Reliance Industries has overtaken ITC as the most influential stock on BSE benchmark Sensex, after the oil & gas major's shares soared by 3.4 per cent. At the end of trade on 17 January, 2013, RIL commanded 9.33 per cent weight in the 30-share Sensex, while ITC had 9.27 per cent weight, followed by Infosys with 8.05 per cent. Shares of RIL ended the day 3.4 per cent higher at Rs 889.65, hitting a 52-week high and marking a second day of gains, ahead of its earnings on 18 January. The stock was also among the top gainers on the Nifty. The RIL counter saw good buying amid government virtually deregulated diesel prices allowing "small" hikes over a period of time. "The bullishness in the stock price also stemmed from the expectation of healthy improvement in refining margins in its quarterly results," said Milan Bavishi, Head Research, Inventure Growth & Securities. Weight of a stock is measured by the value of a company's free-float or non-promoter shares that can be freely traded in the market. ITC had first replaced RIL as the most influential stock on Indian bourses on April 17 last year, but the very next day the energy major regained the status. RIL also remains the country's most valued company in terms of market capitalisation. The energy major commands a market value of Rs 2,87,848 crore. Reliance is expected to report its first profit increase after four quarters of declining profits, according to consensus of analyst estimates, Thomson Reuters Starmine data showed. However, declining KG-D6 volumes and muted gross refining margins (GRMs) are likely to impact Reliance Industries '(RIL's) December quarter earnings. The company's petrochem segment may post better numbers on good volumes and higher base price effect, partially offsetting poor show from other businesses. Dealers say Essar results point to potentially improving refining margins at Reliance when it posts results on 18 January. Essar Oil, which reported results earlier this week, swung to a net profit in the October-December quarter, with gross refining margins at a healthy $9.75 a barrel. Investment bank, UBS, increased weightage on Reliance ahead of its December quarter earnings, thereby turning 'overweight' on the petrochemical sector from 'neutral' earlier.Nomura sees over 15 per cent upside in Reliance Industries from the current levels to Rs 1000. It says an improvement in exploration and production sentiments and more positive decisions would revive the E&P investment. According to the brokerage, the era of underperformance of the oil & gas major seems to have ended. With the Government of India (GoI) keen to end the long period of policy paralysis, decision-making has been revived and tensions between the government and contractors are finally easing. Reliance shares have been rising on media reports that recommendations from a government-appointed panel to look at gas pricing will be submitted to the cabinet for consideration soon. The recommendations are expected to lead to higher gas prices. Last week, Oil Minister M Veerappa Moily allowed Reliance Industries to explore for oil and gas within the producing fields subject to certain conditions. RIL had proposed to drill an exploration well on the flagging D1&D3 gas fields in the KG-D6 block to study reservoir characteristic.
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Emerging market investors have adopted "a modest overweight" position on Indian shares for the first time since July 2010, according to Bank of America-Merrill Lynch's survey of fund managers, which was out on 16 January.However, among Asia-Pacific investors, India was among the least favoured region, alongside Australia and Philippines, according to the BofA-ML survey.The BSE Sensex rose 25.7 per cent in 2012, outperforming the regional benchmark MSCI Asia Ex Japan index, which rose 18.56 per cent in the same period.In a separate report, BofA-ML says investors are "generally overweight" on India, based on feedback from investors in the UK and Europe, having added to their positions in the past six months.However, part of that preference was driven by an "underweight" position in China.With the risk of a hard landing receding in China, and with a potential cyclical shift in the making, BofA-Merrill says, "there is a possibility of a move towards China over next few months".India needs to improve its financial system supervision and crisis preparedness while at the same time liberalising some sectors to reduce distortions and risks created by heavy state involvement in banking, the International Monetary Fund said on 15 January.The IMF's Financial System Stability Assessment Update said India had improved its supervision and regulations in the 20 years since it started liberalising its economy and that its financial system fared well in the global financial crisis. "Despite these recent successes, India's financial sector still confronts longstanding impediments to its ability to support growth as well as new challenges to stability," said the 116-page study. Read Also: India Needs Greater Financial Supervision: IMFRead Also: WB Expects India To Inch Closer To China In Growth Meanwhile, India's growth is expected to inch closer to that of China in near future, World Bank Chief Economist Kaushik Basu said on 16 January.The World Bank had released its latest issue of Global Economic Prospects 2013 on 15 January, in which the economies of developing countries like India, China and Brazil are projected to be recovering and higher growth rate.The World Bank expects that by 2015, the growth rate of China would be 7.9 per cent and that of India 7 per cent, World Bank Chief Economist Kaushik Basu told reporters during a conference call.He added that the gap between the two Asian giants has been closing."We do expect India to inch closer to China and for a very, very good reason--not an analysis of what's happened over the last one year or two years, but a bit of a sweep of history," he said.While the growth of the world economy growth is projected to inch up from 2.3 per cent in 2012 to 2.4 per cent in 2013, with the high-income countries remaining at the same level of growth of 1.3 per cent in both 2012 and 2013, it is the emerging markets like India, China and Brazil that would show significant signs of recovery."Growth in Brazil had gone down quite sharply in 2012 of 0.9. We at the World Bank are expecting Brazil to make a recovery to 3.4 per cent in 2013. We are expecting recovery in the case of China from 7.9 per cent growth in 2012 to 8.4 per cent in 2013."We are expecting a recovery in India from 5.1 per cent growth in 2012 to 6.1 per cent growth in 2013," Basu said."China is growing at a phenomenal rate right from 1978 or 1980 and you can't grow at 10 per cent for more than a couple of decades."China has done it for 30 years and this has been expected in China and expected by us that China will continue to grow very rapidly but it will probably come down from these great highs," Basu said."So, there is going to be a catch-up of India's growth getting closer to China's growth and, who knows, a couple of years down that road, they may be completely neck to neck," Basu said in response to a question.Basu said the next one or three years will remain difficult as structural reforms are put in place primarily in the euro zone countries, but even elsewhere in the world. (Agencies)
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Giving a big relief to overseas investors, the government has postponed implementation of controversial GAAR provisions by two years to April 1, 2016. The decision earned a positive market reaction and is likely to help attract more capital inflows. "Having considered all the circumstances and relevant factors, the government has ...decided that provisions of Chapter 10A of the Income Tax Act (dealing with GAAR) will come into force from April 1, 2016 as against April 1, 2014," Finance Minister P Chidambaram said in New Delhi on 14 January 2013. The BSE Sensex rose as much as 1 per cent after the news of the delay and after a slower-than-expect rise in inflation cemented hopes for an interest rate cut this month. "The indication from the government seems to suggest attracting capital flows is imperative for the economy and to fund the current account deficit," said Dhananjay Sinha, co-head of institutional research at brokerage Emkay Global. Sinha added that the deferral was in line with India's stated objectives and recent policy measures like opening up its supermarket and aviation sectors, which were also aimed at attracting increased foreign capital inflows. According to the proposed rules, investments made before August 30, 2010, would not attract tax provisions under the rules. However, they would apply to investors who route through tax-havens such as Mauritius for getting tax benefits. The General Anti Avoidance Rules (GAAR) provisions, introduced by the then Finance Minister Pranab Mukherjee in the Budget 2012-13, were aimed at checking tax avoidance by overseas investors. The proposal, however, generated controversy, with investors expressing apprehensions that it would result in unnecessary harassment by tax authorities. The decision to postpone the implementation, Chidambaram said, follows the recommendations of the Shome Committee which was set up by Prime Minister Manmohan Singh in July last year to look into investor concerns. The government, Chidambaram further said, has accepted major recommendations of the panel with some modifications. "The modifications that we have done are fair, non-discriminatory, just and strike a balance between interest of revenue and interest of investors. So, all apprehensions should now be set addressed," he said. The GAAR provisions, the minister also clarified, would override the double taxation avoidance agreement (DTAA) benefits if the arrangements were intended solely to evade taxes. No investor, Chidambaram said, "should now have any apprehension about his investments in India. Only those arrangements, which have been made for the purpose of tax avoidance, will be brought under GAAR, he added. He also clarified that investments made by Non-Resident Indians (NRIs) will not be covered by the provisions of GAAR. About the applicability of the GAAR provisions, he said FII investments seeking benefits under Sec 90 and Sec 90 (A) of the I-T Act (dealing with DTAA) would be covered. The minister said only those arrangements which are aimed at only obtaining tax benefit would be considered as 'impermissible arrangement' and would attract GAAR. As per the original GAAR provisions under Chapter 10 (A) of Finance Bill, 2012, the anti-tax avoidance provisions could be invoked "if one of the purposes" was to obtain tax benefit. The Minister clarified that there would be a threshold limit of Rs 3 crore of tax benefit for invocation of GAAR, as suggested by the Shome panel. Moreover, Chidambaram said, that investments made before August 30, 2010, would not attract the provisions of GAAR. On whether tax officials can look into cases between August 30, 2010, and the date for implementation of GAAR, he said: "They can go back is technically correct. But in order to go, you have to comply with a number of provisions in the I-T Act. If the assessment is completed, you can reopen the assessment only after very strict circumstances." "This decisions (of GAAR rules modifications) have by and large addressed the concerns that were expressed by investors ... Most of the apprehensions I think have been removed now," Chidambaram said. Chidambaram also said officials from India and Mauritius would meet by March to review the provisos of a bilateral tax treaty, signed in 1982. Since the island nation does not tax capital gains, the treaty has been misused by many investors to evade taxes. India gets nearly 40 per cent of its total foreign direct investment inflows through Mauritius, besides large portfolio investments. The minister said the minimum threshold to come under the GAAR would be 30 million rupees, and that would mean large number of taxpayers would not be effected. The current account deficit hit an all-time high of 5.4 percent of gross domestic product in the July-September quarter, putting the rupee under pressure and increasing the reliance on volatile capital flows to fund the shortfall. This reliance on foreign capital inflows to bridge the gap is regarded as a serious fault line in the economy, haunted by memories of a 1991 balance of payments crisis when the central bank sent 47 tonnes of gold to Europe as collateral for a loan to avert a sovereign default. The government is likely to approach parliament next month to water down the rules that damaged investor confidence, which may help settle British-based Vodafone Group Plc's long-running $2 billion tax dispute. (Agencies)
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Three financial sectors reforms laws including, Prevention of Money Laundering (Amendment) Bill and Banking Laws (Amendment) Bill, 2012 have now become law of the land with Indian President Pranab Mukherjee giving assent to them.The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2012 also got the President's assent, an official statement said here on Wednesday.The Prevention of Money Laundering (Amendment) Bill, which seeks to enlarge the definition of money laundering offences and could help curb funding of terrorist operations, was approved by Parliament in the Winter Session.The Bill had sought to remove existing limit of Rs 5 lakh as fine under the Act. It proposes to make provision for attachment and confiscation of the proceeds of crime even if there is no conviction so long as it is proved that offence of money laundering has taken place, and property in question is involved in money-laundering.The Banking Bill will pave the way for corporate houses to enter the banking sector which is a key reform legislation pending for long.The Banking Bill was approved by Parliament after the government dropped the controversial clause concerning allowing banks to trade in commodity futures.The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2012 aimed at strengthening the provision for bad debts by banks and financial institutions.(PTI)
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Pia Singh, daughter of DLF chairman K P Singh, on 8 January 2013 sold 42.5 lakh shares of the realty major worth nearly Rs 100 crore to six other promoter entities.As per bulk data available with the stock exchanges, Singh, one of the promoters of DLF, offloaded 42,49,600 shares of the realty major.These shares were sold on an average price of Rs 235 aggregating the deal size to Rs 99.86 crore, the data showed.In an inter-promoter transfer, shares were acquired by Kavita Singh, wife of Pia's brother, and five other promoter entities --DLF Investments, Kohinoor Real Estates Company, Madhur Housing & Development Company, Sidhant Housing & Development Company and Vishal Foods & Investments.Last month, DLF had informed the stock exchanges that Pia Singh would sell up to 50 lakh shares or amounting to 0.29 per cent stake in the company, at Rs 217.17 per share by January 31, 2012.Shares of DLF grew by 0.74 per cent to settle at Rs 236.65 apiece on the BSE.(PTI)
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As I was looking to pick up a book on dinosaurs for my daughter, I heard the financial channel playing in the background announcing the latest quarterly results for the top Indian banks. India is a land of big numbers: 1.2-billion population with roughly 500 million unbanked and an even larger number of people under the age of 30 – known as the demographic dividend. The roughly 700 million that are banked have on average 1-2 trade lines versus an average of 4-5 in developed markets and the top 10 banks account for a majority share of total credit in the country. The case for growth in the Indian banking sector over the next decade can be a more nuanced discussion but to the laymen it is as simple as not having enough banks to cater to a very large unbanked population. Furthermore, for the banked population, the lack of relevant and differentiated products limit the amount of household income people put to work in their bank, especially when you consider the high rates of inflation the government has been tackling in recent times.Indian banks need to focus on profitably acquiring the unbanked and under-banked while enhancing the level of service to existing customers by developing relevant products to increase interest and service revenue. That seems simple enough given the large unbanked population and the number of young people joining the work force every year. So why shouldn’t we expect strong double digit growth from the same top 10 banks over the next decade?Well, have you recently called customer service at your bank to close an account or change your mailing address or order a replacement debit card? Have you recently tried to use your bank’s mobile banking or internet banking solution to pay bills or order a tax statement? I have done just that at a number of banks and the experience has left me underwhelmed. Banks in India have not fully exploited the power of these channels to differentiate and provide the level of exemplary service they simply cannot afford to do at a branch.However, the path to an evolved and all inclusive banking environment is not going to be one without challenges. Technology, as in most industries, is leveling the playing field (and fast) by allowing smaller and newer banks to stand shoulder to shoulder with their larger and more established competitors. The smaller banks have consciously focused on core banking activities to keep total cost of operations low versus debating how to better utilize large data centers. That said, these banks continue to measure their success by how well they do against their peer set in India versus a more global sample which may give them a false sense of security. Competition will intensify as the RBI issues more banking licenses. Non-banking financial companies (NBFCs) are aggressively developing differentiated retail banking products which are more in tune with aspiring consumer needs (i.e. individual car leasing plans). Sebi will soon pass additional guidelines on the role of the investment advisor, this should help increase household allocations into different assets classes that provide better returns versus CASA or fixed deposits.Banks who want to stay competitive as the landscape evolves will need to look at their existing product portfolio and figure out ways to increase customer utilisation and enhance revenue. For example, given the new regulations on debit merchant rates, banks will need to reduce their reliance on debit card loyalty programmes as the primary solution to increase card utilisation at POS. Banks currently subsidising their merchant acquiring businesses with CASA accounts will realise, if they haven’t already, that those models are not sustainable. The same applies to currency management; banks need to look at solutions that will increase the efficiency of currency in circulation. There are cash and logistics solutions that can help Banks manage ATMs and Branch currency needs without having to constantly draw down and top up currency chests around the country.Finally, banks need to understand that mobile and online channels should be an opportunity to delight their customers through a differentiated offering which is hard to do when everyone is using the same basic solutions. One internet banking application I used recently allowed me to pay bills but then I had to log out and then log back in to complete an NEFT transaction. This is not delighting your customer and it causes customers to question how the bank actually thinks through other products and services. Ideally, the transaction set a customer is exposed to online should be the same across all channels (i.e mobile, IVR, etc.). When banks use disparate solutions the experience is disjointed and inconsistent often leading to customer dissatisfaction.I do believe the Indian Banking sector is headed towards new heights over the next decade but I also believe that the banks on top of the league tables today, like the dinosaurs, will find themselves lower down on the food chain if they do not adapt to the changing landscape.Sunil Sachdev, Managing Director, International Payments Group and India Business Development – India Markets, Fiserv.
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The Reserve Bank today allowed real estate developers and housing finance companies to raise up to $1 billion (approx Rs 5,400 crore) through external commercial borrowings (ECBs) in the current fiscal to promote low cost housing projects. The funds raised through ECBs could be used either for developing low cost housing projects or for providing loans up to Rs 25 lakh to individuals for buying units with a price tag of Rs 30 lakhs or less. "It has been decided to allow ECB for low cost affordable housing projects as a permissible end-use, under the approval route. ECB can be availed of by developers/builders," RBI said in a circular. Besides developers, the central bank said housing finance companies (HFCs)/National Housing Bank (NHB) can also raise ECBs for financing prospective owners of low cost, affordable housing units. Slum rehabilitation projects, the circular said will also be eligible for raising ECBs to fund affordable housing projects. ECBs are considered attractive as cost of raising the loan overseas is lower than that of domestic borrowings. Besides, they provide an additional avenue to access large amounts of funds from global financial markets. As per the guidelines, developers/builders with a minimum track record of five years in undertaking residential project will be eligible to raise ECBs. With regard to HFCs, the circular said that only those companies with a minimum paid up capital of Rs 50 crore and minimum net owned fund of Rs 300 crore would be eligible to raise ECBs. It further said the maximum loan amount for individual buyers should be capped at Rs 25 lakh subject to the condition that the cost of the individual housing unit would not Rs 30 lakh. (PTI)
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The Reserve Bank of India (RBI) left its key interest rates unchanged but said policy focus was shifting towards growth, reiterating its October guidance of further easing in the first quarter of 2013 as inflation was seen cooling. The RBI has been resisting calls from the government and business to cut rates due to elevated inflation, in contrast to other big emerging market central banks in China, Brazil and South Korea that have been more aggressive in easing policy to stimulate growth. The RBI, which had last cut its policy rate in April, held the repo rate unchanged at 8 per cent and also kept the banks' cash reserve ratio (CRR) steady at 4.25 per cent, its lowest since 1974. "In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards," the central bank wrote in its mid-quarter monetary policy review. The 10-year bond yield fell 3 basis points to 8.14 per cent from levels before the decision, after initially gaining 1 bp, as the RBI signalled a shift to focus on growth, raising expectations for a rate cut as early as January. However, the BSE Sensex fell 0.2 per cent as of 0538 GMT. "Whatever the RBI spelt out in October seems to have got support from the inflation trajectory. Net of the base effect, we see the current trend continuing and a case for a rate cut strengthening, which they could do in January," said Abheek Barua, chief economist at HDFC Bank, in New Delhi. With headline inflation expected to ease more in coming months, the central bank also assured that it would manage liquidity conditions to support growth. Appreciating the government's recent policy initiatives, the central bank said such moves along with further reforms should boost business activity and investment climate. The Indian economy has posted GDP growth below 6 per cent for the past three quarters and is on track for its weakest annual performance in a decade in the fiscal year ending March. The wholesale price index, India's main gauge for inflation, softened to a 10-month low of 7.24 per cent in November from a year earlier prompting some economists to bring forward their rate cut expectations. "In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards," the Reserve Bank of India wrote in its mid-quarter monetary policy review. "The policy is benign. I think the RBI will begin the easing cycle with a CRR cut in the January policy, said Sujan Hajra, chief economist, Anand Rathi Securities, Mumbai. "The first rate cut will come in February-March and I expect cumulative 75 basis points of repo cuts by June." Expert Views:Leif Esken, chief economist for India and Asean, HSBC, Singapore"The Reserve Bank of India did not see a need to cut the cash reserve ratio at this point, which is a little bit of a surprise. But otherwise their action is in line with expectations. "They have re-emphasised their earlier guidance of possible easing in the last quarter of the fiscal year. I think there is still limited room to cut rates. Structural reforms and a revival of investment in infrastructure would be needed to revive growth." Arvind Chari, fixed income fund manager, Quantum Asset Management, Mumbai"The lack of a CRR cut means that OMOs (open market operations) will continue, which is extremely supportive of bond prices. The text suggests that the January policy should see a repo rate cut, so it makes sense to continue to remain long bonds. We were a bit disappointed by not seeing a rate cut today. Given that the overall trend is towards easing, there was no major reason to wait for the January policy." Shubhada Rao, chief economist, YES Bank, Mumbai"While we definitely expected liquidity injection through more calibrated moves based on government spending, open market operations would still be the preferred route. So basically we are anticipating a rate cut in January by 25 basis points and in March by 25 bps and going into the next fiscal year, we are expecting 50-75 bps additional rate cuts. "If the government keeps a very tight lid on spending in the rest of the fiscal year, we could see a CRR move, but given the sticky nature of government expenditure, it would still be the OMO route for liquidity injection." Abheek Barua, Chief Economist, HDFC Bank, New Delhi "I had expected a CRR cut but there was no compelling reason to do so. Whatever the RBI spelt out in October seems to have got support from the inflation trajectory. Net of the base effect, we see the current trend continuing and a case for rate cut strengthening, which they could do in January. "There is still some uncertainty on government's borrowing, and they could borrow additionally in the last quarter, which could create a situation of tight liquidity and RBI could save for a CRR cut until then.I think today's move reinforces the expectation of more open market operations, which is a bond positive." Radhika Rao, Economist, Forecast PTE, Singapore"Last week's sub-consensus November WPI had fanned speculation in some quarters that the RBI might lower the key rate today, though we reckon that a cut at this stage would have been premature given the scope for these prints to be revised higher in coming months. "That said signs in softening RBI guidance is apparent as focus has shifted to growth and odds for a rate cut in Jan-March quarter is likely to gather considerable momentum here on. Barring a sharp acceleration in December WPI, we look for a 50 basis points reduction in Q1 2013, possibly front-loaded in the January meeting." Anubhuti Sahay, Economist, Standard Chartered Bank, Mumbai"The RBI has struck a cautious note even as it acknowledged moderation in inflation. We expect RBI to reduce repo rate by 25 basis points in Q1 2013 as moderation in the inflation trajectory is likely to be confirmed by then." A. Prasanna economist, ICICI Securities Primary Dealership Ltd, Mumbai"I think it's slightly more dovish than the October policy, driven by lower than expected inflation. They are still concerned about growth. My expectation is of cut in CRR and the repo rate by 25 basis points in January and another repo rate cut of 25 bps in March. "They have said they will continue to provide liquidity and that implies OMO will continue. We expect another 500 billion rupees through OMOs until March. "We are not sure about additional borrowing, because even if there is some slippage to the 5.3 per cent fiscal deficit target, it can be managed through additional T-bills." Rupa Rege Nitsure, chief economist, Bank of Baroda, Mumbai"In line with our expectations, the RBI did not ease monetary policy today citing elevated level of retail inflation. But the language has certainly become more dovish and the probability of a rate cut in January has gone up." Shakti Satapathy, analyst, AK Capital, Mumbai"Today's announcement was mostly in line with the previous tone of the policy. Given growth supportive fiscal stance taken in the recent days by the central government along with ebbing inflationary pressure from the coming months, the RBI would seek a proactive 50 bps repo cut in the January policy. "With almost all the negativity priced in and continuation of timely OMOs, the government bond yields would be on a downward bias in the coming weeks." Arun Singh, senior economist, Dun & Bradstreet, Mumbai"Today's action shows the Reserve Bank of India's seriousness in fighting inflation. The ideal time for the central bank to cut rates will be the end of January, provided there are no surprises on the inflation front. "I think there will be a 25 to 50 basis points cut in the repo rate in the March quarter." Upasna Bhardwaj, Economist, ING Vysya Bank, Mumbai"RBI's forward guidance seems fairly pro-growth, further reinforcing our view that the central bank will ease repo rate in the January meeting. We expect a total 50 bps rate cuts in the March quarter." Anjali Verma, economist, MF Global, Mumbai"The tone of the policy warranted a CRR cut. The liquidity deficit is about 3 per cent of bank deposits. OMOs will most likely continue to come, but does not ease the liquidity situation much. "I think the policy today reinforces a 25 bps repo cut in January. I expect 50-100 bps of cumulative rate cuts in 2013." Aneesh Srivastava, Chief Investment Officer, IDBI Federal Life Insurance, Mumbai"It's another disappointing policy against hopes of a CRR cut and a long shot of a rate cut, but RBI may act in January though. One good thing is markets are seeing buying at lower levels." Market Reaction* The benchmark 10-year bond yield fell 3 bps to 8.14 per cent after rising 1 basis point to 8.17 per cent immediately after the policy.* The rupee trimmed gains to trade at 54.79/80 from 54.76/77 after the policy decision.* The benchmark 5-year OIS rate rose 4 bps to 7.15 per cent while the 1-year OIS rate firmed 6 bps to 7.67 per cent.* The BSE Sensex dropped 0.4 per cent in a knee-jerk reaction after the policy. It had pared most gains and was flat just before the announcement. (Reuters)
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Meet The Duggals. They lead a simple life, live in a Delhi Development Authority (DDA) flat (which weren’t really made to look swanky) and own a scooter. Head of the family, Mr D, ekes out a living as a school teacher and adores his wife and tries to be strict with his children. Mrs D loves him back, but she probably loves living it up more. The children are, well, children. They want what they can’t get or have to whine to get. And then, there’s the scooter. Yes, a two-wheeler for four people. That’s middle-class life, right there.In essence, The Duggals are the epitome of middle-class living.When Planman Motion Pictures released Do Dooni Chaar, last year, little did they realise how it will strike a chord with millions of middle-class Indians out there. The film received rave reviews from critics, and the box office numbers added more feathers to its cap. Why was it that there were hordes of people queuing up to watch the movie? Even the youth loved it, which was surprising, given the absence of ‘youth-icons’.What struck a chord with half the population was the feeling that this was their story, playing out on the big screen. Small, primitive flat on rent – check. Two-wheeler for a family of four – check. All signs of basic, simple living – check. An extreme desire to be better-off and live a life of not necessary luxury, but higher than rudimentary living. A car, neither a Maruti, nor a Toyota, but maybe a Hyundai – on loan, of, course. And yes, a flat with a few modern amenities.Meet the Urban Aspirers – The Duggals of real life. Of AspirationsThe term, Urban Aspirers, coined by the Boston Consulting Group in association with the CII, defines what roughly 19 million households are – what is called the Middle Income Group (MIG). They have successfully eked out a place for themselves between the ‘haves’ and the ‘have-nots’.Urban Aspirers constitute a neat 8 per cent of Indian households, preceded only by Strugglers, a whopping 50 per cent, and Small Town and Rural Next Billion at 24 per cent.That translates into an annual household income for Urban Aspirers that falls between $7,400 and $18,500 and ownership (for two-thirds of their population) of basic television, single-door refrigerator or LPG stove.The same is true for less than one-half of the Rural Aspirer population (at 14 million households, 6 per cent of the population). While two-thirds of Urban Aspirers believe, in two years’ time, their lifestyle will be better than what it is now; only 53 per cent of their rural counterparts feel so.Urban Aspirers are typically characterised by their urbaneness, higher spending power and their propensity to spend compared to their rural counterparts. This Aspirer class will be driven by the urge to mimic their Affluent counterparts, but what will set them apart is their relatively watchful approach to discretionary spends.The BCG says some 300-400 million people will migrate to cities over the next 25 years. With this part of the population playing such an important role in the India growth and consumption Story, the Urban Aspirers of today will end up becoming the New Affluents of tomorrow.The one common thread between Aspirers, both Urban and Rural is the dream of owning a house they call their own. The Urban counterparts, with their stable jobs (if not necessarily double income but controlled discretionary spend), are the target audience banks and other lenders look out for, to provide a home loan that stretches for two decades.What also binds these millions together is their hunt for a house that is actually affordable. Given the current housing shortage - conservative estimates put the 11th Five Year Plan (2007-2012) at 26.53 million dwelling units - finding affordable housing is a tricky problem.In a 2010 report on Affordable Housing, global consultancy KPMG and CREDAI broadly defined affordability in buying a house based on three key parameters: income level, size of dwelling unit and affordability.Taking these three parameters, the Urban Aspirers, or the MIG fall into a category that earns INR 3-10 lakh per annum, needs a dwelling unit of 600-1200 square feet in and whose household expenditure to income ratio is less than 5.1 – the dictionary definition of Affordable Housing.A more commonly accepted rationale for affordability is the household expenses to gross income ratio. In the United States, for example, housing affordability means housing costs that do not exceed 30 per cent of a household’s gross income, while in Canada the figure has changed with times – it went from 20 per cent to 25 per cent in the 1950s and finally now at 30pe4 cent. For India, this number is 40per cent.Although, recent data suggest that housing affordability has declined (to 4.6 in FY 11-12, from 22 in ‘94-95), the serious lack of available housing essentially means the prices of dwelling units coming down will take time. The concept of “Affordable Housing” in contrast is applicable across “ALL” income categories. The ‘affordability’ of a household in a given location is an interactive outcome of house price, income, spending & saving behavior. It is recognized that “affordability” is relative to geographical area, time & income category.The Central government tried to define affordable housing by setting up a committee under HDFC chairman Deepak Parekh. The committee has defined affordable housing in two parameters: The minimum area each category of income should be living in and how much should he be paying for that area.Say for example, a 300 sq ft flat is a decent livable area for a driver working in a government or private firm. Then, he should get it at 5 times his annual income which is defined as Rs 60,000 per annum. So he should get a 300 sq ft flat worth Rs 3 lakh somewhere near his area of work. If he cannot get houses at that rate, then we have a problem that the market is not producing products that people could pay.Suburbs like Boisar and Vasind near Mumbai, Talegaon near Pune are areas where developers are focusing, given the availability of land and access to city centres thanks to a growing network of public transport.Urban Aspirers, who typically fall in the middle income category, are set to play a major role in the demand for affordable housing in the coming few years. What this translates into is a housing shortfall of roughly 35 million plus dwelling units in Urban India.With their numbers set to rise to 23 per cent of the population in less than a decade, Urban Aspirers will rule the roost. The BCG suggests Urban Aspirers are going to lead the India Consumption Story in the current decade, with current consumption pattern suggesting that Urban Aspirers account 11 per cent of India’s total consumption ($109 billion out of $991 billion) and rising three times to $358 billion by 2020.With Middle Class India increasing in size over the next decade, there will be many, many more Duggals added to the list. A large number will be looking for a permanent roof over their heads. While the reel-life Duggals were able to temporarily manage a car, Urban Aspirers will unlikely settle for temporary solutions for housing. What is needed, are millions of such affordable houses for the millions of Duggals out there. Are we up to the challenge?(The author of the article is Brotin Banerjee, MD & CEO, Tata Housing )
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US market regulator SEC has charged four Indian brokerages -- Ambit Capital, Edelweiss, JM Financial and Motilal Oswal -- for providing unauthorised broking services here, but agreed to settle the charges after a payment of more than $1.8 million (about Rs 10 crore).Besides, the Securities and Exchange Commission (SEC) is further probing the role of other companies, which may include some from India, for potential violation of similar nature.The SEC said in a statement late 27 November night that the four financial services firms were providing brokerage services to institutional investors in the US without being registered with the SEC as required under the federal securities laws."The four firms - Ambit Capital Private Limited, Edelweiss Financial Services Limited, JM Financial Institutional Securities Private Limited, and Motilal Oswal Securities Limited - agreed to pay more than $1.8 million combined to settle the SEC's charges," the regulator said.Despite being unregistered broker-dealers, the four companies engaged the US investors here through sponsored conferences, regular travel of their employees to meet the US investors, traded securities of India-based issuers on behalf of US clients and participated in securities offerings from India-based issuers to US investors, SEC said.In their respective settlements, the firms agreed to be censured while neither admitting nor denying the SEC's charges. Ambit agreed to pay disgorgement and prejudgement interest totalling $30,910, Edelweiss agreed to pay $568,347, JM Financial $443,545 and Motilal Oswal Securities agreeing to pay $821,594.The SEC said that the companies' "cooperation with the Commission staff and their prompt remedial measures", besides their initiating registration with the SEC as a broker-dealer, were "important factors in accepting the firms' settlement offers, particularly the Commission's decision not to impose a cease-and-desist order or a penalty."The regulator said it "is continuing to look for potential violations at other firms".With regard to Ambit, SEC said that it systematically solicited US institutional investors for the purpose of providing brokerage services from at least January 2011 through April 2011.When contacted by SEC in May 2011, Ambit said its solicitation had not yet resulted in significant brokerage business from US investors."However, Ambit had received some transaction-based compensation for buying and selling the securities of Indian issuers on Indian stock exchanges on behalf of US investors," the regulator said. About Motilal, SEC said that it solicited and provided brokerage services to US investors from at least 2007 until April 2011.As part of its solicitation of US investors, Motilal organised and sponsored an annual conference in the United States to which Motilal brought representatives of Indian issuers and invited US investors, it said.Further, Motilal bought and sold the securities of Indian issuers on Indian stock exchanges on behalf of US investors in exchange for commissions and soft dollar payments.During the relevant period, as a result of these activities, Motilal received from at least 42 US institutional investors transaction-based compensation in the amount of approximately USD 13.7 million, it said.After being contacted by SEC, the regulator said, Motilal promptly undertook corrective action, including by cancelling a planned conference in the US, entering into an agreement with a US registered broker-dealer, and initiating registration with the Commission as a broker-dealer.JM Financial solicited and provided brokerage services to US investors from at least October 2007 until February 2012, the SEC said.As part of its cross-border activity with US investors, JM Financial bought and sold securities of Indian issuers on Indian stock exchanges on behalf of at least 91 US investors and received transaction-based compensation of about USD 2.3 million.For its overall services to Indian issuers, JM Financial received approximately USD 24 million in transaction-based compensation based upon a percentage of the value of the offerings, a portion of which was attributable to purchases by US investors, SEC said.However, JM Financial also undertook corrective action after being contacted by SEC, the regulator said.In its order against Edelweiss, SEC said that the Indian firm solicited and provided brokerage services to US investors from at least 2007 until July 2011.As part of its cross-border activity with US investors, Edelweiss bought and sold securities of Indian issuers on Indian stock exchanges on behalf of US investors and received transaction-based compensation of about $9.4 million, it said.Edelweiss also participated as a lead or co-lead manager in public offers of seven Indian companies in which shares were sold and/or marketed to US investors. It also participated in private placements of securities structured as 'Qualified Institutional Placements' and alternative asset funds that were marketed to the US investors.After being contacted by the SEC staff, Edelweiss also promptly undertook corrective action, including by immediately ceasing all cross-border US business, the regulator said. PTI BJ(PTI)
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