Nifty crosses 5,700 led by banks & auto

Rate sensitive sectors like Realty, Auto and Banks have zoomed between 2-3%.

Benchmark indices are trading near day’s high with Nifty hitting the psychological mark of 5,700 led by global markets and rate sensitive shares.

At 15:10 PM, the Sensex was up 291 points at 19,238 and the Nifty surged by 90 points at 5,702.

European shares hit a 2-1/2 month high and the dollar was on course for its first three-day rise since June on Tuesday before data expected to paint an improving economic picture on both sides of the Atlantic.

A sentiment survey from Germany is seen bolstering recent signs of momentum in Europe's powerhouse economy while the fastest rise in British house prices in seven years signalled the pick-up going on there too.

Back home, BSE Realty and BSE Bankex indices have surged between 3-4%. Apart from Consumer Durables and Metal, all the major BSE sectoral indices are trading in green zone.

The main gainers on the Sensex at this hour include NTPC, Bajaj Auto, ICICI Bank, Tata Motors and HDFC, all surging between 3-4%.

The market breadth in BSE remains firm with 1,386 shares advancing and 842 shares declining.

Benchmark indices maintain the steady trend amid firm global cues, along with rate-sensitive sectors leading the rally.

At 13:50 PM, the Sensex was up 196 points at 19,145 and the Nifty surged by 59 points at 5,672. The Sensex and Nifty have touched an intra-day high of 19,160 and 5,677 levels, respectively.

On the global front, Japanese shares rose sharply and the yen fell after a media report on Tuesday said Prime Minister Shinzo Abe is considering a cut in corporate tax to counter the pain of a planned sales tax increase, while gold eased but held near three-week highs.

European shares rose on Tuesday, climbing for a fourth straight session, on expectations of robust European data which could see equity markets flirt with their highs of the year.

The FTSEurofirst 300 was up 0.5% at 1,235.85 by 0737 GMT, its highest level since late May and within sight of its 2013 peak of 1,258.09. The euro zone's blue-chip Euro STOXX 50 was also up 0.5%, at 2,841.41.

Back home, the rupee slumped to near a record low on Tuesday on doubts about the government's latest plan to narrow the current account deficit, deepening concerns about the economy and fears of more foreign capital outflows.

India's finance minister announced a slew of measures on Monday in a bid to relieve some of the grinding pressure on the currency, focusing on curbing imports and raising money abroad.

The Reserve Bank of India (RBI) chief Duvvuri Subbarao said on Tuesday that "perhaps" there was a need to reduce the reserves that banks have to set aside via the cash reserve or the statutory liquidity ratios.

On the sectoral front, rate sensitive sectors like Realty, Auto and Banks have zoomed between 2-3%. Sectors like Power, Healthcare, IT, Consumer Durables, Capital Goods and Oil & Gas have gained by 1% each. Apart from Metal, all the major BSE sectoral indices are trading in green zone.

Shares of rate sensitive sectors such as banks, auto and realty have moved higher as the Reserve Bank of India chief Duvvuri Subbarao said that "perhaps" there was a need to reduce the reserves that banks have to set aside via the cash reserve or the statutory liquidity ratios.

M&M, Bajaj Auto, Hero Moto and MRF from Auto sector have surged between 2-4%.

From the banking sopace, HDFC Bank, Axis Bank, ICICI Bank and  IndusInd Bank have risen between 1-4%.

Realty majors like Oberoi Realty, DB Realty, DLF, Peninsula Land and Anant Raj Inds have spurted between 3-13%.

IT majors continue to maintain firm trend on weak rupee. Wipro, TCS and Infosys have gained between 1-3%.

Cipla has extended yesterday’s gains and have surged by nearly 3% on reporting strong Q1 nos. However, Morgan Stanley has downgraded Cipla to "underweight" from "equal-weight" and reduces its target price on the stock to 386 rupees from 414 rupees citing slower growth prospects and valuations.

On the losing side, Hindalco Industries is the top Sensex loser, trading lower by over 4% at Rs 90, in otherwise firm market, ahead of April-June (Q1) earnings today.

Coal India, ONGC and ITC have declined between 1-2%.

Among other shares, Bajaj Finance has surged 7.5% to Rs 1,216, extending its previous day’s nearly 8% rally, after the foreign investor Acacia II Partners LP bought more than three lakh shares of non-banking finance company for Rs 33 crore.

Autoline Industries has rallied 13% to Rs 80, extending its previous day’s 20% surge, after the company said Autoline Industrial Parks Limited, a subsidiary of the company, has executed a term sheet with Smart Value Homes Limited, a wholly owned subsidiary of Tata Housing Development Company to explore the possibility of development of Special Township on its land located at Chakan (Pune).

The market breadth in BSE remains firm with 1,299 shares advancing and 818 shares declining.

Hindustan Copper metal output up 23% in quarter to June 30

Hindustan Copper Ltd said in the first quarter to June 30 it improved its performance on the mining front. Production of metal from mines increased by 23 per cent vis-à-vis the same quarter of the last financial year.

However, owing to the planned shutdown of its smelter plant at Ghatsila in Jharkhand, sales and net profit were down, the PSU explained in a note today.

On Monday, the listed company had announced its Q1 numbers to the stock exchanges without explanations. It undertook a major overhaul during May and June for which the company was shut down, it said.

The plant has since restarted and production levels have assumed normality. The company said it had taken steps to smelt the accumulated inventory of copper concentrates. This was expected to be completed by the end of this month.

Import duty on gold, silver, platinum hiked to 10%

The Government raised the import duty on gold, silver and platinum to 10 per cent on Tuesday.

The Government expects to earn Rs 4,830 crore from the duty hike in the remaining period of fiscal.

The import duty on gold and platinum was earlier 8 per cent and on silver, 6 per cent.

To contain sliding value of rupee and widening current account deficit (CAD), Chidambaram had yesterday said he would announce steps to compress demand of gold, silver, oil and non-essential items.

The Minister had also said the notifications effecting changes in the duty rates would be tabled in Parliament today.

Besides changes in import duty structure, Chidambaram had yesterday announced other measures including easier overseas borrowing norms to fetch an additional $11 billion this fiscal to rescue rupee and contain the burgeoning CAD to $70 billion or 3.7 per cent of the GDP.

CAD touched an all-time high of 4.8 per cent of the GDP in 2012—13.

The rupee, on account of various domestic and global factors, had slipped to 61.80 to a dollar earlier in the month.

M&M Q1 net up 29% to Rs 938 cr on other income, tractor biz

Revenues from M&M's farm equipment segment jumped to Rs 3,899.52 crore from Rs 3,078.29 crore Y-o-Y, but auto segment's sales fell to Rs 6,120.54 crore from Rs 6,278.65 crore during the same quarter.

Utility vehicle maker Mahindra and Mahindra (M&M) reported a higher-than-expected 29 percent growth year-on-year in its net profit of Rs 938 crore during April-June quarter, largely driven by other income and tractor business.

Total income from operations rose lower-than-expected 7 percent on yearly basis to Rs 10,022 crore in the first quarter.

Analysts on an average has expected the auto company to report net profit of Rs 870 crore on total income of Rs 10,264 crore.

Revenues from farm equipment segment jumped to Rs 3,899.52 crore from Rs 3,078.29 crore Y-o-Y, but auto segment's sales fell to Rs 6,120.54 crore from Rs 6,278.65 crore during the same quarter.

"The automotive industry in India has been facing challenging times in the recent past and in Q1 the industry shrank by 2 percent," M&M said in its filing. It sold 56,969 passenger utility vehicles during the quarter and continued to maintain its leadership position with 46 percent market share.

Meanwhile, it sold 71,696 tractors in the domestic market in Q1 as against 56,861 units in a year ago period, a growth of 26.1 percent while exports (tractors) increased 5.5 percent Y-o-Y to 3,187 units. The market share of the company in this segment was 41.4 percent during the quarter.

Earnings before interest, tax, depreciation & amortisation (EBITDA) grew by 16 percent Y-o-Y to Rs 1,287 crore while operating profit margin increased 100 bps to 12.8 percent during the quarter, which too were lower-than-forecast of Rs 1,326 crore and 13 percent, respectively.

Other income surged 2.7 times to Rs 164.2 crore in April-June quarter from Rs 60 crore reported in a year ago period, which included dividend received from subsidiaries.

"South Korean subsidiary Ssangyong Motor Company posted a 26.8 percent growth in consolidated revenues and 138 percent growth in results broke even for the first time since its acquisition in March 2011 and returned a profit after tax of Rs 41 crore," M&M said.

Post earnings, the stock trimmed gains from 3.5 percent to Rs 1.85 percent at Rs 876.05 on the BSE at 14:10 hours IST.

Sensex gains 158 points during pre noon trade

A benchmark index of Indian equities markets was trading 157.88 points or 0.83 percent up during the pre-noon trade Tuesday.

Good buying was observed in auto, banking index (bankex), IT and healthcare sectors; while selling pressure was seen in metal and consumer durables sectors.

The 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 18,895.26 points, was trading at 19,104.86 points in the pre-noon session, up 157.88 points or 0.83 percent from the previous day’s close at 18,946.98 points.

The Sensex touched a high of 19,156.41 points and a low of 18,864.81 points in the trade so far.

The S&P BSE auto index surged 188.14 points, the bankex increased by 155.44 points, the IT index moved up by 116.63 points and the healthcare index went up by 124.32 points.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) was also trading 52.55 points or 0.94 percent up at 5,664.95 points.

BPCL Q1: Analysts expect net loss at Rs 2,250 cr

Analysts expect gross refining margins (GRMs) of BPCL at USD 4.4 a barrel due to lower benchmark margins and forex loss of Rs 1400 crore on its forex debt.

Bharat Petroleum Corporation (BPCL) will announce its April-June quarter earnings today. Analysts on an average expect net loss of the state-run oil marketing company to fall to Rs 2,250 crore from Rs 8,840 crore year-on-year, according to a CNBC-TV18 poll.

Sales are seen going up to Rs 57,400 crore in first quarter from Rs 54,520 crore reported in a year ago period while earnings before interest, tax, depreciation & amortisation (EBITDA) loss is expected to be at Rs 1,259 crore as against Rs 8,180 crore Y-o-Y.

Analysts see gross refining margins (GRMs) of the company to stand at USD 4.4 a barrel due to lower benchmark margins and forex loss of Rs 1400 crore on its forex debt.

Last time when an FT group exchange shut down…

Members were stranded when Safal National Exchange ceased operations in 2009; litigation followed
National Spot Exchange (NSEL) is not the first Financial Technolgies (FT) group venture that has collapsed spectacularly landing investors and trading partners in a financial quagmire.

Four years ago, another venture that opened with much fanfare and projected to hit volumes of Rs 60,00 crore shut down suddenly.

SAFAL National Exchange of India Limited (SNX) was incorporated on June 14, 2006 as a joint venture between FT, Multi Commodity Exchange (MCX) and Mother Dairy Fruit and Vegetable Private Limited, company promoted by National Dairy Development Board. SNX was incorporated for the purpose of spot trading in horticulture, floriculture, dairy and allied produce and products. FT group, which held 51%, also provided the electronic trading infrastructure.

The exchange picked up, drawing a lot of interest from farmers but was suddenly called off in March 2009.

Among the theories that were floated include that the FT group wanted to drive traffic to its 100% venture NSEL, which was taking baby steps then. People also talked about lack of agreement between buyers and sellers on quality and price, a problem that would come to haunt NSEL at a much larger scale four years later.

Following the shut down of SNX, a group of investors and members had filed complaints with the Economic Offences Wing (EOW) against the promoters of SNX, including FT and MCX, which together held 51%.

The investors alleged they were cheated of Rs 5 crore by Safal National Exchange (SNX).

It was alleged that the promoters, which included Multi Commodity Exchange and Financial Technologies, did not return the membership fee to its 200 investors after winding up.

According to the investors, Rs 2.6 lakh each deposited with SNX for membership was not returned after the exchange was closed.

"All of sudden the trading was suspended on the portal without any information being given to the members. Further, the information about the members, directors and contact details were removed from the website. SMS enquiry facility was stopped, all the business development officers and supply chain people were removed," said the members in their petition.

According to them, after dissolving SNX, the members were later given the option to migrate to another exchange, National Spot Exchange Ltd (NSEL), and trade in fruit and vegetables only.

The complainants further submitted, "Launch of SNX was a plot scripted by FT and executed in connivance of NDDB by which the FT could secure a large number of members for trading purposes at NSEL."

In addition, they were asked to pay Rs 5 lakh along with an annual subscription fee to get full trading rights on the new exchange. The FT annual report of FY2010 does not have any reference to SNX’s closure of operations. In the FY11 annual report it said, “Your Company exited as JV Partner of “SAFAL National Exchange of India Limited” by entering into a settlement along with MCX and Mother Dairy Fruit and VegetablePrivate Limited (“Mother Dairy”) inter alia  agreeing to terminate the joint venture and  to amalgamate Safal with Mother Dairy.”

FT had an investment of Rs 4.56 crore in the venture, according to the annual report, which was written off.

A group spokesperson did not comment on the closure and legal position vis-à-vis investors but in an email response referred to disclosures made in the MCX public issue prospectus.

According to the prospectus, “We had previously invested in a joint venture, Safal National Exchange of India Limited, which permanently ceased operations during the fiscal 2009. Pursuant to the settlement agreement dated June 25, 2010 to terminate the joint venture, Mother Dairy Fruit & Vegetable Private Limited (MDFVL) holds 100% of the equity share capital of Safal National Exchange of India Limited with effect from December 29, 2010.”

MCX further said that the Company has accounted for its investment in SNX of Rs 7.2 crore under Accounting Standard 13 - Accounting for Investments and has fully provided for diminution in value being other than temporary and for advances due from SNX based on its assessment of net realizable values of SNX's assets and liabilities.

Reliance Power wins Appeal against CERC Order on Sasan UMPP

Reliance Power has won the appeal against CERC Order on Sasan UMPP as the Appellate Tribunal for Electricity (APTEL) has pronounced its judgment allowing the appeal of Sasan Power - a wholly owned subsidiary of Reliance Power - against Central Electricity Regulatory Commission’s (CERC) order dated June 06, 2013 on Commercial Operation Date (COD) of the first 660 MW unit of Sasan UMPP. APTEL has set aside CERC’s order and has directed CERC to decide the matter afresh, including the issue of maintainability raised by Sasan Power (SPL) without being influenced by its earlier findings.

Aggrieved by CERC’s order, which shad set aside the certificate issued by Independent Engineer’s (IE) for declaration of COD of Sasan UMPP’s first 660 MW Unit based on petition filed by western region load dispatch centre (WRLDC), SPL filed appeal before the APTEL on grounds that CERC’s order is violative of principle of natural justice and is not tenable in law.

Glenmark receives final ANDA approval for Acamprosate Calcium Delayed Release Tablets

Glenmark Generics Inc, USA, the United States subsidiary of Glenmark Generics, has been granted Abbreviated New Drug Approval (ANDA) from United States Food and Drug Administration (US FDA) for Acamprosate Calcium Delayed Release Tablets, the generic version of forest Laboratories’ Camparl Delayed Release Tablets.

Acamprosate is indicated for the maintenance of abstinence from alcohol in patients with alcohol dependence. Based on IMS health sales data for the 12 month period during March 2013, Acamprosate garnered sales of $21 million.

Glenmark’s current portfolio consists of 88 products authorized for distribution in the U.S. marketplace and 53 ANDA’s pending approval with the U.S. FDA. In addition to these internal filings, GGI continues to identify and explore external development partnerships to supplement and accelerate the growth of the existing pipeline and portfolio.

Glenmark Generics is a subsidiary of Glenmark Pharmaceuticals and aims to be a global integrated generic and API leader.

RBI chief says reserve ratios may need to come down

The RBI has recently tightened monetary conditions by raising short-term interest rates and draining cash in a bid to defend the rupee

The Reserve Bank of India (RBI) chief Duvvuri Subbarao said on Tuesday that "perhaps" there was a need to reduce the reserves that banks have to set aside via the cash reserve or the statutory liquidity ratios.

The cash reserve ratio, or the amount of cash lenders must deposit with the Reserve Bank of India, stands at a record low of 4%. Meanwhile, the statutory liquidity ratio, which includes securities such as government bonds, stands at 23%.

Subbarao was speaking at a banking conference in Mumbai.

The RBI has recently tightened monetary conditions by raising short-term interest rates and draining cash in a bid to defend the rupee, but the currency has weakened nonetheless, sparking concerns the central bank would need to either raise the CRR or raise the key repo rate.

IDBI Bank puts Deccan Chronicle's newspaper titles on the block

Public sector lender IDBI Bank today issued fresh proposal to auction four newspaper titles owned by Hyderabad-based media house Deccan Chronicle Holdings (DCHL) to recover its dues.

The lender has said it will transfer four titles---Deccan Chronicle, Andhra Bhoomi, The Asian Age and Financial Chronicle---to the highest bidder.

"IDBI Bank, hereby, invites all the interested persons to submit their proposals/bids for acquiring, on an "as is" basis, the trademarks collectively or separately for each trademark," the lender said.

The notice further read,"As security for the financial assistance granted by IDBI Bank, DCHL along with the other co-owners has created a charge by way of hypothecation on their trademarkes...Due to failure on the part of DCHL to repay the financial assistance provided to it, IDBI Bank has decided to enforce the security."

IDBI Bank, in February, had issued similar notice, which had got a stay from the debt recovery tribunal (DRT) due to objections from other lenders.

DCHL owes around 18 lenders to the tune of Rs 4,000 crore.

Shares of the company were trading at Rs 2.27, up 0.9%.

Suprajit Engineering commences Commercial Production at new cable plant

Suprajit Engineering has commenced the Commercial Production at its new cable plant located in Pathredi with deliveries to customers. The company’s 100% Export Oriented subsidiary - Suprajit Automotive, has also started commercial production at its new cable plant at Doddaballapur with regular deliveries to overseas customers.

Suprajit Engineering is committed to being a world class organization, supplying cables and components to overseas and domestic customers in automobile and non-automobile sectors.

Tech Mahindra gains on plan to invest Rs 1,000 crore in next 3 years

Tech Mahindra is currently trading at Rs 1317.50, up by 51.70 points or 4.08% from its previous closing of Rs. 1265.80 on the BSE.

The scrip opened at Rs 1276.10 and has touched a high and low of Rs 1329.00 and Rs. 1276.00 respectively. So far 108508 shares were traded on the counter.

The BSE group 'A' stock of face value Rs 10 has touched a 52 week high of Rs 1329.00 on 13-Aug-2013 and a 52 week low of Rs 775.00 on 30-Aug-2012.

Last one week high and low of the scrip stood at Rs 1329.00 and Rs 1209.00 respectively. The current market cap of the company is Rs 30600.35 crore.

The promoters holding in the company stood at 47.17% while Institutions and Non-Institutions held 42.62% and 10.22% respectively.

Tech Mahindra, a specialist provider of connected solutions to the connected world, is reportedly planning to invest around Rs 1,000 crore over the next 3 years to expand its infrastructure capacity and increase its delivery capabilities. This expansion plan is not only for big cities like Mumbai and Chennai but also for tier 2 and tier 3 cities.

Tech Mahindra is a leading provider of solutions and services to the telecommunications industry with a majority stake owned by Mahindra & Mahindra.

Results

Scrip Name                 Alok Inds	Date  13-Aug-13
Amtek Auto-$	13-Aug-13
ANANDPROJ	13-Aug-13
Ashiana Ispat	13-Aug-13
Astrazeneca Phar	13-Aug-13
BF Utilities-$	13-Aug-13
Career Point	13-Aug-13
Educomp Sol	13-Aug-13
Emami Paper	13-Aug-13
Escorts	13-Aug-13
Fintech Comm	13-Aug-13
GMR Infra	13-Aug-13
Gujarat State Pet	13-Aug-13
GV Films	13-Aug-13
HEG	13-Aug-13
Igarashi Motors	13-Aug-13
Indian Oil Corp	13-Aug-13
Kalindi Rail-$	13-Aug-13
LML	13-Aug-13
Mahindra & Mahindra	13-Aug-13
Max India	13-Aug-13
Orient Paper	13-Aug-13
Pidilite Inds	13-Aug-13
Pratibha Inds	13-Aug-13
Rohit Ferro	13-Aug-13
Tata Steel	13-Aug-13
Voltas	13-Aug-13
Walchandnagar	13-Aug-13

              

YES Bank loses market value

YES Bank, which gets 69% of its funding from bulk deposits and debt

YES Bank lost almost half its market value in less than a month on investors' concern that a record surge in interest rates will erode profits and boost defaults. The stock has tumbled 43 per cent, the most in the S&P BSE Bankex Index, since the Reserve Bank of India on July 15 began taking emergency steps to tighten liquidity and bolster the rupee.

YES Bank, which gets 69 per cent of its funding from bulk deposits and debt, is among lenders that are most vulnerable if rates remain high, according to Espirito Santo Securities India.

The percentage of gross and net non-performing assets stood at five per cent and three per cent, respectively as against three per cent and two per cent, respectively. It said these slippages were short-term and it would be addressed during the current financial year.

Muthoot Finance files draft prospectus with SEBI to issue NCDs worth Rs 300 crore

Muthoot Finance is planning to raise Rs 300 crore through issue of secured non-convertible debentures (NCDs). In this regard, the company has filed the draft prospectus with market regulator Securities and Exchange Board of India (SEBI) for public issuance of the same.

The NCD issue aims at aggregating up to Rs 150 crore with an option to retain over-subscription of up to Rs 150 crore for issuance of additional NCDs aggregating to a total of up to Rs 300 crore.

The raised fund will be used for financing activities, including lending and investments, besides utilising them to repay existing loans, capital expenditure plans and to meet working capital requirements. ICICI Securities is the lead managers to the issue, while Link Intime India is registrar to the issue.

Muthoot Finance is a non-deposit taking systemically important non-banking finance company (NBFC). It is primarily in the business of lending against used household gold jewellery to individuals.

Exports surge to 21-month high

July shows highest monthly jump in nearly 2 years, at 11.6 per cent; rupee's fall, some recovery abroad and govt's recent measures help

Exports in July soared 11.6 per cent to $25.8 billion, compared to $23.1 bn in the same month last year. This is the highest growth rate in exports in 21 months, since October 2011, when exports grew 23.7 per cent over the same month of the earlier year.

This financial year (from April 1), exports fell in May and June, by 1.1 per cent and 4.6 per cent, respectively.

The rise in July’s exports was mainly on account of a falling rupee (at an all-time low of 61.81 against the dollar last week), coupled with a rise in demand in America, Africa and East Asia.

And, imports in July were $38.1 bn, down 6.2 per cent from $40.6 bn in July last year.

“Continuing interest in Africa, Latin America, Asean (Association of Southeast Asian Nations) and the Far East regions is the main reason why exports have risen. We expect this trend to continue,” commerce secretary S R Rao said.

He said the government’s recent measures to help shipments would also help arrest the earlier fall in merchandise export. Total export in the April-July period reached $98.3 bn, about 1.7 per cent higher than the $96.6 bn in the corresponding period of 2012-13. In this period, imports rose 2.8 per cent to $160.7 bn against $156.3 bn in the same period last year, according to the data released on Monday.  The trade deficit in July, therefore, was $12.3 bn compared to $17.5 bn in July last year. During April-July, this deficit widened to $62.45 bn as against $59.7 bn in the corresponding period of 2012-13.In 2012-13, the current account deficit reached a historic high of 4.8 per cent of gross domestic product, due to a surge in import of gold and petroleum products.

“We expect our exports to do slightly better this year. Although the growth in four months has been a mere two per cent, our target is much higher, at 10 per cent for the present financial year,” he added.

In July, export of readymade garments, pharmaceuticals and textiles have been impressive; those of engineering goods and gold jewellery have fallen. Import of pearls, semi-precious and precious stones, transport equipment and fertilisers have risen; those of gold and silver, crude oil and vegetable oil have declined, said Anup K Pujari, director general of foreign trade.

According to M Rafeeque Ahmed, president, Federation of Indian Export Organisations, this positive trend in exports is likely to continue, with “positive signs emanating from the US and EU (European Union)”.

In July, crude oil imports stood at $12.7 bn, down eight per cent over the $13.8 bn in the same month last year. Total crude oil import in these four months of 2013-13 have reached $54.6 bn, up 2.7 per cent from the $53.2 bn in the same period of 2012-13.

“We expect this trend in exports to continue, as the government did the right intervention at the right time,” said Sanjay Budhia, chairman of the Confederation of Indian Industry’s export committee.

Non-oil imports in July reached $25.4 bn, falling 5.3 per cent against the $26.8 bn in July last year. However, during these first four months, non-oil imports rose three per cent, to $106.15 bn from $103.15 bn last year in the same period.

“The market is the US is gaining strength but the EU is still under economic stress. Though we have registered a growth of around 16 per cent in readymade garments in the US and EU markets, our export diversification in  non-traditional markets and sustained government help has also helped,” said A Sakthivel, chairman, Apparel Export Promotion Council.

Since the beginning of the fiscal exports have fallen for two consecutive months in May and June when it dropped by 1.11 per cent and 4.56 per cent respectively.

The rupee touched an all time low of 61.81 against the dollar last week.


Last fiscal the current account deficit (CAD) reached a historic 4.8 per cent of GDP due to a surge in import of gold and petroleum products. 

Govt to increase import duty on gold, luxury goods

PSU financial agencies to get nod for quasi-sovereign bonds, oil firms to get ECB window

The government is looking at increasing the import duty on gold and on non-essential, or luxury, commodities to reduce the current account deficit (CAD), Finance Minister P Chidambaram said on Monday.

The government would also allow public sector financial institutions to raise dollars through quasi-sovereign bonds. For the first time, Indian subsidiaries of multinational companies would be allowed to raise funds from their parents through a relaxed external commercial borrowing (ECB) window. Public sector oil companies would also be allowed to raise funds via ECB. The Customs notifications on import duty will be placed in Parliament on Tuesday, he said. The import duty on gold now is eight per cent.

The minister announced these proposals to keep the CAD at a three-year low of 3.7 per cent of gross domestic product (GDP) in 2013-14, bolstered by the lower trade deficit of June and July. "If the CAD is contained at $70 billion, it will amount to 3.7 per cent of GDP," Chidambaram said in a statement in the Lok Sabha.

FISCAL MATH

Measures to fetch an additional $11 bn to check the burgeoning CAD & arrest rupee fall $4 bn IRFC, PFC and IIFCL to be allowed to raise together through quasi-sovereign bonds for infrastructure sector needs $4 bn PSU oil companies to be allowed to raise external commercial borrowings $2 bn Gains expected from liberalisation of ECB norms $1 bn Gains expected from liberalisation of non-resident deposit schemes

The CAD had touched a record 4.8 per cent in 2012-13. In absolute terms, it was $88.2 billion. GDP is projected to be $1.89 trillion this financial year (assuming the rupee at 60 against a dollar). At this rate, $70 billion works out to 3.69 per cent of GDP. If GDP falls, the CAD in percentage terms would go up. The deficit estimate has been made on the basis of projections for exports and imports and the trade deficit this year.

Chidambaram said gold imports were likely to fall to 850 million tonnes this financial year from 950 million tonnes in 2012-13. He hoped that fall in gold and oil imports would save the economy $1.5 billion.

The government would ask public sector financial institutions Power Finance Corporation, India Infrastructure Finance Company Ltd and India Railway Finance Corporation to go for a quasi-sovereign bond to fund long-term infrastructure needs and to ask oil companies to raise ECB. He said oil PSUs and PSU financial institutions would raise $4 billion a year this way. The rate on dollar-denominated non-resident Indian deposits, or foreign currency non-resident deposits, is being de-regulated, the finance minister said, adding the Reserve Bank of India (RBI) would also issue a circular to allow Indian subsidiaries of multinational companies to raise funds through ECB. The minister said liberalisation of ECB norms and non-resident deposit schemes would fetch $2 billion to the exchequer.

As measures were taken to narrow the CAD, the finance minister said there was a need to do more to contain the deficit, reduce volatility in the currency market and to stabilise the rupee. In 2011-12, the government had to draw foreign exchange reserves of $12.8 billion to finance the CAD. "Last year, we had a larger CAD at $88.2 billion. Nevertheless, we were able to fully and safely finance the CAD, and do even better. We added $3.8 billion to the reserves," he said, adding there could be a small accretion to foreign exchange reserves this year.

The rupee has depreciated 12 per cent against the dollar since the beginning of this financial year. It closed at 61.28 on Monday.

It had hit an all-time closing low of 61.30 against the dollar last Wednesday. Depreciation of the rupee also means lower GDP in dollar terms, which would magnify any given absolute number of the CAD.

After touching $17.8 billion in April and $20.14 billion in May, the trade deficit fell drastically to $12.3 billion in June and $12.3 billion in July. Even then, it widened to $62.5 billion in the first four months of the current financial year, against $59.7 billion in the corresponding period of the previous year