The rupee is trading at 61.23/24 versus its close of 61.13/14 on 9 December, tracking losses in the domestic sharemarket and on the back of dollar demand from oil importers.The BSE Sensex is down 0.2 per cent on profit-taking after hitting record highs in the previous session.Traders expect the pair to remain in a 60.90 to 61.40 range during the session with stocks moves the key to direction as traders will watch the likely direction of foreign fund flows.Almost all Asian currencies trading stronger to the dollar.(Reuters)
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Oil prices stabilised on 26 November after the previous session's slide as traders questioned how quickly the Iranian nuclear accord could translate into higher supplies, while Asian shares got off to a cautious start.The yen regained some poise following Monday's steep decline to a six-month low against the dollar and a four-year trough versus the euro.US crude prices added 0.2 per cent to above $94 a barrel, pausing after the previous session's 0.8 per cent decline following a weekend deal between the West and Tehran to halt Iran's most sensitive nuclear activities in exchange for some relief from crippling sanctions."The interim six-month 'freeze' agreement just reached on Iran's nuclear programme should not have any impact on oil prices, aside from short-term sentiment, because core sanctions on oil and banking have not been touched," Societe Generale said in a note."We see a greater than 50 per cent chance that a comprehensive agreement will be successfully reached within six months....If and when that happens, it could take Iran three to nine months to recover the one million barrels per day in production lost since 2011."MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.1 per cent, adding to a 0.3 per cent rise in the previous session on the back of the Iranian deal.Thai assets looked set to come under further pressure on heightened political uncertainty as anti-government protesters forced their way inside the country's Finance Ministry and burst through the gates of the Foreign Ministry compound, in a bid to oust Prime Minister Yingluck Shinawatra.On Monday, the Thai SET index fell for a fifth straight session to an 11-week closing low and the baht tumbled to a two-week low versus the dollar.Citigroup said the Iranian nuclear deal could be a "get-out-of-jail-free card" for current account deficit countries, such as India, Indonesia and Turkey, which face a liquidity drain when the Federal Reserve eventually tapers in the coming months.Tokyo's Nikkei share average was likely to take a breather, with futures pointing to a weaker open after it climbed 1.5 per cent on Monday to within sight of a 5-1/2 year peak reached in May.The Japanese currency, which typically falls when share price rise, was up 0.2 per cent at 101.52 yen to the dollar and up 0.1 per cent at 137.27 to the euro.The euro was little changed at $1.35195, having fallen 0.3 per cent overnight."We remain bullish on the dollar heading into 2014 but remain tactically cautious on establishing longs, with a number of U.S. dollar pairs already trading at the high end of their ranges and data unlikely to be consistent enough to support expectations for an early tapering," analysts at BNP Paribas wrote in a note.Data showed on Monday that contracts to buy previously owned U.S. homes fell for a fifth straight month in October, hitting a 10-month low and adding to signs of cooling in the housing market.US stocks ended mixed overnight, with the Dow Jones industrial average posting a slim gain to end at another record high, while the S&P 500 eased 0.1 per cent.(Reuters)
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The Reserve Bank of India plans to soon launch a 10-year savings instrument that will offer inflation-linked returns to small investors as an alternative to investing in gold."It is proposed to launch Inflation Indexed National Saving Securities (IINSSs) for retail investors in November/December 2013 in consultation with the government," the RBI said today in its Second Quarter Review of Monetary Policy 2013-14.The inflation-indexed securities for retail investors will be linked to the new (combined) consumer price index (CPI). The interest on these securities would comprise of a fixed rate plus inflation."Interest would be compounded half-yearly and paid cumulatively at redemption. These securities will be distributed through banks to reach out to the masses," the RBI said.Eligible investors would consist of individuals, Hindu undivided families, trusts and charitable institutions.The Union Budget for 2013-14 had proposed introducing instruments that would protect savings from inflation and provide an alternative to gold as an investment avenue for individuals.Both the government and the RBI have imposed a host of restrictions on the import of gold, one of the major reasons for the record high current account deficit in the previous financial year.In another decision, the RBI allowed banks to pay interest on savings and term deposits at shorter-than-quarterly intervals. Banks are currently required to pay interest on such deposits at quarterly or longer intervals. (Reuters)
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Finance Minister P Chidambaram on Thursday (24 October) asked financial sector regulators, including RBI and Sebi, to take preventive steps to neutralise the impact of US Federal Reserve's monetary stimulus tapering that is likely early next year.Chidambaram, according to sources, asked regulators at FSDC meeting to work out preventive measures. The Financial Stability and Development Council (FSDC) members include heads of regulatory bodies like RBI, Sebi and IRDA.The meeting was attended by RBI Governor Raghuram Rajan, Sebi chief U K Sinha, among others. Former Reserve Bank of India (RBI) head D Subbarao was a special invitee. The Forward Markets Commission (FMC) was included in the FSDC and its Chairman Ramesh Abhishek was also present.The Minister, sources said, "asked different regulators to work on preventive measures to counter the impact of tapering which is likely to take place early next year".Tapering, which refers to gradual withdrawal of the USD 85 billion a month bond purchase programme, was deferred by the US Federal Reserve in September.The tapering, whenever it takes place, will have a bearing on global economy. It will impact fund flows to emerging economies, including India.Chidambaram also expressed the confidence that current account deficit (CAD), the difference between outflow and inflow of foreign exchange, will remain within the earlier estimate of USD 70 billion of 3.7 per cent of the GDP in the current fiscal.It had touched an all time high of USD 88.2 billion, or 4.8 per cent, in 2012-13. .Chidambaram said all efforts would be made to bring down the fiscal deficit to 4.8 per cent of the GDP in the current fiscal from 4.9 per cent in the previous fiscal.Earlier this month, the Finance Minister at an IMF committee meeting in Washington had said the government was committed to the path of fiscal consolidation and had drawn red lines for fiscal and current account deficits."We shall not allow the red lines to be breached under any circumstances and we shall remain within the red lines. We are prepared to take difficult decisions in this regard, should the need arise," he had said.Elaborating on the tapering at the FSDC meeting here, Chidambaram said it was likely to take place sooner or later and as such regulators "must take all possible action to avoid any adverse impact on the Indian economy".Among other things, the FSDC also discussed the possibility of implementation of the Financial Sector Legislative Reforms Commission (FSLRC).It was decided in the meeting that all regulators, including FMC, would finalise the principles relating to regulatory governance, transparency and operational efficiency for implementation of the FSLRC recommendations.The Commission, headed by former Justice B N Srikrishna, had presented its report to the government in March suggested merging of financial sector regulators such as Sebi and Irda into a Unified Financial Agency (UFA) and the role of RBI be restricted to regulating banks and managing monetary policy.Under the regulatory architecture proposed by the Commission, Sebi, FMC, Insurance Regulatory and Development Authority (Irda) and Pension Fund Regulatory and Development Authority (PFRDA) should be merged into a UFA.The Commission had proposed setting up of seven agencies -- RBI, UFA, Financial Sector Appellate Tribunal (FSAT), FSDC, Resolution Corporation, Financial Redressal Agency and Public Debt Management Agency --- for managing the financial sector.(PTI)
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India, the world's biggest buyer of bullion, will stop futures trading in precious, base metals and energy futures on Saturdays with immediate effect, in line with global practices, a move that could hurt already sagging volumes at the Multi Commodity Exchange.However, trading in futures of agricultural commodities will continue on Saturdays for now and will be reviewed after three months, the Forward Markets Commission, which regulates commodity futures exchanges, said in a statement.The move could further dent volumes, which are already down due to the imposition of the commodity transaction tax from July, and higher margins."Already volumes had been falling from July on MCX. With today's announcement we might see a further fall. Retail traders may opt to close their positions on Friday itself," said Sumit Mukherjee, an analyst with Karvy Comtrade in Hyderabad.MCX recorded an average volume of Rs 2015 crore on Saturdays from July to September, about 7 per cent of the daily weekday volume of 269.72 billion rupees, data from the exchange showed.(Reuters)
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Months of anticipation will come to an end next week when the Federal Reserve finally says whether it will start to rein in its massive stimulus of the economy, which has flooded financial markets with some $2.75 trillion over the past five years, supercharging returns on everything from stocks to junk bonds.But for all the concerns that the reduced presence of such a giant asset buyer would be calamitous for investors, it appears equity and bond markets are poised to take next week's Fed decision largely in stride - provided the central bank doesn't surprise with the size of its move or shock in some other way.The Fed has telegraphed its intentions to pare back its monthly purchases of $85 billion in bonds at its two-day meeting that ends next Wednesday. The scale of the tapering and what Fed Chairman Ben Bernanke might say at his press conference are key here, but the steady messaging in the last few months means next week probably won't see carnage in the markets.Investors have already done a lot of work in absorbing the Fed's message. Benchmark bond yields are now hovering near two-year highs, while stocks have edged off highs reached in early August, removing some of the froth that had started to concern some investment strategists."The Fed already got tapering without actually tapering," said Daniel Heckman, senior fixed income strategist at US Bank Wealth Management in Kansas City, Missouri.Key measures of volatility and futures positioning show there is not much fear. The CBOE Volatility Index, the market's favoured gauge of Wall Street's anxiety, hovered around 14 on Friday, 13 September, a level associated with calm markets.The Fed has said it would wind down its program if it is confident that the economy is improving, particularly that the jobless rate is heading lower. If it delays any action, it could raise concerns that it fears economic growth is going to be too anemic without the Fed's help.Recent data has been mixed, with August jobs and retail sales data falling short of expectations. Consumer sentiment has fallen in part due to rising interest rates.That's prompted analysts to issue only modest forecasts for the reduced buying. A Reuters poll showed a consensus for the program's $85 billion monthly pace to be cut by $10 billion, less than earlier estimates.However, the current low volatility means the Fed runs the risk of spooking markets if it moves too quickly or surprises with its intentions."The Fed needs to move from being aggressively stimulative to merely very stimulative," said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York. "Markets are less prepared for it to do more, and if it does you might see a return to defensive areas."In May, after Bernanke spoke about potentially slowing stimulus this year, the S&P 500 fell 7.5 per cent. The index is unlikely to see a similar decline on any surprise next week, with many analysts citing its 50-day moving average as support. Currently, the index is 0.7 per cent above that level.Reducing Risk Still, investors have been taking steps to reduce risks ahead of such an important announcement. Trading in options of the S&P 500 tracking exchange traded fund - the SPDRs - was dominated by bearish put buying. Put contracts give a holder a right to sell a security by a given date at a certain price, and are generally used to hedge against declines.A total of 1.16 million puts and 559,000 calls changed hands in the SPY fund on Thursday, a ratio of 2.08 to 1, according to options analytics firm Trade Alert. That ratio is above the 22-day moving average of 1.64."As we head into the weekend and the Fed meeting next week, traders are starting to hedge their long equity positions," said JJ Kinahan, chief strategist at TD Ameritrade.Michael Mullaney, who oversees $10.7 billion as chief investment officer at Fiduciary Trust Co in Boston, said his firm was pulling back because of the uncertainty."We don't want to get aggressive for a while; there are just too many uncertainties to get through before we add more risk," he said, also citing seasonal issues and government budget policy as overhangs.That sentiment prevailed among many investors in August, resulting in a 3.1 per cent loss for the S&P that month, the worst monthly performance in a year. That decline helped restrain S&P valuations, with the forward price-to-earnings ratio of the S&P 500 currently at 14.6, according to Thomson Reuters data, in line with a historic average of 15.Sectors tied to the pace of economic growth have been among the biggest beneficiaries to the Fed's policy, with both the financial and consumer discretionary groups up more than 20 per cent this year, outpacing the S&P 500's 18-per cent rise. Any surprise from the Fed could hit those groups the hardest."Those economically sensitive groups would pullback the most, and housing is at the top of any list of vulnerable sectors," said BNY's Grohowski, who oversees about $175 billion in client assets.Housing stocks have performed well recently, rising 6.3 per cent in September, but remain more than 16 per cent below a peak reached in May. The sector could weaken further if the Fed takes any steps that lead to a rise in interest rates."Both stocks and bonds will like it if the Fed tapers $10 billion only in Treasuries. If it pares down on its mortgage-backed security purchases, we're very worried about what that will do to the housing market," said Mullaney.The Fed is expected to maintain its current level of purchases of mortgage securities, focusing instead on pulling back on its $45 billion in monthly buys of Treasury notes. Anticipation of this has pushed yields on the 10-year Treasury note higher for five straight months.Still, blistering demand for Verizon's record $49 billion bond deal this week, together with a solid reception for the government's $65 billion in debt supply this week, signaled investors might have grown less wary of reduced stimulus.Hurting Emerging MarketsIn the currency market, an aggressive Fed could lift the US dollar "by pushing rates up at the long end, making U.S. yields more attractive, and at the short end as well, making Japanese investors, among others, worry that hedging costs could go up quicker than expected," said Steven Englander, head of currency strategy at CitiFX, a division of Citigroup, in New York.Emerging markets were hardest-hit once the Fed started to lean in the direction of cutting stimulus, with sharp selloffs in debt and equity markets around the world. Some markets have since recovered some losses, but investors have been hedging against any Fed shock that could hit those markets.Mike Tosaw, financial advisor at RCM Financial Services, an investor advisor in Chicago, said his firm has a put position on the iShares China Large-Cap ETF."Now is definitely not the time to take it off because what happens with the FOMC meeting next week could have a ripple effect on global markets," Tosaw said.While the Fed will be the primary market driver next week, investors will also look to quarterly results from FedEx Corp , viewed as a proxy for economic activity, and software giant Oracle Corp. The market will also see data on August housing starts and existing home sales, and the monthly Philadelphia Fed business index.(Reuters)
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Gold prices suffered the steepest fall in a week on 5 September' 2013, falling by Rs 1,250 to Rs 30,950 per ten grams here on heavy sell-off by stockists as equity markets and rupee recovered after RBI's fresh measures. Silver also plunged by Rs 1,800 to Rs 53,700 per kg on poor offtake by industrial units and weakening trend in overseas markets. Traders said the precious metals fell sharply following fast recovery in rupee against the dollar after the new RBI chief announced measures to boost economic growth. The rupee was trading higher by 84 paise at Rs 66.24 per dollar, while stock markets were up by over 2 per cent, denting the appeal of gold considered as safe haven for investors during economic turbulences. New RBI Governor Raghuram Rajan came out with a slew of measures to rescue the battered financial markets to boosting growth. Traders said a weakening trend in overseas markets on expectations for reduced stimulus in the US and limited military strikes against Syria, further influenced sentiment. Gold in Singapore, which normally sets price trend on the domestic front, fell 0.7 per cent to 1,381.35 dollar an ounce and silver by 0.9 per cent to 23.27 an ounce. On the domestic front, gold of 99.9 and 99.5 per cent purity suffered Rs 1250 loss each to quote at Rs 30,950 and Rs 30,750 per ten grams respectively. It had gained Rs 1,100 in last two sessions. Sovereign declined by Rs 200 to Rs 25,100 per piece of eight gram. Silver ready dropped by Rs 1,800 to Rs 53,700 per kg and weekly-based delivery by Rs 2400 to Rs 54,600 per kg. Silver coins also fell by Rs 1,000 to Rs 88,000 for buying and Rs 89,000 for selling of 100 pieces.(PTI)
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Retirement fund manager EPFO will launch an online facility tomorrow where over 5 crore subscribers can view their updated accounts. "We will launch the facility tomorrow where subscribers can track their accounts online on a real-time basis and check their updated accounts," EPFO's Central Provident Fund Commissioner K K Jalan said. At present, subscribers get account statements once a year. The Employees' Provident Fund Organisation (EPFO) has to dispatch annual PF account slips by September. The PF slips for 2012-13 are supposed to be provided by September 30, 2013. Sometimes, it takes longer to receive the statements because the EPFO hands them over to employers for distribution to workers. The new facility will enable subscribers to see their updated accounts and take printouts for their records. Jalan said EPFO members would be able to see their account balances, including credited interest, as of March 31. For the period starting in April, they would be able to see the amounts credited to their accounts every month without the interest component because the rate of return on PF deposits for this fiscal has not been announced, he added. Jalan also said the EPFO will issue annual PF account slips on demand. The facility will be launched by Labour Minister Sis Ram Ola tomorrow morning at the EPFO headquarters in the capital. All members, including those with inoperative accounts, will benefit from online access, Jalan said. The EPFO makes accounts inoperative when a contribution is not made for 36 months in a row.(PTI)
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The BSE Sensex fell around 400 points and the Nifty slumped over 100 points on Wednesday, 21 August. The Bank Nifty was off highs, and was down 0.5 per cent after earlier rising as much as 5.93 per cent after the RBI eased cash and bond holding rules for banks late on Tuesday. The rupee on the other hand, hit a fresh all-time low, trading around 64.40 per dollar as heavy dollar buying from large state-run banks along with demand from custodian banks hurt the local currency on Wednesday. The partially convertible rupee was trading at 64.30/40 per dollar, after hitting a record low of 64.40 and down around 1.7 percent on the day. Traders said there was no signs of RBI's intervention in the spot market so far during the session. Book value or net worth of state-owned banks would become more opaque after the Reserve Bank of India eased bond holding rules, Morgan Stanley said in a report on Tuesday. State Bank of India is down 1.2 per cent after earlier rising as much as 5.5 per cent, while ICICI Bank Ltd is down almost 2.4 per cent, also retracing intra-day gains. Falls also track lower global shares on concerns that minutes of the US Federal Reserve's July policy meeting may add to suspicions it will soon pare back on stimulus. Market Reacted Well To RBI MeasuresEarlier, snapping a three-day downmove, the Bombay Stock Exchange (BSE) benchmark Sensex Wednesday jumped by 321 points in early trade, led by rally in banks and capital goods stocks, on the back of overnight steps taken by Reserve Bank of India (RBI) to ease liquidity. The RBI said late on Tuesday it will buy Rs 8,000 crore of bonds on Friday and will pare down its cash management bill sales as its target of pushing up the overnight rate to the central bank's emergency funding rate of 10.25 per cent had been achieved. The RBI relaxed rules on mandatory bond holdings for banks, known as the statutory liquidity ratio, which will help protect lenders from large mark-to-market losses. While banks had previously been asked to cut their hold-to-maturity bond holdings gradually to 23 per cent of deposits, the RBI on Tuesday allowed banks to retain them at 24.5 per cent of deposits. The 30-share barometer surged by 321.66 points, or 1.76 per cent, to 18,567.70, aided by buying in beaten down bluechip stocks. The index had lost over 1,121 points in the previous three sessions. Similarly, the wide-based National Stock Exchange index Nifty recovered 80.85 points, or 1.50 per cent, to 5,482.30. Brokers said sentiments turned better after the RBI yesterday (20 Aug) announced a fresh set of liquidity easing steps amid rupee falling past 64 mark. The banking sector index led the recovered by gaining 5.53 per cent to 11,092.12 points as stocks of SBI were up by 5.07 per cent to Rs 1,632.20, ICICI Bank by 3.34 per cent to Rs 857.25, and HDFC Bank by 5.25 per cent to Rs 614.90. Meanwhile, in other Asian markets, Hong Kong's Hang Seng index fell by 1.01 per cent, while Japan's Nikkei shed 0.79 per cent in the early trade. Ahead of release of crucial minutes of the Fed meeting held in July, the US Dow Jones Industrial Average ended 0.05 per cent lower in Tuesday's trade.(Agencies)
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Stating that the current economic scenario is similar to 1991-92 crisis, foreign brokerage Barclays today said credit growth of banks will slow down to 10-11 per cent levels, just like it did during the crisis in early 90s. "The current macro context and consequently the monetary policy challenges are similar to those in FY1992," it said in a note. Barclays drew a slew of parallels between the ongoing economic scenario and the one during the dark period of 1991-92, like a sharp GDP slowdown, strained external account and sticky inflation. It can be noted that growth has fallen to a decade low of 5 per cent in FY13, the current account deficit is at a record high of 4.8 per cent, while the headline inflation also surged to 5.79 per cent due to the rupee depreciation, after showing ebbing for three months. Top economic policymakers, including Prime Minister Manmohan Singh, who ushered in the reforms in 1991 as a result of the crisis, have been repeatedly asserting that the scenario at present is not the same as 1991. It added that in 1991-92, capital spending and credit growth were weak, and hence, going to the bond markets was an unattractive option for banks. "If the FY92 scenario is repeated, credit growth could drop to 10-11 per cent," it said, conceding that this is contrary to the current focus on credit growth getting constrained because of weak deposit growth. Barclays said given their inflexible cost structures, public sector banks would get impacted because of this while others like Yes Bank and Indusind Bank, which are witnessing a string of growth in operating expenses because of network investments will also be hit. "A prolonged slowdown in credit growth would put pressure on the cost to income ratios of banks that have an inflexible cost base," it said.(PTI)
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