Monday, 30 September 2013

VRITTAM (22 SEP 2013 - 28 SEP 2013)


RBI now against 0% EMIs for consumer goods, banks withdraw finance schemes; festive sales likely to be hit 

RBI feels consumers have been fooled by zero per cent or discounted interest rate schemes into Believing that bank funding comes for free, and wants them stopped. Consumer durable manufacturers offer the zero per cent facility mostly on high-value products such as smartphones, LED TVs and premium home appliances.

Fitch says bad loans of Indian banks likely to peak by FY16

International rating agency Fitch on Friday said bad loans in India's banking system are likely to peak in FY2015-16, but stopped short of putting a number to the same.The agency had earlier said the bad loans in the system will peak by the middle of the current fiscal (FY14) but on Friday it said the change in forecast is due to recent macroeconomic developments. Earlier this week, Fitch had downgraded the viability ratings of three state-run lenders, including Punja National Bank and Bank of Baroda, by one notch to 'bb+' from 'bbb-', citing concerns about a protracted economic slowdown, high "stressed assets" and their low capital but retained their long-term issuer default ratings at 'bbb-'.


Forex reserves jump $2 billion to $277 billion

India's foreign exchange reserves rose by a robust $2.03 billion to $277.38 billion in the week ended September 20 on a healthy increase in the core currency assets. The reserves had increased by $544.7 million to $275.35 billion in the previous reporting week.

Raghuram Rajan brings Wall Street flavour to Mint Street

The composition of two new panels by the Reserve Bank of India signals governor Raghuram Rajan's determination to consign the old school of thought to the dustbin, and a bigger role for intellectuals from financial markets in central banking than bureaucrats. The panel on Comprehensive Financial Services for Small Businesses and Low-Income Households, headed by Nachiket Mor, and the Urjit Patel Committee to revise and strengthen monetary policy framework do not have a single bureaucrat who are renowned to throw rule books stalling decision making than letting new ideas flourish. Rajan, who became the third youngest governor of the central bank this month, is pushing for a vibrant financial market with many instruments to trade in bonds and currency which are looked at with reservations by old timers. He has begun to dismantle rules on bank branches and hedging which are seen as a break from bureaucracy.

Oil subsidy, rupee may push fiscal deficit above 5 percent

Widening oil subsidy and weakness in rupee are likely to push India's fiscal deficit above 5 per cent in the current financial year as against the budgetary target of 4.8 per cent, a ratings and research agency said.India Ratings & Research, a unit of Fitch Group, said the recent depreciation in the value of rupee is likely to increase oil subsidy to 0.4 per cent of the country's gross domestic product (GDP), 0.1 per cent more than the budgetary target.

Govt clears 15 FDI proposals worth over Rs 2,000 crore

The finance ministry has approved 15 foreign direct investment (FDI) proposals totalling Rs 2,000.5 crore and recommended two applications, including that of US drug major Mylan, for final Cabinet clearance. The 15 proposals were cleared following recommendations by Foreign Investment Promotion Board (FIPB) on August 27.

Outgoing SBI chairman Pratip Chaudhuri leaves poor investors, rich legacy

Most chairmen carry on the older tradition and leave an equally dirty balance sheet for the successor to clean up. But not Chaudhuri. For quarter ending June 2013, State Bank of India's net profit was Rs 4,298.56 crore when he made provisions of Rs 600 crore for pension liabilities and said similar provisions need to be made in the next few quarters.

Fuel price hike, curb on gold imports & other reforms: How consumers & investors are impacted

While the government has taken measures to control the deficit, these have been met with contrasting reactions; though the public is upset about some of the steps affecting their monthly budgets, the stock market seems to be cheering them. How can something that hurts us as consumers be encouraged by investors? The fact is that the recent measures taken in the name of reforms seem to have pitted the consumers against investors. The reforms that generate the highest returns for investors are often at odds with the interests of consumers.

Wall Street flat as Washington fiscal battles weigh 

US stocks were little changed in choppy trading on Tuesday after data failed to ease investor concerns about the impact on the economy of stalled budget negotiations in Washington. 
The S&P 500 faced a possible fourth straight day of decline, but a gain of nearly 5 per cent in Facebook shares led the
 Nasdaq composite index higher. Tea Party-backed US senators threatening to stall a bill to fund the 
US government ran into a wall of resistance late Monday from top Senate Republicans, including Minority Leader Mitch McConnell. 

Power shortages cost India $68 bn in GDP: Ficci

India loses $68 billion, or about Rs 4,14,800 crore of its Gross Domestic Product due to electricity shortage, says a report."There is strong correlation between power consumption and the GDP of the country. Power shortages currently cost India a GDP loss of $68 billion (0.4 per cent of total GDP)," said a Ficci report on Power Transmission. Transmission bottlenecks are an important reason for these shortages. Since demand and generation capacity are both expected to increase in the future, transmission constraints need to be addressed urgently, said the report released on Friday.

Banking licence applicants will have to wait: Bimal Jalan

Not one to mince words, former Reserve Bank of India (RBI) Governor Bimal Jalan spoke out succinctly on the differences between the central bank and the Finance Ministry.He also made it clear that private companies which had applied for banking licences should be prepared to wait awhile. Jalan heads the external committee that will screen the 26 applications. Some of the biggest Indian groups and entrepreneurs such as the Tatas, Anil Ambani and Kumar Mangalam Birla are among the applicants.




Why Indians love it when government makes gold expensive

By Sutanuka Ghosal.

Government of India makes gold more expensive by hiking duties four times in 20 months, hoping this will deter citizens of India from holding more gold.


To know where the market is heading now click on the slide show below    



Cap and Trade
A regulatory system that is meant to reduce certain kinds of emissions and pollution and to provide companies with a profit incentive to reduce their pollution levels faster than their peers. Under a cap-and-trade program, a limit (or "cap") on certain types of emissions or pollutions is set, and companies are permitted to sell (or "trade") the unused portion of their limits to other companies that are struggling to comply.


Today's word: PAC-MAN DEFENCE
Theme for this fortnight: MERGERS & ACQUISITIONS
A strategy of survival in the takeover game, named after a popular game in the US in the early 1980s, in which a character which does not swallow its opponents is itself consumed. In a typical Pac-man defence a target company in the takeover bid will threaten to take over the acquirer and start buying its shares.

Friday, 27 September 2013


Theme for this fortnight: MERGERS & ACQUISITIONS

An employment contact offered to company directors and senior management which guarantees to pay extensive benefits if the executives is made to leave the company. Such contacts are offered to make unfriendly takeovers expensive.

Tuesday, 24 September 2013


Today's word: DAWN RAID
Theme for this fortnight: MERGERS & ACQUISITIONS

A takeover attempt by an individual or a company in which instructions are given to buy all available shares of the target company at current market price as soon as stock exchange is opened for business on a particular date. With this base the bidder makes an attractive offer to the other sharesholders in order to make a full takeover bid.

Sunday, 22 September 2013

VRITTAM (15 SEP 2013 - 21 SEP 2013)



Draft Company rules mandate rationale for high salaries, hikes

The government has proposed to limit the number of investors in private placement schemes to 200 persons with a minimum investment size of Rs 50,000 each in a financial year, the rules suggest that it should be made mandatory for listed companies to give their rationale behind salaries and hikes given to top management personnel vis-a-vis the performance of the company.

Costlier lending likely, say banks

Banks could raise their lending rates following RBI's monetary policy announcement on Friday as tight liquidity could increase cost of funds.

Bankers welcome Raghuram Rajan-led RBI's repo rate hike

Bankers welcomed the Reserve Bank of India (RBI) Governor Raghuram Rajan's mid-quarter monetary policy announcements and termed them as "a balanced and a pragmatic move" which will reduce banks' borrowing costs.

Raghuram Rajan tracking Indian rupee 'minute-by-minute', says it's not stable yet

After hitting a lifetime low of 68.85 against the dollar on August 28, the rupee has recovered aggressively to become the best performing Asian unit in the last fortnight.

Deadlock over RBI's 80:20 gold import norm ends

The problem was that of interpretation of 80:20. This means that at least 20 per cent you have to give for exports. So, somewhere it was misinterpreted that you cannot export more than 20 per cent. One can export more than 20% of imports.

RBI repo rate hike pours cold water on auto makers' festive season hopes

"The industry had been hoping for a recovery through the ensuing festive season, anticipating an improvement in markets. But this move comes as a surprise dampener to all these expectations," Society of India Automobile Manufacturers (SIAM) said in a statement. Market analysts, however, said the repo rate hike should not have much impact on the auto sector.

Raghuram Rajan wants 'bullet-proof' shield for India against US Fed

"What we need to do is put our house in order before it (tapering) comes back. The postponement of tapering is only that, a postponement. We must use this time to create a bullet-proof national balance sheet and growth agenda, which creates confidence in citizens and investors alike," RBI Governor, Raghuram Rajan said.


RBI repo rate hike: Indian realty developers unhappy with Raghuram Rajan, say will impact housing

Expressing disappointment over RBI Governor Raghuram Rajan's decision to hike the key policy rate, real estate developers said this would lead to increase in finance cost and also affect housing demand during the festive season.

RBI or SEBI should create awareness against ponzi schemes: SBI

Recently, the West Bengal based Saradha Group has been accused of duping investors of their savings running into thousands of crores of rupees.

Fed makes room for RBI

The more immediate impact of the Fed’s decision not to taper, however, is to give RBI more room to ease policy rates.

SBI increases base rate to 9.80 pct, makes loans costlier

The country's largest lender, State Bank of India, said it increased its base rate, or the minimum rate of lending, to 9.80 per cent, a day ahead of the RBI's policy review. SBI increased spreads on auto and home loans by as much as 0.20 pct. All top private sector lenders, including ICICI Bank, HDFC Bank and Axis Bank, had hiked rates to protect net interest margins.

Outlook: Indian rupee likely seen higher to US dollar, RBI monetary policy review meet key

The US Federal Reserve's decision to press ahead with its asset-buying gives India's battered rupee a reprieve and creates space at a policy review on Friday for its Reserve bank of India (RBI) to scale back some of the measures put in place to support the currency.

 Indian rupee could appreciate to 59 against US dollar: Fitch

The basis of Ind-Ra's (India Ratings & Research, a Fitch group company) expectation of INR appreciation is based on economic developments in the last one to two months of this fiscal and the likely developments in the remaining months.

FIPB clears Axis Bank's proposal to raise FDI limit beyond 49 pct

The FIPB (Foreign Investment Promotion Board) approved raising the foreign equity holding in Axis Bank to 62 per cent from 49 per cent, subject to the condition that the holding of foreign institutional investors does not exceed 49 per cent.

Indian rupee gains 142 paise to 61.96 against dollar on Fed's surprise decision

RBI acts tough on offshore forex trading on Internet

In a circular issued late on Tuesday, the Reserve Bank of India (RBI) asked banks to advise customers not to undertake forex trading on foreign websites that offer currency contracts by accepting margins through credit card and online money transfer mechanisms. The RBI also asked banks to close the credit card or online bank account of a customer that is found to be in violation of the rule.

RBI asks banks to allot different product code to dormant accounts

Because State and central governments have expressed difficulties in crediting cheques/Direct Benefit Transfer/Electronic Benefit Transfer/scholarships for students, Zero Balance Accounts, into accounts opened for the beneficiaries under various central/state government schemes but had been classified as dormant/inoperative due to non-operation of the account for over two years.

RBI tightens norms for lending against gold jewellery

In order to standardise the valuation and make it more transparent to the borrower, it has been decided that gold jewellery accepted as collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the Bombay Bullion Association (BBA).

Foreign banks to provide upfront loans to wealthy NRIs for Indian dollar deposits

Foreign banks will provide upfront financing for wealthy non-resident Indian clients to entice them to place bulky dollar deposits back home in response to India's drive for dollar funding to defend its weak currency.

State Bank of Patiala opens all women in Chandigarh

Achal Kumar Gupta, Managing Director, State Bank of Patiala said that this is the third all women branch of State Bank of Patiala after Bathinda and Patiala.

 Foreigners allowed to carry up to Rs10K beyond immigration desk

RBI today permitted foreigners to carry up to Rs 10,000 beyond immigration desk to the duty free area in airports for miscellaneous expenditures, but they will have to dispose the Indian currency before boarding plane.

Credit Suisse sees Indian rupee at 57-58 levels to US dollar

Rupee may see a sharp appreciation on the back of measures taken by RBI and government as the decline was largely driven by “fear trade”, analysts at Credit Suisse said.


Click on the picture below and find what you need to know


Balanced and pragmatic
Given all the domestic and global cross-currents at play, RBI has done the best it could.
By Sajjid Chinoy, chief India economist, JP Morgan.


To know why government takes to ‘cattle class’ again, click on the slideshow below



Shadow Banking
·         The term ’shadow banking system‘ was first used in 2007, and gained popularity  during and after the 2008 financial crisis, as it highlighted the bank-like functions  performed by entities outside the regular banking system.
·         The more comprehensive definition, as adopted by the Financial Stability Board (FSB), i.e., ‘credit intermediation involving entities and activities (fully or partially) outside the regular banking system’ has been globally accepted.
·         This definition has two important components:

o   First, non-bank financial entities or entities outside the banking system that engage in the ‘bank like’ activities of maturity transformation, undertaking credit risk transfer and using direct or indirect financial leverage.

o   Second, activities such as securitization, securities lending and repo transactions that act as important sources of funding for non-bank entities. 

·         Thus, shadow banks comprise entities which conduct financial intermediation directly, such as finance companies or NBFCs, and entities which provide finance to such entities, such as mutual funds.
·         Globally, shadow banking entities could be covered under the broad heads of (i) Money Market Funds, (ii) Credit investment Funds, Hedge Funds, etc. (iii) Finance Companies accepting deposits or deposit like funding, (iv)  Securities brokers dependent on wholesale funding, (v) Credit insurers, financial  guarantee providers and (vi) Securitisation vehicles.



Theme for this fortnight: MERGERS & ACQUISITIONS

            In relation to mergers and acquisitions (M&A), a sleeping beauty is a company that is "sleeping;" that is, one that is ripe for takeover to achieve its full potential. A sleeping beauty might be a new company that has great potential but has not yet been noticed, or it could be an established company that has not been managed well, and is therefore not maximizing its potential. A sleeping beauty essentially lies in wait until a takeover occurs, at which point the company theoretically would be able to live up to its potential.

Tuesday, 17 September 2013


Today's word: SANDBAGGING
Theme for this fortnight: MERGERS & ACQUISITIONS

           A tactic used to hide or limit expectations of a company's or individual's strength in order to produce greater than anticipated results. Sandbagging, in business, is most often seen when company managers temper the expectations of superiors or shareholders by giving guidance below what they know will be achieved. Once the better than expected results are presented, the firm looks all the better.

Monday, 16 September 2013

VRITTAM (8 SEP 2013 - 14 SEP 2013)


Nokia raises tax issue with Commerce Minister Anand Sharma; will stay in India 

Nokia raised the Rs 2,080 cr tax dispute with Commerce Minister Anand Sharma, seeking his help for an early resolution of the matter.
Finnish mobile phone maker Nokia today raised the Rs 2,080 crore tax dispute with Commerce Minister Anand Sharma, seeking his help for an early resolution of the matter. Nokia India has been slapped with a tax demand notice of Rs 2,080 crore for the five years beginning 2006-07. The demand concerns the tax treatment of payments made for software supplied by Nokia's parent company for devices produced in India. Indian tax authorities consider the payments as royalties that are subject to taxation in India. 

Sebi to announce steps to improve debt market liquidity: UK Sinha 

With an aim to bolster the bond market, Sebi  said it will soon announce some measures to improve liquidity and trading mechanism for the debt market. Launching a Corporate Bond Information Database (CBID), prepared by top stock exchangeNSE and the Prime Database, he said it would help in dissemination of information in the bond market "that was one big hurdle till now". The new platform for this Corporate Bonds Information Database would provide comprehensive information on Corporate Bonds to market participants, to encourage the growth of the debt market in India. 

August exports bring some cheer

Up 13% and imports fall slightly but oil import rises 18%; govt hopes situation will improve Merchandise exports in August brought needed cheer to a gloomy economic environment, growing 13 per cent to $26.1 billion compared with $23.1 billion in the same month last year. Month-on-month, this is a second straight month that exports saw double-digit growth, due to improved demand in the US, Europe, Africa and the Asia-Pacific.
Imports in August contracted 0.7 per cent to $37.1 billion from $37.3 billion in August 2012. Trade deficit, which is part of the wider current account deficit (
CAD), declined almost 23 per cent at $10.91 billion in August against $14.17 billion in the corresponding year-ago month.

Banks with 12% capital ratio can borrow more from abroad

The Reserve Bank of India (RBI) on Tuesday said only banks with a capital adequacy ratio (CAR) of at least 12 per cent could avail of the higher foreign borrowing facility. Last week, the central bank announced the current foreign borrowing limit for banks had been raised from 50 per cent of unimpaired Tier-I capital to 100 per cent. Banks were also given the option to swap such borrowing with RBI at a concessional rate of 100 basis points below the swap rate prevailing in the market. For the additional headroom, the borrowing period should be at least three years.

India keen on paying for oil imports from Iran only in rupees

India is keen to restart the system of paying crude oil it buys from Iran entirely in rupees to help stabilise the local currency and reduce the country's current-account deficit. Iran had in July agreed to take payments for oil it sells to India entirely in rupees after US and western sanctions blocked all other payment routes. However, shortly after a brief trial of the mechanism, it reverted to the old system of taking only 45 per cent of the payments due in rupees. 

India is keen to restart the system of paying crude oil it buys from Iran entirely in rupees to help stabilise the local currency and reduce the country's current-account deficit

Forex reserves may be used to secure World Bank loans

The government might dip into its foreign exchange reserves to continue getting loans from the World Bank beyond 2014-15. The Cabinet is expected to discuss a proposal to this effect on Thursday. For this, India will have to subscribe to a $4.3-billion special bond issued by the multilateral development bank. Senior officials said this would allow India to get an equal amount of loan from the World Bank, taking the country's net borrowing limit to $21.8 billion, against $17.5 billion at present.

Gold tumbles below Rs 30,000 mark as intense selloff continues

Gold prices tumbled to hit its lowest level in a month and closed below the key psychological Rs 30,000 per 10/gm mark on the domestic bullion market on the back of relentless speculative selling amid global meltdown. Silver also plummeted by over 4 per cent to revisit the key Rs 50,000 per kg level following frantic unwinding from stockists and savvy traders. 

Large-cap IT stocks can rally another 15-20% despite rising rupee

Most of the large-cap IT companies have rallied up to 30-70 per cent so far in 2013, supported by a nearly 15 per cent slip in the currency against the US dollar in the same period and signs of revival in global economies such as the US and Europe. If we look at data since January, the BSE IT Index has rallied nearly 40 per cent as compared to nearly 2 per cent rise in the S&P BSE Sensex in the same period.

Worst may be over for eurozone, recovery on the horizon

The skies above Europe are getting much brighter. Or at least investors seem to believe they are. A survey of investor sentiment in the eurozone this month moved into positive territory for the first time since the summer of 2011. European stocks have been rising for more than a year, with bank stocks leading the way. The yields on Spanish and Italian government bonds - which were more than 5 percentage points higher than German bonds' last summer - now have spreads half that level. 

FIIs can invest in government debt without auction

Purchase of Indian government bonds will get easier for foreign institutional investors as the regulator scrapped the rule that they purchase permits from the markets regulator in an auction before they actually buy bonds.Government bond purchases for foreigners will now be on par with corporate debt where they can buy freely up to 90% of the $51-billion limit. Once their holdings reach 90%, they have to buy permits from Sebi. Foreigners' ownership of Indian government bonds is capped at $25 billion.

To know the impact of fuel hike on different sector click on the slide show below


Crude Imports: India must trade more with Iran to contain rupee crisis

By Rajeev Jayaswal


Forex Hedge
A transaction implemented by a forex trader to protect an existing or anticipated position from an unwanted move in exchange rates. By using a forex hedge properly, a trader who is long a foreign currency pair can be protected from downside risk, while the trader who is short a foreign currency pair can protect against upside risk