India's inclusion in popular government bond indexes such as the J.P. Morgan's Government Bond-Emerging Markets-Global Diversified index could attract about $20 billion-$40 billion in over a year, Standard Chartered Bank wrote in a note on Thursday, 12 September.India will, however, have to do away with the foreign fund investment limits in government debt, currently capped at $30 billion, which is a key criteria for inclusion in such indexes as the market otherwise is considered restrictive.The bank said the move would help the rupee and the debt market while also easing balance of payments concerns. It will result in foreign fund outflows from Turkey, Indonesia, Thailand and Hungary, they added. Standard Chartered expects India to have around 10 percent weight in the index eventually, though it may be assigned a lower weightage in the beginning.The investment bank says Indian policymakers' belief that high foreign ownership would lead to elevated bond-market volatility may be unfounded as research across 14 EM countries shows only a weak relationship between these two factors.The bank expects India's inclusion to firstly help bond markets by bringing in inflows from a wider investor base, deepen the market, and boost the rupee while also helping the economy at large.(Reuters)
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India's factory output likely shrank for the third straight month in July, albeit at a slower pace than the month before as production in the country's core industries picked up, a Reuters poll found. The poll showed output at factories, mines and utilities shrank an annual 0.8 per cent, after contracting 2.2 per cent in June, according to the median consensus of 22 economists. "Underlying industrial production momentum is expected to remain weak, despite a slight improvement in the infrastructure index," economists at Barclays said in a note to clients. Growth in Asia's third-largest economy has slowed to below 5 per cent in each of the past three quarters and with the central bank concentrating on propping up the battered rupee currency many economists have slashed GDP forecasts for this fiscal year. Infrastructure sector output rose 3.1 per cent year-on-year in July from 0.01 per cent in the previous month, government data showed last week. The sector is made up of the eight core industries - coal, crude oil, oil refinery, natural gas, steel, cement, electricity and fertilisers - and accounts for 37.9 per cent of India's industrial output. Other data on Thursday is expected to show that consumer inflation probably eased to 9.55 per cent year-over-year last month, only just below July's 9.64 per cent, as food prices continued to rise, the poll also found. "A weak rupee and significantly higher food and fuel prices are likely to maintain upward pressure on CPI inflation," wrote Barclays' economists. The rapidly falling rupee has aggravated price pressures since rising crude oil and gold prices, two of India's most imported items, have swollen the country's already huge import bill. An exodus of funds from emerging markets, triggered by the US Federal Reserve's hint at paring back its stimulus, has left the Indian rupee suffering more than its peers as it is weighed down by a bloated current account deficit. (Reuters)
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Some Indian companies could see the quality of their debt decline as higher global borrowing costs and a sharply weaker rupee take their toll, Moody's Investors Service said. Companies such as Indian Oil, Tata Steel and Tata Power will remain highly leveraged over the next 12 months because of weak industry dynamics and resulting constraints on cash flows, it said. "We believe they will be able to refinance their maturing debt, but possibly at higher credit spreads than on existing debt," the agency said. But while the rupee has slumped as much as 20 percent this year, it said rated Indian non-financial companies should be able to meet their $32.8 billion in debt coming due through March 2014, more than half of which is denominated in foreign currency, as they will continue to have access to offshore and onshore funding sources. State-run companies Oil and Natural Gas, Bharat Petroleum and Indian Oil, and private sector energy conglomerate Reliance Industries, together account for 60 per cent of the total rated corporate debt maturing through next March, it said. The agency said that as domestic interest rates are also rising most companies will face higher borrowing costs after refinancing of existing debt. (Reuters)
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The rupee rose to a three-week high on Wednesday, extending gains for a fifth session, with corporates selling the dollar as the Indian currency continued its recovery.The rupee's sharp recovery has been aided by the easing of geopolitical concerns, with an attack on Syria appearing less imminent, and the announcement of a series of steps to attract inflows by the new central bank Governor, Raghuram Rajan.Dealers cited large dollar inflows from a private petrochemical company as well as some likely dollar selling related to Mylan Inc's $1.6 billion deal to acquire a unit of Strides Arcolab Ltd.Foreign institutional investors (FIIs) bought $421.15 million worth of shares on Tuesday, bringing their total to nearly $800 million over the previous four sessions."The panic dollar buying has reduced. Those who were sitting on the sidelines hoping for further falls in the currency have started selling. I expect the rupee to recover to 61 to the dollar," said Satyajit Kanjilal, chief executive at ForexServe.The partially convertible rupee closed at 63.38/39 per dollar compared with 63.84/85 on Tuesday. It rose to 63.0575 in session, its best level since August 19.The rupee has now recovered 5.8 percent over the last five sessions, its longest winning streak in a year, since Raghuram Rajan took over as the central bank chief on September 4 and unveiled a raft of steps including allowing banks to borrow more overseas and offering a concessional swap facility to banks to raise deposits from overseas Indians.Globally, investors are seeking high-yielding assets after U.S. President Barack Obama pledged on Tuesday to explore a diplomatic plan from Russia to take away Syria's chemical weapons, although he voiced scepticism about it and urged Americans to support his plan to use military force if needed.The rupee is waiting for the monetary policy on Oct 20. Prior to that, the government will detail July factory data and August inflation data.Dealers are now focusing on whether Rajan will reverse the cash tightening steps initiated by his predecessor Duvvuri Subbarao in mid-July to curb rupee speculation.In the offshore non-deliverable forwards, the one-month contract was at 64.12 while the three-month was at 65.37.In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 63.62 with a total traded volume of $3.4 billion.(Reuters)
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Inflation likely edged up to a sixth-month high in August, driven by higher food prices and as the battered rupee made key imports such as fuel costlier, a Reuters poll found.Wholesale prices, India's key inflation measure, probably rose an annual 5.80 per cent last month from the same period a year earlier, the poll of 20 economists showed, just above July's 5.79 per cent which was the highest since February.If realised, that consensus would be above the Reserve Bank of India's perceived comfort level of 5 per cent for the second month, adding to the pressure on the central bank which is already fighting a weak currency and slowing economic growth."The rise would be largely because of an increase in fuel costs, resulting from rising crude prices in the international market coupled with a considerable drop in the rupee," said Shakti Satapathy, a fixed income strategist at AK Capital Services.The rupee plunged more than 20 per cent at one point against the dollar this year, hitting record lows almost daily in August, making it the worst performer among its emerging market peers. It has since clawed back some ground but most strategists in another Reuters poll do not expect much of a recovery over the coming year.That and a pick up in prices of crude oil last month pushed state-run oil marketing firms to hike retail prices of diesel and petrol, weighing on food inflation."An increase in transportation costs and shortages in supply of some key perishable items such as vegetables and onions probably pushed food prices higher," said Rupa Rege Nitsure, chief economist at Bank of Baroda.Food prices increased for a third month in a row through July, reflecting a more than 20 per cent rise in vegetable and onion prices during that period.Any further acceleration in inflation will only add to the declining popularity of the Congress-led government ahead of elections early next year.A separate Reuters poll showed consumer inflation - scheduled to release on Thursday - probably eased to 9.55 per cent year-over-over last month, only just below July's 9.64 per cent.(Reuters)
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Gold prices recovered by Rs 270 to Rs 31,370 per ten gram on fresh buying by stockists despite a weak global trend.However, silver plunged by Rs 970 to Rs 53,330 per kg on reduced offtake by industrial units and coin makers amid a weak global trend.Traders said fresh buying by stockists to meet the festive season demand mainly led recovery in gold prices.Gold in London, which normally set price trend on the domestic front, fell by 0.8 per cent to 1,375.71 dollar an ounce and silver by 1.9 per cent to 23.26 dollar an ounce.On the domestic front, gold of 99.9 and 99.5 per cent purity recovered by Rs 270 each to Rs 31,370 and Rs 31,170 per ten grams, respectively, after losing Rs 625 yesterday.Sovereign held steady at Rs 25,200 per piece of eight gram in limited deals.On the other hand, silver ready dropped by Rs 970 to Rs 53,330 per kg and weekly-based delivery by Rs 1595 to Rs 53,300 per kg. Silver coins followed suit and plunged by Rs 1,000 to Rs 87,000 for buying and Rs 88,000 for selling of 100 pieces.(PTI)
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The Centre is not keen on taking back the power vested with states to suspend an IAS or IPS officer, officials said today, adding new rules are being worked out to shield bureaucrats from any unjust disciplinary actions.Officials in the Ministry of Personnel said that existing service rules were being reviewed to further provide safeguards to All India Service personnel--Indian Administrative Service (IAS), Indian Police Service (IPS) and Indian Forest Service (IFoS).The government is not considering to encroach on states' power to act against an All India Services officer working in their jurisdictions, they said.At present, the state government as a cadre controlling authority has powers to transfer or suspend an officer of the elite services.The demand to remove states' power to suspend an IAS, IPS and IFoS officer had come up against the backdrop of controversial suspension of Durga Sakthi Nagpal, a 2010 batch IAS officer, by Uttar Pradesh government.The representatives of IAS, IPS and IFoS associations had also met Minister of State for Personnel, Public Grievances and Pensions V Narayanasamy here recently to demand change in service rules.The three associations of the elite services had demanded that the power of suspensions should be vested with the Centre instead of states in case of officers working in their jurisdiction among other changes in the rules.The associations had demanded a mandatory provision for the governments to issue a 'show cause notice' with a minimum period of 15 days to any officer before suspension and for states to compulsorily seek prior concurrence of the central government to suspend the officer giving the facts and the grounds for taking the action.28-year-old Nagpal was suspended on July 27 ostensibly for ordering demolition of a wall of an under-construction mosque without following the due process.The officer, as SDM, had taken action against sand mining mafia active in Gautam Budh Nagar district of Uttar Pradesh.(PTI
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The prospects for the world's major developed economies improved further in July according to a monthly leading indicator of growth compiled by the OECD, while emerging markets continued to lose steam.The Paris-based Organisation for Economic Cooperation and Development said its monthly composite leading indicator (CLI) covering 33 member countries overall pointed to firming growth.The indicator, which is designed to provide early signals of turning points in economic activity, rose to 100.7 in July from 100.6 in June, edging higher above its long-term average of 100 and reaching its best level since April 2011."The CLIs point to improvements in growth in most major OECD countries but stabilising or slowing momentum in large emerging economies," the OECD said in a statement.The trend was in line with an update last week of the OECD's forecasts for the major economies, which flagged an improving outlook led by firm growth in the United States and Japan while Europe was also seen at last joining the recovery.The indicator for the United States rose to 101.1 from 101.0 while Japan's reading was stable at 101.1.The OECD's leading indicator for the euro area rose to 100.5 in July from 100.3, which it said was a sign of growth gaining momentum.In a sign the tide may be changing for recession-hit Italy, its indicator rose to 100.6 from 100.3, compared to regional powerhouse Germany which saw its index rise to 100.4 from 100.2.The indicator for France, Europe's second-biggest economy, rose to 99.6 from 99.5, which the OECD said was a sign of a tentative, positive change in momentum although it remaind below the long-term average of 100.Meanwhile, among the major emerging economies, China saw its indicator ease to 99.4 from 99.5, which the OECD said was a signal that growth was returning to trend.India saw momentum continue to slow with its indicator falling to 97.1 from 97.3 while Brazil's index fell to 98.9 from 99.1. Russia, however, saw its indicator edge up to 99.3 from 99.2.(Reuters)
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Gold edged lower as the euro eased on Monday (9 September) but a possible delay in the US Federal Reserve's decision to taper off its bond-buying programme could boost the metal's safe-haven appeal.Bullion, which has benefited from central bank liquidity, reversed heavy losses last week and gained nearly 2 per cent on weaker-than-expected US nonfarm payrolls.Gold fell 0.2 per cent to $1,388.09 an ounce by 0352 GMT. It slipped to $1,362.55 on Friday (7 September), its weakest since August 22, before rallying after data showed US employers hired fewer workers than expected in August."Even as recently as last week, we heard diverging views on the tapering schedule from Fed governors themselves, making it hard to know what the central bank will ultimately decide to do," said Edward Meir, an analyst at INTL FC Stone."This confusion will likely prevent gold from weakening substantially over the course of this week, but we suspect that the selling should intensify after the Fed meeting is out of the way and assuming we do indeed get a modest amount of tapering."The disappointing US jobs report, which initially weighed on the dollar, raised speculation the Fed may minimise the size of a likely reduction in stimulus many investors expect later this month. The euro dropped 0.1 per ent to $1.3175 on Monday (9 September).The US jobless rate hit a 4-1/2-year low as Americans gave up the search for work, complicating the Fed's decision on whether to scale back its monetary stimulus this month.US gold was up $2.30 an ounce to $1,388.80."We still see that gold should probably test $1,400," said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore. "We are still seeing some demand. There are more inquiries from India for both gold and silver."Jewellers in main gold consumer India expect a surge in imports this week after the government clarified overseas buying rules. Most of the jewellers are sustaining on stocks shipped from April to May, which totalled more than 300 tonnes. Gold is one of the biggest items in a record current account deficit that has helped push the rupee to an all-time low. The government has raised the import duty on gold to an all-time high of 10 per cent.(Reuters)
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India will announce many new measures in the next few days and weeks to curb non-essential imports in order to strengthen the rupee and contain inflation, Finance Minister P. Chidambaram said on Saturday. The government has already banned duty-free import of flat-screen televisions from August 26, adding to a package of measures designed to prop up the rupee. "I hope that all these measures taken together will have a beneficial impact on inflation," Chidambaram told lawmakers. He added that no decision has been taken to raise fuel prices. Government officials said on Friday, 6 September, that India may announce more measures to curb fuel consumption later this month and raise diesel prices by close to 10 percent soon in a bid to cut the biggest item in its import bill and support the rupee. (Reuters)
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