VRITTAM (8 SEP 2013 - 14 SEP 2013)

THE WEEKLY FINANCIAL NEWS

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.

A SNEAK PEAK INTO THE WORLD OF FINANCE

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

EXPERT VIEW

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

By Rajeev Jayaswal

TERM OF THE WEEK

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

Read More

PREDATOR

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

In mergers and acquisitions, a company with sufficient financial means to easily bear the risks associated with acquiring other companies. Predators are considered to be the financially strong company in the merger or acquistion. The weaker acquisition targets are sometimes called "prey," because they can be snatched up by more powerful firms. Many firms fall somewhere in the middle of these extremes.

 

Read More

LOBSTER TRAP

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

 

             The trap that is designed to hold large lobster, but they permit small ones to escape. A similar mechanism to fend off hostile takeovers stipulates that a convertible debenture holder can not convert his debentures into equity shares if he already holds, or going to hold as a result of the conversion, 10% or more of the company's equity shares.

 

Read More

VRITTAM (01 SEPTEMBER 2013 - 07 SEPTEMBER 2013)

THE WEEKLY FINANCIAL NEWS

Manufacturing slump casts further shadow over Indian economy

India’s manufacturing output contracted sharply in August, prompting economists to warn the country’s ailing economy had not reached the bottom of its slowing cycle. It was for the first time in four years that Indian manufacturing has contracted.

Singh demands ‘orderly exit’ from global easing policies

The currencies of India and other emerging markets, including Brazil, Indonesia and Turkey, have fallen sharply as international investors shift capital to newly attractive US assets ahead of the anticipated “taper” of the US Federal Reserve’s programme of quantitative easing through the buying of bonds.
Manmohan Singh, Indian prime minister, urged the developed world to help emerging markets by managing an “orderly exit” from the monetary easing policies that have flooded the world with liquidity since the 2008 financial crisis.

Now, Moody’s warns on India’s sovereign rating

Moody’s Investors Service Inc. has put India on notice, warning that the country’s sovereign rating outlook will depend on the depth and extent of the current economic downturn and the trends in the balance of payments situation.

New RBI chief Rajan raises hopes with action plan

In an unexpectedly detailed and wide-ranging briefing, Rajan outlined plans to attract more funds from overseas by subsidising hedging costs for banks and making it easier for importers and exporters to hedge currency risk. 

Gold buyers rush to order as import rules clarified

The Indian customs department issued its guidelines on how the central bank's call for gold imports to be split 80 percent for domestic use and 20 percent for export would be monitored.

RBI move on 80:20 home loan schemes reduces your risk

Reserve Bank of India (RBI) expressed its displeasure on home loan products such as the 80:20 or 75:25 schemes that make upfront payment to builders. Such schemes are meant to attract buyers in an otherwise lukewarm realty market. Under such schemes, buyers need to pay 20% of the full value of the house upfront after which they don’t need to pay equated monthly instalments (EMIs) for two years.

Why are FIIs selling quality stocks?

Quality stocks are coming under selling pressure; Nifty 50 continues to deliver negative dollar returns. Foreign institutional investors (FIIs) have a reason to worry because the falling rupee is putting at risk the $100 billion they have pumped into Indian equities since 2009. Over the last two weeks, what has surprised everyone is the manner in which “quality stocks” have cracked. In the worst of times, stocks such as ITC and HDFC Bank have held on because of their safe haven status. With the rupee’s fall, the dollar returns for foreign investors have declined meaningfully.

 

Moody's downgrades subdebt ratings of 11 Indian banks

Affected banks include 8 PSUs and three from the private sector. Moody’s said in a statement that the downgrade reflects the increasing international trend of imposing losses on holders of sub-debt securities as a pre-condition for distressed banks to receive government support.

Gold tumbles by Rs1,250 as rupee, markets recover

Gold prices suffered the steepest fall in a week on Thursday falling by Rs1,250 to Rs30,950 per 10 grams in New Delhi on heavy sell-off by stockists as equity markets and rupee recovered after RBI’s fresh measures.

Prepaid cards: RBI allows cash withdrawal of up to Rs 1,000 per day

The Reserve Bank of India (RBI) on Thursday allowed cash withdrawals of up to Rs 1,000 a day through prepaid cards, including gift cards, issued by banks from point of sale terminals, a move aimed at enhancing customer convenience in using plastic money.

As of now, this facility was available only to debit cards issued by banks.

 

Bank stocks cheer Raghuram Rajan booster shot, surge over 21%, Yes Bank, Axis Bank shares skyrocket

"It has been decided accordingly to offer such a window to the banks to swap the fresh foreign currency non-resident (banks) FCNR(B) dollar funds, mobilised for a minimum tenor of three years and over at a fixed rate of 3.5 per cent per annum for the tenor of the deposit," RBI said in a notification.

India scrambles to reduce oil bill inflated by sinking rupee

The oil minister is grasping at desperate measures to cut the country's oil costs by nearly $20 billion after the rupee's slide to record lows has left India facing an oil bill potentially 50 percent higher than on May 1. Oil Minister M. Veerappa Moily has suggested pricking the ballooning oil bill with everything from a street theatre campaign encouraging lower fuel use, to shutting fuel stations, to increasing imports from Iran.

Assocham suggests a slew of measures to boost economy

To boost exports, government should lower cost of export credit.Industry body Assocham suggested that the government raise investment in agriculture, cut back on subsidies, aggressively disinvest and roll out tax reforms like DTC and GST to revive economic growth.

The corporate borrowing binge has put India at risk

Unlike say the economic crisis of 1991, when sovereign debt accounted for a major chunk of India’s external debt, this time it is corporate debt that is the major contributor to India’s indebtedness. While external sovereign debt has shrunk to one-fifth of the total external debt over the past two decades, corporate debt has boomed. External commercial borrowings accounted for nearly 31% of the total external debt at the end of fiscal 2013, according to Reserve Bank of India (RBI) data. Worse, there has been a sharp spike in short-term debt. Short-term debt was only one-tenth of external debt in March 1991, and rose to 16% in 2007.

BRICS to commit $100 billion to forex fund

The BRICS group of emerging economies will contribute $100 billion to a fighting fund to steady currency markets destabilized by an expected pullback of US monetary stimulus, Russian President Vladimir Putin said on Thursday. China, holder of the world’s largest foreign exchange reserves, will contribute the bulk of the currency pool.

10 THINGS YOU SHOULD KNOW ABOUT MICROSOFT-NOKIA DEAL

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

 

EXPERT VIEW

India needs to end fiscal dominance over the central bank

By Gavyn Davies, chairman of Fulcrum Asset Management and co-founder of Prisma Capital Partners.

A SNEAK PEAK INTO THE WORLD OF FINANCE

To know how only Raghuram Rajan can offer symptomatic treatment to Indian economy click on the slideshow below

 

 

TERM OF THE WEEK

Quantitative easing

·         Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective.

·         A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions with newly created money, in order to inject a pre-determined quantity of money into the economy. 

·         Quantitative easing increases the excess reserves of the banks, and raises the prices of the financial assets bought, which lowers their yield.

Read More

KILLER BEES

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

 

       

An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an attempted hostile takeover from occurring. Companies use a variety of anti-takeover measures, sometimes referred to as shark repellents, to discourage unfriendly takeover attempts from happening. Once an unfriendly takeover attempt has been initiated, the company can use other anti-takeover measures to deter or prevent the takeover.

       The merger and acquisition boom of the late 1980s forced companies to develop strategies to thwart would-be takeovers. Killer bees, named for the insect that aggressively swarms and overpowers its victims with hundreds of stings, act aggressively on behalf of a firm that is under the threat of an unfriendly or hostile takeover. The killer bee may employ tactics such as making the target company less attractive or more difficult to acquire.

 

Read More

GODFATHER OFFER

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

 

A takeover offer so attractive that the target company cannot refuse. Usually these types of takeovers result in a change of the management team. Shareholders too, sometimes have reasons to assume that the takeover will serve some ulterior motive of the predator (such as asset stripping, transfer of reserves) rather than uphold their interest. A godfather offer has none of these nasty implications.

 

Read More

BEAR HUG

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

It is used in takeover situations. It is an indication to the board of a target company that an offer of takeover is under consideration. A strong bear hug is a formal notice to the target company of an intended takeover. A teddy bear hug is an indication from a target company that it will favorably consider a takeover, but at a higher price than offered.

Read More