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Rupee in tailspin, adds to woes of govt and importers
Developing mines |
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E-commerce industry growing rapidly in India
Mah Satyam-Tech M merger gets HC nod
Job losses loom as car sales down by 12%
BSE to shift 54 stocks to ‘T’ group; NSE to move 17 scrips
Deadline for delivery of rice for central pool
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Rupee in tailspin, adds to woes of govt and importers
Mumbai, June 11 Another fall
With the rupee falling to a fresh low of Rs 58.98 during intra-day trade today, the stock markets tanked 298 points as investors fled equities. “Companies which have a large import component could suffer erosion in margins especially if their foreign loans are unhedged,” says Abheek Saha, an analyst with a brokerage firm here. He said many companies, especially medium and small firms, have unhedged exposure to foreign currency after many players suffered losses in the derivatives market a few years ago. Analysts say the impact of the volatile rupee will be evident in the coming months when companies prepare their financial statements for the first two quarters of this financial year. Among the major losers are expected to be state-owned oil companies which subsidise the country's oil import bills from their profits. Similarly, private producers who have tied up with foreign companies for coal to fuel their power plants in the country too could be impacted. The analysts say these are big players who can afford to hedge their foreign exchange positions unlike smaller companies who do not have access to a full-fledged treasury desk. IT industry hit
Incidentally, the depreciating rupee will have a negative impact on software exporters who bill their foreign customers in dollars. Reports say several software companies have privately told analysts tracking this sector that their clients are forcing them to revise billing rates downwards. The analysts say the steep fall in the rupee could prove to be a major dampener for the economy. "A weak rupee can revive a number of past woes -upset the easing inflation trajectory, raise the current account deficit financing concerns, raise repayment burden on external debt and up the currency risks for offshore borrowers," says Radhika Rao, an economist at DBS Singapore. Rao said inflation too could rise sharply since India depends on imports for its energy requirements. The research note also sounded pessimistic about a further interest rate cuts when the Reserve Bank of India meets the next week. Free fall?
So far there is no clear consensus on what has caused the rupee to go into free fall. While a few blame the strengthening US dollar against major world currencies, the government, including Finance Minister P Chidambaram, blame the sharp rise in gold imports which has worsened India's Current Account Deficit. “The dollar has not managed to surge as much internationally to validate such a heavy depreciation in the ruprr," Mecklai Financial Services said in its report today. The brokerage attributes the fall to a number of factors like the heavy selling of Indian debt by FIIs, reduction in foreign exchange reserves of the RBI, higher current account deficit due to gold imports, and rising interest rates in the US. However, not every one is sanguine about the economy. Brokerage Anand Rathi said falling prices of commodities, including crude oil, would continue to keep inflation low. It noted that barring gold, India had a current account surplus in eight of the last 12 years. The brokerage noted that capital inflows would remain steady. India received investments to the tune of a record US$24 billion in equity and $7 billion in debt in 2012, it noted. According to Anand Rathi, the rupee continued to be undervalued on purchasing power parity basis. "Despite inflation being higher in India, absolute prices are high in the developed countries," its report noted. Exporters’ gain
Meanwhile, bankers dealing with export houses and NRIs say they are hopeful of their clients repatriating funds back home to take advantage of the softening rupee. “NRIs showing interest in shifting towards rupee-based assets and we could expect additional inflows in the coming weeks,” says Ashutosh Nagpal, an equity analyst with a Mumbai brokerage. Some analysts are also hoping that the Reserve Board of India adopt a contrarian move and go in for sharp rate cuts so that
the economy can be kick-started. In a report, Bank of America-Merrill Lynch
(BofA-ML) suggested that RBI cut rates could accelerate economic recovery. "Keeping rates high - on the ground of defending the rupee, at least - will likely only further defer recovery, deter FII equity inflows, delay re-accumulation of foreign exchange reserves and depreciate the rupee," the report said. Advising the RBI to cut rates, the report said lower rates could aid recovery and attract equity inflows from foreign investors. This would also strengthen the rupee, the report said. Impact on gold
The Bombay Bullion Association said gold imports might decline if the rupee continues to be soft as the yellow metal will get expensive. "Gold prices are touching Rs 28,000 per 10 grams following the fall in the rupee. This can bring down demand," says BBA president Suresh Hundia. over to RBI
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Coal Ministry issues show-cause notices to 12 firms
Girja Shankar Kaura/TNS
New Delhi, June 11 The show-cause notices have been issued to PSUs like NTPC, SAIL, Damodar Valley Corporation, other state agencies and private companies and they have been asked to file their replies in the next 20 days, failing which it would be presumed that the companies have no explanation to offer and appropriate action would be initiated for the de-allocation of the coal blocks. The show-cause notices have been issued following the meeting of the IMG on May 1, 2013, in which it was noticed that none of the companies had made significant progress in developing the mines allocated to them. The IMG then recommended to the Coal Ministry to de-allocate the coal blocks after seeking explanation from the companies. The companies facing notices include Maharashtra State Mining Corp, Madhya Pradesh State Mining Corp, West Bengal Power Development Corp, Tenughat Vidhyut Nigam, Bhushan Steel & Power, Abhijeet Infrastructure, Rungta Mines, OCL India, and Ocean Ispat. Earlier on June 7, the ministry had issued similar show-cause notices to public sector power producer NTPC and 10 other private companies, to explain the delay in development of coal blocks allocated to them. “You are hereby called upon to show cause, on each milestone separately, to this Ministry within a period of 20 days as to why the delay in the development of the coal block should not be held as violation of the terms and conditions of the allotment,” the notice said. In addition, the government also asked these companies to divulge the progress of end-use projects for which the mines were allocated. The notices to firms have been issued for 12 blocks that include Gondulpara, Jamkhani, Brinda, Sasai, Meral, Radhikapur (West), Gangaramchak, Gangaramchak Bhadulia, Marki Barka and Warora coal blocks alloted between June 2003 and July 2007. Strong action
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E-commerce industry growing rapidly in India
Chandigarh, June 11 Launching a website- getdistributors.com, that will help mid and large sized businesses to boost their channels of sale and distribution, Bikky Khosla, CEO of Tradeindia.com and chairman of the e-Commerce committee of Assocham, said e-commerce in India was growing by leaps and bounds and the e- commerce industry in the country was expected to grow by. “It is only after seeing the success of firms like Flipkart, Snapdeal, global leaders like Amazon and Groupon have now entered the Indian market. What has helped these e-commerce sites grow is 32 crore debit card users and the 125 million internet users,” he said. Talking about the new website launched by the company here today, Khosla said this website would help the e-commerce players appoint distributors,sales agents or franchisees in India s well as abroad. |
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Mah Satyam-Tech M merger gets HC nod
Hyderabad, June 11 Last year, the firms announced their intention to merge aiming to create a $2.4 billion entity. — PTI
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Job losses loom as car sales down by 12%
New Delhi, June 11 According to the data released by the Society of Indian Automobile Manufacturers (SIAM) today, the industry closed last month producing 4.08 per cent lesser number of vehicles as compared to May, 2012 with the overall domestic sales down 0.64 per cent over the like period last year. The SIAM said, "The industry produced 1,737,548 vehicles in May 2013 as against 1,811,515 in May 2012, a decline of 4.08% over the same month last year. The overall domestic sales during April-May, 2013 declined by 0.64% over the same period last year." The car sales declined 12.26 per cent in May which was the seventh consecutive month and the longest period that the economy has seen the decline of car sales. Domestic passenger car sales in May stood at 1,43,216 units as against 1,63,222 units in the same month of 2012. Fearing a large number of job cuts as a result of the falling sales and no rescue measures from the government, SIAM Director General Vishnu Mathur said, "This is the longest stretch of consecutive decline in car sales we have witnessed. Even in the 2008-09 downturn, there were no such prolonged period of fall. These are worrying times for the automobile industry." Mathur said although there had been no layoffs as of now, but with no relief measures in sight, the same could start soon. This is the highest fall in car sales recorded by the SIAM with the previous highest fall being in April this year when the car sales dropped 10.43 per cent to 1,50,789 units. The worrying aspect fro the industry is that there has been a decline in sales of all segments of automobiles. Except for the utility vehicles and scooters, all the segments have posted decline in sales in May. While for passenger vehicles it was the sixth consecutive month of decline in sales, heavy commercial vehicles continued to slide for the 15th consecutive month and for the first time even the motorcycle sales have been affected with the decline for the fourth month running. The overall commercial segment registered a slide of 5.2% in April-May 2013 as compared to the same period last year. Medium and heavy commercial vehicles registered a negative growth of 12.11% and light commercial vehicles also dropped by 1.36%. Two-wheelers registered a marginal growth of 1.04% during April-May 2013 over April-May 2012. Within the two-wheelers segment, mopeds and motorcycles declined by 11.45% and 1.38% respectively, while scooters grew by 13.88 % in April-May 2013 over April-May 2012.
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BSE to shift 54 stocks to ‘T’ group; NSE to move 17 scrips
Mumbai, June 11 The National Stock Exchange (NSE) said it would shift 17 stocks to the trade-to-trade segment or 'T group', while the BSE would move 54 scrips to the category, the exchanges said separately. The NSE would transfer 95 stocks back to rolling segment from the restricted trading category, while the BSE would shift 309 scrips to the segment. The changes would be effective from from June 14. Moreover, the NSE said 39 stocks would continue to be available for trading in ‘T group’, while the figure stood at 393 for BSE. Under the ‘trade-to-trade’ segment, no speculative trading is allowed and delivery of shares and payment of the consideration amount are mandatory. In the rolling settlements, trades done on each single day are settled separately from the trades done on earlier or subsequent trading days. Among the stocks which would be moved to the T group are — ANG Industries, Morarjee Textiles, Orient Abrasives and HB Stockholdings. — PTI
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Deadline for delivery of rice for central pool
Chandigarh, June 11 He said so far 74 lakh tonne of rice (87 per cent) had been deposited in the central pool and the residue supply of 11 lakh tonne rice was to be delivered by June, 30. He said instructions had been issued to charge Rs 2,600 per quintal from the millers if they fail to release the supply in time for the central pool. |
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The continued fall in the rupee against the US dollar has given rise to panic among corporate houses and importers who face the prospect of reduced profit margins if they are unable to pass on the higher cost of imported raw materials to their final consumers.
Continuing with the strong action as suggested by the Inter Ministerial Group (IMG) for not developing the coal mines, the Coal Ministry has issued show-cause notices to 12 companies, including public sector undertakings (PSUs) seeking an explanation from them for not developing the blocks and why the same should not be de-allocated.
Automobile sale is said to be a reflection of the state of economy. With the industry selling over four per cent less automobiles as compared to the sale in May last year, and the passenger car sales plummeting by 12.26 per cent, one can expect job cuts as well.