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RBI may hold interest rates even if Re fall impacts inflation
‘Rupee may slide to 55.10 per $ by March’
Tata Group market value jumps by over $1 bn
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Cos expose investors to volatility due to promoters’ share pledging
Gold prices seen to hit $2,000 by March 2012
High NPAs push Punjab banks
to go slow on education loans
NRIs can invest up to $10 bn in IDFs
Fitch downgrades Portugal to
junk status
Food inflation falls to single digit at 9.01%
India ‘relatively less’ exposed to global shocks: Fitch
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RBI may hold interest rates even if Re fall impacts inflation
New Delhi, November 24 The rupee has slid more than 14% this year against the US dollar, with most of the losses coming in the last three months, as investors cut exposure to riskier assets amid Europe's raging debt crisis, fears of a global recession and signs of a domestic economic slowdown. Strains on India's current account balance and the fiscal deficit have heaped further pressure on the rupee, with a poll this week showing investors have turned the most pessimistic on the currency in more than three years. Much of the inflationary pressure from a falling rupee comes from crude oil, which makes up a third of India's total import bill. But the resulting impact may only add between 20 and 50 base points to headline inflation, economists say. That would be something that policymakers could live with, given worries that 13 rate hikes since March 2010 are now hurting growth even as global demand sputters. "As far as the current cycle of tightening is concerned, I think we are done for now," said Shubhda Rao, chief economist with Yes Bank. Yes Bank says headline inflation will fall from December to about 7% by end-March, in line with forecasts from the Reserve Bank. Inflation in October was stronger than expected, remaining above 9% for the 11th straight month. "I don’t completely rule out inflation breaching the double-digit mark in November but I think the base effect will come into play in December and we would expect inflation to trend down after that," Rao said. A senior finance ministry source said on Wednesday that the rupee could stay in the region of 50 to a dollar for three months, indicating that inflation from commodity exports could continue to add pressure to prices. Others say with the Indian economy showing definite signs of fatigue, the risks to growth for Asia's third-largest economy will be the key criterion that will shape the central bank's policy response. — Reuters Re@52 won’t push up rates, inflation
The fall in rupee value may not put additional pressure on already-high inflation and interest rates, unless the Indian currency reaches Rs 70 level versus the US dollar, global banking major Credit Suisse has said. In a research note on the falling rupee, Credit Suisse said that a massive depreciation of 16% in the Indian currency since the end of July has raised concerns about further surge in inflation and interest rate levels. — PTI |
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‘Rupee may slide to 55.10 per $ by March’
New Delhi, November 24 India's external debt is dominated by dollar to the extent of 54.2%, Assocham said, adding the 16.54% rupee depreciation between April and November is bound to raise interest payments on dollar-denominated loans. It added the depreciating rupee would add further pressure on the overall domestic inflation. — PTI |
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Tata Group market value jumps by over $1 bn
Mumbai, November 24 Bluechips like TCS, Tata Motors, Tata Steel and Tata Power rallied in a strong market, helping the group attain a market capitalization of close to Rs 3,80,000 crore (about $73 billion). This marked a gain of more than Rs 7,200 crore (about $1.4 billion) in the group's market value from Wednesday's level. The biggest contributor was the group's most valued firm TCS, also the country's biggest IT company, while significant gains were also seen in the valuation of firms like Tata Motors, Tata Power, Tata Steel and Tata Global Beverages. Shares of two listed companies from the SP group, Forbes & Company and Gokak Textiles, also moved higher on Thursday. — PTI |
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Cos expose investors to volatility due to promoters’ share pledging
New Delhi, November 24 There are 748 companies in which promoters have pledged shares. The total value of the pledged shares by the promoters aggregates to Rs 1.09 lakh crore. The study says there are several companies in which promoters have pledged substantial portion of the shares. Such firms include Gujarat Pipavav (in which the promoters have 100% of their holding), Tata Coffee (100%), Ansal Properties (97.74%), Koutons (97.03%), GTL (96.38%), Dunlop India (91.89%), Kingfisher (90.93%), Gati (89.83%), United Spirits (89.64%), Gujarat NRE Coke (88.35%), JSL Stainless (87.69%), Spice Jet (86.16%), Essar Oil (83.99%), Bilcare (83.05%), S Kumars (83.03%), Omaxe (81.61%), Era Infra (80.9%), Orchid Chemicals (77.14%), McDowell Holdings (74.14%), Parsvnath (71.24%), KS Oils (70.28%) and Suzlon Energy (69.41%). The promoters of larger corporates may able to withstand the margin pressures associated with pledged shares. However, the promoters of midcap and small cap companies may find it extremely difficult in the scenario of collapse of share prices and eventual trigger of margin calls, the study says. In such scenario, there is a big risk of company running out of hands of the promoters, in the cases where the promoters have pledged more than 50% of their shareholding, according to the study. A similar study by CRISIL Research reveals that promoters of 31% of the 1,214 listed companies, with market capitalization of Rs 1 biLlIon or more, have pledged a portion of their shareholding. The total pledge works out to Rs 1.1 trillion worth of market capitalization as on November 18, 2011. The CRISIL report says that in the backdrop of inadequate disclosure levels on share pledging, investment in such companies exposes an investor to severe price volatility in case a promoter is not able to meet payments or provide additional collaterals in a falling market. Since the value of these collaterals (pledged portion of promoters’ shareholding) is linked to the daily stock price, the fall in stock price below a threshold level leads to a margin call requiring the promoters to pledge additional shares to make up for the erosion in value. In case they don’t, lenders cover the losses by actively selling the pledged shares in the market, leading to further price fall. CRISIL Research’s analysis also reveals that of the listed companies which have reported pledging, in 183 companies, 25% or more of promoter holding is pledged; this includes 107 companies with 50% or more of promoter’s holding being pledged. In as many as 14 companies, promoters have pledged 90% or more of their holding, thereby exposing the companies to the risk of losing promoter control and also higher share price volatility if the prices fall from their current levels. Sectorwise, power generation, information technology and ITeS, infrastructure, and pharmaceuticals and healthcare companies have seen higher levels of pledging. |
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Gold prices seen to hit $2,000 by March 2012
Mumbai, November 24 "Investor demand has compensated the decline in the jewellery consumption. The rising gold prices, which has boosted the investors appetite, may result in close to 1,000 tonne imports of the yellow metal," Rajan Venkatesh, MD, India bullion, SocotiaMocatta, part of the Bank of Nova Scotia, told reporters here. The current US and eurozone crisis, he said, will keep the gold prices bullish and it is likely to reach $2,000 an ounce in another 3-4 months, he said. "People are losing faith in cash, as load of the US currency can be printed," Venkatesh added. — PTI |
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High NPAs push Punjab banks
to go slow on education loans
Chandigarh, November 24 According to Reserve Bank of India guidelines, banks are required to grant collateral free loans for an amount of up to Rs 4 lakh. However, with the NPAs level in these collateral free education loans rising to an staggering five per cent, banks across the state have drastically reduced advances made under this category. According to the data released by the state level bankers committee of Punjab, as many as 355.50 crore education loans, amounting to Rs 1,051.26 crore, have been extended by the various banks in Punjab till September this year. The NPAs for these loans is around 3.5%. Of the total education loans worth Rs 1,051.26 crore, banks have disbursed education loans worth Rs 399.22 crore as collateral free loans. However, the NPAs level of these loans is as high as 5.4%. The data also shows advances under various education loan schemes in Punjab witnessed an increase of Rs 74.42 crore (from Rs 976.84 crore as on September 2010 to Rs 1,051.26 crore in September 2011), showing a growth of 7.61%. However, the rate of growth in this sector is much less than during the corresponding period of last year. The amount extended as education loan in the state between September 2009-September 2011 had shown an increase of Rs 139.10 crore, or a percentage growth of 16.6 per cent. Sources close to the banking sector told The Tribune many youngsters were taking the collateral free education loans and were unable to repay them. Lack of employment opportunities and a general slowdown in hiring were cited as main reasons by these loan recipients to repay their loans. “Collateral free education loans have become a big problem for the banks, so we’re insisting that in case of an application for an education loan the loan be extended only when collateral is made available,” said a senior banker in a state-owned bank. |
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NRIs can invest up to $10 bn in IDFs
Mumbai, November 24 In a notification issued on Wednesday, the central bank also said sovereign wealth funds, multilateral agencies, pension funds, insurance funds and endowment funds registered with the market regulator SEBI, among others, would be eligible as nonresident investors in IDFs. "All nonresident investment in IDFs, other than non resident India (in both rupee and foreign currency denominated securities) would be within an overall cap/limit of $10 billion only," the RBI said. This comes a day after the central bank issued guidelines on Infrastructure Debt Funds paying the way for banks and NBFCs to float such funds, a move that will help in garnering long-term resources for the infrastructure sector. Banks and nonbanking financial companies (NBFCs) will now will be able to sponsor IDFs, which can be set up either as mutual funds or NBFCs, the RBI said. "All nonresident investment in the securities would be subject to a lockin period of three years. However, all nonresident investors can trade amongst themselves within this lockin period of three years," the notification said. However, the original/initial maturity of all securities at the time of first investment by a non resident investor shall be five years. — PTI |
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Fitch downgrades Portugal to
junk status
Lisbon, November 24 Fitch, one of the three leading credit rating agencies, blamed Portugal's ``large fiscal imbalances, high indebtedness across all sectors, and adverse macroeconomic outlook'' for its decision to cut the country's rating by one notch to BB+. That means Portugal is considered noninvestment grade by Fitch and will likely mean it's even more difficult for the bailed out country to return to bond markets. Like others in the
eurozone, Portugal has embarked on a big austerity program to make its debts sustainable. The government's tough medicine is proving to be unpopular. — AP Airlines canceled hundreds of international flights, and the airports of Lisbon, Porto and Faro were mostly empty as tens of thousands of workers walked off the job. Commuters had to get to work without regular bus or train services. The Lisbon subway was shut, and police said roads into the capital were more congested than normal. Few staff were working at government offices, local media reported. Many medical appointments, school classes and court hearings were canceled, while mail deliveries and trash collection were said to be severely disrupted. An unsustainable debt load and feeble economic growth over the past 10 years pushed Portugal towards bankruptcy earlier this year, forcing it to ask for a (euro) 78 billion ($104 billion) international bailout. Greece and Ireland also needed financial help to weather the crisis which has since spread to bigger countries such as Italy and Spain. |
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Food inflation falls to single digit at 9.01%
New Delhi, November 24 Food inflation, as measured by the wholesale price index (WPI), was 10.63% in the previous week. The rate of price rise in food items stood at 11.38% in the corresponding week of the previous year. According to the data released by the government today, onions became cheaper by 32.85% year-on-year, while potato prices were down by 7.23. The price of wheat also fell by 3.09%. However, all other food items became expensive on an annual basis during the week under review. Vegetables became 17.66% costlier, while pulses grew dearer by 14.28%. — PTI |
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India ‘relatively less’ exposed to global shocks: Fitch
London, November 24 "At a macroeconomic level, Fitch considers China, India and Indonesia to be relatively less exposed to global growth shocks compared to the smaller and more open economies of Thailand, Malaysia and Mongolia (in Asia)," the rating agency said. The spiralling debt crisis in Europe and concerns about the economic health of the US have cast a shadow on emerging markets as well. India and China have been the major drivers of global economic recovery post the meltdown of 2008. — PTI |
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