Hat tip to Surjit Bhalla for brilliant analysis in which he clearly shows Food Security Bill to be costing as much as 3% of India’s GDP, almost equal to total education spending. Read the article here.
Tuesday, August 27, 2013
Have We Bitten More Than We Can Chew...
Reminder to our readers how much impact (read damage) newly proposed Food Security Bill can cause country’s balance sheet.
Hat tip to Surjit Bhalla for brilliant analysis in which he clearly shows Food Security Bill to be costing as much as 3% of India’s GDP, almost equal to total education spending. Read the article here.
Hat tip to Surjit Bhalla for brilliant analysis in which he clearly shows Food Security Bill to be costing as much as 3% of India’s GDP, almost equal to total education spending. Read the article here.
Friday, August 23, 2013
Weekly Market Commentary - Aug 19 - Aug 23, 2013
To say that markets were volatile would be an understatement this week. Sensex lost around 700 points in first three days and gained 600 in last two. This week highlights were new lows made by rupee and RBI turning dovish (throwing in the towel?) and attempting easing liquidity in the market after a spell of tightening measures to fight the currency decline (which didn’t work of course, but RBI did claim victory!). Sensex and Nifty ended this week down 0.4% and 0.7% respectively, while CNX Midcap was down 1.6%.
Monday - Sensex down by 1.6%, Nifty down by 1.7%, Midcap down by 1.9%
Markets continue to plunge as investors voted with their feet as currency fell to its new all-time low of 62.81 vs. USD. Govt’s move of clearing few investment projects worth Rs.1,100bn was unable to provide any support to the market.
Tuesday - Sensex down by 0.3%, Nifty down by 0.2%, Midcap down by 0.6%
Investors’ worries seem not to be abating as any of the RBI measures have failed to stem rupee declines. So far, Indian IT and Pharma stocks have been able to save investors from full scale carnage in the markets.
Wednesday - Sensex down by 1.9%, Nifty down by 1.8%, Midcap down by 1.5%
A fresh low of 64.55 a dollar made by rupee prompted investors to even exit and book profits on their IT and Pharma stocks. RBI, in a bid to ease liquidity in the system and reduce long-term cost of borrowing announced purchase of Rs80bn worth of bonds in the market on Aug 23 and may buy more if required. This RBI action came as a breather to banks and banking stocks rallied amid the falling market.
Thursday - Sensex up by 2.3%, Nifty up by 2.0%, Midcap up by 1.1%
Tape turned green for the first time this week as RBI signaled change in its monetary stance. RBI also stated that its measures on short-term policy rates have stained their objectives, which send a positive signal to the market indicating no more tightening in short term. Bullish sentiment in the market overcame the Fed announcement on continuing tapering of its QE and new low made by rupee against the dollar.
Friday - Sensex up by 1.1%, Nifty up by 1.2%, Midcap up by 1.2%
Markets continued their previous day’s upside momentum as investors rushed to bargain hunting especially in capital goods sector, which has been facing lot of bearishness owing to delay in large scale projects in the country and abroad and increase in cost of borrowings.
Monday - Sensex down by 1.6%, Nifty down by 1.7%, Midcap down by 1.9%
Markets continue to plunge as investors voted with their feet as currency fell to its new all-time low of 62.81 vs. USD. Govt’s move of clearing few investment projects worth Rs.1,100bn was unable to provide any support to the market.
Tuesday - Sensex down by 0.3%, Nifty down by 0.2%, Midcap down by 0.6%
Investors’ worries seem not to be abating as any of the RBI measures have failed to stem rupee declines. So far, Indian IT and Pharma stocks have been able to save investors from full scale carnage in the markets.
Wednesday - Sensex down by 1.9%, Nifty down by 1.8%, Midcap down by 1.5%
A fresh low of 64.55 a dollar made by rupee prompted investors to even exit and book profits on their IT and Pharma stocks. RBI, in a bid to ease liquidity in the system and reduce long-term cost of borrowing announced purchase of Rs80bn worth of bonds in the market on Aug 23 and may buy more if required. This RBI action came as a breather to banks and banking stocks rallied amid the falling market.
Thursday - Sensex up by 2.3%, Nifty up by 2.0%, Midcap up by 1.1%
Tape turned green for the first time this week as RBI signaled change in its monetary stance. RBI also stated that its measures on short-term policy rates have stained their objectives, which send a positive signal to the market indicating no more tightening in short term. Bullish sentiment in the market overcame the Fed announcement on continuing tapering of its QE and new low made by rupee against the dollar.
Friday - Sensex up by 1.1%, Nifty up by 1.2%, Midcap up by 1.2%
Markets continued their previous day’s upside momentum as investors rushed to bargain hunting especially in capital goods sector, which has been facing lot of bearishness owing to delay in large scale projects in the country and abroad and increase in cost of borrowings.
Sunday, August 18, 2013
Weekly Market Commentary - Aug 12 - Aug 16, 2013
This independence day, RBI took away some of the freedom from its citizens and corporate as it introduced measures to cap dollar movement outside the country. While RBI and govt did their best to allay the fears of capital control, it is everybody’s guess what other bad policy decision lies ahead for the market and for how long this drama will continue. Sensex and Nifty went down by 1% each, while CNX Midcap gained 0.4% this week.
Monday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 1.6%
Markets went up as investors bought stocks amid govt and RBI interventions to prop up rupee. Although the measure adopted by RBI has failed to curb any decline in the rupee value, trade date brought good news as exports grew by ~12% to $26bn in July. SBI’s latest quarterly release indicating worsening asset quality, which is putting a dent on its profitability, capped the investor confidence.
Tuesday - Sensex up by 1.5%, Nifty up by 1.5%, Midcap up by 1.5%
Markets rallied as investors rushed to cover their shorts after recent sharp corrections ignoring the poor IIP data. The index of industrial production (IIP) declined by 2.2% in June while industrial output was 1.1% lower y-o-y. Govt move to hike import duty on gold and silver to curb CAD also cheered the bulls.
Wednesday - Sensex up by 0.7%, Nifty up by 0.8%, Midcap up by 0.4%
Tata group companies saved the day as markets ignored the impact of rise in WPI to 5.79% in July from 4.86% in June. Tata Motors surged around 10% after its unit Jaguar Land Rover reported 21% higher sales in July globally. Tata Steel also beat the street expectations with consolidating net profit surging by 90%.
Thursday – Independence Day Holiday
Friday – Sensex down by 4.0%, Nifty down by 4.1%, Midcap down by 3.1%
RBI spooked the investors as they bring back capital controls and restricted the movement of USD outside the country. RBI on late Wednesday brought back controls on fund flows limiting the investment citizens and domestic companies can do abroad. It also banned the import of gold coins and medallions while introducing fresh measures to attract NRI money. Recent positive developments in US and other developed markets also instilled fresh fears of stimulus tapering from Fed, which added to the bearish sentiment.
Monday - Sensex up by 0.8%, Nifty up by 0.8%, Midcap up by 1.6%
Markets went up as investors bought stocks amid govt and RBI interventions to prop up rupee. Although the measure adopted by RBI has failed to curb any decline in the rupee value, trade date brought good news as exports grew by ~12% to $26bn in July. SBI’s latest quarterly release indicating worsening asset quality, which is putting a dent on its profitability, capped the investor confidence.
Tuesday - Sensex up by 1.5%, Nifty up by 1.5%, Midcap up by 1.5%
Markets rallied as investors rushed to cover their shorts after recent sharp corrections ignoring the poor IIP data. The index of industrial production (IIP) declined by 2.2% in June while industrial output was 1.1% lower y-o-y. Govt move to hike import duty on gold and silver to curb CAD also cheered the bulls.
Wednesday - Sensex up by 0.7%, Nifty up by 0.8%, Midcap up by 0.4%
Tata group companies saved the day as markets ignored the impact of rise in WPI to 5.79% in July from 4.86% in June. Tata Motors surged around 10% after its unit Jaguar Land Rover reported 21% higher sales in July globally. Tata Steel also beat the street expectations with consolidating net profit surging by 90%.
Thursday – Independence Day Holiday
Friday – Sensex down by 4.0%, Nifty down by 4.1%, Midcap down by 3.1%
RBI spooked the investors as they bring back capital controls and restricted the movement of USD outside the country. RBI on late Wednesday brought back controls on fund flows limiting the investment citizens and domestic companies can do abroad. It also banned the import of gold coins and medallions while introducing fresh measures to attract NRI money. Recent positive developments in US and other developed markets also instilled fresh fears of stimulus tapering from Fed, which added to the bearish sentiment.
Thursday, August 15, 2013
Once Upon a time in India Dobaara
Bollywood released its much awaited sequel of Ajay Devgan – Emraan Hashmi starrer “Once Upon a Time in Mumbaai” this Thursday. The jury is still out on whether the sequel, “Once Upon a Time in Mumbaai Dobaara” has lived up to the magic of first one (first one has some good lines delivered by Ajay and good acting skills of Emraan). In the meantime, there is another sequel being served to the country, which will definitely have wider ramifications than the movie.
This sequel could aptly be called “Once Upon a Time in India Dobaara” as India in an effort to curb currency decline, brings back capital controls, 90s style. RBI has announced slew of measures like reducing the Overseas Direct Investment (ODI) by Indian companies from 400% of net worth earlier to 100% now. Local residents also now have to go through RBI if they are sending more than $75,000 abroad for investments or otherwise. This limit was earlier set at $200,000.
RBI exempted banks from including fresh deposits from NRIs into reserve requirements, raised the ceiling on FCNR deposits to LIBOR + 400bps (300bps earlier) for 3-5 years deposits and banned the import of gold coins and medallions.
No points for guessing who’ll get hurt the most by these measures: the corporate as their plans to invest abroad due to weakening local investment climate are put on halt and; Local residents who bought residential property abroad (as some did in Southeast Asia at favorable terms during slowdown) and are making regular payments towards it.
Reader will vividly remember those 90’s movies where Amrish Puri and Ranjeet were widely feared bad guys, used to spend their nighttime near Bombay beaches with a torch in their hands, for their “consignment” which was most of the time, you guessed it right, used to be gold biscuits. Latest import curbs and rising duties on gold have already started turning local Indians into smugglers (See here and here) as already one high profile case of a member of big industrial house caught smuggling on Mumbai airport has been highlighted by local media.
I have long argued (see here and here) that problems with our currency are largely fundamental ones and these govt policies are at best, can only be termed shortsighted. Investors are going to sell off your currency if they don’t find any value in it, if not today, tomorrow. But this is one definite, which is going to happen. Therefore, instead of using weak currency to make your economy export competitive and make some efforts towards solving your structural problems, you stop your citizens from importing anything from abroad.
Some people might argue that focusing on structural problems may not yield any short-term result and nobody in the current establishment has time and patience to wait. But isn’t that the same attitude which has landed us in current mess.
You ask anyone in establishment about their purpose behind these measures, you get a terse two word reply: Rupee stabilization. What they don’t tell you is when they think rupee has stabilized. Given our country’s problem, it doesn’t look like it is going to happen anytime soon and there is a strong chance that current measures and controls are not as temporary as they are sounded out to be.
This sequel could aptly be called “Once Upon a Time in India Dobaara” as India in an effort to curb currency decline, brings back capital controls, 90s style. RBI has announced slew of measures like reducing the Overseas Direct Investment (ODI) by Indian companies from 400% of net worth earlier to 100% now. Local residents also now have to go through RBI if they are sending more than $75,000 abroad for investments or otherwise. This limit was earlier set at $200,000.
RBI exempted banks from including fresh deposits from NRIs into reserve requirements, raised the ceiling on FCNR deposits to LIBOR + 400bps (300bps earlier) for 3-5 years deposits and banned the import of gold coins and medallions.
No points for guessing who’ll get hurt the most by these measures: the corporate as their plans to invest abroad due to weakening local investment climate are put on halt and; Local residents who bought residential property abroad (as some did in Southeast Asia at favorable terms during slowdown) and are making regular payments towards it.
Reader will vividly remember those 90’s movies where Amrish Puri and Ranjeet were widely feared bad guys, used to spend their nighttime near Bombay beaches with a torch in their hands, for their “consignment” which was most of the time, you guessed it right, used to be gold biscuits. Latest import curbs and rising duties on gold have already started turning local Indians into smugglers (See here and here) as already one high profile case of a member of big industrial house caught smuggling on Mumbai airport has been highlighted by local media.
I have long argued (see here and here) that problems with our currency are largely fundamental ones and these govt policies are at best, can only be termed shortsighted. Investors are going to sell off your currency if they don’t find any value in it, if not today, tomorrow. But this is one definite, which is going to happen. Therefore, instead of using weak currency to make your economy export competitive and make some efforts towards solving your structural problems, you stop your citizens from importing anything from abroad.
Some people might argue that focusing on structural problems may not yield any short-term result and nobody in the current establishment has time and patience to wait. But isn’t that the same attitude which has landed us in current mess.
You ask anyone in establishment about their purpose behind these measures, you get a terse two word reply: Rupee stabilization. What they don’t tell you is when they think rupee has stabilized. Given our country’s problem, it doesn’t look like it is going to happen anytime soon and there is a strong chance that current measures and controls are not as temporary as they are sounded out to be.
Subscribe to:
Posts (Atom)