Sensex may touch 21,000 level by Diwali: Experts

New Delhi: The BSE benchmark Sensex is likely to hit the much awaited psychological level of 21,000 this Diwali, driven by robust foreign fund inflow, good quarterly earnings from corporates so far and favourable global cues, say analysts.

The Sensex touched its one-year high level of 20,932.23 on Friday triggered by global cues as concerns about the US tapering eased and China's economic growth picked up.

The 30-stock index is 323.88 points away from its all- time peak of 21,206.77 hit on January 10, 2008.

Meanwhile, foreign institutional investors (FIIs), the main driver of the Indian stock market, have poured in nearly Rs 7,000 crore (USD 1.12 billion) in the domestic equity market since the beginning of this month.

With this, the total foreign investment in the Indian stock market has reached Rs 80,174 crore (USD 14.77 billion) so far in 2013, as per data available with market regulator Sebi.

Marketmen attributed the foreign fund inflows to easing concerns over the US tapering.

"Markets rose sharply on Friday, buoyed by the postponement of the debt ceiling issue and on likely expectations that the Fed will not taper the stimulus programme in its next meeting, pending final resolution of the debt ceiling programme," said Dipen Shah, Head of Private Client Group Research at Kotak Securities.

The Sensex has gained 1,365.74 points or 6.99 percent so far this month to 20,882.89.

According to analysts, the way things are looking positive for the country and the liquidity force will take markets to higher levels.

"The Sensex is likely to remain strong in near-term. The kind of inflows and liquidity that we are seeing indicates that the Sensex may scale new highs in the days to come. The Sensex is likely to touch its all-time high by Diwali as the global set-up is good, results by Indian Inc is reasonably decent and most importantly FII inflows are robust," said Paras Bothra, Research Head at Ashika Stock Brokers.

The sentiment in the market last week was boosted on speculation that Federal Reserve could maintain monetary stimulus next year on concerns that the 16-day partial US government shutdown may curb growth in the world's largest economy.

"Markets may move up further as indications from the US markets are positive, corporate results are good. Besides, FIIs are positive on the Indian stock market. So, it is likely that markets may touch their record high levels by Diwali," said Alex Matthews, Geojit BNP, Research Head.

BSE Sensex fails to maintain initial gains, turns negative

New Delhi: The S&P BSE benchmark Sensex failed to maintain initial gains and was quoted lower in afternoon trade Monday on selling pressure mainly in consumer durables and IT counters.

The 30-share index opened higher at 20,915.76 and moved up to 20,970.92 on buying in capital goods, auto and realty shares on the back persistent capital inflows from foreign funds coupled with higher global cues.

However, it later dropped to 20,787.56 and was quoted at 20,810, showing a loss of 72.74 points, from its last weekend's level.

Similarly, the 50-share NSE benchmark Nifty moved lower by 7.70 points, to 6,182.

Foreign institutional investors (FIIs) bought shares worth Rs 1752.98 crore on last Friday, according to provisional data from the stock exchanges.

Asian markets rose as traders continued buying spree that began last week on bets that US Federal Reserve will continue its monetary stimulus for the world's largest economy.

Key benchmark indices in Singapore, Hong Kong, China, Indonesia and Japan rose between 0.1 percent and 1.13 percent, while indices in South Korea and Taiwan fell between 0.12 percent and 0.21 percent.

How to make Narendra Modi PM, Web masters at work

The Congress polled about 11 crore votes to win the 2009 general election decisively. In 2014, when the country votes again, it will have more than 14 crore mobile Internet users alone.
That’s a thought for pause. And that’s the thought that Narendra Modi seized upon at a BJP office-bearers’ meeting in Delhi on April 7 to underline how the 2014 polls could be won — on the Internet. Two months later, after being named the BJP’s campaign committee chief, he told a Maharashtra core group meeting that there were 165 Lok Sabha seats where social media could be used to enhance the campaign pitch.
That thought has since then fructified into an Information and Communication sub-committee headed by Rajya Sabha MP Piyush Goyal, as part of the panels set up by the BJP on July 19 to look after various aspects of its poll campaign. The sub-committee in turn is helped by the party’s IT cell, with an alumnus of IIT-BHU, Arvind Gupta, as convenor, and a Communication (or Samvad) Cell, headed by an MBA degree holder from IIFT (Indian Institute of Foreign Trade), Anupam Trivedi.
The BJP’s IT drive includes a third arm outside the party fold: Rajesh Jain. An IIT-Bombay alumnus and one of the original IT entrepreneurs turned venture capitalists and serial entrepreneurs, he is working as a volunteer for the party.
“Rajesh, Arvind and Anupam are the three pillars of my Information and Communication sub-committee,” says Piyush Goyal.
While Gupta and his team look after digital and social media platforms, Trivedi’s men work on content development. Jain and his self-initiated team handle IT-enabled election management down to the booth level.
If anyone had doubts about how thorough this work was, Jain effectively removed these at a meeting in the Capital on August 18, according to those present. Asked to make a presentation before a gathering of BJP central office-bearers, state unit chiefs and state organisation secretaries, Jain took up former deputy chief minister of Bihar Sushil Modi as an example, used a software tool that crawls through the Election Commission’s database of electoral rolls, identified the BJP leader’s polling booth, then

India can't afford fiscal slippages: Fitch

New Delhi: Global rating agency Fitch on Thursday cautioned that fiscal slippage could have negative bearing on India's sovereign rating, which is at the lowest investment grade in view of weakening CAD and persistent inflationary pressure.

"In India and Indonesia, both BBB- (lowest investment credit rating) with stable outlook, their relatively weak starting positions with high inflation and recent rises in current account deficits (CAD) suggest that their credit profiles have limited tolerance for policy slippage that saw their current account deficits and-or inflation rates stay high or rise further," it said.

Countries experiencing the greatest pressure on their currencies and reserve levels are those where weakening current-account positions and persistent inflationary pressure have raised doubts over the credibility of policy management - India and Indonesia in particular, it said.

In a report titled 'Emerging Asia: Slowing Growth Amid Market Pressures', Fitch sees limited scope for policy slippage for either sovereign at the current rating levels of 'BBB-' with stable outlook.

The government is taking all steps to contain fiscal deficit to 4.8 percent of the GDP in the current fiscal.

The fiscal deficit during 2012-13 came down to 4.9 percent of the GDP from 5.8 percent a year earlier.

"The government will do whatever is necessary to contain the fiscal deficit to 4.8 percent of GDP this year. The most growth-friendly way to contain the deficit is to spend carefully, especially on subsidies that do not reach the poor, and we will take effective steps to that end," Prime Minister Manmohan Singh had said.

Finance Minister P Chidambaram at many occasions has reiterated that red line has been drawn for the fiscal deficit and they will not be breached.

With aim to stick to fiscal deficit target, the government had announced slew of austerity measures including reduction in non-plan expenditure, ban on holding seminars in five-star hotels and creation of new jobs.

As for the Current Account Deficit (CAD), it was expected to be less than USD 70 billion or 3.7 percent of GDP for the full fiscal.

The CAD, which is the difference between inflow and outflow of foreign funds, was at 4.9 percent of GDP in the April-June quarter.

India's service sector activity suffers worst slump in over 4 years in Sept

 
Bangalore: Activity at Indian services companies shrank at the fastest pace in more than four years last month, suggesting the slowdown in Asia's third-largest economy still has some way to run, a survey showed on Friday.

The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, slipped from 47.6 in August to 44.6 in September, its weakest since April 2009.

That marked its straight third reading below 50, the threshold between growth and contraction.

It showed firms were less optimistic about the future and were cutting staff as new business dries up.

The PMI also capped the worst quarter for the Indian services sector - which accounts for nearly 60 percent of the economy - in more than four years, stoking fears that growth in the three months to September will be weaker than April through June.

India's economy grew just 4.4 percent in the quarter to June, its weakest quarterly pace since the first three months of 2009.

"Service sector activity contracted further in September ... as tighter financial conditions and heightened macroeconomic uncertainty weighed on growth," said Leif Eskesen, chief economist for India at survey sponsor HSBC.

The PMI's new business index fell to 45.0 in September from 46.6 in August, the weakest reading since February 2009 and the third month running that demand has declined.

Such weak demand augurs poorly for coming months, too.

An HSBC Markit manufacturing survey released on Tuesday showed factory activity shrank for a second month in September.

Adding to economic woes, a ballooning current account deficit has driven funds out of the country, hurting the Indian rupee and pushing the Reserve Bank of India (RBI) to adopt measures which effectively drained cash from the market.

Those moves raised funding costs for banks and companies, creating a ripple effect that has crimped investment.

The weaker currency also pushed wholesale inflation to a six-month high in August, prompting RBI Governor Raghuram Rajan's surprise repo rate hike of 25 basis points to 7.50 percent on September 20.

"Despite the weak growth backdrop, inflation readings held broadly steady. This, in turn, supports RBI's stepped up efforts to better anchor inflation expectations," said Eskesen.

However, economists in a Reuters poll taken last week were split over whether Rajan will hike rates again at the central bank's next policy review on October 29.

Rupee advances to 7-week high at 61.45 against dollar

Selling of the US currency by banks and exporters triggered by its weakness overseas helped the Indian rupee advance by 28 paise to a seven-week high of 61.45 against the dollar in late morning deals on Friday.

Good foreign capital inflows into equity market also boosted the rupee value against the dollar, a forex dealer said.

The rupee resumed lower at 61.85 per dollar as against the Thursday's closing level of 61.73 at the Interbank Foreign Exchange (Forex) Market on mild dollar demand from some banks.

However, it recovered immediately to 61.34 before quoting 61.45 per dollar at 1045 hours, on fresh selling by banks and exporters.

It may be recalled that the dollar was quoted at 61.32 on August 16, 2013.

The domestic currency hovered in a range of 61.34 and 61.95 per dollar during the morning deals.

In New York market, the dollar hit an eight-month low against the euro on Thursday as investors grew more concerned about the economic effects of a prolonged shutdown and debt-ceiling debate.

Meanwhile, the benchmark BSE index Sensex moved down by 29.66 points or 0.15 per cent to 19,872.41 at 1125hours, after earlier touching the 20K level.

BSE Sensex up in morning trade on sustained buying, Jet Airways shares gain

 
The BSE benchmark Sensex continued its rising sreak and was trading over 100 points in morning trade on Friday on sustained buying by funds as well as retail investors, ignoring a weak trend on the other Asian boures.

At 10.38 am, Sensex was up 93.11 points at 19995.18. Similarly, Nifty was up 33.95 points at 5943.65 during the same time.

The 30-share index gained 60.89 points, or 0.31 per cent, to trade at 19,962.96 points in early trade with auto, consumer durables, IT and realty sector stocks leading the rise. It had rallied over 522 points in the past two sessions.

On the similar lines, the wide-based National Stock Exchange index Nifty moved up 12.00 points, or 0.20 per cent, to 5,921.70.

Brokers said sustained buying by funds as well as retail investors took place as the partial US government shutdown eased fears about the Federal Reserve tapering its monetary stimulus programme soon.

Stocks of Jet Airways turned buyers' fancy and shot up by 3.60 per cent to Rs 400.50 after the Union Cabinet on Thursday night cleared its proposed sale of 24 per cent equity to Abu Dhabi-based Etihad.

In the Asian region, the Japan's Nikkei fell 0.90 per cent, while Hong Kong's Hang Seng shed 0.72 per cent in early trade.

The US Dow Jones Industrial Average ended 0.90 per cent lower in Thursday's trade.

Cabinet okays Telangana. Hyderabad to be joint capital for 10 years

The Centre Thursday took the first significant step towards creation of Telangana from southern Indian state Andhra Pradesh and decided that Hyderabad will be the joint capital of the two states for 10 years.

Over two months after the Congress Working Committee put its seal of approval, the Union Cabinet approved the proposal of the Home Ministry for creation of the 29th state and decided to set up a Group of Ministers (GoM) to work out modalities.

"The Cabinet has given its approval for the creation of a new state of Telangana," Home Minister Sushilkumar Shinde told reporters after the meeting that lasted more than two hours.

He said it was decided that Hyderabad will be the common capital of the two bifucated states for 10 years.

After the creation of the new state, the security and guarantees including fundamental rights of the people of coastal Andhra, Rayalaseema and Telangana will be ensured, he said.

The Cabinet approved a GoM that will go into the issue of a special financial disbursement that may be required from the central government for the residuary state of Andhra Pradesh, for building its capital and to cater to special needs of backward regions.
The new state will have a geographical area of 10 of the 23 districts of undivided Andhra Pradesh.

Thursday's decision brings to fruition the announcement made by the then Home Minister P Chidambaram on December 9, 2009 for creation of Telangana.

Joy & anger in Andhra Pradesh over Centre's nod for Telangana

Telangana Rashtra Samithi (TRS) President K Chandrasekhar Rao and other statehood supporters hailed the Union Cabinet's approval of separate Telangana while Seemandhra leaders and people expressed anguish and anger over the decision.

The pro-united Andhra employees of the state government, who are in the forefront of the agitation against division of southern India state Andhra Pradesh, called a 48-hour shutdown in Seemandhra (coastal Andhra and Rayalaseema regions) from 6 AM tomorrow.

The TRS President hailed the decision but asked Telangana supporters to be "alert till the Bill for formation of the separate state is passed in both houses of Parliament".

Welcoming the decision, Andhra Pradesh Information Minister D K Aruna, who hails from Telangana, thanked ruling United Progressive Alliance (UPA) Chairperson Sonia Gandhi, Prime Minister Manmohan Singh and Congress Vice-President Rahul Gandhi for formation of the separate state comprising ten districts.

Several other Congress leaders from the region expressed happiness over the Cabinet's decision which comes over two months after the Congress Working Committee gave its nod to bifurcate Andhra Pradesh.

Telangana supporters set off crackers and celebrated the occasion at the TRS office here and elsewhere in Hyderabad, which was the epicentre of the long-drawn statehood stir.

On the other hand, the pro-united Andhra employees of the state government, who are in the forefront of the agitation against division of AP, called a 48-hour shutdown in Seemandhra (coastal Andhra and Rayalaseema regions) from 6 AM tomorrow.

Centre asks Andhra government to remain on high alert

The Home Ministry Thursday asked the government of southern Indian Andhra Pradesh to remain on high alert in view of the Union Cabinet's approval to create Telangana and deploy adequate forces, especially in Seemandhra region, to maintain peace.

Apprehending protests, particularly from those opposing bifurcation of Andhra Pradesh, the Centre has already sent around 2,500 paramilitary personnel to assist the local police to deal with the law and order situation there.

Police barricade 7 RCR against the anti-Telangana activists.

The Home Ministry told the state government to remain on high alert and deploy forces in all sensitive locations in Hyderabad, coastal and Rayalaseema regions to deal with any situation arising out of the Cabinet's decision, official sources said.

People in the Seemandhra region have been protesting for the past two months against the bifurcation of Andhra Pradesh and the agitation is expected to be intensified in the coming days following today's decision.

The Cabinet took the first significant step towards creation of a separate Telangana state and decided that Hyderabad will be the joint capital of the two states for 10 years.

Over two months after the Congress Working Committee put its seal of approval, the Cabinet approved the Home Ministry's proposal for creation of the 29th state and decided to set up a Group of Ministers (GoM) to work out modalities.

Read more at: http://indiatoday.intoday.in/story/cabinet-note-on-telangana-recommends-hyderabad-as-capital-of-new-state/1/312859.html

Read more at: http://indiatoday.intoday.in/story/cabinet-note-on-telangana-recommends-hyderabad-as-capital-of-new-state/1/312859.html

Raghuram Rajan meets Chidambaram; discusses economic situation

Rajan discusses economic situation with Chidambaram

Ahead of the RBI's central board meet, the central bank chief Raghuram Rajan on Thursday met Finance Minister P Chidambaram and is understood to have discussed economic issues. "Our meeting was part of regular interaction that takes place between RBI and Finance Ministry," Rajan said after his hour long meeting with the Minister and Economic Affairs Secretary Arvind Mayaram. The Central Board of Reserve Bank will meet in Raipur on Friday to discuss key economic and financial developments. The RBI board meets at least once every quarter. The meeting would be chaired by Rajan. The four deputy governors are the official directors on the board, while Mayaram and Financial Services Secretary Rajiv Takru are the government nominees. There are also 11 non-official directors on RBI board. The meeting assumes significance in the wake of economic growth falling to a four year low of 4.4 per cent and current account deficit (CAD) at an elevated level of 4.9 per cent in the April-June quarter. While the government has been emphasising on measures for incentivising growth, the RBI in its policy review last month had hiked interest rates by 0.25 per cent. The RBI is scheduled to announce its second quarter policy review on October 29. Although Prime Minister Manmohan Singh and other government functionaries are expecting the growth to improve in the second half of this fiscal, Asian Development Bank in its recent report lowered India's growth projection for 2013-14 to 4.7 per cent. The economic growth rate slipped to a decade's low level of 5 per cent in 2012-13.

Remittances to developing world to reach $414 bn this year: World Bank

Developing world to get $410 bn in remittances

India and China would account for nearly a third of total remittances of $414 billion to the developing world this year, according to the World Bank. The total remittances to the developing world this year would be 6.3 per cent higher compared to 2012. "Remittance volumes to developing countries are projected to continue growing strongly over the medium term, averaging an annual growth rate of 9 per cent to reach $540 billion in 2016," the World Bank report also said. Global remittances, including those to high-income countries, are estimated to touch $550 billion this year, and reach a record $707 billion by 2016, the report added. World Bank Senior Vice President and Chief Economist Kaushik Basu said: "Remittances act as a major counter-balance when capital flows weaken as happened in the wake of the US Fed announcing its intention to rein in its liquidity injection programme. "Also, when a nation's currency weakens, inward remittances rise and, as such, they act as an automatic stabiliser." The estimates reflect recent changes to The World Bank Group's country classifications, with several large remittance recipient countries, such as Russia, Latvia, Lithuania and Uruguay no longer considered developing countries. The top recipients of officially recorded remittances for 2013 are India (with an estimated $71 billion), China ($60 billion), the Philippines ($26 billion), Mexico ($22 billion), Nigeria ($21 billion), and Egypt ($20 billion), World Bank said. Other large recipients include Pakistan, Bangladesh, Vietnam, and Ukraine. Growth of remittances has been robust in all regions of the world, except for Latin America and the Caribbean, where growth decelerated due to economic weakness in the US. The high cost of sending money through official channels continues to be an obstacle to the utilisation of remittances for development purposes, as people seek out informal channels as their preferred means for sending money home, World Bank said. The global average cost for sending remittances is 9 per cent, broadly unchanged from 2012, it added.

EOW likely to defreeze NSEL escrow account on Thursday

The economic offence wing (EOW) of Mumbai Police is likely to defreeze an escrow account of National Spot Exchange Ltd (NSEL) by Thursday morning. NSEL's escrow account was among those 58 bank accounts which was frozen by EOW on Tuesday, to investigate Rs.5,500 crore NSEL payout crisis.

Crisis-ridden NSEL had opened an escrow account after direction by the government to ensure payouts on priority to about 8,000 small investors stuck after the exchange halted trading. But on Tuesday, NSEL failed its payout seventh time in a row - giving a reason that EOW had frozen its settlement and escrow accounts, both.

In an email statement, NSEL had said, "Due to freezing of bank accounts, NSEL is unable to make any payouts on Tuesday. NSEL has informed the FMC of this development. NSEL is taking legal advices to defreeze the settlement bank accounts. Investors and members will be notified in due course."

Talking exclusively to Headlines Today, senior EOW official admitted, "It was our mistake to freeze escrow account on Tuesday. At that point of time, when all 58 bank accounts were getting freezed, we were unaware which are escrow account and which are settlement accounts." But he assured,"

For the benefit of investors, we would defreeze the escrow account at the earliest. Wednesday is public holiday, therefore, on Thursday we would communicate to the bank and will ensure NSEL's escrow account gets defreezed soon."

Interestingly, as of now, NSEL's escrow account has only Rs.18 crore. That means - payout failure was quite imminent. NSEL was supposed to make a scheduled payment of Rs.174.72 crore to investors on Tuesday.

According to settlement plan, NSEL would pay Rs.3,494.4 crore this year in installments of Rs.174.72 crore every Tuesday. The exchange has defaulted on payouts for the past six weeks and has settled about Rs.150 crore so far.

EOW has frozen total 58 bank accounts of promoters of FTIL and NSEL - which also includes personal accounts of Jignesh Shah, Anjani Sinha, Joseph Massey, Shantilal Guru, B D Pawar, Amit Mukherjee, M C Pandey, Shrikant Jawalgekar, Neerav Pandey, NSEL's auditor Mukesh Shah and others.

Read more at: http://indiatoday.intoday.in/story/eow-likely-to-defreeze-nsel-escrow-account-on-thursday/1/312804.html

Onion prices down over past fortnight

Retail onion prices in the capital have declined by about 20 per cent to Rs.60-65 per kg over the past two weeks.

Onion arrivals in Delhi and in the major markets of Maharashtra, the biggest producer of onions, have been going up in last few days.

In Delhi, the average arrival price for wholesale onion dipped from Rs.5,555 per quintal on September 17 to Rs.3,639 on September 30, a drop of over 34 per cent. The declining trend at the wholesale level is expected to reflect at the retail level with a further drop in prices this month, said a wholesaler at Delhi's Azadpur market.

The harvest of the onion kharif crop has been good in Karnataka and Andhra Pradesh. In October, arrivals will pick up in Maharashtra and Rajasthan. The two states account for one-third of country's output. October's nine day long Navratri celebrations - when people avoid eating onions - are also likely to lead to a drop in consumption and prices. With a 244 per cent rise in prices in August, onions were instrumental in driving up the August wholesale price inflation to  a six month high of 6.1 per cent. India produces about 16 million tonnes of onion but consumes only 10-11 million tonnes. Higher domestic prices had led to a resumption in imports of onion after a gap of two years and onions from countries like Egypt, China and Pakistan have found a market in India.

Remunerative domestic prices and the imposition of a higher minimum export price have slowed onion exports. In August, onion exports fell sharply to 29,247 tonnes compared to 156,165 tonnes in July and 150,512 tonnes in June. India exported 1.82 million tonnes of onion in 2012/13, valued at Rs.2,295 crore. In the first five months of current fiscal year, exports have only been 697,028 tonnes.

Read more at: http://indiatoday.intoday.in/story/onion-prices-down-retail-wholesale-delhi-maharashtra/1/312710.html

ADB clears $700 mn loan for infrastructure development

The Asian Development Bank (ADB) has approved $700 million in loans to support the Indian government's efforts to accelerate investment in infrastructure which the country requires to ensure strong economic growth.

"Poor infrastructure is one of the biggest drags on growth and development in India and there is a large investment funding gap of about $113 billion during the 12th Five-Year Plan for 2012-2017," ADB said in a statement.

This assistance to India's Infrastructure Finance Company Ltd (IIFCL) will allow it to lead the market evolution for infrastructure financing and will spur greater involvement from the private sector, said Cheolsu Kim, Lead Finance Specialist in ADB's South Asia Department.

The government estimates that $1 trillion is needed in infrastructure investment to achieve economic growth of 8.4 per cent under its current five-year development plan, and expects nearly half of that to be financed by the private sector.

However, banks which have been the key source of infrastructure finance, are increasingly unable to provide funds as they are fast approaching exposure limits to key infrastructure companies, the Manila-based multi-lateral funding agency said.

ADB's funds - provided through two loans under a multi tranche financing facility - will be used to provide direct loans for project developers and to replace bank loans, freeing up banks to provide credit in other greenfield projects, it added.

Currently, 31 road, railway, airport, urban infrastructure and energy projects, including in renewable energy, are in the pipeline to receive support from ADB.

Established in 2006, IIFCL is wholly owned by the government and its borrowing programme is fully backed by a government guarantee.

PE investments dip 67% in Q3; 9 month figure drops by 38%

Private Equity firms invested about $1.3 billion across 75 deals, during the quarter ended September 2013, registering a decline of 67 per cent over the corresponding period last year, a report says.

According to research firm Venture Intelligence, the latest numbers take PE investments in the first nine months of 2013 to $5,059 million through 281 investments.

This is down 38 per cent compared to the corresponding period of 2012 when deals worth $8,152 million were made via 373 investments.

There were only two PE investments worth over $100 million during the third quarter of 2013 compared to five such transactions in the same period last year and eight during the immediate previous quarter, the Venture Intelligence analysis showed.

Baring Private Equity Asia's Rs 1,687 crore ($260 million) buyout of 41.8 per cent stake in publicly listed IT Services firm Hexaware Technologies was the top PE deal of the Q3 2013.

Including the mandatory open offer for an additional 26 per cent stake, the deal value could go up by another Rs 1,058 crore, the report said.

The second largest transaction reported during Q3 2013 was e-tailer Flipkart's raising of an additional $200 million from existing investors including Tiger Global, Accel India, Iconiq Capital and South Africa-based strategic investor Naspers.

Led by the Hexaware and Flipkart deals and accompanied by the $75 million commitment by Softbank to another e-tailer Snapdeal.com, IT & ITES companies grabbed almost 45 per cent of the PE investments (by value) in the third quarter of this calender year.

IT & ITES ($582 million across 25 investments) was followed by manufacturing ($185 million across nine investments) and healthcare and life sciences ($140 million across 14 investments) as the most favoured industries for PE investments in Q3 2013, the report added.

India’s GDP growth likely to be at 5.2% in 2013: UNCTAD

New Delhi, Sep 12:  

The Indian economy is likely to grow at 5.2 per cent in 2013 calendar year on the back of rising domestic demand, says a report by UN agency UNCTAD.

In its release of Trade and Development Report 2013, the United Nations Conference on Trade and Development (UNCTAD) said the Indian economy is expected grow at 5.2 per cent in calendar year 2013 as against 3.8 per cent in 2012.

UNCTAD’s India growth forecast at 5.2 per cent for 2013 is however lower than the International Monetary Fund’s projection of 5.6 per cent for the year.

In case of China, the UNCTAD report said, the growth rate is expected to moderately decline to about 7.6 per cent in 2013 from 7.8 per cent last year.

“Growth in some large developing economies such as India, Brazil, Argentina and Turkey, which was subdued in 2012 is forecast to accelerate in 2013,” the report said.

Developing nations continue to be the main drivers of growth, contributing about two—thirds of global growth in 2013. In many of them, growth has been driven more by domestic demand than by exports, as external demand, particularly from developed countries has remained weak, it said.

Developing countries may grow at a rate of 4.5-5 per cent in 2013.

However, several other developing economies including South Africa seem unlikely to be able to maintain their previous year’s growth rates.

“Their expected growth deceleration partly reflects the accumulated effect of continuing sluggishness in developed economies and lower prices for primary commodity exports.

Also, the decreasing policy stimuli which were relatively weak would affect the growth,” it said.

The combination of these factors may also affect China’s growth rate, which is expected to slow down moderately from 7.8 per cent in 2012 to about 7.6 per cent in 2013, it said, adding, “even though this would be only a mild deceleration, it is likely to disappoint many of China’s trading partners.”

India’s economic growth fell to a decade’s low of 5 per cent in 2012—13 fiscal. The RBI has projected a growth rate of 5.5 per cent for the current fiscal.

Onion prices decline by about 20 per cent in New Delhi in two weeks

Retail onion prices in the capital have declined by about 20 per cent to Rs 60-65 per kg over the past two weeks.

Onion arrivals in Delhi and in the major markets of Maharashtra, the biggest producer of onions, have been going up in last few days.

In Delhi, the average arrival price for wholesale onion dipped from Rs 5,555 per quintal on September 17 to Rs 3,639 on September 30, a drop of over 34 per cent. The declining trend at the wholesale level is expected to reflect at the retail level with a further drop in prices this month, said a wholesaler at Delhi's Azadpur market.

The harvest of the onion kharif crop has been good in Karnataka and Andhra Pradesh. In October, arrivals will pick up in Maharashtra and Rajasthan. The two states account for one-third of country's output. October's nine day long Navratri celebrations - when people avoid eating onions - are also likely to lead to a drop in consumption and prices. With a 244 per cent rise in prices in August, onions were instrumental in driving up the August wholesale price inflation to  a six month high of 6.1 per cent.India produces about 16 million tonnes of onion but consumes only 10-11 million tonnes. Higher domestic prices had led to a resumption in imports of onion after a gap of two years and onions from countries like Egypt, China and Pakistan have found a market in India.

Remunerative domestic prices and the imposition of a higher minimum export price have slowed onion exports. In August, onion exports fell sharply to 29,247 tonnes compared to 156,165 tonnes in July and 150,512 tonnes in June. India exported 1.82 million tonnes of onion in 2012/13, valued at Rs 2,295 crore. In the first five months of current fiscal year, exports have only been 697,028 tonnes.

TCS sees companies spend on social media like Facebook, Twitter, LinkedIn at $19 mn

Companies across the globe, including India, will spend an average $19 million (Rs 119 crore) on social media this year, a global study by IT services major TCS said today. It further said that since 2010, 64 per cent of the firms covered have assigned at least one full-time equivalent (FTE) to use public social networks like Facebook, Twitter and LinkedIn.
According to the Mumbai-headquartered company's Global Trend Report on social media, this average spending will rise to $24 million (about Rs 150 crore) by 2015.
"Companies will spend an average of nearly $19 million per company this year on social media and will increase that to $24 million by 2015," said the report titled 'Mastering Digital Feedback: How the best consumer companies use social media'.
Most consumer companies have become serious about social media in just the last three years, it added.
Tata Consultancy Services (TCS)'s Global Trend Report explores how 11 global consumer industries and large firms in the world's 4 largest economic regions are using social media. This is the fourth report TCS has published since 2011, the last being on Big Data, it said.
Market research firm ResearchNow surveyed 655 respondents from mostly $1 billion plus consumer companies in June and July this year, the average revenue of which was $15.6 billion (median of $4.9 billion), it added.
"56 per cent of respondents have measured the return on social media investments and most of them say it has been positive," the report said.
Marketing and customer service are the functions that most regularly view consumers' comments on social media, it added.
"The three biggest success factors for using social media effectively are protecting consumer data, having a corporate culture that values consumer opinions and responding rapidly to consumers who have issues about a company or its products," the report said.
Only 10 per cent of enterprises are realising significant improvements to their business as a result of social media investments. Despite the hype and increased investments, it seems that enterprises are still struggling to make the most

Indian rupee up 14 paise to 62.46 vs US dollar on CAD, US shutdown

The Indian rupee today rose 14 paise to 62.46 against the US dollar, supported by better-than-expected current account data and a weakening US currency.
Fresh dollar sales by exporters also helped the rupee. However, capital outflows capped the gains, a dealer said.
The rupee resumed stable at the previous closing level of 62.60 a dollar and touched a low of 62.61 at the interbank foreign exchange market. It later climbed to a high of 62.17 as local equities recovered and exporters sold dollars.

The rupee pared its mid-session gains on late dollar demand from importers and fell to settle at 62.46, a rise of 14 paise or 0.22 per cent.
Traders said the US government shutdown is seen having a negative impact on economic growth, which may delay the tapering of the Fed's massive bond-purchase programme.
"Yesterday, the current account data was released, which was better than expectations and that helped the rupee to post gains against the US dollar," said Abhishek Goenka, CEO of India Forex Advisors. "It came out at $21 billion against expectations of $23 billion for the April-June quarter. Today, after the news came regarding US government's shutdown, the rupee reacted positively as the US dollar index fell."
The 30-share S&P BSE Sensex firmed up 137.38 points or 0.71 per cent. Foreign institutional investors sold a net $83.55 million of shares yesterday, as per Sebi data.
"Dollar index is losing for the second consecutive day as the US government began a partial shutdown on Tuesday...which helped the rupee to trade strong," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).
The dollar index was down 0.21 per cent against key rival currencies after the US government entered a partial shutdown following the failure of lawmakers to break a budget impasse.
Forward dollar premiums fell on fresh receipts by exporters.
The benchmark six-month forward dollar premium payable in March dipped to 268-272 paise from 273-1/2-277-1/2 paise previously and far-forward contracts maturing in September ended lower at 486-491 paise from 493-497 paise.
The RBI fixed the reference rate for the dollar at 62.3555 and for the euro at 84.5365.

NHPC's Rs 1,000 cr tax free bonds issue likely on Oct 15

Siliguri: State-run power producer NHPC is likely to hit the market with its maiden tax-free bonds issue worth Rs 1,000 crore on October 15.

For the issue, the company filed the Draft Red Herring Prospectus (DRHP) with capital market regulator Sebi on Monday.

"We are expecting to come out with Rs 1,000 crore tax-free bonds issue on October 15," NHPC Director (Finance) A B L Srivastava said.

The company would come out with the issue in a single tranche, he told reporters late on Monday.

For this fiscal, NHPC's construction budget is Rs 3,450 crore. Out of that amount, around Rs 1,831 crore is planned to be garnered by way of debt.

The country's largest hydro power is awaiting approvals for about ten projects having total capacity of 8,801 MW.

When asked about government selling stake in the company, Srivastava said it would be decided by the Department of Disinvestment.

The disinvestment is likely through the Offer for Sale (OFS) route, he added.

Inflation for factory workers slips to 10.75% in August

New Delhi: Retail inflation for industrial workers eased marginally to 10.75 percent in August as compared to 10.85 percent in the previous month, mainly on account of lower prices of fruits, vegetables and edible oil.

However, retail inflation measured in terms of all India Consumer Price Index for Industrial Workers (CPI-IW) during August was higher than 10.31 recorded in the same month last year.

"The year-on-year inflation measured by monthly CPI-IW stood at 10.75 percent for August, 2013 as compared to 10.85 percent for the previous month and 10.31 percent during the corresponding month of the previous year," a Labour Ministry statement said.

"... The food inflation stood at 13.91 percent against 14.10 percent of the previous month and 12.20 percent during the corresponding month of the previous year," it stated.

The largest upward pressure to the change in current index came from food group, contributing 1.58 percentage points to the total change.

At item level, rice, wheat, wheat atta, goat meat, dairy milk, milk (cow & buffalo), onions, chillies, tea (readymade), firewood, doctors' fee, private tuition fee, secondary school books, petrol, tailoring charges are responsible for the rise in index.

However, this was compensated to some extent by groundnut oil, fish, fresh vegetables and fruit items, putting downward pressure on the index.

According to a press release, all-India CPI-IW for August rose by 2 points, and pegged at 237. On a one-month percentage change, it increased by 0.85 percent between July and August compared with 0.94 percent between the same two months a year ago.

At centre level, Chindwara recorded the highest increase of 8 points each followed by Jalpaiguri and Siliguri (7), Durgapur (10) and Ranchi, Hatia, Nagpur, Kolkata, Asansol and Tiruchirapally (6 each).

Among others, 5 points rise was registered in 8 centres, 4 points in 6 centres, 3 points in 12 centres, 2 points in 13 centres and 1 point in 19 centres.

On the contrary, Goa reported a decline of 5 points, followed by Ernakulam, Quilon and Surat (2 each) and 3 other centres by 1 point each. Rest of the 6 centres'indices remained stationary.

The indices of 39 centres are above All-India Index and other 38 centres' indices are below national average. The index of Tiruchirapally centre remained at par with all-India index.

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.

Oil & gas sector may get safety regulator

 
The Ministry of Petroleum and Natural Gas plans to set up a regulator to look into health, safety and environment (HSE) practices in the oil and gas sector, minister M Veerappa Moily said on Thursday.

“I have moved a proposal to have a regulator for HSE and the ministry is looking into it,” Moily said on the sidelines of the two-day Global HSE Conference organised by Cairn India.

Currently, the Directorate General of Mines Safety is the regulatory body looking into safety in mines and oil fields. Moily said the proposed body would focus on the oil and gas sector.

Moily said the next round for the New Exploration Licensing Policy bidding would be early next year. “Taking lessons from the first nine rounds of auctioning, we would come up with a comprehensive policy this time. It would be industry-friendly,” he added.

On another matter, the minister said the deadline of the Kirit Parikh committee has been extended by a month. The panel was set up to look into a new methodology for pricing of diesel and liquefied petroleum gas, after ministries had a difference of opinion on pricing. “The report would be submitted after a month, as they have asked for an extension,” Moily said.

The finance and petroleum ministries had disagreed over the issue.

The finance ministry wanted a change in the formula and calculation to be made on the basis of export parity pricing, against import parity pricing now.

The new formula was expected to result in savings of Rs 15,000-18,000 crore a year, as it wouldn’t include costs such as transportation.

Calculating using import parity pricing involves 80 per cent of import parity price and 20 per cent of export parity price.

The new methodology was mooted by the finance ministry to reduce underrecoveries, as Customs duty of 2.5 per cent (according to import parity pricing) was going as underrecoveries.

RBI governor says forex reserves comfortable

 
Even as the country’s foreign exchange reserves are at a 39-month low, Reserve Bank of India (RBI) Governor Raghuram Rajan says they are at a “comfortable level”.

According to RBI data released last Friday, the country’s foreign exchange reserves were at $275.3 billion as on September 13, which went up by about half a billion over the previous week.

The central bank has been cautious in using its forex to stem the depreciation of the rupee, which has weakened by 14.4 per cent against the dollar this financial year. Under Rajan, who took charge on September 4, the currency has been able to halt its fall, which has appreciated 5.5 per cent this month.

In July, the central bank had beefed up its foreign exchange market intervention as it sold close to $6 billion to stem the rupee fall. Rajan has also announced several steps, like swap facility for banks for foreign currency non-resident bank, or FCNR (B), deposits and banks’ overseas borrowing limit. Both these windows, which are available till November 30, are expected to swell the forex kitty by $10 billion.

According to a Bank of America Merrill Lynch report, India’s import cover has halved to seven months — last seen in 1998 — in the past five years, which is well below the eight to 10 months needed for rupee stability.

Rajan, who was speaking at a seminar in Frankfurt, reiterated the policy stance of the central bank was “neutral” at this point in time, though he said high and persistent retail price inflation was a concern. “At this point, we are neutral, we will see how things develop,” he said when asked about the central bank’s policy stance.

The RBI chief added inflation was not just due to higher food prices. “Unfortunately, there is still some inflation when you strip out the effects of food and energy. Therefore, it is not just food, it’s other factors also, which are driving inflation,” Rajan told reporters on the sidelines of the conference.

During the mid-quarter policy review, Rajan had hiked the repo rate by 25 basis points (bps) to 7.5 per cent, while reducing the marginal standing facility rate by 75 bps to 9.5 per cent.

“The intent here is that when the repo rate becomes the effective policy rate, it should be consistent with inflationary conditions in the economy. On net, these measures will reduce the cost of bank financing substantially while allowing us to take an appropriately precautionary stance on inflation,” Rajan said while announcing the policy last Friday.

He added there was a need to bring real interest rates down as low as possible. According to him, there is a need for new innovative ways to bring down real interest rates. Rajan believes emerging market economies must resort to fiscal tightening when money is flowing in.

The US Federal Reserve has recently decided against reducing its massive monetary stimulus, known as the third round of quantitative easing. According to Rajan, an exit from quantitative easing will be more abrupt than entry. He said there was a need to rethink dangers of over-stimulation. Besides, there is a need to rethink dangers of cross-border capital flows. Going forward, the external consequences are large, he added.

CBI set to probe NSEL crisis

With Finance Minister P Chidambaram on Thursday saying the Central Bureau of Investigation (CBI), the Forward Markets Commission (FMC) and the Ministry of Corporate Affairs (MCA) will look into the payment crisis at National Spot Exchange Ltd (NSEL), the probe net on the exchange looks set to widen.

Chidambaram said the three would look into different aspects of the troubles at NSEL, “which flouted rules from Day-1”, and take action under their respective jurisdictions. He added the income tax department was also checking the financial details of NSEL investors to see if any black money was involved.

A committee headed by Economic Affairs Secretary Arvind Mayaram had on Monday given its report on NSEL to the finance minister.

“The Mayaram panel report has suggested CBI, FMC and MCA must take appropriate action. They have listed the irregularities... They will take action,” Chidambaram said at a press conference here.

FMC might file its report in a couple of days, after which the three bodies would decide on the action, he said.

A CBI official said the agency was in the process of verifying the NSEL complaint. It was looking into the aspect of criminal offence to find out if there was an instance of fraud or cheating.

The government had received a complaint from investors but not referred the matter to CBI yet. The agency, therefore, was also trying to establish whether the probe in this matter came under its jurisdiction, a senior CBI official said.

Ruling out similarities between the crises at Satyam and NSEL, Chidambaram dropped hints that the government might not bail out the people that had put their money in the exchange, saying they invested with open eyes, knowing full well they were investing in an unregulated entity. “The government does not come into the picture at all,” he added.

Chidambaram said NSEL was not a registered or recognised association under FMC; it got exemption even before it started its business.

“In the way NSEL started business, there’s much more than meets the eye. People seem to have given money to NSEL promoters, knowing fully well that it is not a regulated entity... Many of them made money in initial stages and some lost money now... I have seen the exemption order. Now, whether it is valid or not has to be examined.” he said. o f the 17,000 investors who put their money in NSEL — which is now grappling with a Rs 5,600-crore payment crisis — 9,000 traded through eight top brokers, including Anand Rathi, Motilal Oswal, India Infoline and Systematix. According to the finance minister, the investors would definitely move court, as it is a matter between them and the company.

The government had in 2007 exempted NSEL from provisions of the Forward Contracts Regulation Act (FCRA) to operate one-day forward commodity contracts.

The exemption was given on some conditions, including delivery of commodities within 11 days and a bar on short-selling by members of the exchange. “From Day-1, NSEL was violating the very conditions under which it claimed it could do business,” he said.

The Mayaram panel had suggested NSEL’s troubles had no systemic risk of an impact on other markets. However, Chidambaram said he had asked both the Securities and Exchange Board of India (Sebi) and FMC to keep a careful watch. NSEL, part of the Jignesh Shah-led Financial Technologies group, had to suspend trading on July 31 after a government directive. It had committed itself to clearing its dues to investors in tranches through weekly payments. But it has so far defaulted on its weekly obligations for six weeks in a row.

Two other trading platforms — Multi Commodity Exchange and MCX-Stock Exchange — are also Financial Technologies-promoted entities. On whether the government was looking at changing the management of other entities with the same promoters, Chidambaram said: “Let us wait for the regulator’s report.”


Supreme Court order on tainted MPs: FM accuses BJP of changing stand
Under attack from the Opposition for bringing an ordinance to protect lawmakers from immediate disqualification, the Centre on Thursday hit back, accusing BJP of changing its stand on overturning a Supreme Court judgment on the issue. Finance Minister P Chidambaram had said in an all-party meeting on August 13 that there was a “unanimous demand” that something be done in relation with the Supreme Court judgment on Sections 62(5) and 8(4) of the Representation of People Act. “They are entitled to change their mind but they should not ask everybody to do so,” he said on Thursday.

Barack Obama asked to address India's discriminatory trade practices

Washington: Hours before the arrival of Prime Minister Manmohan Singh here, as many as 18 influential American groups asked President Barack Obama to address India's alleged discriminatory trade practices when he meets the Indian leader at the White House.

"India's discriminatory trade policies put American businesses at a disadvantage, place manufacturing jobs at risk, and jeopardize India's ability to grow its economy," said Alliance for Fair Trade with India (AFTI) co-chair and National Association of Manufacturers vice president of International Economic Affairs Linda Dempsey.

"The business community, elected officials, and the administration are united in their concern with these protectionist policies. We urge President Obama to seek immediate and concrete solutions that can lead to growth in the American and Indian economies alike," she said.

In the letter sent to Obama Thursday, the organisations highlighted the alleged harmful trade policies of India which include a failure to protect IP rights, forced local production of certain information technology and clean energy equipment, and revocations of patents and compulsory licenses for innovative medicines.

These unfair policies are designed to benefit a few Indian corporations at the expense of manufacturing and jobs in the United States and other countries around the world, they said in the letter.
 "In the last 18 months, India has consistently failed to recognise international intellectual property rights, hindering India's path to an innovative and knowledge-based economy," said Mark Elliot, co-chair of AFTI and executive vice president of the US Chamber of Commerce's Global Intellectual Property Centre.

"During his meeting with Prime Minister Singh, President Obama has the opportunity to promote a trade environment that fosters innovation and creativity, creates high-quality jobs, and advances global economic development," he said.

The letter to Obama by 18 business organisations adds to the growing anti-India campaign here.

This week, a bipartisan group of governors highlighted the impact India's unfair trade practices have on jobs in states across the US in a letter to Obama.

Additionally, more than 170 US Representatives and 40 Senators expressed concern over the trade environment in India that puts American jobs and industries at risk in letters to the administration earlier this year.

GAAR to come into effect from April 1, 2016

New Delhi: The controversial GAAR provision, which seeks to check tax avoidance by investors routing their funds through tax havens, will come into effect from April 1, 2016, a government notification said.

The provision of General Anti Avoidance Rules (GAAR) will apply to entities availing tax benefit of at least Rs 3 crore, according to the notification dated September 23.

It will apply to foreign institutional investors (FIIs) that have claimed benefits under any Double Tax Avoidance Agreement (DTAA).

Investments made by a non-resident by way of offshore derivative instruments or P-Notes through FIIs, will not be covered by the GAAR provisions.

Investments made before August 30, 2010, will not be scrutinised under GAAR, it said, adding the provisions will apply to assessees that obtain tax benefits on or after April 1, 2015.

"Stock markets will have a lot to cheer as FIIs which do not seek to avail of treaty benefits will not be subjected to GAAR. Investment in Participatory Notes will not be subject to GAAR," Deloitte Haskins & Sells Partner N C Hegde said.

The GAAR provisions were introduced in the 2012-13 Budget by then Finance Minister Pranab Mukherjee to check tax avoidance and were to have come into effect from April 1, 2014. The proposal generated controversy, with investors getting apprehensive about harassment by tax authorities.

To soothe the nerves of jittery investors, Finance Minister P Chidambaram in January announced the postponement of the implementation of Chapter X-A of the I-T Act (dealing with GAAR) by two years to April 1, 2016.

A business arrangement can be termed 'impermissible' if its main purpose is to obtain tax benefit. Under the original GAAR proposals, the anti-tax avoidance provisions could be invoked "if one of the purposes" was to obtain tax benefit.

"Where a part of an arrangement is declared to be an impermissible avoidance arrangement, the consequences in relation to tax shall be determined with reference to such part only," the notification said.

The assessing officer has to issue a show-cause notice, with reasons, to invoke GAAR provisions and also has to give an opportunity to an assessee to explain whether an arrangement was 'impermissible.'

The government's decision to amend the provisions was in response to fears by investors that the tax department, armed with discretionary powers, would crack the whip even in cases where tax avoidance was not the intent.

The notification is broadly in line with recommendations of the Parthasarathi Shome Committee, which was set up by Prime Minister Manmohan Singh in July last year to address the concerns of investors.

"From the notification, it is apparent that many recommendations of the Shome Committee have been accepted. However, the benefit of grandfathering has been limited - firstly, to investments made before August 1, 2010, and secondly, only for benefit up to March 31, 2015," said Rahul Garg, Direct Tax Leader at PwC India.

FCNR golden goose: Great returns on borrowed capital

Foreign banks are scrambling to raise dollar deposits from non-resident Indians — even tempting them with loans — to open their foreign currency non-resident (bank), or FCNR (B), deposit accounts in India.

The move comes after the Reserve Bank of India (RBI), as part of its efforts to stem the rupee’s depreciation, opened a special window for swapping FCNR (B) dollar funds of three years or more at a concessional rate and offered various other incentives, including cheap dollar-rupee swap rates.

Observers say this has offered Indians residing abroad an opportunity to increase their income manifold using borrowed capital.

The process, as bankers and market participants explains, begins with a foreign bank requesting a non-resident to open a FCNR (B) deposit account with its India unit. The bank immediately offers the customer a loan against this deposit. The customer uses the loan to create another FCNR (B) deposit account, against which he is again given a loan. The process is repeated eight to 10 times. The customer benefits as he earns more interest on FCNR (B) deposits than he pays on loans against those.

Some of the Indian banks with foreign branches have also approached their non-resident customers to raise FCNR (B) deposits, but observers say these lenders are not as aggressive as their foreign rivals.

Industry analysts say, using this mechanism, non-resident Indians (NRIs) can make a net return that is significantly higher than the interest rates offered on deposits in developed markets like the US. The returns would easily lure NRIs. According to some estimates, by putting up just 10 per cent of the deposits, the client effectively makes between 18 and 21 per cent on the dollars.
On September 4, 2013, in an almost desperate move to arrest the slide the rupee, RBI had announced a window for swapping FCNR (B) dollar funds, mobilised for a period of at least three years, at a fixed rate of 3.5 per cent a year for the duration of the deposit. The scheme, the central bank had said, would remain operational until November 30, 2013.

In other words, the banking regulator is now permitting lenders to convert three-year FCNR (B) dollar deposits into rupees at 3.5 per cent, even though the swap cost, considering the recent rupee-dollar forward rates, is estimated to be more than six per cent. This has encouraged banks to mobilise FCNR (B) dollar deposits, as they can reduce their cost of fund by at least 250 basis points using this window.

“It is a win-win situation for all. The interest rates offered to non-residents on three-year FCNR (B) deposits in India are significantly more than the current dollar swap rate of 80 basis points a year for a comparable tenure. Banks will benefit, as they will have access to low-cost funds. And, ultimately, this will increase dollar flows into India,” Param Sarma, director and chief executive of NSP Treasury Risk Management Services, says.

Market participants expect banks to bring in over $10 billion through this route which will probably avoid the need for an immediate sovereign bond issue by the government.

“The swap window was necessitated by a sharp depreciation in the rupee and need to bridge the current account gap. There was a need for one large chunk of dollar inflow, which probably led to the introduction of this scheme. However, it is a subsidy, assuming the rupee-dollar swap cost is currently over six per cent. This subsidy will have to be borne by the country,” says Mecklai Financial Deputy CEO Partha Bhattacharyya.

Some industry analysts believe the subsidy burden on Indian taxpayers because of this move might be as high as Rs 2,000 crore a year, assuming banks bring in $10 billion of FCNR (B) deposits.

“We discontinued FCNR (A) deposits since we did not want to bear the entire currency risk, and these deposits also violated IMF (International Monetary Fund) conditions. But by allowing swap at a concessional rate of 3.5 per cent for FCNR (B), we are going back to the FCNR (A) regime, at least partly. I believe, we should be explicit in saying what would be the estimated cost of this subsidy, since the deposits might run up to five years,” Ranade adds.
The process, however, has raised concerns of systemic risk.

“The 2008-09 crisis was triggered by over-leveraging. We are again seeing foreign banks encouraging leveraging. There are reports that lenders are offering NRIs upfront loans against FCNR (B) deposits and repeating the process. Such leveraged money can leave as abruptly as it comes in, thereby increasing systemic risk,” Ajit Ranade, chief economist of Aditya Birla Group, says.

Chidambaram and Modi are sparring over growth figures. Who is correct?

The finance minister says the BJP Prime Ministerial nominee's claim that economic growth rate during the tenure of the Atal Behari Vajpayee government was 8.4% a year on average. Calling Modi's claim a 'fake encounter' with facts, Chidambaram says the average annual growth for the six-year NDA period stood at 6% and that for the last five years at 5.9%. Obviously one of the two is wrong. Is it Chidambaram or Modi? Do share your views with us.

Oberoi Realty share sale begins, stock falls 3%

Oberoi Realty is trading lower by 3% at Rs 164 on NSE after the real estate firm’s share sale programme for diluting 3.49% of the promoter’s stake commenced today at bourses.

The company’s CMD and promoter Vikas Oberoi will sell 11.4 million shares at Rs 158 per share through stock exchanges to meet market regulator Sebi's guidelines on minimum public share holding norm, Oberoi Realty said in a regulatory filing.

As on June 30, 2013, the promoters had 78.49% in the company and they need to pare their stake to 75% for meeting Sebi guideline on minimum 25% public shareholding for private sector listed companies.

The stock hit high of Rs 165 and low of Rs 163 so far. A combined around 20,000 shares change hands on the counter in early morning deals on NSE and BSE.

RBI assures Street on liquidity management

The Reserve Bank of India (RBI) on Wednesday assured the market it was closely monitoring liquidity conditions. It added it would take appropriate action, including open market operations, to ensure adequate liquidity was available to support the flow of credit to productive sectors of the economy.

Experts said the statement would result in government bond yields falling further on Thursday.

Beginning with the mid-quarter review of monetary policy on Friday, RBI began a calibrated unwinding of the exceptional measures announced since July to restore normalcy to financial flows. Currently, RBI is injecting about Rs 1.5 lakh crore into the system on a daily basis, through the liquidity adjustment facility, the export credit refinance facility and the marginal standing facility.

However, despite this, liquidity conditions have been tightening, as shown by the hardening of yields in the government securities market, owing to uncertainty on the government’s borrowing programme for the second half of 2013-14 and the prospective effects of banks’ half-yearly account closure. The seasonal pick-up in credit demand, the festive-season-related demand for currency and the sluggish deposit growth have also contributed to the tight liquidity.

On Wednesday, the yield on the 10-year 7.16 per cent benchmark government bond closed at 8.79 per cent, compared with its previous close of 8.84 per cent. Experts said the RBI’s assurance was necessary, as two government bond auctions were scheduled for this week.

On Monday, a government bond auction for a notified Rs 15,000 crore devolved partially on primary dealers to the tune of Rs 4,030 crore. On Friday, RBI would auction government bonds for a notified Rs 14,000 crore.

PM-Sharif meet to focus on trade

 
While the situation on the Line of Control in Jammu and Kashmir will definitely be discussed when Prime Minister Manmohan Singh meets his Pakistani counterpart, Nawaz Sharif, in New York on the sidelines of the United Nations General Assembly, it was emphasised by high-level sources on Wednesday that progress on trade would be made, as there is a concrete agenda to be followed for that.

The sources, who spoke on the condition of confidentiality, said that a significant step forward in exporting electricity to Pakistan could happen as early as next week. It had been held up, they claimed, not for political reasons but because the Pakistani side was evaluating its technical and commercial viability. However, it is believed that process is close to conclusion, and Pakistan may express formal interest in cross-border electricity trade, sending a delegation on the subject, within a week. Sharif and Singh are likely to meet on Sunday.

In another significant development, the Nuclear Power Corporation of India Limited, or NPCIL, will likely move forward within a few days on evaluating the terms of a possible contract with nuclear supplier Westinghouse. A limited exploratory agreement might be in place between the two companies, according to the highly-placed sources, before Singh meets US President Barack Obama on Friday. This is in spite of concerns expressed domestically that US companies, including Westinghouse, wish to dilute the nuclear liability legislation passed by the Parliament beyond recognition.

A lack of progress in transforming the US-India civil nuclear agreement of 2008 into real projects on the ground is often cited as a major cause for a chill in bilateral relations. However, officials close to the prime minister strongly denied that the United States had any ground for disappointment, and suggested that such claims may just be an American negotiating tactic.

Singh will also make a pitch for more US investment in India. Although the recent diplomatic coolness between India and the US has been driven in large part by the souring of US business on the India story, officials insisted that the outreach was not unusual. Reporters were told that a ramped-up pitch for investment will be the one consistent theme of all major upcoming foreign visits, including to China. The PM is scheduled to meet a group of US CEOs in New York City later this week.

Risk of a sovereign downgrade increases after SBI downgrade by Moody's

The risk of a sovereign downgrade risk has only become exacerbated after international rating agency Moody’s downgraded State Bank of India’s senior debt and local currency deposit to ‘Baa3’, and now has a negative outlook. The market is viewing this as a proxy for the sovereign rating. The State Bank of India and group entities account for 25 per cent of the country’s banking system. Currency strategists say that despite the recent euphoria after the Fed’s “no taper” decision, India is far from the comfort zone.

The stress is not only in the banking system, India Ratings and Research in a report has said that the default rate of corporate finance issuers in the country has risen to 4.5 per cent in FY13 from 3.5 per cent and 0.3 per cent in the previous two years. What this implies is that the RBI’s move to ease liquidity conditions will have little bearing on the current financial condition of borrowers and their ability to repay loans. Scotia Bank’s currency strategist Sacha Tihanyi says that this should remind the market of the risk to the sovereign of a credit rating downgrade, as Standard & Poor’s currently has the country’s BBB– investment grade rating on a negative outlook (other major agencies have it on stable).