India's industrial output growth slumped to 3.3 per cent in July, its weakest annual pace in nearly two years, reinforcing expectations the RBI will pause its monetary policy tightening after one more rate rise this week.The output growth was much lower than 6.2 per cent forecast in a Reuters poll and added to the Reserve Bank of India's dilemma of combating inflationary pressures without further stifling economic growth.But analysts argue that data on Wednesday, which is expected to show inflation pushing towards 10 per cent, will sway the RBI to raise rates on Friday for the 12th time since March 2010, before it takes stock."We expect the RBI to continue its tightening stance on September 16," said Shubhada Rao, chief economist of Yes Bank in Mumbai. "There is a case building up for a pause thereafter."Indian stocks fell and the rupee slipped to its lowest level in more than a year on worries over the health of an economy that grew in April-June at its slowest annual pace in six quarters.The euro zone's deepening debt crisis and worries about the health of the US economy have rattled world markets, adding to the domestic concerns of Indian policymakers and another reason for the central bank to pause its tightening.This is similar to China, where economists argue the central bank will hold off on further monetary policy tightening after nine increases in bank reserve requirements and five rate rises since October, as inflation is peaking and economic growth is slowing down.For India though, inflation will remain a problem for a few months more, said the chief economic adviser to the finance ministry, Kaushik Basu."Inflation is going to be very close to 10 per cent (for the month of August)," he said on Monday. "We are expecting inflation to remain very difficult till the month of November, maybe December and then begin to slow down."India's headline inflation was 9.22 per cent in July. The median forecast of a Reuters poll suggested Wednesday's data will show it picked up to 9.6 per cent in August.The central bank has maintained that it has to fight inflation even at the cost of a loss of some economic growth. Most analysts in a Reuters poll expect the RBI to raise its repo rate on Friday by 25 basis points to 8.25 per cent.Still, the weak industrial output figures and global economic concerns have increased the risk that the central bank skips a rate rise this week, some analysts said.Other data, including an Indian purchasing managers' index and car sales have also suggested the rise in interest rates is weighing on the economy."Our base view is for a 25 bps rate hike by the RBI this week. But the probability of a pause has increased due to global uncertainty," said Kumar Rachapudi, fixed income strategist at Barclays Capital in Singapore.Stocks Rattles, Rupee SlidesBSE Sensex extended losses after the data and closed the day down more than 2 percent. The rupee weakened to its lowest in more than a year.India's 5-year swap rate fell 6 basis points (bps) after the data to 6.59 per cent and the 1-year rate slipped 4 bps to 7.51 per cent. The 10-year benchmark bond yield fell 1 bp to 8.26 percent.July's industrial output growth was the weakest since October 2009.Overall industrial output growth was dragged down by a 15 per cent decline from a year earlier in capital goods production, the government data showed. In June, capital goods rose 38 percent from a year earlier.Annual growth in production of consumer goods and consumer durables rose compared to June, indicating consumer demand is still holding up somewhat in the face of rising interest rates.Some cautioned that such high volatility raised doubts about the reliability of the data."We think that this data cannot be a credible guide to RBI policy. Inflation will continue to hold the key for the September rate decision," said A. Prasanna, an economist with ICICI Securities Primary Dealership in Mumbai.Manufacturing output , which constitutes about 76 per cent of the industrial production index, rose 2.3 per cent over a year earlier.Weakness in the West is taking a global toll on manufacturing. South Korea's manufacturing sector shrank in August for the first time in 10 months as new export orders decreased, while China's manufacturing sector contracted slightly for the second consecutive month.(Reuters)
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India will borrow 2.2 trillion rupees ($44.9 billion) in the second half of the fiscal year that begins on Oct. 1, the government said, significantly more than expected, sending bond yields and swap rates higher.R. Gopalan, economic affairs secretary, said the government's borrowing in the second half of the fiscal year would be 528 billion rupees higher than had been budgeted in February.Investors had been expecting additional borrowing, if any, to be around 200-300 billion rupees.Slowing growth in Asia's third-largest economy and rising interest rates to fight high inflation have put pressure on government finances, and New Delhi is far behind target on its plans to sell holdings in state-controlled companies.The government had in the February budget pencilled in gross market borrowing of 4.17 trillion rupees for the 2011-12 fiscal year, to help bridge a fiscal deficit that is forecast to be at 4.6 per cent of the GDP.It has already completed borrowing of 2.5 trillion between April and September, and the full-year borrowing now stands at 4.7 trillion rupees.The benchmark 10-year bond yield spiked 8 basis points to 8.43 per cent immediately after the announcement. The benchmark 5-year swap rate rose 12 bps to 7.15 per cent and the one-year rate rose 6 bps at 7.96 per cent, traders said."Increased supply in an elevated policy rate environment would exert upward pressure on yields," said Nagaraj Kulkarni, a senior rates strategist at Standard Chartered Bank said.Gopalan said the additional market borrowing was required due to lower government cash balances and a lower pool of small savings, but will not change the fiscal deficit target of 4.6 percent of gross domestic product for the current fiscal year.Gopalan declined to comment on whether the government would reduce its disinvestment target of 400 billion rupees in light of the current market turmoil.(Reuters)
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India's commodity exchanges are poised for steady growth over the next few years after annual turnover more than quintupled to $2.5 trillion since futures trading started in 2003, but political hurdles hinder more dramatic development.While a bill to strengthen market oversight and free up entry of financial institutions and the launch of new products has hung fire since 2005, government moves such as bans on some agricultural futures trading have fed regulatory uncertainty."The bill is critical not only for growth but also to unshackle chains that bind the market and restrict its forward movement," said Tanushree Mazumdar, vice president at the National Commodity Exchange, India's second largest."Besides allowing trading in options and indices, it will give more teeth to the regulator."But politicians worry that unbridled futures speculation will drive up food prices, particularly as double-digit inflation proves resistant to the central bank's efforts to rein it in with 12 rate hikes in the past 18 months.A government embarrassed by a wave of public protest over a slew of corruption scandals looks unlikely to take dramatic new steps to quickly alter the picture."There is no political will, no one wants to take a call in the government now," said Kuljeet Kataria, head of business alliance at broker Unicon Investment Solutions, which does $125 million to $167 million worth of futures trades every day."You could hope for something in a couple of years when these things settle down," he said, echoing a timeline suggested by at least two government officials who asked not to be named.Tremendous PotentialYet analysts see tremendous potential in Indian exchanges, even though they have lagged Chinese forward trading which made up 51 per cent of commodity derivative volumes traded worldwide last year, the World Federation of Exchanges says."Globally, commodity derivatives volumes are 35 to 40 times of the physical market but in India it is just 4 times," Nirmal Bang, a leading broking firm, wrote last month."We expect the Indian commodity futures market to reach at least 15 to 20 times by 2015," the firm added, painting a picture of dramatic growth in volume since physical commodities contribute 45 percent to Indian GDP.India, the world's biggest buyer of bullion and the second-largest grower of wheat and rice, has 21 commodity bourses, five operating at the national level, trading in about 80 commodities ranging from gold to carbon credits, though 8 to 10 commodities make up the bulk of volumes.Indian commodity futures volumes have grown to 112.52 trillion rupees ($2.5 trillion) in the financial year to March 2011 from 20.53 trillion in the year to March 2006. Average monthly volumes now stand at about 6 trillion rupees.Turnover in the commodity futures markets has outstripped that of equity derivatives, growing 30 percent since 2008 against a 22 percent increase in the latter, as investors found a "store of value" in commodities in a slowing global economy.Reforms-Driven GrowthBut future growth will only be unlocked by reform moves, including steps to allow foreign and domestic institutional investors, banks and insurance firms to trade and open up options and index businesses.Higher volumes will also spur consolidation of exchanges, much as in the United States. China has just three."Regional exchanges have already been marginalised and they won't be able to sustain themselves, they'll have a big challenge in surviving," said Anil Mishra, chief executive of the National Multi-Commodity Exchange of India, the country's third-largest, with turnover of $46 billion in the 2009/10 fiscal year.India must also overcome infrastructure deficiencies and build an effective warehousing system for its commodity derivatives market where 1 per cent to 5 per cent of total trades are settled by physical delivery, traders say.Although India is a top commodity producer and consumer, turnover on its commodity exchanges is just 5 per cent of those in China -- which limit the role of foreign companies and also do not offer options -- and less than half a percent of US futures trade.Since 2003, government intervention to control key commodity prices has led to several flip-flops in forward trading policy.The government banned futures trading in rice, wheat and two varieties of lentils in early 2007 and sugar in 2009 in its efforts to curb rising food prices. The ban on rice remains.Such moves have proved little help in controlling inflation, bolstering trading firms' views that fears about speculation driving up prices were unfounded and freeing up the futures market could only bring stability to commodity supplies.Also, the government is beginning to see that beyond the massive volumes, forward trading could bring price protection to farmers and their families, who make up almost 60 percent of the country's 714 million voters."The government can no longer ignore the fact that futures trading offers a great price discovery platform that farmers can benefit from," said D. H. Pai Panandiker, head of private think tank RPG Foundation. "Farmers can plan better when they know what price their produce is going to fetch."(Reuters)
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Stock markets around the world had a torrid time last week and the Indian ones were no exception. Concerns over a possible sovereign debt default by Greece and belied expectations of a third of quantitative easing (QE3) by the US Federal Reserve Board sent a wave of negative sentiment through Dalal Street, resulting in across-the-board selling by investors. In a word, liquidity (mainly from foreign institutional investors, or FIIs) just dried up. There was a massive fall on Thursday and Friday that wiped off 900 points from the Bombay Stock Exchange (BSE) Sensitive Index (Sensex), which ended the week with a loss of 772 points overall, closing at 16,162.06 points. On Thursday, FIIs sold over $251 million worth of stock."The volatility in the Indian market is the mirror of what's happening in the global markets," says Puneet Nanda, executive director at ICICI Prudential Life Insurance. "If you ask me when I see the market stabilizing, the answer is I don't know." he's not alone. many others believe the market could fall another 10 or even 15 per cent from here on; no one knows the fate of countries in the Euro-zone.At least for another few weeks, they say, fear and uncertainty will be the twin swords of Damocles hanging over the markets. Economic recovery in the US holds out no hope of certainty either (which matters because the US is opne-third of the global economy). Nanda is certain that there is still some pain left in the Indian market. "The next two-three quarters will be tough in terms of corporate performance," he says. There is little doubt that the slowdown will sooner or later impact corporate profitability. The bigger worry is the long-term, as going ahead (about 2 years from now, according to Nanda), when the the capacity bottle-necks will impact the topline or revenues of many companies. Is there any respite? Perhaps a fall in crude oil prices; they also fell, following the pessimism on the global economic outlook. Brent crude is down $5, trading at around $105 per barrel. Crude oil imports accounts for nearly 55 per cent of total Indian imports.So don't let the bull to charge this week. Markets will probably remain volatile ahead of the expiry date of futures and options (F&O) contracts at end September. Some short covering may help the market regain some of last week's losses, but overall the Sensex is expected to remain jittery, and take cues from its global counterparts.
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The Reserve Bank of India (RBI) remains bent on fighting domestic inflation despite weakening global conditions, officials with direct knowledge of policymaking said, a week before it is widely expected to raise interest rates once again.The RBI, which has lifted rates 11 times in 18 months, makes its mid-quarter review on September 16.Though senior bank officials are hawkish, RBI Governor Duvvuri Subbarao will not make a final decision before the release of August inflation data on Sept. 14, the sources said."We still have high food and non-food manufacturing inflation, good credit growth to industry and growth is also quite good according to our view," said an official with direct knowledge of the matter."So, domestic factors will continue to be the key driver for policy framing," the official said.RBI officials have kept up the hawkish talk in recent weeks even as fears mount that western economies are slipping back into recession, although the central bank is widely believed to be nearing the end of its tightening cycle as its earlier actions exact a toll on demand in Asia's third-largest economy.Also, the finance ministry is putting pressure on Subbarao, whose term was recently extended for two years, not to continue tightening for much longer. Finance Minister Pranab Mukherjee this week was quoted as saying that he hoped the RBI will not raise rates further.Senior finance ministry officials said continued steady rate increases may not have the desired effect of cooling inflation without overly disrupting growth."Yes, inflation still remains the big concern but I see that peaking off at the end of the year, but growth will also come into sharp focus," one of the officials told Reuters.Inflation FirstLast week's jump in food inflation, high non-food manufacturing inflation, the knock-on impact of a June fuel price increase and resilient credit growth all point to a need for continued vigilance, several RBI officials said, declining to be identified given the sensitivity of the matter.Headline inflation for July was 9.22 percent, much above the RBI's end-March 2012 projection of 7 percent. India's food price index rose 10.05 percent in the year to Aug. 20, its highest in nearly six months, while the fuel price index was up 12.55 percent."Inflation has not yet peaked. To some extent the global developments will have some impact on the external sector. We are cautiously hawkish," the first RBI official said.While advanced economies are struggling to ward off stagnation, central banks in emerging markets are confronted with high inflation and cooling growth.Brazil recently surprised with a rate cut despite still-high inflation, and market speculation that China may ease lending conditions for some small and medium sized companies has added to expectations the tightening cycle will soon end in emerging markets."Brazil cut rates after raising them sharply, so they had room to cut. We are anyway behind the curve," said another senior RBI official."So where is the room to even pause unless the global recovery concerns bring down commodity prices drastically?" the official said.Gross domestic product growth in India slipped to 7.7 percent in the three months through June, and with high inflation persisting, many economists are scaling down their growth forecasts.The RBI has raised its key rate by a total of 325 basis points to 8.00 percent since March 2010, including a sharper-than-expected 50 basis point hike in July, meaning its next move is not easily predicted.The minutes of the July meeting of the RBI's advisory panel on monetary policy showed that the majority favoured a pause or a quarter point increase.Subbarao overruled them.(Reuters)
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The Reserve Bank of India (RBI) will consider intervention in the foreign exchange market if pressure on the exchange rate is too great and disrupts real sector activity, Subir Gokarn, a deputy governor of the Reserve Bank of India said on Wednesday.Gokarn was speaking at the annual conference of Federation of Indian Chambers of Commerce and Industry (Ficci) in Mumbai.(Reuters)
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Why do asset bubbles occur? Normally because of widespread denial and not due to a lack of clear indications. Thinking back to the times of the dotcom crash, the Standard &Poor'S&P 500 was trading at almost 30x trailing earnings, slightly less than double its historic mean. Back then, experts explained it with the fast penetration of Internet in all sectors of life, which led to the slight misinterpretation that cash burn rates and revenue/share price multiples are better indicators of a company´s well-being than profitability ratios. In late 2006, before the 40+ per cent decline in US housing prices, the ratio of prices to rents was double the 'old normal', well reasoned again by experts who claimed that it occurred due to Fanny and Freddie´s generous financing (mal-)practices, governmental subsidies and, thanks to Alan Greenspan, low interest rates.This time is different? Well, Rogoff´s and Reinhart´s publication in late 2009 should have disillusioned our hopes of paradigm shifts in the avoidance of bubble/bust cycles in economies and markets. It is still not different. Why? Let´s take a closer look at the V-shape recoveries of western stock markets and if they show signs of overheating. In filtering the most impacting factors on global stock market performances, the US consumer´s recovery and the sustainability of China´s growth path need to be top ranked. Let us examine the pulse of the US consumer. Listening to financial heads talk on big media channels, one would believe that the spin of "reasonably valued stocks" is due to an impressive turnaround in margins and earnings of, in particular, larger corporations. Even if a new equity bubble is arising at the horizon, the signs for it are less obvious.However, going beyond main stream sentiment, is always worth the effort. Taking the S&P 500 current price-to-earnings ratio (PER), trailing earnings, of 15x, we now trade at levels slightly above the 14.6x of its historic mean. Reasonably priced? Applying the more realistic Shiller PER (based on average inflation-adjusted earnings from the previous 10 years), we find a fundamentally different picture. The current Shiller PER of 24x, has only been higher twice; before the Great Depression and at the peak of the dotcom boom. A statistical outlier? Let´s dig deeper. An economy with a GDP still relying on consumption at close to 70 per cent requires a consumer that participates in the creation of wealth. Otherwise the equation is not satisfied. The 'real median household income' doesn´t mince the message: no increase in over 14 years. Is the consumer at least deleveraged, after the roller-coaster real-estate ride during the last cycle? No, not even mean reverted. CoreLogic´s latest release for Q4/2010 sees more than 23 per cent of all mortgages in negative equity!How can we expect the US consumer leading the economy out of the muddle through periods of sluggish growth, turning around the housing market and, as a consequence, justifying higher equity prices, when neither the participation rate in the US job market, nor the wages paid for work are supporting a sustainable recovery?No wonder, Ben Bernanke felt pressurised in August 2010 to announce QE II, compensating for President Obama´s lack of political capital for a second stimulus (Bush tax cut extensions in late 2010 had a marginal effect on the economy). Did the soon to end QE II at least work? Bernanke´s goal to stimulate Main Street activities expanded the central bank´s balance sheet to $ 2.72 trn (or about 18 per cent of US GDP). In the official M3 money supply was shrinking until spring 2011 since the outbreak of financial crisis. The Fed´s activities might not have helped the Main Street recover (US GDP growth in Q1/11 has been marginal at +0.4 per cent QoQ (quarter on quarter), compared to Germany´s +1.5 per cent QoQ), but successfully fought deflationary pressure. We can call it consolation money. In short, the current state of the US consumer doesn´t justify the market´s assumption of a sustainable economic recovery. The 'Sustainable' Chinese Growth PathIs China the last man standing? Not so much. Since the Chinese Vice Prime Minister Li Keqiang admitted that "man-made" GDP numbers that are "for reference only" (WikiLeaks, 2007 cable, published Jan11), we now officially know what to do with those numbers; ignore them. He himself recommended that it is better to measure the country's economic health via electricity consumption and similar second and third row indicators. How can we refuse the advice of a high ranked party member? Electricity consumption increased in 2010 by 14 per cent, indicating stronger growth of the economy than the GDP numbers tell. Interestingly, the quarterly growth pattern has shown a significant slowdown during 2010. Starting with +22.7 per cent in Q1, the year ended with only +5.5 per cent. China´s gross fixed capital formation was close to 50 per cent towards the end of 2010, which indicated significant overcapacity not only in real estate but sectors as well. Also, the rise of inflation is clearly not under control yet. Instead, the National Bureau of Statistics has reduced the weighting of food prices in the CPI basket as per 1January 2011, to lower the official inflation numbers. Statistical tricks might do the job for some time to keep the public quiet. Global investors should however be warned by these red flags. ConclusionEquity investors beware of the market´s confidence in the US consumer and Chinese short term strength. Emerging market indices are down 20+ per cent from their post-crisis highs. The flow of funds for Q1/11 reports an outflow from emerging economies, back to the old world´s equity markets. But even this assumption is built on sand. We are bearish on global equity for the second half of 2011. Markus Schuller is a professor of Finance at International University of Monaco. He is the founder of Panthera Solutions , an alternative investment consultancy in the Principality of Monaco
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The Reserve Bank of India has not intervened in a big way in the currency markets, unlike most of its emerging Asian peers, because it can ill-afford to expend a limited and fragile holding of foreign exchange reserves, RBI sources say.The rupee gained on Friday, recovering sharply from a more-than-28-month low, aided by a firm euro and suspected intervention by the central bank, traders said.The RBI is likely to have sold dollars from around 49.60 per dollar, traders said, taking the rupee to the day's high of 49.10, at which point it recovered 1.6 per cent from the day's low.That reluctance to intervene is just one of the factors that sets the RBI apart. It also is currently the most hawkish in the region, waging an expensive and tough war against inflation, while most of the world frets about slowing US growth and a European debt crisis.A persistent current account deficit and realisation that an uncertain global environment is bound to keep markets volatile are reasons the RBI is loath to intervene in a big way, spending its small pool of dollar reserves, sources with direct knowledge of the matter told Reuters.While many Asian central banks including South Korea, Indonesia and Philippines have been spotted selling dollars to protect their currencies, the RBI has put up only a token show, with some minor intervention in recent weeks.India's partially convertible rupee has been the worst performer among major Asian currencies -- so far in 2011, losing nearly 12 percent of its value since touching its 2011 high of 43.855 against the dollar on July 27."Intervention depends upon the pace of volatility. But the threshold for volatility also changes with the situation," an official familiar with the matter told Reuters."Look at how the euro has been behaving, how gold, U.S. Treasuries have been moving. If all asset classes are so volatile, then the tolerance level will also rise."The rupee has weakened nearly 7.2 percent against the dollar since late August, on heightened concerns over European sovereign debt and a likely Greece default. The euro has fallen on most days since Aug. 29, 7.3 per cent down in the period and touched a seven-month low of $1.3499 on Sept. 12.In the same period, the key Asian currencies -- Korean won, Indonesian rupiah, Philippine peso have fallen between 1 percent and 10 per cent.UndervaluedThe RBI's modest approach would be understandable if they were keeping the rupee stable in trade-weighted terms, but that is not the case. The rupee has been increasingly undervalued in nominal trade-weighted terms.However, this approach is not new. Its forex policy has by definition been hands off.Asia's third largest economy has reserves that are merely a tenth of the size of mighty neighbour China's. Because India runs a trade deficit, the reserves also comprise a pool of borrowed money that can dwindle quickly should foreigners pull short-term investments away from the country.Still, many traders and economists are now questioning the wisdom of sticking to that practice amid high inflation, a large trade deficit and heightened uncertainty across currency markets."Downside pressure remains strong, and one-off intervention may not be enough in an environment of growing contagion risks. This begs the question of whether an increase in the frequency and magnitude of RBI intervention is likely," Standard Chartered said in a report.The RBI was last a net seller of dollars in April 2009, when the Lehman crisis weakened the rupee, and any intervention since then has always been aimed at checking a rise in the local unit.But the biggest impediment to dollar sales is the country's current account deficit , a stark contrast with its Asian peers such as Indonesia, South Korea and Taiwan, all of whom are running current account surpluses."There is an asymmetry when a central bank buys dollars to intervene and when it sells dollars to intervene," the official familiar with the matter said."When you are selling dollars, you are losing the country's FX reserves, which is not a very comfortable thought given that we are a current account deficit country."In the face of foreign fund outflows and India's trade deficit, the RBI's absence from the FX market has only fuelled investor pessimism towards the rupee, the Standard Chartered economists noted.India's current account deficit in January-March narrowed to $5.4 billion from $12.8 billion deficit a year earlier, but the global slowdown could hurt exports, widening the deficit again.A wider current account deficit would put pressure on the country's ability to buy oil which is by far the largest component in India's import bill.Inflation & InterventionThough the RBI maintains that it will never use the foreign exchange rate to contain inflation, selling dollars to arrest the rupee's current sharp drop has the added attraction of helping to ease imported inflation.India's big state oil companies last week raised the price of petrol by nearly 5 per cent."Yes, the petrol prices were raised because of the rupee depreciation and not due to any rise in global oil prices and that will have an impact on inflation," said another official senior official, directly involved in the matter."But any impact on inflation due to intervention will be incidental and not our objective," the official added.India's inflation has stayed over 9 percent for the last four months and persistently above the central bank's comfort zone of 4.0-4.5 percent despite the RBI's aggressive 18-month rate tightening cycle."It is a sentiment spiral that started in August and I don't think the rupee will turn around unless there is some positive development globally," he added.(Reuters)
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Stock markets turned a sea of red on Thursday, with the BSE Sensex plunging the most in 26 months -- down 704 points to 16,361.15 -- as investors dumped equities globally on US Fed warning on the American economy, triggering fresh fears of worldwide slowdown.All the 13 sectoral indices closed with sharp losses of up to 6 per cent, while all 30 Sensex-scrips closed in red.Investors lost over Rs 2 lakh crore in the meltdown.Besides, fall of the rupee to over 2-year lows against the US dollar -- Rs 49.36 per USD in intra-day trade -- weakest level since July 13, 2009, added to investor worries.A sputtering US economy and headwinds from a European debt crisis could crimp foreign portfolio investments, while a sharp fall in the rupee will accelerate inflation pressures, traders said.Asian and European markets tumbled, following drubbing of the Wall Street as funds pulled out of risky assets on worries over slowing global economy.The selloff picked up pace after European stocks tumbled nearly 4 per cent, with export-driven software services exporters such as Infosys, energy major Reliance Industires and banks among the big losers."We are mimicking what is happening globally. Our markets will remain weak unless there is some recovery (in Europe)," Sailav Kaji, director of institutional equities at Padmakshi Financial Services, said.Analysts said the US Federal Reserve disappointed investors with its stimulus plan yesterday, while warning of serious downside risks to American growth amid severe euro zone debt crisis.The US indices, Dow Jones and Nasdaq tanked 2.49 per cent and 2.01 per cent respectively, weighing heavily on other global markets today.The Hong Kong's Heng Seng dropped 4.85 per cent, Japan's Nikkei by 2.07 per cent, Indonesia?s index by 8.88 per cent.Markets fell more than 3 per cent in Taiwan, Russia and Poland. The European indices, led by London' FTSE plunged 4.55 per cent, followed by Paris - 4.65 per cent - in early trade.The 30-share BSE index, Sensex, opened 230 points lower and plunged to 16,361.15, a fall of 704.00 points or 4.13 per cent. It had plunged by 869.65 points or 5.83 per cent on July 6, 2009.Shares in Reliance Industries, which has the maximum weight on the main index, fell 6.1 percent in their biggest one-day fall since June 2009, after media reports the oil ministry may lower the company's cost recovery at its key gas blocks off India's east coast.A company spokesman declined to comment when contacted by Reuters.Earlier this month, India's federal auditor had criticised the energy major and the government over development of natural gas field in the Krishna Godavari basin and called for revamping profit sharing arrangements from oil and gas blocks.Software services bellwether Infosys shed 3.4 percent and bigger rival Tata Consultancy Services dropped 4.7 percent.State Bank of India, the country's largest lender, lost 3.6 percent and rival ICICI Bank fell 4.3 percent.Other big losers included realty major DLF, which fell 7.2 percent, while infrastructure firm Jaiprakash Associates tumbled 9.3 percent on growth concerns.Similarly, the broad-based NSE index Nifty plunged 209.60 points, or 4.08 per cent to close below 5K mark at 4,923.65.The 50-share NSE index closed down 4.08 percent at 4,923.65 points. There were 10 losers for every gainer in the broader section on heavy volume of 625.4 million shares.World Stocks TumbleWorld stocks as measured by MSCI fell more than 2.4 percent to a new year low, making for a 14 per cent year-to-date loss.The more volatile emerging markets stock index was down nearly 5 percent for a 22 percent 2011 loss.The stocks slide sent the rupee skidding to its weakest in more than 26 months and triggered concerns about more pressure on inflation that has been running at more than 9 percent for months."We are net importers of crude and rupee-fall will bring in imported-inflation as all our crude imports are in dollar terms," Kaji said.The Reserve Bank of India had raised rates last week for the 12th time in 18 months and warned fighting stubbornly high inflation remained its priority even as economic growth was slowing.Stocks That Moved* Astral Poly Technik rose as much as 20 percent after the company said it was in preliminary talks with U.S. based Lubrizol Corp to set up a chlorinated poly vinyl chloride making plant.* Videocon Industries closed down 1 percent after initially rallying 3 percent following an oil and gas discovery in Brazil announced by the energy unit of the consumer electronics maker.Top 3 By Volume* KS Oil on 36.77 million shares* Unitech on 29.42 million shares(Agencies)
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Think of it as reinvestment with a twist. HDFC Mutual Fund has launched a debt fund for cancer cure, which lets investors donate a part of or the full dividend to the Indian Cancer Society. After a decade of profitability and steadily growing assets under management (AUM), the latest offering is an innovative way of espousing philanthropy from this year's winner of the Best Fund House in BW-Value Research survey of the mutual fund industry. But Milind Barve, managing director of the fund's asset management company (AMC), says this is not a one-off thing; the AMC will continue its focus on philanthropy and investor education, activities that investors will remember it for, besides its record of quality performance.In the year of its launch, HDFC AMC, an offspring of HDFC Bank, collected Rs 1,238.13 crore (as on 31 March 2001) of average assets under management (AAUM); by December 2010 this figure was Rs 87,883 crore, a 71-fold increase in 10 years. Its profits for the year ended 31 March 2010, were Rs 208.36 crore, compared to Rs 129.11 crore in the previous year. The first year was the only year in which it missed paying a dividend. The performance speaks for itself: in 2010, the AMC had 22 top-rated funds, seven of which were 5-star rated (HDFC Top 200, HDFC Equity, to name two), and 15 were rated 4-star by Value Research. Franklin Templeton AMC and Birla Sun Life AMC are the next best performers. Barve attributes this success to the AMC's focus on the retail investor (much like the parent bank's focus on the retail customer) and not spending too much resources developing new products. He believes in keeping his funds simple in order to make them investor friendly. Says Barve: "We believe passionately that the Indian market needs products that are not too innovative, or they become too complex for our investors." The AMC has added only two new products in past five years and around 60 per cent of its assets come from retail investors. Top 3 Mutual Fund Houses 1 HDFC Mutual Fund2 Franklin Templeton AMC3 Birla Sun Life Mutual Fund So, besides the consistently high performance, what is it that helped the fund outshine other players in the business? "The focus was to build the retail business instead of going after the low hanging fruit of getting large amounts of money from a few corporate and large institutions," says Barve. So much for the customer; but what about investments by the funds? The story there is pretty much the same: buyvaluable companies, look at potential growth, and take a good look at management. Simple, perhaps boring, but very effective. But Barve is going global: he will allow overseas investors to put money into his existing funds, using Credit Suisse's marketing network. But he is also concerned about the low penetration of MFs in India. "All of us relatively large players in the industry have a role in building the market," says Barve, who may be wearing his hat as chairman of the Association of Mutual Funds of India when he says this. "It's not about market share, or about being No. 1 or 2. Unless the market itself grows, we cannot." His AMC has the resources to achieve some of that: a system of 111 service centres and nearly 36,500 distributors to further the cause. shrutika(dot)verma(at)abp(dot)in (This story was published in Businessworld Issue Dated 28-03-2011)'
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