<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[GOOD SHOW: The June IIP numbers have far surpassed market expectations (Bloomberg)
Talk about surprises. The Index of Industrial Production (IIP) numbers for June that came out on Wednesday were way above market consensus estimates of about 4 per cent growth; they came in at 7.8 per cent over June 2008.
A significant contributor was mining, but that is a seasonal factor: coal mining, among others, picks up ahead of the monsoon. Consumer goods also grew by about 4 per cent. But the biggest surprise was in the growth numbers for capital goods, which grew at an astounding 11.8 per cent — which translates into over 14 per cent month-on-month — after having contracted steadily month-on-month since February this year.
Some of that could be from automobile spares and other goods for the transportation sector, but not enough to justify the 11 per cent jump.
The surprising thing is that there seems to be nothing that explains this performance; very little has changed in the last months to suggest a large uptick in industrial activity or industrial investment. Many analysts have gone ahead and raised gross domestic product growth estimates, and that might be a little misleading.
A bleak monsoon is already throwing some doubts about the 6 per cent growth estimate that most have forecast. The swine flu pandemic scare is another factor that could impact current estimates downwards. The IIP growth could offset those adverse effects, but that’s all. The IIP numbers for July could well fall back to the 3-4 per cent range.
For many, that could be another surprise albeit an unpleasant one.
MUTUAL FUNDS
Exit Strategy
Sebi sets the record straight by asking AMCs to levy a uniform exit load
NOT ENOUGH: Small investors feel Sebi
should have penalised erring mutual funds
(Pic by Satheesh Nair)
There seems to be no respite for the mutual fund industry from the scrutinising eyes of the market regulator, Securities and Exchange Board of India (Sebi). After the recent ban on entry loads, Sebi has now asked asset management companies (AMCs) to make sure the exit load charged from investors is uniform, regardless of the size of the investment. Over the past few years, several AMCs used to charge higher exit loads from smaller investors (those who invest less than Rs 10 lakh) and less or zero load from bigger investors.
“This was violating the mutuality principle that says you should ensure that every investor receives the same treatment,” says Dhirendra Kumar, managing director of Value Research, a mutual fund research company.
While small investors welcome Sebi’s move, they feel Sebi should have penalised AMCs for this unfair practice. A Sebi circular of May 2008 states that funds may levy exit loads but “without discrimination to any specific group of unit holders”.
Meanwhile, large investors can ask their mutual funds to launch new schemes where the minimum subscription amount is itself Rs 10 lakh or more and then have lower exit loads for all the investors in these schemes.
Rajesh Gajra
STRICTLY BUSINESS
The diplomatic tussle between Beijing and Australia has eased with China formally charging four employees, including one Australian citizen, of British-Australian mining giant Rio Tinto with bribery and trade secrets infringement. Earlier, China had slapped charges of espionage, a serious offence punishable with death penalty.
Click here to view 'Sugar Consumption Soars'
EXPORTS
The Elusive Fish
Vietnam and China have pipped India to the third spot in shrimp exports. Blame it on the Marine Products Export Development Authority (MPEDA), which failed to develop the shrimp varieties that were in demand in the global market. One of the thrust areas of MPEDA is to keep a close watch on the global trends and the competition.
Recently, Jyotiraditya M. Scindia, minister of state for commerce and industry, said that due to tough competition from countries such as Vietnam, China, Thailand and Indonesia, India’s shrimp exports declined during 2008-09. India, which was the second-largest supplier of Black Tiger shrimp variety — a delicacy in Japan — has faced stiff competition from Vietnam since 2001, but had managed to hold on the second spot. Exports from India to Japan fell from 67,373 tonnes in 2007-08 to 57,271 tonnes in 2008-09. India’s overall shrimp exports also declined from 136,223 tonnes to 126,042 tonnes.
M. Rajendran
(Businessworld Issue Dated 18-24 Aug 2009)