Posts Tagged ‘finance ministry’

Weekly Update of The Market (08th-12th February)

Hello Friends, here, we bring you the weekly overview of the Indian as well as of the Global economy and  latest global business and industry updates.

.

Weekly Update of The Market (08th-12th February)

.

After starting the year on a good note & Indices making fresh highs within few weeks many Asian markets have corrected between 7 to 10%.

.

The global sell off over sovereign debt problems in Europe and an unexpected rise in jobless claims in US put investors on the defensive mode.

.

The anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the Euro & has led strength to US dollar.

.

Foreign investors sell off is an outcome of dollar-carry-trade unwinding as when they borrowed the dollar was cheap & now it is recovering.

.

Investors viewed the markets in year 2010 with confidence in view of recovery gaining momentum is now shaken over the debt problems, nascent economic recovery & confidence of the governments that stand behind the euro.

.

Efforts of China to curb lending preventing overheating in economy also pose a risk to derail the global recovery.

.

Back at home, the effect of turmoil in the international market also made government to think its strategy on ambitious disinvestment programme.

.

🙂

.

Lukewarm response to the NTPC, the much awaited issue managed to get subscription of just 1.2 times on its closing day.

.

The maximum bid of 20.87 crore shares was put by Indian institution under the first time adopted French Auction route.

.

This has challenged the finance Ministry hopes on the proceeds from disinvestments to make up the sliding revenue & rising expenditure.

.

While it looks that PSU disinvestment may not yield desired results on market weakness, the 3G auction i.e. expected to garner Rs. 35,000 crore could be postponed to next fiscal year.

.

🙂

.

The fate of some of the IPO’s like NMDC, Satluj Jal Vidyut Nigam Ltd and Rural Electrification Corporation that are on the disinvestment agenda before March 31, looks tough to sail through, if the stock markets do not rise and big investors do not come back.

.

On the contrary, Banks like Bank of Baroda & Indian Bank that were expected to raise money overseas have put now their plans on hold.

.

🙂

.

The good news from the external sector continued as the data showed a 9.3% annual increase in exports in December to $14.6 billion, a second consecutive month rise.

.

While imports increased by 27.2% from a year earlier to $24.75 billion.

.

Food inflation remained at high levels & rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week on the back of rising pulses & potato prices.

.

Markets are likely to take a closer view of the advance estimates on economic growth for the current fiscal ending March 2010 scheduled to be released on Monday.

.

🙂

.

In the days to come an activity in the sectors like railways, fertiliser, textiles, pharma, education, power and infrastructure may be seen on expected positive policy announcements and budgetary sops.

.

It was clearly mentioned last week that world markets are going in downtrend and one should be careful in such a scenario and that one should be moving in cash.

.

Now the markets have taken a very sharp fall last week due to rise in Dollar Index and fall in all asset classes.

.

🙂

.

The coming week might see some counter rally from lower levels.

Nifty faces resistance between 4900-5000 levels and Sensex between 16400-17000 levels.

.

🙂

.

If we talk about commodity markets then one can see that strengthening dollar and lack of firm global cues had pressurized commodities prices to move southward.

.

Investors are selling riskier assets and putting their money in dollar as a safe haven buying.

.

Debt concerns facing Greece, Portugal and Spain coupled with dollar index which is trading above the mark of 80 is most likely to compel commodities to trade lower.

.

French and euro zone GDP, USD advance retail sales, USD U. of Michigan Confidence will give further direction to commodities.

.

Investors should keep an eye on gold – silver ratio.

It was 58:1 few months back, now reached to 67:1 on MCX, heading towards the level of 70:1.

It is demonstrating more selling in silver.

.

🙂

.

Stay Tuned for More on weekly updates.

.

Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here

India’s Total External Debt Touched $243 Billion

India’s Total External Debt Touched $243 Billion

.

India’s total external debt rose by 8.1% to $242.8 billion at the end of September 2009 from $224.6 billion at March-end 2009.

.

The long term debt increased by 10.6% to $200.4 billion, while short term debt declined by 2.3% to $42.4 billion.

.

Most of the increase in the debt ($8.3 billion or 45.6%) is due to depreciation of dollar against major global currencies, out of total increase of $18.2 billion, according to a finance ministry statement.

.

The total external financial assets increased by $21 billion to $378.6 billion at September end 2009 over the previous quarter.

.

Total external financial liabilities increased significantly by $32.7 billion over the previous quarter and stood at $476.4 billion at Septemberend 2009.

.

Direct investment and Portfolio investment in India increased by $11 billion and $10.2 billion respectively over the previous quarter.

.

Long-term debt at $ 220.4 billion accounted for 82.5% of the total debt.

As a positive development, India’s short term debt, which had increased sharply between March 2005 and March 2008, went down by $985 million to $42.4 billion at September-end.

.

The decline was seen in all the components of short-term debt except trade related credits for period above six months and up to one year

.

Short-term credit, that is a credit of less than 180 days, short-term liabilities of banking system and investment of foreign central banks and other global financial institutions in government’s treasury bills is considered bad for economy.

.

🙂

GST Introduction in April to Reduce Indirect Tax Burden

GST Introduction to Reduce Indirect Tax Burden

The Finance Ministry maintained that the net burden of indirect taxes on the people would reduce by 25-30% when the proposed Goods and Services Tax (GST) is introduced from April 1, 2010.

.

However, it is said that real estate would also be brought under the GST scanner and deliberations in this regard between the Centre and the States were almost conclusive.

.

The draft legislation on GST had been referred to legal experts and would be finalized in order to facilitate the government to achieve target of implementation of Goods and Services Tax as has been promised by April, 1, 2010.

.

Meanwhile, it is said that there were divergent views expressed by the Empowered Committee of State Finance Ministers and the Thirteenth Finance Commission (TFC) on certain issues relating to GST, but noted that these were on the verge of finding a solution.

.

On the other hand, according to the implementation programme, the government plans to introduce the GST regime from the new fiscal to replace excise duty and service tax at the Central level and the VAT at the State level, apart from others levies like cess, surcharges and local taxes as currently applicable on good and services.

🙂

GST set to reduce the burden of Indirect Taxes on people.

GST set to reduce the burden of Indirect Taxes on people

.

The Finance Ministry maintained that the net burden of indirect taxes on the people would reduce by 25-30% when the proposed Goods and Services Tax (GST) is introduced from April 1, 2010.

.

However, it is said that real estate would also be brought under the GST scanner and deliberations in this regard between the Centre and the States were almost conclusive.

.

The draft legislation on GST had been referred to legal experts and would be finalized in order to facilitate the government to achieve target of implementation of Goods and Services Tax as has been promised by April, 1, 2010.


Meanwhile, it is said that there were divergent views expressed by the Empowered Committee of State Finance Ministers    and the Thirteenth Finance Commission (TFC) on certain issues relating to GST,  but noted that these were on the verge of finding a solution.

On the other hand, according to the implementation programme,

the government plans to introduce the GST regime from the new fiscal to replace excise duty and service tax at the Central level

and the VAT at the State level, apart from others levies like cess, surcharges and local taxes as currently applicable on good and services.

.

🙂

RBI not in favour of 3-yr lock-in in realty FDI

The Department of Industrial Policy and Promotion (DIPP) proposal made last month to remove the three-year lock in period for foreign direct investment (FDI) in real estate has not found favour with the Finance Ministry or with the Reserve Bank of India (RBI). Both entities have written to the DIPP to this effect.

The developers were asking for a removal of the lock-in period in order to encourage speculation in realty. CNBC-TV18’s Latha Venkatesh reports.

It has been a long standing demand of the real estate companies that this lock-in of FDI into real estate projects should be removed because that restricts the number of investors into real estate projects. But this proposal even historically has never found favor with the RBI and the Finance Ministry. When the proposal was mooted around November 22-23 and was sent by the DIPP to Finance Ministry and related ministries—the urban development ministry as well as the RBI, what we now gather is that both the Finance Ministry and the RBI have raised their descent note against this proposal, their argument more or less similar is that allowing this lock in to be removed would mean a free flow of money coming in and parking in, pushing up real estate prices and then cashing out and booking a quick profit.

Primarily to avoid such speculative boosting of asset prices is the reason why both the Finance Ministry and the RBI are opposed to it. But sources who told us that this descent note has been sent, have added that they do not have any final authority over this kind of a proposal and that their descent in the past has been overruled. We know of the various press notes which have been opposed by various sections in the Finance Ministry and in the RBI in very recent cases and their descent need not necessarily be taken in by the Commerce Ministry or the DIPP. But a descent has been put on the record.

Source:http://www.moneycontrol.com/news/cnbc-tv18-comments/fin-min-rbi-notfavour3-yr-lock-inrealty-fdi_430429.html

RBI to Assess Affairs of Foreign Banks Operating in India

RBI to Assess Affairs of Foreign Banks Operating in India

RBI to Assess Affairs of Foreign Banks Operating in India

The Reserve Bank of India (RBI) decided to run a detailed assessment of the risk-management capabilities and evaluate the transparency in financial affairs of all foreign banks operating in India with an aim to ensure that they do not pose any systemic risk to the banking sector.

🙂

However, until this process is finished, foreign banks are doubtful to be permitted to open more branches in India while India has committed to allowing 12 new branches to foreign banks in a year, but has been more liberal.


Moreover, this has resulted in a high presence of foreign banks in India as their WTO commitment allows them to deny licenses to foreign banks once their share in the total assets of the banking system exceeds 15%.


Additionally, as it comes in the aftermath of the financial crisis, the audit reflects concerns over an unduly large presence of foreign banks creating risks for Indian financial markets.


Meanwhile, the finance ministry and the central bank had always supported allowing foreign banks to operate in India as they thought that increased presence of foreign banks boosts the efficiency of the domestic banking sector.

EPFO Panel to Meet in October for Parking Money in Stock Market

The Finance and Investment Committee (FIC), key advisory body of the Employees Provident Fund Organization, would meet next month in order to take a view on parking 3 to 5 per cent of its large corpus of Rs 2.57 lakh crore in the capital market.
employee-provident-fund-epfo

As per the EPFO sources, this was a long pending issue and was likely to be discussed at the committee meeting scheduled next month. If this proposal got the nod then it would result flowing of Rs 13,000 crore into the stock markets. FIC would make necessary recommendations to Central Board of Trustees, EPFO”s apex body, for the final decision, after the evaluation of the proposal

At a recent meeting of FIC, it was felt in order to enhance or maintain overall returns to the subscribers as fixed-income products, an alternative avenues are a must.

CBT this July had dumped the proposal of parking up to 15 per cent of its funds in equities. However, K P Krishnan, joint secretary in the finance ministry, then told the trustees that EPFO could start parking 3-5 per cent of corpus in stock markets, if CBT members had reservations about investing in equities.

Did IPO Grading Fail to Catch the Fancy of Investors??

ipo grade system

The grading system of initial public offers (IPO) is in need of an upgrade, say market participants.

🙂

Two years after it was first introduced by market regulator SEBI, the system has failed to catch the fancy of investors as share price trends of newly listed companies have shown little or no correlation to the grading given by rating agencies.

😦

“IPOs with grading 4 have shown returns that are much lower than IPOs with grades 1 and 2.
So, this is raising the question whether it is time to look at amendments to the existing structure or maybe SEBI can think of completely scrapping the system,” said Jagannadham T, equity head of SMC Capitals.

🙂

However, one can’t deny the importance of the IPO grading system not only is it beneficial for retail investors who don’t have the time or skills to go through an entire prospectus but it also acts as a deterrent for fly by night promoters who wish to access the primary market solely for their gains.

🙂

Not only financials of a company is looked at but also people at the business head level are contacted to see what the company is up to.

🙂

As per few experts, IPO grading doesn’t have anything to do with the price post listing. A lot of things apart from fundamentals drive the stock.

The reservation of comment on pricing is a sore point, but even more, is the grading of a SEBI barred company like Austral Coke at Grade 2 by CARE above Orbit Corporation at 1 by the same rating agency.

:O 😦

And this makes one wonder if a thorough due diligence is done by all rating agencies that’s ground enough for a review.

🙂

Invest Retirement Funds in Stocks for Better Returns :)

retirement fund scheme

The government has asked the Employees Provident Fund Organisation to begin parking 3-5% of its subscribers’ retirement funds in stocks for better returns — a move that would also increase flow of funds to capital markets by up to Rs 13,000 crore.

🙂

The suggestion was made by finance ministry at a recent meeting of the Central Board of Trustees (CBT), the apex decision making body of the EPFO.

🙂

Trustees were told that EPFO could begin by parking 3-5% of its corpus in stocks, if the CBT members had reservations about investing in equities.

🙂

They were further told that long term investments in stock indices would generate healthy returns to the EPFO with negligible risk.

🙂

The finance ministry’s note on investment would be considered by the finance and investment committee, an advisory body of the EPFO, at its next meeting.

🙂

The recommendations of the committee are usually accepted by the CBT, which is headed by the labour minister and has the authority to take policy decisions.

🙂

India May Trigger $39 Billion of Share Sales With Ownership Cap :)

India Shines

India may trigger as much as 1.9 trillion rupees ($39 billion) in stock sales, equivalent to five years of equity offerings, with a proposal to limit stakes of controlling shareholders.

🙂

Prime Minister Manmohan Singh’s government is considering a plan that would require at least 25 percent of a company’s stock to be traded.

🙂

The rule would prompt equity sales in 560 of Mumbai’s 3,335 most-active stocks, such as NMDC Ltd. and Steel Authority of India Ltd., according to data compiled by Bloomberg.

🙂

The changes may encourage foreign investment by bringing Indian regulations in line with the U.S., U.K. and Hong Kong.

🙂

The 25 percent minimum would be good for the long-term Indian market. There are many very attractive companies with small floats that investors would like to be able to invest in.

🙂

The rule change would require the government, whose constitution embraces socialism, to reduce dominant stakes in key industries such as steel making, oil and electricity supply.

The top 10 companies that would have to sell stock are state- run, accounting for about 80 percent of the total by value.

🙂

Sensex Surges :

The Bombay Stock Exchange’s Sensitive Index, or Sensex, has climbed 61 percent this year, the eighth-best performer among 89 measures tracked by Bloomberg.

🙂

Growth in Asia’s third-largest economy may accelerate to 7.75 percent after the government initiated stimulus plans to bolster banks’ capital and spur consumer spending, according to the finance ministry.

🙂

International funds have bought 357.5 billion rupees of Indian stocks this year through Aug. 11, compared with record net sales of 530 billion rupees for all of 2008, according to data on the Securities and Exchange Board of India Web site.

🙂

The government plans to boost funding for a rural jobs program by selling shares in some state-run companies.

🙂

No Minimum :

Rules allow companies with a free-float worth at least 1 billion rupees to have as little as 10 percent traded, while there is no minimum for state-run enterprises, the ministry’s Web site says.

🙂

The Sensex has returned 192 percent over the past five years, second in Asia only to Indonesia.

Since 2005, companies have raised 1.89 trillion rupees in share sales, including 116 billion rupees in January last year by Mumbai-based Reliance Power Ltd. that marked the country’s biggest initial public offering.

New Delhi-based DLF Ltd., India’s largest real estate developer, sold 92 billion rupees of stock in June 2007.

🙂

Government Control :

India’s government plans to sell 8.38 percent of NMDC, the nation’s largest iron-ore producer.

The stake would fetch 120 billion rupees at current prices.

The government holds 98.4 percent in Hyderabad-based NMDC, and 85.8 percent of New Delhi-based Steel Authority of India, the nation’s second-biggest producer, according to Bloomberg data.

🙂

“The sheer magnitude of offloading involved may result in an overhang on the secondary capital markets,” Jagannadham Thunuguntla, the head of equities at SMC Capitals Ltd. in New Delhi, said in an interview.

“The capital market may find it difficult to absorb such heavy equity” he added.

🙂

The Securities and Exchange Board of India advocates “a phased approach, as companies may need time” to sell shares, N. Hariharan, a Mumbai-based spokesman for the market regulator, said in an e-mail Aug. 7.

🙂

‘Phased Manner’

The proposal “should be positive for markets if introduced in a phased manner,”

🙂

Such a change is a welcome one.

Ensuring a reasonable minimum float would help avoid share price manipulation, scams, abuse by majority shareholders, etc. This would constitute a positive structural change.

🙂

India may trigger as much as 1.9 trillion rupees ($39 billion) in stock sales, equivalent to five years of equity offerings, with a proposal to limit stakes of controlling shareholders.

Prime Minister Manmohan Singh’s government is considering a plan that would require at least 25 percent of a company’s stock to be traded. The rule would prompt equity sales in 560 of Mumbai’s 3,335 most-active stocks, such as NMDC Ltd. and Steel Authority of India Ltd., according to data compiled by Bloomberg.

The changes may encourage foreign investment by bringing Indian regulations in line with the U.S., U.K. and Hong Kong, said Anshul Krishan, the Mumbai-based head of Goldman Sachs Group Inc.’s India financing group. The sales, equal to about 4 percent of India’s $1 trillion stock market, probably won’t affect prices if they’re staggered over time, said Purav Jhaveri, senior investment strategist at Franklin Global Advisers.

“The 25 percent minimum would be good for the long-term Indian market,” Seth Freeman, chief executive officer of EM Capital Management LLC in San Francisco, which advises investors on emerging markets and runs the EM Capital India Gateway Fund, said in an e-mail response to questions. “There are many very attractive companies with small floats that investors would like to be able to invest in.”

The rule change would require the government, whose constitution embraces socialism, to reduce dominant stakes in key industries such as steelmaking, oil and electricity supply. The top 10 companies that would have to sell stock are state- run, accounting for about 80 percent of the total by value.

Sensex Surges

The Bombay Stock Exchange’s Sensitive Index, or Sensex, has climbed 61 percent this year, the eighth-best performer among 89 measures tracked by Bloomberg. Growth in Asia’s third-largest economy may accelerate to 7.75 percent after the government initiated stimulus plans to bolster banks’ capital and spur consumer spending, according to the finance ministry.

International funds have bought 357.5 billion rupees of Indian stocks this year through Aug. 11, compared with record net sales of 530 billion rupees for all of 2008, according to data on the Securities and Exchange Board of India Web site.

Finance Minister Pranab Mukherjee said in his July 6 budget speech that a rule requiring a public float of at least 25 percent for listed companies should be enforced uniformly, even for state-run enterprises that had been exempted. The government plans to boost funding for a rural jobs program by selling shares in some state-run companies.

No Minimum

Rules allow companies with a free-float worth at least 1 billion rupees to have as little as 10 percent traded, while there is no minimum for state-run enterprises, the ministry’s Web site says.

“The average public float in Indian listed companies is less than 15 percent,” Mukherjee said. “Deep, non-manipulable markets require larger and diversified public shareholdings.”

The Sensex has returned 192 percent over the past five years, second in Asia only to Indonesia. Since 2005, companies have raised 1.89 trillion rupees in share sales, including 116 billion rupees in January last year by Mumbai-based Reliance Power Ltd. that marked the country’s biggest initial public offering. New Delhi-based DLF Ltd., India’s largest real estate developer, sold 92 billion rupees of stock in June 2007.

Government Control

India’s government plans to sell 8.38 percent of NMDC, the nation’s largest iron-ore producer, Steel Secretary Pramod Rastogi said Aug. 5. The stake would fetch 120 billion rupees at current prices, he said. The government holds 98.4 percent in Hyderabad-based NMDC, and 85.8 percent of New Delhi-based Steel Authority of India, the nation’s second-biggest producer, according to Bloomberg data.

“The sheer magnitude of offloading involved may result in an overhang on the secondary capital markets,” Jagannadham Thunuguntla, the head of equities at SMC Capitals Ltd. in New Delhi, said in an interview. “The capital market may find it difficult to absorb such heavy equity.”

GMR Infrastructure Ltd., based in Bangalore, scrapped a $500 million international sale on June 30 as at least 40 companies announced plans to sell more than 350 billion rupees of shares, mostly to foreign institutional investors.

The Securities and Exchange Board of India advocates “a phased approach, as companies may need time” to sell shares, N. Hariharan, a Mumbai-based spokesman for the market regulator, said in an e-mail Aug. 7.

‘Phased Manner’

The proposal “should be positive for markets if introduced in a phased manner,” Franklin’s Jhaveri said in an e-mail response to questions. Franklin Templeton Investments in San Mateo, California manages $482.4 billion worldwide, including more than $3 billion in Indian stocks.

The Finance Ministry sought public comment on the plan on its Web site July 9. Singh’s administration plans to take up the issue after completing 100 days in office, Junior Finance Minister Namo Narain Meena said in a written statement to parliament in New Delhi on Aug. 4. Singh was sworn in on May 22.

The changes are important for protecting shareholders in India, said Andrew Foster, who oversees $2 billion in assets, including Indian securities, at Matthews International Capital Management LCC in San Francisco.

“Such a change is a welcome one,” Foster said in an e- mailed response to questions. “Ensuring a reasonable minimum float would help avoid share price manipulation, scams, abuse by majority shareholders, etc. So I think this would constitute a positive structural change.”