Raghuram Rajan effect on banks: 'Cautious' rating to banking sector shares

The Raghuram Rajan-effect: The short-medium-and long-term plans. The short-term steps announced by the RBI (lower swap cost on FCNR and foreign currency borrowings), in the wake of new Governor Raghuram Rajan taking over top job at central bank, aim to address currency issues with negligible benefit to banks. The secondary effect of the recent move by the RBI on the bond market, if any, would be the key event to watch for. However, the medium-term (branch/bank licensing) and long-term plans (structural reforms) could have a positive impact, whenever they are implemented.

Short-term measures have negligible impact from an earnings perspective: The RBI has allowed two measures to boost dollar flows—(i) FCNR (foreign currency non-resident account) deposits can be swapped with the RBI at 3.5%, which would enable banks to raise dollar deposits at attractive rates (Libor + 400 bps + 3.5%) for lending in the domestic currency; (ii) banks can raise foreign currency borrowings up to 100% of tier-1 against 50% currently and swap with the RBI at a rate of 100 bps less than the ongoing swap rate. These two measures would have limited impact on banks’ earnings as (i) the landed cost of these deposits would be almost similar to term deposits and (ii) the ability to raise borrowings, at least, has been impacted in the current environment.

FCNR deposits have languished at $15 bn in recent years and CDS (credit default swap) spreads of large banks increased by about 200 bps in recent months, making it challenging to raise these funds. We note that large PSU banks like State Bank of India (SBI), Bank of Baroda, Bank of India and ICICI Bank would be direct beneficiaries as they have a large international presence.

Medium-term measures positive especially on branch licences: The two key medium-term measures—(i) RBI indicated that new bank licences would be announced by January 2014 and that it would constitute a panel headed by former RBI governor Bimal Jalan to assist in the screening process; (ii) “well-run banks” would have the flexibility to open branches.

Consumer expenditures in 2012 surpass pre-recession highs

This contrasts with 2010-2011, when the increase in average expenditures mirrored the increase in prices.

Average expenditures per consumer unit (1) in 2012 were $51,442, an increase of 3.5 percent from 2011 levels, the U.S. Bureau of Labor Statistics reported today. This surpassed the spending peak recorded in 2008, after which the effects of the recession led to a low of $48,109 in 2010. The 2012 calendar year increase in spending outpaced the 2.1-percent increase in prices for goods and services during the same period, as measured by the Consumer Price Index (CPI-U). This contrasts with 2010-2011, when the increase in average expenditures mirrored the increase in prices.

Most of the major components of household spending increased in 2012, with apparel being the lone exception, as shown in table A. The 11.2-percent rise in cash contributions (including payments for support of college students, alimony and child support, and giving to charities and religious organizations) was the largest percentage increase among all major components. Overall spending on transportation (+8.5 percent) and health care (+7.3 percent) rose significantly, while spending on housing (+0.5 percent) and entertainment (+1.3 percent) only increased modestly. Other highlights include a 2.2-percent increase in food and a 3.1-percent increase in personal insurance and pensions.

Spending patterns, 2010-2012

Since overall expenditures began to increase again in 2011, cash contributions, health care, and transportation have had the largest percentage increases of all the major expenditure items. Table B shows some of the more prominent components of these categories from 2010 to 2012. Spending changes included:

• The 11.2-percent increase in cash contributions since 2011 can largely be attributed to a 13.1-percent increase in cash contributions to churches and religious organizations over that same time period. This increase is amplified due to expenditures in this category falling in 2011.
• Health insurance routinely consumes nearly 60 percent of overall health care expenditures. The 12.6-percent increase in health insurance since 2010 was the driving force behind the increased expenditures on overall health care.
• Gasoline expenditures (largely dependent on gasoline prices) rose 29.6 percent from 2010 to 2012, but the majority of that was due to a 24.7 percent increase in 2011. In 2012 gasoline expenditures increased 4.0 percent.
• Despite gasoline expenditures remaining relatively stable in 2012, overall expenditures on transportation continued to rise (+17.2 percent since 2010). This can be traced to a 20.3-percent increase in expenditures on vehicle purchases from 2011 to 2012.

Spending by selected demographics

Consumer Expenditure Survey (CE) data measure how consumers allocate their spending among the various components of total expenditures. For example, table C compares the share allocated to selected expenditures by ethnicity and race. Hispanic consumer units (CUs) allocated more money to transportation and food than the non-Hispanic groups. Black, non-Hispanic CUs allocated more money to housing than any other group, and white, non-Hispanic CUs allocated more money to health care and entertainment than other CUs. Share of spending on cash contributions, the category with the largest percentage increase for all CUs in 2012 was varied, with Hispanics devoting a smaller portion than their non-Hispanic counterparts.

Rupee nears 63/dollar; lifts Sensex, Nifty

The Indian rupee neared 63 per dollar mark on Wednesday and is on track for its fifth consecutive day of gains. The sharp gain in the rupee lifted sentiments in stock markets too, with the BSE Sensex bouncing back into the green after earlier falling by over 200 points.

The rupee hit a high of 63.07 per dollar, up over 1 per cent as against Tuesday's close of 63.84. This is the fourth straight day when the partially convertible rupee has seen gains of over 1 per cent.

The rupee recovered from the day's low at 64.20 per dollar and traded at 63.23 as of 3.10 p.m.

Dealers told Reuters that corporate inflow related selling of dollars supported the rupee today. Several dealers cited selling by a large private petrochemical company.

A convincing break of 63.30 means 63 will be next support, analysts said. The rupee has gained over 6 per cent since the lows hit last Wednesday. That day Raghuram Rajan took over as the new Reserve Bank governor and announced a series of measures to defend the currency.

Stock markets were choppy today after a four-day rally. The BSE traded up 29 points at 20,026, while the Nifty traded 26 points higher at 5,922.

Traders attributed the correction to profit taking after a four-day rally saw a complete turnaround in sentiments. The BSE Sensex has around 10 per cent or around 1,800 points in the previous four trading sessions starting Wednesday. Markets were closed on Monday.

Essar Power raises Rs 1,000 crore through bonds

As part of its plan to lower the debt service burden by replacing short-term debt with long-term borrowing, Essar Power has raised Rs 1,000 crore through an 11-year domestic bond sale.

The city-based company, which is a subsidiary of the London-listed Essar Energy, is offering a coupon of 12.5 per cent on the bonds, which will be listed on the BSE and will be repaid from 2017 to 2024.

The company had earlier said it would be replacing Rs 5,000 crore of its short-term debt with long-tenor borrowing, and the current sale is the second such attempt as it had already raised Rs 1,750 crore.

Essar Energy chief financial officer Deepak Maheshwari said, "The rupee bond issue will allow our power business to benefit from longer debt maturity time-frames and lower interest rates, compared to our existing debt facilities.

Essar Power has seven operational plants in the country and one in Algoma, Canada, with a total installed generation capacity of 3,910 MW. Last fiscal, Essar Power had completed a number of coal-fired power projects and its operational capacity will touch 6,700 MW shortly.

Essar Power has also access to around 500 million tonnes of coal resources across seven coal blocks in the country and overseas.

Jaypee Cement to sell 51% stake in Gujarat unit to Ultratech

 After a little over a year's negotiation, Jaypee Cement has struck a deal with Aditya Birla Group firm UltratechBSE 1.29 % to sell 51 per cent stake in the 5 mtpa Gujarat facility for close to Rs 4,000 crore.

"The deal has been finalised. Ultratech will buy Jaypee Cement Corporation's 51 per cent stake in Gujarat plant, which has an annual capacity of five million tonnes for close to Rs 4,000 crore" a Jaypee Group official told PTI.

The Jaypee Group, having interests in areas such as real estate, cement and hospitality, is the country's third largest cement maker with an installed capacity of 33.5 mtpa.

Though Jaiprakash Associates, the flagship company of the Group, holds the majority of the cement business, however, operations in Gujarat and Andhra Pradesh having a total capacity of 9.8 mtpa, are under the aegis of Jaypee Cement Corporation. This was hived off for monetising the asset.

Aditya Birla Group, the country's largest cement maker with 54 mtpa capacity, runs cement business through Ultratech Cement and plans to increase its capacity by another 10 mtpa by 2015. The two were engaged in negotiations for a little over a year now.

Apart from Ultratech Cement, there were other contenders including French building material major Lafarge, for the acquisition of the unit.

However, a previous transaction between the two in the acquisition of Bina Power Supply (BPSL) in 2008 also helped the deal. A group company of Jaiprakash Associates had acquired BPSL from the Aditya Birla Group.

Jaypee Cement Corporation wanted to sell Gujarat asset for raising some funds and had been mulling various options, including offloading to a private equity firm. The proceeds would be used to meet the capacity expansion and retire debt, among others things, it had said earlier.

Jaypee Group is working on increasing its cement capacity to 36 mtpa by the end of the current fiscal and is evaluating various locations to take it to 50 mtpa capacity over the next five years.

Toshiba to acquire T&D Business from Vijai Electricals

The acquisition will be completed in November 2013.

Toshiba Corporation and Vijai Electricals Ltd. (Vijai), one of India's leading manufacturers of power and distribution transformers, today announced that they have agreed to Toshiba's acquisition of the major part of Vijai's electricity transmission and distribution (T&D) business for approximately US$200 million. The acquisition will be completed in November 2013.

In parallel, Toshiba will establish a new company that will absorb the acquired business, and also integrate Toshiba's state-of-the-art design and manufacturing technologies for T&D systems. The new company will also enter other growing markets in India, including power electronics systems, such as high voltage direct current (HVDC) power transmission and static var compensators for high voltage networks (SVC), and railway power supply systems. Toshiba will position the new company as a core production base for expanding its T&D business in India and the global market, alongside its other bases in Japan, China, Brazil, Russia and Southeast Asia.
Vijai was established in 1973, to manufacture and sell electricity distribution transformers. The business has grown on the strength of the company's high quality production capabilities, which have allowed it to win the top share in the Indian market and major footholds in both Europe and Africa. Vijai further expanded its T&D business in 2006, when it entered the power transformer and switchgear businesses, and through the business activities Vijai has manufactured and supplied the world's highest voltage class ultra-high voltage 1200 kV power transformer.
"The acquisition is necessary for our global T&D strategy, and Vijai's products and sales channel provide us with an ideal fit for our T&D business in India and beyond," said Takeshi Yokota, Corporate Vice President of Toshiba. "It will support us not only in the Indian market, where we aim to secure a 20% market share within five years, but in reinforcing our position in the global market, by strengthening our worldwide network."
Dasari Jai Ramesh, Vijai's Chairman added "I'm delighted to reach agreement with Toshiba, a global company. We are proud that our technology strengths and people capabilities will become part of Toshiba Group and will provide them a powerful platform for their business growth and market expansion."
India has recorded year-on-year GDP growth of over 5% since 2003, and long-term capital investment is expected to continue to counter current infrastructure shortages in key areas, including electricity and transportation. The T&D market size is expected to rise to over US$4 billion by 2015.

Investors cash in on soaring gold price, cash out of ETFs in August

Gold Exchange Traded Funds (ETFs) saw massive profit-booking last month as investors sold funds to take advantage of soaring gold prices which topped Rs 33,000 in August, following the slide in the local currency coupled with the rise in import duty on gold and fears of a military strike on Syria by the US.

With gold prices peaking, investors in gold ETFs are staying away and heavy profit-booking by them resulted in net redemptions of Rs 588 crore from Gold ETFs in August this year — the highest single month redemption in over six years.

In fact, investors have been consistently booking profits in gold ETFs for the past three months since the rupee started to weaken against the dollar.

According to Association of Mutual Funds in India (Amfi), gold ETFs have reported net redemptions of almost Rs 900 crore in the past three months alone, a trend witnessed for the first time in gold ETFs since these schemes were launched in February 2007.

The number of investor portfolios in gold ETFs have also shrunk from a record high of 6.06 lakh portfolios in May to 5.87 lakh in July this year and it is quite likely to have shrunk further in August —for which data is not available now.

"Investors cannot digest gold giving negative returns and hence have exited at an appropriate opportunity," says Lakshmi Iyer, head-fixed income, Kotak Mutual Fund. The yellow metal has generated negative returns of 3.8% in the past year, after having risen a multifold over the past six years. But Lakshmi does not believe that the current trend reflects a change in perception about gold among Indian investors.

"While gold demand is likely to be muted and there may be further profitbooking till the time the rupee stabilises against the dollar, we do not expect investors to exit their investments in gold significantly and move to other asset classes such as equity. In fact, With the Sensex at 20000 levels, investors may very well tread cautiously in equities," she says.

Interestingly, equity funds, including equity linked savings schemes (ELSS) reported net inflows of over Rs 450 crore last month after redemptions of over Rs 1,800 crore in July. But according to ICICIBSE -1.03 % Prudential Mutual Fund MD & CEO Nimesh Shah, this is due to lower redemptions seen in August, because of subdued equity markets.

There has not been any significant change in gross sales of equity funds, he says. Association of Mutual Fund in India (AMFI) data show that gross sales in equity schemes have, in fact, shrunk for the third straight month from Rs 3,180 crore in June 2013 to Rs 2,811 crore in July 2013 and Rs 2,660 crore in August 2013.

KEC International bags orders worth Rs 1,004 crore

KEC International, a global infrastructure EPC major, has secured new orders worth Rs 1,004 crore in its Transmission, Cables, Telecom and Power Systems Cables businesses.

Under Transmission business, the company has secured orders in India (Tamil Nadu and Andhra Pradesh), America and Kuwait amounting to Rs 760 crore. In state of Tamil Nadu, the company received two orders consisting supply and erection of 400 kV transmission lines between the Anikadavu-Thappagundu 400 kV proposed substations and between the Anikadavu -Rasipalayam 400 kV proposed substations on turnkey basis. The orders are secured from the Tamil Nadu Transmission Corporation and the total value of orders is Rs 314 crore. In Andhra Pradesh, the company has received order for supply and erection of 400 kV transmission line between Kamavarapukota-Chinnakorukondi substations on turnkey basis. The order is secured from the Transmission Corporation of Andhra Pradesh and is valued at Rs 271 crore.

On international front, the company’s wholly owned subsidiary - SAE Towers, has secured orders for the supply of lattice towers, monopoles and hardware from United States, Brazil and Mexico. The total value of orders is Rs 147 crore. In Kuwait the company has received order for design, supply and erection of Gantry at Az Zour substation on turnkey basis. The order value is Rs 28 crore.

Under Cables Division, the company has secured orders worth Rs 98 crore for supply of Power and Telecom Cables, while under Telecom Division the company has secured an order for supply and installation of OPGW cable and associated hardware on turnkey basis in Maharashtra. The orders are secured from the Maharashtra Transmission Communication Infrastructure. The order value is Rs 90 crore.

Under Power Systems Business, the company has secured an order worth Rs 56 crore for establishment of 138 kV substations on turnkey basis under the Matanao-Gensan transmission line project and the Mindanao substation expansion project 2 in Philippines. The order is secured from the National Grid Corporation of the Philippines (NGCP).

Double-digit gas price will reduce domestic demand: Oil Minister

Oil Minister M Veerappa Moily has said that the government’s move for doubling of natural gas prices will halve the demand of gas in the country. At present, most of the domestically produced gas is sold at $4.2 per million British thermal unit (mmBtu) and delivered up to price $6.5, which generates an additional demand of 204 million standard cubic metres per day (mmscmd) over and above present consumption of 145.7 mmscmd.

Moily, quoting a recent study on the gas sector, said that total gas demand would increase to around 260-350 mmscmd, if delivered gas prices continue at $5.8-6.5 per mmBtu. By adding further he said that in case the prices rises to $10-12 per mmBtu, potential domestic gas demand would be lower at around 180 mmscmd, generating additional demand of only 72 mmscmd, whereas at prices above $12 and up to $18 per mmBtu, the potential demand would be limited to 38 mmscmd only. High natural gas prices would neither benefit the buyers nor the producers/suppliers and there is no doubt that high prices would drift the demand away from LNG to other competing fuels. At present, the share of natural gas in the total energy consumption in the country is at 11 percent, which is expected to increase 20 percent by 2025.

As per the study commissioned by the Petroleum and Natural Gas Regulatory Board (PNGRB), domestic gas production, which was 101.1 mmscmd in 2012-13, is projected to rise to 156.7 mmscmd in 2016-17 and to 182 mmscmd in 2021-22 on back of desired policy support and correct pricing signals.

Earlier, in June, the government had approved the pricing of all domestically produced gas at an average of international hub rates and cost of imported LNG, which will translate into a price of $8.4 per mmBtu, while, the delivered price will be over $10 mmBtu. However, the gas price hike has been opposed by user industries and a petition has also been filed in the Supreme Court saying that rate increase will benefit only a single corporate.

Sadbhav Engineering soars on emerging successful bidder for two projects

Sadbhav Engineering has been declared successful bidder (L1) for the two projects/works worth Rs 456.92 crore. The company emerged as the successful bidder for project worth Rs 428.00 crore in respect of the bid invited by Water Resources Department, Government of Madhya Pradesh for Bahuti High level canal from KM 18 to KM 74 with full canal network to irrigate irrigable command area of 65000 hectares with all in-line structures on the canal system can turnkey basis with defect liabilities period of three year reckoned from issuance of completion certificate.

Meanwhile, the company is also emerged as the successful bidder for project worth Rs 28.92 crore in respect of the bid invited by Narmada, Water Resources Water Supply and Kalpsar Department, Gandhinagar for Improvement to KRB MC Ch 30750 to 39277 M, Ta : Mandvi, Dist:- Surat.

Sadbhav Engineering (SEL) is one of the largest BOT developers in the road sector in India with good project execution skills. SEL operates in the four distinct business areas in the infrastructure sector viz. BOT road projects, cash contract-based road projects, irrigation projects and mining.

Piramal Enterprises gains on plan to invest $11 million in UK facility

Piramal Healthcare is planning to invest $11 million at its Morpeth, UK facility to triple the production capacity for hormonal products, including contraceptive pills and hormone replacement therapies. The expansion, which has been commissioned in response to customer demand and new business gains, will see the Morpeth site’s production capacity increase by around 2 billion tablets per annum.

Work on the new suite, which will house formulation, packaging coating and tableting equipment, will commence at the end of 2013, with mechanical completion anticipated within 12 months and full operations expected to begin following a 6 month validation period.

Piramal Enterprises is one of India’s largest diversified companies, with a presence in pharmaceutical, financial services and information management sectors.

Sensex down 157 points in early trade on profit-taking

The BSE benchmark index Sensex on Wednesday fell nearly 157 points in early trade on profit-booking by funds and retail investors after recent gains amid a mixed trend in the Asian region.

The 30-share index fell by 156.98 points, or 0.79%, to 19,840.11 in early trade with shares of Infosys, Reliance Industries and ICICI Bank leading the fall. Sensex had rallied over 1,757 points in the previous four sessions.

Similarly, the wide-based National Stock Exchange index Nifty declined by 42.85 points, or 0.73%, to 5,853.90.

Brokers said emergence of profit-booking by funds as well as retail investors at prevailing higher levels amid a mixed trend in Asian region mainly attributed fall in stock prices.

In the Asian region, Hong Kong's Hang Seng index fell by 0.38%, while Japan's Nikkei Index was up by 0.62% in early trade.

Jindal Steel surges on inking MoU with the Liberian Government

Jindal Steel & Power (JSPL) has entered into Memorandum of Understanding (MoU) with the Liberian Government to set-up (175x2) 350-MW power project in Liberia. The agreement will be positive for a separately proposed iron ore mining project in the African country.

At present, JSPL is in negotiations with Liberian authorities for the iron ore asset there. It proposes to acquire the exploration and mining rights of the Wologisi asset, located in Lofa County. A Chinese miner is also reportedly in the fray.

JSPL is a part of Jindal Group and is a leading player in Steel, Power, Mining, Oil & Gas and Infrastructure. The company produces economical and efficient steel and power through backward integration from its own captive coal and iron-ore mines and passes on the benefits to its customers.

TCS wins Goa police project

Tata Consultancy Services is believed to have bagged a five-year e-governance deal to electronically link up all police stations and provide real-time crime and criminal information in Goa.

TCS shares were trading up marginally at Rs 1,995 on the BSE in afternoon trade.

TCS has received the letter of intent to become the systems integrator responsible for implementing the Crime and Criminal Tracking Network and Systems project, which is part of a larger e-governance that aims to electronically connect 14,000 police stations throughout the country.

A formal contract is expected to be signed between Goa Police and the country’s largest software firm within the next few weeks, sources said.

TCS’s subsidiary company CMC and Tech Mahindra were the other players in the race for this project. TCS and CMC had bid separately for this project.

Database on crime & criminals

The systems integrator will assist the police in creating and maintaining a digital database on crime and criminals, according to the Department’s Request for Proposal (RFP).

The system, which will cover all 27 police stations in the State, can also be accessed by citizens to file their complaints and track the status of their applications.

Once fully operational, the project is expected to make the State’s police force more effective, thereby reducing the crime rates.

The winning bidder will have to procure and deploy an execution management system that will administer all applications, infrastructure and network-related components related to the project.

M&M’s Scorpio crosses milestone sales of 4 lakh vehicles

Mahindra & Mahindra (M&M), the country’s leading SUV manufacturer, has crossed yet another milestone with over 4 lakh sales of its iconic SUV, Scorpio.  With sales of over 50,000 units for the past two years, the Mighty Muscular Scorpio has ruled the roads for 11 years, moving from strength to strength and transforming the SUV space in the country.

The Scorpio outsells all SUVs and MUVs in key states such as Uttar Pradesh, Uttarakhand, Rajasthan, Orissa, West Bengal, Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh and the North East.  The Scorpio’s online community on Facebook is one of the largest online auto communities on Facebook India. The brand’s popularity is also evident on the Scorpio YouTube channel which has garnered over 4 million views.

Launched in 2002, the Scorpio is one of the most awarded brands in the industry with nearly 40 awards, the latest being a bronze at the 2012 EMVIES. The Scorpio also has a distinguished achievement to its name in the form of a Harvard Business Case Study. It has been a recipient of some of the most prestigious awards in the motoring world, including Car of the Year, Best SUV of the Year, Launch of the Year, etc.

TCS enters into partnership with Scandinavian Airlines

Tata Consultancy Services (TCS), the leading IT services, consulting and business solutions organisation, has been selected by Scandinavian Airlines (SAS), Scandinavia's leading airline, to help transform and optimise its IT processes, applications and infrastructure. TCS will implement its proprietary cloud-based solutions to simplify and standardise the SAS IT landscape.

This Five-year deal is part of the SAS’4 Excellence Next Generation’ strategy aimed at improving the competitiveness of the SAS Group. Through this partnership, SAS will also tap into TCS’s aviation and digital innovation labs to develop solutions addressing the needs of the new digital consumer.

Tata Consultancy Services is an IT services, consulting and business solutions organisation that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT, BPO, infrastructure, engineering and assurance services.

NSEL defaults again, by a huge margin

The exchange announced a total pay-in of Rs 0.695 crore from its members until September 6, the last day of the fourth pay-in schedule

In its fourth default, the crisis-ridden National Spot Exchange Ltd (NSEL) on Tuesday announced the disbursal of Rs 13.45 crore to investors, against the total commitment of Rs 174.72 crore.

Acting according to the process directed by the Forward Markets Commission (FMC), the exchange realised Rs 7.77 crore by auctioning underlying commodities in members’ warehouses. The remaining amount was received from members. The exchange announced a total pay-in of Rs 0.695 crore from its members until September 6, the last day of the fourth pay-in schedule, as announced by NSEL last month.

Alok Churiwala, vice-chairman, BSE Brokers’ Forum, said, “Investors’ nerves remained frayed, with NSEL defaulting for the fourth time on the revised settlement plan. There is little patience left for excuses, for not getting their dues as committed and seething anger on the repeated defaults. Expectations of government stepping in strongly and taking concrete steps run high.”

In the first three pay-out schedules, the exchange had received Rs 120.10 crore from its 24 registered members and recorded a total deficit of Rs 409.56 crore.

NSEL is pursuing the recovery of dues from members with pay-in obligations. It has initiated civil and criminal proceedings against defaulting members, besides taking action under the rules of the exchange. So far, 19 members had been declared defaulters and legal proceedings have been initiated against them, said an NSEL statement. While 13 defaulters have met exchange officials during the last two weeks, six are yet to do so. Legal notices against 14 defaulters have been issued under the Negotiable Instruments Act for bouncing of cheques for settlement.

So far, five defaulters, with a liability of Rs 1,328.48 crore, have committed to providing their properties as collateral for recovering the dues. The value of the collateral stands at Rs 1,458 crore, according to the defaulters. NSEL was yet to carry out an independent assessment of this, the exchange said. With the auctioning process underway, the realisation is set to rise in the coming days.

Chartered accountants Sharp and Tannan Associates (STA) confirmed the total liability of defaulting members stood at Rs 5,574.25 crore, as on August 12. STA also conducted a physical audit of gold, silver, platinum and base metals in respect of e-series contracts and found the stocks in order.

India's trade deficit shrinks to $10.9 billion in August

Giving some more respite to the Indian currency, India's trade deficit narrowed sharply for the month of August, as slowing gold demand limited imports; while the government's efforts to encourage exporters tap newer markets drove merchandise exports higher for the month. The country’s exports registered a double-digit growth of 12.97% for the second consecutive month in August 2013 to $26.14 billion, while imports declined during the month, narrowing the trade deficit to $10.9 billion from $14.17 billion a year earlier.

Country’s imports during the month declined 0.68% to $37.05 billion, with gold imports declining to just $0.65 billion compared with $2.20 billion in the previous month. The lower gold imports were mainly due to the steps taken by the government and the Reserve Bank of India to check demand in the world's largest consumer of the precious metal. The government has increased the import tax on gold, while the central bank has tightened rules to reduce speculative purchases by bullion dealers and taken other steps as well to curb demand.

The country’s wide trade gap is one of the biggest worries that has driven a sharp rise in India's Current-Account Deficit (CAD), thereby raising concerns that the country may find it difficult to finance the gap, if the US Federal Reserve begins scaling back its easy-money policies and FIIs consequently pulling their investments out. Meanwhile, the Commerce Minister has warned that with the international prices of crude oil rising over the past ten days, the import bill may go up in the coming months.