Gold price slips from 3-week high, down Rs 315

 
Gold prices slipped from a three-week high on Monday, losing Rs 315 to Rs 30,885 per 10 grams in New Delhi, on profit-selling at prevailing higher levels.

Traders said sluggish demand due to ongoing 'Shradh' period also influenced the sentiment.

Gold of 99.9 and 99.5 per cent purity plunged by Rs 315 each to Rs 30,885 and Rs 30,685 per ten grams, respectively.

It had climbed to a three-week high of Rs 31,200 in the previous session.

Sovereign also lacked necessary follow-up support and declined by Rs 100 to Rs 25,000 per piece of eight gram.

In line with a general weak trend, silver ready declined by Rs 100 to Rs 49,580 per kg and weekly-based delivery by Rs 20 to Rs 49,580 per kg. The white metal had surged by Rs 1,225 in the previous session.

However, silver coins held steady at Rs 86,000 for buying and Rs 87,000 for selling of 100 pieces.

Debt-laden companies are selling off assets in a slowing economy

Kishore Biyani is smiling again. The poster boy of the retail revolution in India is starting a new business called Big Bazaar Direct . The e-commerce initiative involves setting up a network of franchisees who will take the Biyani-led Future Group's Big Bazaar retail chain to the doorsteps of consumers. The venture, says the company, will usher in the next retail revolution. While that may be a tad too optimistic, the new business certainly means Biyani has overcome the difficulties he was facing until recently.

What makes Biyani bullish? Until a year-and-a-half ago, Future Group was burdened with massive debt. But the company was not generating enough cash. That not only made repaying the debt difficult but also put a question mark on the company's survival. What did Biyani do? In April last year, he sold his profitable Pantaloon retail business to Aditya Birla Nuvo for Rs 1,600 crore. A month later, he sold his financial services business to private equity player Warburg Pincus for Rs 590 crore. And this year, he sold a 22.5 per cent stake in his life insurance joint venture with Italy's Generali for Rs 300 crore. The sale of assets helped him prune the debt to Rs 3,500 crore from Rs 10,000 crore two years ago, and put him back on track.

In debt-laden Corporate India there are several instances like the Future Group. While financially stressed companies globally are shedding assets - French retail giant Carrefour and Canadian gold producer Barrick Gold to name two - the trend is most visible in India. Corporate houses such as GMR Group, Anil Ambani's Reliance Group, Videocon Industries, Adani Group, GVK Group and Jaiprakash Associates have either sold some assets and stakes in the companies or are planning to do so in order to ease their debt burden.

Companies mop up Rs 4,800 cr via issue of retail NCDs

Indian companies have mopped up over Rs 4,800 crore so far this financial year through non-convertible debentures (NCDs) to retail investors, garnering nearly three times the amount that was actually targeted.

NCDs are loan-linked bonds issued by a company that can't be converted into stock, but offer higher interest rate than convertible debentures.

Four non-banking finance companies (NBFCs) - Srei Infrastructure Finance, Shriram Transport Finance Company, Rural Electrification Corp and Muthoot Finance - have tapped the NCD route so far in 2013-14.

According to data available with the Securities and Exchange Board of India (Sebi), these companies have managed to garner about Rs 4,809 crore through NCD route, indicating a strong investor demand for the retail debt market products.

They had a target to mop up Rs 1,700 crore collectively.

Interestingly, Srei Infrastructure Finance has taken the NCD route twice between April and September.

Experts say volatile conditions in the equity markets have led to companies opting for the NCD route to raise funds. Besides, investors are attracted to good returns being offered in these NCD issues.

"Debt instruments, especially NCDs, have emerged as a preferred route for retail investors to park their funds as these were offering higher returns compared to what most of the banks providing on fixed deposits," a market analyst said. "While banks offer a return of about 8.75 per cent for a five-year period, NCDs of a similar tenure can offer between 10 per cent and 12 per cent," he added.

Most of the funds were raised to support financing activities and to meet working capital requirements.

Individually, REC garnered Rs 3,510 crore against the target of Rs 1,000 crore, Shriram Transport Finance Company Ltd mopped up Rs 736 crore against the base size of Rs 375 crore and Muthoot Finance raked in Rs 324 crore against the target of Rs 150 crore.

Srei Infrastructure Finance raked in a total of Rs 134 crore against the base size of Rs 75 crore in April and raised Rs 105 crore in September against the base size of Rs 100 crore.

In 2012-13, 15 companies had raked in nearly Rs 17,000 crore via NCDs. In comparison, a cumulative amount of Rs 35,611 crore was garnered by 16 firms through their NCDs in the preceding year.

Finance oil imports via ECBs, Chidambaram tells Moily PTI

	Finance Minister P Chidambaram has dubbed Oil Minister M Veerappa Moily's claim of cutting 3 per cent in oil import bill through fuel conservation as "ambitious" and has suggested that more oil imports need to be financed through overseas borrowings to help cut current account deficit (CAD). Moily is set to launch a six-week mega fuel conservation drive on Tuesday, attempted to taper demand, thereby cutting oil import bill by $2.5 billion. He had outlined the drive as well as other measures in a letter to Prime Minister Manmohan Singh and Chidambaram on August 30 saying his initiatives would help save $20 billion in foreign exchange outgo. Responding to Moily's letter, Chidambaram wrote back last week saying the projected savings of foreign exchange on account of various measures proposed are optimistic, official sources said. "While it is recognised that a conservation campaign might result in some reduction in petro-product consumption, the estimates of savings projected at 3 per cent, over and above the proposed crude imports cut, appear to be ambitious," the finance minister wrote. Stating that only $3.75 billion out of the total crude oil import bill of over $160 billion is proposed to finance through External Commercial Borrowings (ECBs), Chidambaram said the possibility of increasing the ECB mode of financing should be explored. India paid about $144.29 billion last financial year for importing oil and this year the outgo is projected at $160 billion. Besides fuel conservation, Moily wants increase in crude oil imports from Iran, which is paid in rupee and will help curtail foreign exchange outgo. Chidambaram also wanted oil companies to be "encouraged to import crude oil from Iran in greater quantities and their imports from Iran be reviewed regularly". As US and western sanctions have blocked all payment routes, India pays Iran in rupees in a Uco Bank branch in Kolkata. Buying more oil from Iran would mean it pays more rupees than dollars it has to pay to other sellers. Sources close to Moily said the conversation drive - which includes the minister and his officials using public transport at least once a week - is aimed at sending a message for conservation down the line. Also, it is aimed at bringing about change in people's mindset and to act as a catalyst in improving public transport system. The government, meanwhile, is grappling with high CAD, the gap between inflows and outgo of foreign exchange. It has set a target to bring down the CAD, which touched a record high to 4.8 per cent of GDP last financial year, to 3.7 per cent level in the current financial year. Moily's other measures included asking state-owned oil firms to keep crude imports at 2012-13 level of 105.96 million tonnes that will save $1.76 billion in foreign exchange. The mega fuel conservation campaign - to limit its consumption growth to last year's 4.1 per cent level - is projected to help prop up the rupee, which has slid sharply against the US dollar this fiscal.

BSE Sensex slumps 347 points ahead of release of CAD data

The BSE Sensex slumped by 347 points on Monday on continued selling in blue chips on negative global cues and in anticipation of poor quarterly current account deficit (CAD) figures later in the day.

Markets showed concern over a possible shutdown of the US Federal government services due to a political deadlock over the 'Obamacare' plan in the budget and with Italy likely to face new elections.

Domestically, the market expected a widened CAD for the April-June quarter that might put more pressure on the rupee and invite a ratings cut by international agencies.

The 30-share index of the Bombay Stock Exchange fell 1.8 per cent, or 347.50 points, to end at 19,379.77 on the last day of trade for September.

The broader 50-share Nifty closed 1.7 per cent, or 97.90 points, lower at 5,735.30.

The rate hike from the central bank on September 20 cut short what had been a rally in domestic shares, although the Sensex still managed to gain 4.1 per cent in September, its biggest monthly advance since November 2012.

Sector-wise, bank, capital goods, metal, automobile and oil and gas scrips tanked. However, information technology (IT) stocks gained.

The bank index plunged 320.07 points, capital goods index was down 231.96 points, followed by metal index (-209.44 points), automobile index (-165.11 points) and oil and gas index (-145.78 points).

Healthy buying was observed in IT index which rose 4.37 points.

CAD widens to 4.9 per cent of GDP in Q1 on high gold, oil imports PTI

High imports of gold and oil pushed current account deficit (CAD) to 4.9 per cent of gross domestic product (GDP) to $21.8 billion in the April-June quarter of the current financial year.

CAD is the difference between inflow and outflow of foreign exchange.

The deficit had declined to 3.6 per cent in the January-March quarter after touching a record high of 6.5 per cent in the October-December quarter. It was 4.4 per cent (or $16.9 billion) in Q1 2012-13.

"The trade deficit, coupled with a slow recovery in net invisibles (income and services), led to widening of CAD to $21.8 billion in Q1 of 2013-14 from $16.9 billion in Q1 of 2012-13," the Reserve Bank of India (RBI) said in its Balance of Payments statement.

Gold imports increased by $7.3 billion in the first quarter of the current financial year. The imports stood at about 335 tonnes in the April-June quarter.

"Excluding the increase in gold imports of $7.3 billion in Q1 of 2013-14 over the corresponding quarter of the preceding year, CAD would work out to $14.5 billion, which translates into 3.2 per cent of GDP," the central bank said.

RBI said there was a small draw down on country's foreign exchange reserves to finance the CAD.

"On BoP basis, there was a slight draw down in foreign exchange reserves of $0.3 billion in Q1 of 2013-14 as against an accretion of $0.5 billion in Q1 of 2012-13," it said.

During the quarter, while exports declined by 1.5 per cent, imports recorded an increase of 4.7 per cent. The trade deficit widened further to $50.5 billion in Q1 of 2013-14, from $43.8 billion a year ago, RBI said.

The government plans to bring down CAD to 3.7 per cent, or $70 billion, in 2013-14 from 4.8 per cent, or $88.2 billion, in 2012-13.

RBI governor Raghuram Rajan receives Deutsche Bank Prize, 2013

Reserve Bank of India governor Raghuram G Rajan has been awarded the Fifth Deutsche Bank Prize for Financial Economics 2013, in recognition of his ground-breaking research work which influenced financial and macro-economic policies around the world.

The academic prize is sponsored by the Deutsche Bank Donation Fund and carries an endowment of euro 50,000. The Centre for Financial Studies (CFS) awards the prize bi-annually in partnership with Goethe University Frankfurt.

Presenting the prize to Rajan, Deutsche Bank co-chairman Juergen Fitschen yesterday said that it would have been hard to find a more deserving winner for this year's award.

Rajan's career "is not only marked by path-breaking, empirically-based research, but he never shied away from the real world of complex policy issues and special interests. He never shied away from speaking inconvenient truths," Fitschen said.

He noted that Rajan had in 2005 warned about the dangers of building up "unsustainable imbalances in the financial system," three years ahead of global financial crisis.

"Prof. Rajan's work revealed that the relationship between the financial sector and the rest of the economy is so complex that it is not good enough to simply look at the size of the financial sector in relation to the gross domestic product (GDP), as is done so often at present," Fitschen said.

He had also "warned us about the dangers of using or rather misusing" financial regulations and financial systems for purposes other than their original objectives, for example, for safeguarding stability or fostering growth, the Deutsche Bank co-CEO said.

The housing bubble in the United States, which triggered the financial crisis in 2008, had highlighted the danger of using the financial system to make up for the failures in social policies.

Jury chairman and director of the Centre for Financial Studies Michael Heliassos said the organisers are quite pleased to welcome Rajan in his new capacity as the RBI governor.

Rajan was picked up for the prize from more than 260 nominations from top universities, central banks and research centres in 37 countries. More than half of the nominations came from the US.