foreign fund house in the country - increased by about 18 per cent for the period April-December, 2010. The AUM of the fund house rose to Rs 39,442.60 crore (as on December 31, 2010), from Rs 33,290.04 crore (March 31, 2010). Fidelity, the second largest foreign fund house, recorded a 15 per cent increase in AUM, which stood at Rs 7,683.91 crore (Rs 8,901.48 crore).

"During 2010, we consciously increased our focus on the fixed income side given the low retail participation in that segment.

As part of this strategy and our conviction about corporate debt, we had pushed two funds that included a new launch focused on accruals," said Mr Harshendu Bindal, President, Franklin Templeton Investments (India).

Top-5 fund houses

Of the top five Indian fund houses in the country, UTI and ICICI Prudential mutual funds have fallen by 19 per cent each during this fiscal. While Birla Sun Life and Reliance Mutual Fund fell by 7.4 per cent, HDFC MF fell by just one per cent during the same period.

The year 2010 saw Shinsei mutual fund completely exiting the mutual fund business in India and selling it to Daiwa. The joint venture between Sundaram MF and BNP Paribas came to an end, with Sundaram continuing on its own and BNP Paribas taking over Fortis Mutual Fund.

AIG Global Investment Group Mutual Fund, owing to its efforts to cut costs and repay debt, has reportedly sold its Indian mutual fund business to Pinebridge Investments (an erstwhile AIG subsidiary).

Despite the struggling mutual fund industry in India, interest and the potential in the India growth story will keep foreign fund houses wanting to enter the industry. "However, many of these players will need to have a long term outlook given that margins are likely to be under pressure," said Mr Bindal.

Nifty out-of-the-money call witnessed aggressive call writing while the out-of-the-money put option witnessed aggressive put buying thus indicating absolute bearishness and constant resistance at the higher levels

.. >Inflation concerns & the slowing corporate earnings and higher cost of capital concerns resulted in the benchmark NSE falling significantly during the week ended 28^th January 2011. Earlier during the week the central bank had raised the repo and reverse repo by 25 bps each in order to rein in inflation. However there are concerns that the RBI may further hike rate as the inflation especially the food inflation continue to remain higher. The food price index rose 15.57% and the fuel price index climbed 10.87% in the year to 15 January 2011, government data on 27 January 2011 showed. There are concerns that the RBI may further hike interest rates, thereby compromising the economic growth as the cost of capital for corporate rise.

The market remained volatile during the previous week due to the fact that it was an expiry week and also because there was active selling by the Foreign Institutional Investors (FII) as some of the funds shifted away from emerging market portfolio. The benchmark nifty fell 184.35 points to close at 5512.15 during the week. However the nifty February series future premium widened 24.40 points to 5536.55 on Friday indicating that the selling was more profound in the cash segment.

The February series nifty added significant open interest (OI) on the expiry date of the January series as well as on Friday indicating shorts being created. On both these days it added 68.63 lakh shares and 9.86 lakh shares in OI to take the total OI on Friday to 2.04 crore shares. Similar was the trend in stock futures as well, as many of them added short positions. Similarly the nifty as well as stock option counters witnessed bearish positions being created. Overall in the futures and option (F&O) segment the trend indicated a bleak outlook. The average volume in the F&O segment during the week under review was Rs 168758 crore. The nifty out-of-the-money call witnessed aggressive call writing while the out-of-the-money put option witnessed aggressive put buying thus indicating absolute bearishness and constant resistance at the higher levels...

The index put-call ratio on Friday increased to 1.10 as compared to 0.96 the previous day, while the overall put-call ratio increased to 1.06 on Friday as compared to 0.94 on the previous day.

Open Interest (OI) break-up as on 28th January 2011
	Open Interest (OI)*	Change**	Change#
Market wide	205.82	7.58	-65.67
Index Future	2.38	0.16	-0.48
Stock Future	178.29	0.66	-29.83
Index Options	11.18	1.97	-4.54
Stock options	13.98	4.80	-30.83
* No of shares in crores ** Change is vis-à-vis previous day # Change is vis-à-vis previous week Source: NSE

The market-wide OI on Friday increased by 7.58 crore shares to 205.82 crore shares as compared to the previous trading day. Major addition was witnessed in the index and stock option segment. (See the OI break-up table)

Most active Nifty options (February 2011 series)
	OI
Call
Nifty 5500	1606550
Nifty 5600	3395100
Nifty 5700	4313900
Nifty 5800	4471250
Nifty 5900	3551950
Put
Nifty 5100	2223150
Nifty 5200	3026650
Nifty 5300	3092350
Nifty 5400	6749350
Nifty 5500	5998600
Source: NSE

The most active nifty options on Friday were the 5500 and up strike calls, which witnessed aggressive writing while the out-of-the money puts too witnessed aggressive addition of OI due to buying. The 5500, 5600 and 5700 strike call option added 10.72 lakh shares, 20.87 lakh shares and 12.79 lakh shares in OI due to writing to take these strikes respective total OI to 16.07 lakh shares, 33.95 lakh shares and 43.14 lakh shares respectively. The 5100, 5200, 5300 and 5400 strike puts added 14.90 lakh shares, 15.29 lakh shares, 12.69 lakh shares and 26 lakh shares respectively. (See the most active nifty option table)

Open Interest (OI) of major February 2011 series stock futures as on 28th January 2011
	Open Interest (OI)*	Change**	Change#
Reliance	1.64	0.09	1.30
Tata Motors	0.87	0.02	0.58
RCOM	2.65	-0.05	2.06
SBIN	0.32	0.00	0.21
Tata Steel	2.46	0.06	1.12
* No of shares in crores ** Change is vis-à-vis previous day # Change is vis-à-vis previous week Source: NSE

 

Top 10 Open Interest (OI) gainers in January 2011 series stock futures on 28th January 2011
Scrip Name	OI*	Change*	% Change
SUNTV	223000	98000	78
ORIENTBANK	2277500	387500	21
COREPROTEC	2519000	414000	20
SRTRANSFIN	310500	49000	19
ALBK	1006000	145000	17
IVRCLINFRA	9990000	1298000	15
LUPIN	2916000	344000	13
CANBK	1006500	107000	12
DLF	17337000	1730000	11
PFC	766000	72000	10
* No of shares Source: NSE

 

Top 10 Open Interest (OI) losers in January 2011 series stock futures on 28th January 2011
Scrip Name	OI*	Change*	% Change
HINDZINC	207000	-60750	-23
NMDC	549000	-125000	-19
CROMPGREAV	1035000	-231000	-18
HCLTECH	1439500	-167000	-10
WIPRO	2910000	-325500	-10
ITC	11292000	-1252000	-10
APOLLOTYRE	18224000	-1628000	-8
PETRONET	2594000	-228000	-8
LITL	11192000	-932000	-8
BHARTIARTL	7586000	-626000	-8
* No of shares Source: NSE

The earnings season seems to have been a no event for the market so far, as there have been not many surprises there. The intermediate trend is bearish and the market will look at the forthcoming budget for any positive clues. Any balancing measure taken by the government to lower food inflation and maintain economic growth will be closely watched till the budget.

A lot of calls have been coming in saying 2011 will be a challenging year.  These calls have come from the country's leading investment banks as India faced a rocky first month.RDD

Nandan Chakraborty, Managing Director, Institutional Equities at ENAM, in an interview with CNBC-TV18's managing editor Udayan Mukherjee sees the first half of 2011 as a major test for the Indian market, in terms of politics, the Fed's QE program and capex.

Below is a verbatim transcript of his interview. For complete details watch the accompanying videos.

Q: The first month has been quite awful. Do you think the rest of the year will mirror what January has been like?

A: I am part of the consensus which does think that till summer, it will be very challenging. Where it will be a real challenge for the investors is how you take the flip to the second half. If you look at the first half there are obvious challenges. Whatever is related to politics is affecting both, the consumption sector in terms of inflation and it is also affecting the capex sector. Incrementally, the GDP growth of India is capex related.

But on the other hand, if you look at the second half of this year, hopefully, even while you and I get depressed about things, the government will make measures - how to improve liquidity, try to solve this nature of how you can make it from serial to parallel in terms of the stages of capex, to set up power, coal stuff etc.

Another challenge that India is facing right now is how to get liquidity in, maybe in terms of bonds or amnesty. These are things that the government is also thinking of now. Towards the second half, you will have a better political situation than now hopefully.

Secondly, this quantitative easing (QE) program of the Fed has to run its course for the first six months because that's what they programmed. The US Congress has not extended the QE too much until they see it properly working. I don't think there will be any positive surprise in the QE in the first half, which means that in the second half there is a possibility of that also working out. These are things which will come in the second half.

Thirdly, if you look at capex, you have three legs. One is government capex, one is PPP which is largely now power and highways and the third is industrial capex. Industrial capex has been dead. The reason for that are not really interest rates. Reason for that is global outlook. Until people are confident of the global outlook, this will take a little bit of time because you make a five or 10 year plan not based on interest rates. That will start to pick up in the second half.

As far as the government capex is concerned, they have to be a little more confident of revenue generation. They might do something in the budget in terms of raising excise duties, some amount of divestment. Once they get a meaningful sum, they will be more confident on the government capex part of it. The PPP is the real leg which is continuing now. There, in both power transmissions, specifically, as well as the highway side because of various reasons that's what is getting delayed. There is a limit to how much you can delay that.

While it affects earnings it has to be made up. It will have to be done in the second half. These are things that we really need to look at in the second half and therefore, the challenge for investors will be how to be defensive and yet not so defensive that you are paying a high valuation and then to move into a more capex oriented portfolio.

Q: But you are sure that's the right strategy or tactical way to approach it that throughout the first three-six months, you look for opportunities to position yourself for the second half?

A: Yes but how do you do it? You can only study it and then see what happens at that price. Each of the hypothesis that I have laid out, what is actually happening to it to be able to monitor it.

Q: Its not a given?

A: Its not a given, it's only logically that I have told you certain steps.

Q: Does it worry you that too many people are thinking like you, that there is almost consensus that after the first six months things will improve in India?

A: Yes, and it is worrying because there are two points in that. One is 90% of the time the consensus is right and the problem is which 10% is the one that you are right and others are wrong and that's very difficult to figure out.

The other thing is having said this, the fears that you have today, in almost all aspects whether its money flowing to the US back from emerging markets or whether it's a local situation in terms of inflation and politics etc, still despite all that the market is at 19,000.

What does that mean in terms of flows? Let's take first the FIIs. Part of the money is India dedicated funds. In terms of stages normally what happens is first people get rid of their very aggressive stocks or those have already fallen.

Q: Banks have gone?

A: Banks are not really very aggressive. I will say more the capex related part. Banks is a fair mix of everything. There is an amount of secularity in banks. There is the consumer side, the housing finance side which is large part of credit growth which people don't realize.

At the first stage people get rid of all their really aggressive bets. Then they get rid of at the margin all the midcaps. Those two have really fallen, so then the third stage comes when the defensives fall. If you look at even the last 10 years history and if you look at various indices how they have performed up and down, when the defensives fall much sharper than the rest of the market is usually the bottom.

Jan. 28 (Bloomberg) -- Oil surged the most since September 2009 as unrest in Egypt raised concern that protests would spread to major oil-producing parts of the Middle East.

Crude gained 4.3 percent after a day of clashes between police and protesters demanding an end to Egyptian President Hosni Mubarak's 30-year regime. Any disruption to Middle East oil supplies "could actually bring real harm," U.S. Energy Secretary Steven Chu said on a conference call.

"If this can happen in Egypt, there is no reason that it can't occur in Libya or Saudi Arabia," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.

Oil for March delivery increased $3.70 to settle at $89.34 a barrel on the New York Mercantile Exchange. The contract has risen 0.3 percent this week and 21 percent in the past year.

Protesters demonstrated throughout Egypt, with clashes erupting in central Cairo. Tens of thousands of marchers chanted "liberty" and "change" after assembling at points across the city of 17 million.

Mubarak ordered a 6 p.m.-to-7 a.m. curfew in Cairo, Alexandria and Suez, state television said. Egypt's national carrier said it suspended flights into the nation, Al-Jazeera reported.

The unrest in Egypt followed an uprising that led to the Jan. 14 overthrow of Tunisian President Zine El Abidine Ben Ali.

"Egypt and Tunisia going down aren't a big deal for the oil market, but if the same happens in Saudi Arabia, that changes everything," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis. "There's a real concern that we're seeing the start of a domino effect."

Suez Canal

Saudi Arabia is the world's largest oil exporter. The kingdom and the other seven Middle Eastern and North African countries in OPEC pumped 78 percent of the group's oil in January, based on Bloomberg estimates.

Egypt is also home to the Suez Canal, which connects the Mediterranean and Red Seas. One million to 1.6 million barrels a day of oil and refined products moved north to Europe and other developed economies in 2008 and 2009, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department.

"It looks like there is a lot of worry in the market about a possible closure of the Suez Canal because of the escalating tensions in Egypt," said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. "That makes perfect sense about the rally we're seeing in the crude market."

The EIA identified the canal as one of seven "world oil transit chokepoints" in a report earlier this month.

"Any disruptions in the Middle East means a partial disruption of the oil we import," Chu said.

Global Supplies

The International Energy Agency, the Paris-based adviser to 28 nations, said earlier this month that the supply of oil in the most developed economies "looks relatively comfortable," particularly in the U.S., the world's biggest crude-consuming nation.

"We have plenty of oil and plenty of oil reserves, so from a numbers standpoint, it's not that big a deal," said Phil Flynn, vice president of research at PFGBest in Chicago. "From a psychological standpoint, it is a big deal. The momentum of discontent is building, and people are starting to get nervous, especially going into the weekend."

Brent crude for March delivery rose $2.03, or 2.1 percent, to $99.42 a barrel on the London-based ICE Futures Europe exchange, the highest settlement since Sept. 26, 2008.

Brent Premium

New York futures narrowed their discount to North Sea Brent to $10.08 a barrel. The differential reached more than $12 a barrel on an intraday basis after Energy Department data showed stockpiles grew 2.3 percent in the U.S. storage hub at Cushing, Oklahoma, last week.

Crude oil also rose as household purchases climbed at a 4.4 percent pace in the fourth quarter, following a 2.4 percent increase in the prior three months. The gain in consumer spending compared with a 4 percent median forecast of 85 economists surveyed by Bloomberg News.

U.S. gross domestic product grew 3.2 percent between October and December, the fastest since the first quarter. It was up from a 2.6 percent rate in the previous three months. The most recent figure fell short of the 3.5 percent in the survey.

Oil rose, even as OPEC output climbed 210,000 barrels, or 0.7 percent, to an average 29.395 million barrels a day in January, the highest level since December 2008, according to a Bloomberg News survey of oil companies, producers and analysts. The increase was led by gains in Iraq and Saudi Arabia.

OPEC Production

The IEA has asked OPEC to watch global demand closely and adjust its production accordingly, as high oil prices are a "detriment to the world economic recovery," Nobuo Tanaka, the IEA's executive director, said in an interview today in Davos, Switzerland.

Oil volume in electronic trading on the Nymex surged to a record 1.39 million contracts as of 4:58 p.m. in New York. That beat the previous record of 1.35 million, set April 13, according to Chris Grams, a spokesman for Nymex parent CME Group. Electronic trading for the day will end at 5:15 p.m. in New York.

The exchange doesn't release floor-trading volume until the following business day. The previous record for combined floor and electronic trading was 1.42 million contracts, also on April 13. Volume totaled 1.01 million contracts yesterday, 50 percent above the average of the past three months. Open interest was 1.52 million contracts.

Your health insurance policy will not pay for the treatment of all ailments.

   If you have a health insurance policy, you might be aware that it covers certain diseases only after a waiting period of four claim-free years. But do you know that conditions related to genetic disorders are not covered at all? And that claims relating to certain self-inflicted ailments—such as cirrhosis (liver disease) due to excessive intake of alcohol, lung and throat cancer due to tobacco use, and HIV—can also be rejected by an insurance company. All this is explicitly stated in the policy terms and conditions but buyers seldom go through the fine print. Even the agent will not disclose these intricate features of the policy for fear of losing business. An agent will not usually tell the buyer about all the exclusions in the policy. 

Congenital diseases 

Conditions such as cataract, hernia and sinusitis, which take a few years to develop into a full-blown ailment, are usually covered after a waiting period of 1-2 years. But genetic disorders such as cystic fibrosis, Down's Syndrome, thalassemia and congenital anaemia don't ever get covered. Often a congenital disease is confused with pre-existing diseases, which are covered in most cases after the fourth policy year. If a person is hospitalised due to an illness and it is discovered that it is a congenital disease, the insurance company may deny the claim.

   There are instances when a person may never know that he suffers from a genetic defect. "If one has regularly undergone medical checkups but a pre-existing ailment never showed up in the tests, the courts have held that the cost of treatment of such an ailment has to be paid by the insurance company. Insurers too are lenient if they know that it was a genuine oversight. If the patient genuinely mistook an earlier heart attack to be only a chest pain due to indigestion, we will consider the claim.

Self-inflicted ailments 

Another reason why a claim can get rejected is if the ailment has been self-inflicted. At the time of application, one has to declare whether he consumes alcohol or uses tobacco. If a person has stated that he is a teetotaller but ends up in hospital with cirrhosis, the claim may be denied. However, there is a fuzzy line of subjectivity here. Insurance companies deny claims for treatment of cirrhosis in such cases under the exclusion self-injury. But they pay for treatment of cancer even for smokers. The logic is that while in nearly 100% cases the cause of cirrhosis is alcoholism, no such empirical relationship exists between cancer and smoking. 

Investigative diagnostics 

Similarly, investigative diagnostics are not covered by insurance if there is no proof of treatment. There have been cases where doctors are unable to detect a problem and suggest a battery of tests. Later the tests reports revealed that nothing is wrong. The claims were rejected because the hospitalisation was primarily for diagnostic purposes. Even if the hospitalisation and the tests were prescribed by a qualified doctor, the claim will still be rejected. "The tests may have been conducted because a doctor prescribed them but there is nothing to justify payment. The insurer will pay only for curative treatment. Besides, policies reimburse costs incurred after hospitalisation for up to 90 days. Here too, there is the condition that the 90-day period must commence and end within the policy period. 

Pregnancy 

Though some standalone health insurance companies such as Apollo Munich do cover maternity costs after four years of continuing with the policy, most health policies do not cover these expenses. Even in the case of Apollo, there is a limit to the expenses under this head. Besides, insurers don't cover pregnancy related complications. But there are some exceptions again. Consider the case of a pregnant woman contracting jaundice. Had she not been carrying, jaundice may not have warranted a hospitalisation. But if it were not for the attack of jaundice, the woman might have normally sailed through her pregnancy without any hospitalisation. As such, if it is clinically established that it is jaundice that led to hospitalisation, cost of such hospitalisation will be paid despite the fact that hospitalisation may not have been warranted for treating jaundice had the patient not been pregnant. 

Equipment costs 

Medical equipment presents its own complications. The cost of prosthetic and other devices or equipment if implanted internally during a surgical procedure are covered. However, the cost of external aids such as ventilators will not be covered. The logic: Ventilation is merely a process helping ease breathing, not an active line of treatment in itself. However, if a patient is undergoing some active line of treatment and as part of it is also put under ventilation (immediately after a surgery), insurance cannot knock of the cost of ventilation from the admissible claim.

The new system will minimise possibility of fraud, increase efficiency and cut costs

   According to the new Reserve Bank of India (RBI) guidelines effective from December 1, 2010, cheque leaves with changes/corrections (with exception of changes / correction on date field duly countersigned) would not be honoured by the banks. Instead, a fresh cheque should be issued. This guideline will be applicable only for cheques cleared under the image-based clearing through Cheque Truncation System (CTS). Presently, the system is operational in Delhi, but will be implemented across India. 
   
However, these guidelines will not be applicable for cheques submitted for: 


• MICR Clearing 

• Non- MICR clearing 

• Over-the-counter collection (for cash payment) 

• Direct Collection of cheques outside the Clearing House arrangement

   CTS is based on electronic data/images without physical exchange of instrument. The cheque is scanned and electronically presented for settlement with the clearing house. The technology captures extracted data from the electronic images and ensures cheque validation, technical and signature verifications with minimal manual intervention that brings efficiency, accuracy and automation in the whole cheque-clearing process.

   CTS helps speed up transactions with accuracy, reduces cheque clearing cost and minimises chances of cheque fraud. Reserve Bank of India's has issued regulations against alterations or modifications in cheques. Under the new system, banks will undertake standardisation of cheques that includes paper quality, watermark, VOID pantograph, bank's logo printed in invisible or ultraviolent (UV) ink, cheque's field placements with Optical/Image Character Recognition (OCR/ICR) engines, mandating colours and clutter free backgrounds and prohibiting alterations or corrections of cheques.

   As per the new guidelines, alterations or modifications in cheques will be disallowed (even if a signature has been made at the place of alteration) and banks will dishonour any kind of altered cheques. All banks will have to strictly follow it.

   CTS was piloted in the National Capital Region (NCR) in February 2008. The existing paper-based cheque clearing mode processed an average of about 4.5 million cheques per day during April to December 2009. Banks and clearing houses are faced with challenges such as variable cheque loads on certain days, time consuming manual processes and security or fraud related issues.

   As such, there is a strong need for automation of inward clearance, standardisation and improved security, which CTS brings in.