Sensex sheds 160 points on weak global cues; Bank, realty stocks slide

The Nifty and the Sensex were trading down by about 0.8 in the pre-close session due to lack of positive cues.

At 3.00 p.m., the Nifty was trading at 5,833.55, down 48.7 points or 0.83 per cent, while the Sensex was trading at 19,733.36, down 160.49 points or 0.81 per cent.

The downtrend was led by banking, realty, metal and capital goods stocks which were down 1.72 per cent, 1.31 per cent, 1.23 per cent and 1.2 per cent, respectively.

On the other hand, oil & gas, healthcare, IT and FMCG stocks capped the Sensex losses and were up 0.54 per cent, 0.08 per cent, 0.02 per cent and 0.01 per cent, respectively.

Hero MotoCorp, Sun Pharma, Coal India, RIL and TCS were the top five Sensex gainers, while the top five losers were BHEL, Tata Steel, Hindalco, Bharti Airtel and HDFC Bank.

European indices, FTSE 100, CAC-40 and DAX were trading marginally in the red after a report said that Bank of England Governor Mark Carney sees no need for further monetary stimulus.

Asian stocks were mixed after US jobless claims data pointed to a improving labour market, reviving hopes of a reduction in US monetary stimulus.

But a stalemate in US congressional negotiations over the budget and increasing the federal borrowing limit is likely to cap the gains in global shares.

Bajaj Auto likely to raise prices of vehicles

It will be launching new variants of Pulsar and Discover in 3 months

Two wheeler major Bajaj Auto today said it was planning to increase prices of its vehicles across segments due to rise in input costs.

"It seems likely that we have to raise prices because commodity prices have gone up significantly, partly owing to the way forex has moved. So, I think, yes, we are looking at a price increase," Bajaj Auto Managing Director Rajiv Bajaj told reporters here.

He was speaking on the sidelines of an AIMA event here.

"We have not decided how much and when but it is inevitable that in the near term there will be a price increase," he added.

When asked about the previous price hike, Rajiv Bajaj said the company had last increased prices of its vehicles five to six months ago, and the rupee at that time was close to 53-54 against the dollar.

"That (rupee value) has changed significantly, and as a result domestic players have increased prices of their products. So, there is a lot of cost pressure," he added.

On being asked if the price rise would cover the entire range of products, Bajaj said: "It would be across most products because when the commodities (prices) go up, they affect all the segments."

On new launches, Bajaj said the company would be launching new variants of Pulsar and Discover in next three months.

When asked if the company is upbeat on the effect of monsoon on sales figure, he said, "It is hard to say. So far, we do not see any tangible signs of change, although we see lot of hope. Next two months will be good for obvious reasons. But, I am concerned about how the demand would shape up from December."

On launch of its next generation vehicle 'Quadricycle', Bajaj said: "I would like to keep it very factual. What I have heard is that Minister Oscar Fernandes called the representatives of the industry and called for their comments. Today is the last day for the 30 days draft notification, and it is expected that in a couple of weeks, the (Road Transport) Ministry would announce a decision."

My own expectation is that there would be no roll back on the Quadricycle, but what exact notification and time-frame would be announced is what we have to wait and watch, he added.

When asked if the company would launch the Quadricycle in Europe if delayed in India, Bajaj said: "I do not want to speculate like that. It is just a matter of two to three weeks. Then we would know what the reality is, and accordingly we would make plans," he said.

Gold futures down 0.26 % on rising rupee

Gold futures prices on Friday fell by 0.26 % to Rs. 29,787 per 10 grams as speculators offloaded their positions, taking weak cues from the global market amid rising rupee.

Besides, subdued demand at spot markets also put pressure on the prices

At the Multi Commodity Exchange, gold prices for delivery in October fell by Rs. 78, or 0.26%, to Rs. 29,787 per 10 grams in business turnover of 490 lots.

Similarly, metal prices for delivery in far-month December declined by Rs. 23, or 0.08%, to Rs. 29,396 per 10 grams in 155 lots.

Analysts said the fall in gold futures was mostly attributed to a weak trend overseas and a rising rupee, which made dollar-quoted precious metal cheaper.

Slackened demand at domestic spot markets, too put pressure on the prices, they said.

Globally, gold prices fell 0.70% to trade at $1,323.80 an ounce in New York on Thursday.

UB Group stocks in demand

United Breweries, United Spirits, UB Holdings, Kingfisher Airlines and McDowell Holdings are up 5-10% on the BSE.

Shares of Vijay Mallya led United Breweries (UB) Group companies are in limelight trading higher by up to 10% in late noon deals on the Bombay Stock Exchange (BSE).

United Breweries, United Spirits, United Breweries Holdings, Kingfisher Airlines and McDowell Holdings are up 5-10% on back of heavy volumes.

Kingfisher Airlines is locked upper circuit for fourth day in a row, up 5% at Rs 6.52 on reports that the UB Group is in talks with a foreign investor for potential stake sale in the company. The stock has surged 44% in past one week from Rs 4.56 on the BSE.

On Tuesday, 24 September 2013, the company's Chairman Vijay Mallya that the company is in talks with a foreign investor for a potential stake sale. Kingfisher Airlines has been grounded since October 2012 for want of cash.

Among the other UB Group stocks, United Breweries Holdings and McDowell Holdings have rallied 10% each at Rs 29.25 and Rs 25.45 respectively, while United Breweries and United Spirits are up 9% each at Rs 900 and Rs 2,675 respectively on the BSE.

Videocon, BPCL JV with Petrobras strikes oil in Brazil

Oil field estimated to hold more than a billion barrels of oil; will be a game changer for Videocon, BPCL JV

A joint venture between Videocon Industries and BPCL has found more than a billion barrels of oil in a field off the Brazilian coast.

Government-owned Brazil Petroleo Brasileiro SA and IBV Brasil, a 50-50 joint venture between Bharat Petroleum Corporation (BPCL) and Videocon Industries Ltd, have found that "SEAL-11" exploration block contains very large amounts of high-quality light crude oil and natural gas.

The field, with $12 billion of oil reserves, is good news for the investors of BPCL and Videocon even as share price of both companies shot up on the Bombay Stock Exchange on Friday. During the afternoon trades, Videocon was up 8.5% to Rs 184 a share while BPCL was up to Rs 336 a share.

“This is the biggest overseas find by any Indian company and it will propel Videocon and BPCL to become one of world’s biggest oil producing companies,” said an oil analyst. IBV owns 40% stake in the block – which is one of the biggest global discoveries of the year.

When contacted, Videocon Chairman VN Dhoot declined to comment on the issue. But sector analysts say the SEAL-11 may hold more than 3 billion barrels of oil in place. The exact numbers will only be known once appraisal plans are completed in the next two years.

For Videocon, the oil find in Brazil is a game changer as it transforms the group from a consumer durables company to an oil giant. Just few months ago, it announced sale of its Mozambique gas field to Indian government-owned OVL and Oil India for close to $2.5 billion. Post its exit from Mozambique field, the company is now focusing on Brazil which holds huge oil reserves.

In an earlier interview, Dhoot had said the company will now endeavor to emerge as a major player in the global oil and gas industry.

“We have created huge and unprecedented value in our entire exploration portfolio built tirelessly over the last seven years globally, ranging from Brazil to Indonesia to Timor and Australia. Mozambique is a small portion of the total pie of reserves and potential reserves our 12-14 prolific blocks show. We are explorers at heart and hence we will continuously look at opportunistic portfolio reshuffle of our assets and buy new assets in exploration and also venture into producing blocks across the globe in new frontiers like we have in the past and further build on the success we have already achieved,” he had said.

Today, Videocon is globally recognized in this field and shares a seat with amongst the world’s largest oil companies in oil exploration and hence opportunities come to us more easily than they did five years back, he said.

“We will continue to focus aggressively on our existing oil assets globally, which have a proven recoverable potential of over 2 billion barrels of oil as of today and a lot more to look forward to with new exploration targets there, especially in Brazil,” Dhoot had said.

Sensex slips 100 points, Nifty slips below 5,850

The Nifty was witnessing selling pressure and was near day's low as profit booking picked up in banks, realty, metals and capital goods sectors. Analysts expect the market to correct further in the near term in absence of positive triggers to drive the market higher.

"The Indian markets snapped the September F&O series on a very quiet note, though the series witnessed gains of over 8 percent for the benchmarks. The start of the new series is likely to be cautious and markets may remain in consolidation mood. Traders will be eyeing the movement of rupee, which is on an appreciation move, outperforming all its regional peers after RBI took additional measures for liquidity," said LKP report.

"There will be some concern in the rate sensitives as the RBI governor Raghuram Rajan has questioned central banks across the globe, whether current ultra-low interest rates are the right way to return to growth after the financial crisis, sending jitters back home," the report added.

At 01:00 p.m.; the 50-share index was at 5,851.20, down 31.05 points or 0.53 per cent. The index touched intraday high of 5,909.20 and a low of 5,846.40.

The S&P BSE Sensex was at 19,784.42, down 109.43 points or 0.55 per cent. It touched a high of 19,981.57 and a low of 19,757.20 in trade today.

The S&P BSE Midcap Index was up 0.18 per cent and the S&P BSE Smallcap Index gained 0.48 per cent.

Among the sectoral indices, the S&P BSE Oil & Gas Index was up 0.66 per cent, the S&P BSE IT Index was 0.20 per cent higher and the S&P BSE Healthcare Index gained 0.17 per cent.

The S&P BSE Bankex was down 1.57 per cent, the S&P BSE Realty Index declined 1.02 per cent and the S&P BSE Metal Index was 0.95 per cent lower.

ICICI BankBSE -1.92 % (2.81 per cent), Tata SteelBSE -2.62 % (2.65 per cent), BHELBSE -3.26 % (2.16 per cent), Hindalco (2.1 per cent) and Jaiprakash Associates (2.08 per cent) were among the top Nifty losers.

BPCLBSE 6.15 % (6.34 per cent), Hero MotoCorpBSE 2.51 % (2.42 per cent), HCL Tech (2.11 per cent), Sun Pharma (1.53 per cent) and Grasim (0.98 per cent) were among the index gainers.

The market breadth was positive on the NSE with 577 gainers against 560 losers.

Foreign institutional investors(FIIs) bought shares worth Rs 172.15 crore while domestic institutional investors were net sellers worth Rs 362.11 crore on Thursday as per the provisional data from the National Stock Exchange.

ICICI Bank opens 12 new branches in Jammu & Kashmir

ICICI Bank, India's largest private sector bank, has opened 12 new branches in Jammu & Kashmir. These new branches will offer the entire gamut of ICICI Bank products including a comprehensive range of deposits, loans and NRI services. Most of the branches will also have Privilege banking as well as locker facilities to cater to different customer profiles and needs. The branches will remain open for customer transactions from 9:00 am to 6:00 pm on Monday to Friday and 9.00 am to 2.00 pm on Saturday.

ICICI Bank has 3,384 branches and extension counters, and over 11,000 ATMs spread across the country. The Bank services its large customer base through a multi-channel delivery network of branches, ATMs, call center and internet banking.

BPCL, Videocon Ind gain on new oil find in Brazil block

BPCL has surged 8% to Rs 333, while Videocon Industries up 3% at Rs 175 on NSE.

Bharat Petroleum Corporation Limited (BPCL) has surged nearly 8% to Rs 333 on NSE reports that a drilling campaign off Brazil's northeastern coast showed that an area control by the consortium of IBV Brazil likely hold more than a billion barrels of oil.

The stock opened at Rs 315 and has seen a combined around 1.4 million shares change hands on the counter till 0950 hours on NSE and BSE.

Petroleo Brasileiro SA, as Brazil's state-run oil company is formally known, and IBV Brazil, a 50-50 joint venture between BPCL and Videocon Industries, have determined the SEAL-11 exploration block contains very large amounts of high-quality light crude oil and natural gas, the Reuters report suggests.

The SEAL-11 block and adjacent areas, 100 kilometers (62 miles) off the coast of the Brazilian state of Sergipe, may hold more than 3 billion barrels of oil in place. If confirmed, that would make the block - owned 60% by Petrobras and 40% by IBV - one of the biggest global discoveries of the year, added report.

Meanwhile, Videocon Industries is trading higher by 3% at Rs 175 on BSE.

Shipping stocks extend gain, ABG Shipyard surges over 35% in 2-days

ABG Shipyard, Bharati Shipyard, SCI, Mercator, G E Shipping and Varun Shipping are up 3-14% on the BSE.

Shares of shipping companies are continue their upward march and rallied up to 14% second day in a row  after the Baltic Dry Index touched its highest level since December 23, 2011 on Wednesday.

ABG Shipyard, Bharati Shipyard, Shipping Corporation of India (SCI), Mercator, Great Eastern Shipping Company and Varun Shipping Company are up 3-18% on the Bombay Stock Exchange (BSE).

The Baltic Dry Index, benchmark for measure of shipping or sea freight rates across the world, has surged over 30% in past two weeks.

Higher shipping rates are generally positive for shipping companies’ revenues, which will positively affect earnings, cash flows, and share prices.

ABG Shipyard has zoomed 14% to Rs 343, extending its previous day’s 20% rally on the BSE. On Thursday, ICICI Prudential Life Insurance Company had sold 582,000 shares of private shipbuilder at an average market price of Rs 271 per share, through open market transactions. However, the name of the buyer was not disclosed by the company.

Among the other individual stocks, Bharati Shipyard has soared 11% to Rs 34, followed by G E Shipping (up 4% at Rs 309) and SCI (up 3% at Rs 41.80) at 1010 hours.

LIC sells stake in Infosys

Sells close to 1.16 crore shares amounting to Rs 3,738 crore

LIC, the country’s largest insurer, has reduced its stake in IT bellwether company Infosys by about 2%. LIC’s stake in Infosys now stands at 5% down from 7% earlier.

In a filing on Friday, the insurer informed the exchanges that it had sold close to 1.16 crore shares amounting to Rs 3,738 crore. The sale was done through the open market on both the NSE and the BSE.

As of June 2013, LIC’s stake in Infosys was about 6.72%. The insurer had been consistently raising its stake in the company for the past two quarters.

On Thursday, the Infosys scrip closed up 0.2% at Rs 3013.35 per share.

The BSE Sensex ended the day on Thursday up 0.2% to 19,893, while the NSE Nifty was up 0.1% to 5,882.

Scindia to seek affordable gas price for power

Power minister Jyotiraditya Scindia said on Thursday that he will soon approach the cabinet for putting in place a suitable mechanism under which gas to power projects can be supplied at a viable price.


Scindia said while the government has raised gas prices - that are expected to almost double to $8.4 a unit (per million British thermal unit) from April, 1, 2014, the same cannot be made applicable for the power sector because the cost of power (being a regulated commodity) at this price is not viable.

"Anything beyond $5 a unit is unviable for the power sector and a mechanism to address this issue will have to be worked out by the government ...for which I will be taking this issue shortly to the cabinet," Scindia said while addressing a conference on completing 300 days as the power minister.

The power sector has been struggling to source gas at an affordable price for the 7,800 MW stranded gas-based power plants. At present, the power sector sources domestic gas at $4.2 a unit, but the new price is expected to be almost double from April 1, 2014.

Scindia said while there has already been an agreement that power projects would get any surplus gas produced in India until March 2016, after requirement of the fertiliser plants is met, the cost at which gas is supplied to this sector is of utmost importance.

Scindia also announced that in order to maintain grid discipline and have greater private sector investment in building transmission systems, he would be taking another proposal to the cabinet for having an independent transmission (or grid) regulator.

This, he said, will be done by providing greater autonomy to POSCO, currently an arm of India's largest transmission company - Power Grid.

"We are looking for private sector participation in the transmission sector for which there is a need for a regulator and POSOCO cannot perform as a regulator if it works as a subsidiary of Power Grid," he said.

After POSOCO achieves autonomous status, it will act as a regulator for the transmission grid that is primarily engaged in maintaining grid discipline and discouraging overdrawal of electricity by the states.

Scindia also exuded confidence over getting a better response from companies for the upcoming ultra mega power projects (UMPPs) in Odisha and Tamil Nadu.

Japan consumer prices up 0.8% in August

Consumer prices in Japan rose 0.8 per cent in August from a year earlier for the third straight month of increase on higher electricity and other energy prices amid the yen’s fall, the government said on Friday.

The core consumer price index, which excludes fresh food, stood at 100.4 against a base of 100 for 2010, the Ministry of Internal Affairs and Communications said.

Bank of Japan Governor Haruhiko Kuroda, who took office in March, vowed to pull the nation’s economy out of 15 years of deflation. The bank decided to take aggressive monetary easing measures to achieve an inflation target of 2 per cent within about 2 years.

In June, the index climbed 0.4 per cent in the first increase in 14 months.

A weaker yen is a factor contributing to the higher energy prices as the depreciation of the currency drove up import costs.

Sun Pharma soars on buzz of higher Doxil sales in US

Sun Pharmaceutical Industries touched an all-time intraday high of Rs 587 a share on Thursday on hopes of higher sales of its key cancer drug, Doxil, after innovator Janssen Pharmaceuticals Inc, a unit of Johnson & Johnson (J&J), said on Wednesday that the drug will likely be in short supply in the coming weeks.

The expected shortage in supply is due to an interruption from the company’s own supplier, Ben Venue Laboratories Inc, J&J said. The company said it is unable to provide an estimate of when the cancer drug would be available again and advised healthcare providers to contact Sun Pharma.

Analysts tracking the sector pointed out that Sun Pharma already has 50% market share in this drug, and the development means it will be the only supplier in the US until J&J resumes supply.

Credit Suisse initiated coverage on the company’s unit Taro Pharmaceutical Industries with an “outperform” rating and a target of $85, saying improving growth visibility, was seen helping the shares.

Barclays reiterated its overweight rating on the stock saying “we see renewed opportunity to drive Doxorubicin growth”.

“Given the current Doxorubicin landscape, we reiterate our OW on Sun Pharma with a 12-month price target of Rs 600. We believe that Sun could likely repeat last year’s success (CY2012 revenues of $120 million vs CY13 revenues of $63 million year to date) as a result of the current situation,” the report added.

The stock closed the day at Rs 581.30, down from the day’s high, but still up 2.16%.

Sensex opens on a flat note

Indian equities opened the session marginally in the green on buying by funds and retail investors in select stocks amid firm Asian cues.

At 9.15 a.m., the 30-share BSE index Sensex was up 30.09 points (0.15 per cent) at 19,923.94 and the 50-share NSE index Nifty was up 23.3 points (0.4 per cent) at 5,905.55.

Asian stocks, except Nikkei, are headed for the best monthly gain since September 2010 after US jobless claims data pointed to a improving labour market, reviving hopes of a reduction in US monetary stimulus.

But a stalemate in US congressional negotiations over the budget and increasing the federal borrowing limit is likely to cap the gains in global shares.

In the Asian trade, Japan's Nikkei fell 16.52 points or 0.11 per cent to 14,782.60, Hong Kong's Hang Seng was up 20.91 points or 0.09 per cent at 23,145.90 and Australia's S&P/ASX 200 was up 12.65 points or 0.24 per cent at 5,307.10.

On Thursday, the Dow Jones industrial average ended down 60.59 points or 0.4 per cent at 15,274.00. The Standard & Poor's 500 Index was down 4.53 points or 0.27 percent, at 1,692.89. The Nasdaq Composite Index was down 7.05 points, or 0.19 percent, at 3,761.21.

Finance Ministry approves Rs 5,500 crore fertiliser subsidy under SBA

Indian fertilizer sector suffering with acute liquidity crunch is not likely to get much respite, as the Finance ministry has agreed to pay only Rs 5,500 crore subsidy under a special banking arrangement (SBA) as against Rs 12,000 crore sought by the Department of Fertilisers (DoF). 

Though, the total requirement of funds for the sector is estimated to be around Rs 30,000 crore, which the department was going to seek under supplementary grant, but as the domestic urea subsidy funds got exhausted, DoF sought Rs 12,000 crore under SBA as immediate requirement. DoF hopes that finance ministry will pay the remaining amount soon as industry plays an important role in making the country self-reliant in food grain production.

Meanwhile, the government has marginally reduced the fertiliser subsidy to Rs 65,971.50 crore for the current fiscal as compared to the revised estimate of Rs 65,974 crore in the previous fiscal. For current fiscal, the government will provide Rs 21,000 crore for indigenous (urea) fertilisers, Rs 15,544.44 crore for imported urea, and Rs 29,426.86 crore for decontrolled fertilisers (DAP, MOP and complexes) for supplying the inputs to farmers at a subsidised rate.

ICICI Prudential Life Insurance sells 5.82 lakh shares of ABG Shipyard

ICICI Prudential Life Insurance Company has sold total 582,608 shares of ABG Shipyard through an open market transaction on September 26, 2013. The life insurer has sold 291,304 shares at Rs 271.01 on National Stock Exchange (NSE) and another 291,304 shares at Rs 271 on Bombay Stock Exchange (BSE).

ABG Shipyard is engaged in the business of carrying shipbuilding and ship repair business. The company has emerged as the largest private sector shipbuilding yard in India with satisfied customer base all around the world.

Balrampur Chini Mills gets nod for merger of KSMPL with itself

Balrampur Chini Mills (BCML) has received an approval whereby Board for Industrial and Financial Reconstruction (BIFR) has sanctioned merger of Khalilabad Sugar Mills (KSMPL) with BCML under the modified draft rehabilitation scheme.

The certified copy of the order of BIFR has been filed with Registrar of Companies (RoC) both West Bengal and UP on September 26, 2013. The said scheme comes into operation from the appointed date i.e. April 01, 2012.

Balrampur Chini is one of the largest integrated sugar manufacturers in India. Its business portfolio consists of manufacturing and marketing of sugar, ethyl alcohol, ethanol, generation and selling of power and also manufacturing and marketing of organic manure.

World shares mixed after US data

US jobless claims point to improving labour market, revive expectations of reduction in US monetary stimulus

The dollar held firm in early Asian trade after US jobless claims figures pointed to a improving labour market, reviving expectations of a reduction in US monetary stimulus.

Lack of progress in budget and debt negotiations in Washington could also undermine investor risk appetite, capping gains in global shares.

Both Japanese shares and MSCI's broadest index of Asia-Pacific shares outside Japan were little changed in early trade.

"Though US jobless claims data is positive enough to marginally lift the market, investors need further evidence of a US economic recovery as well as a settlement in Washington," said Hanyang Securities analyst Lim Dong-rak.

The dollar's currency basket index held firm after gaining 0.2% on Thursday, extending its recovery from seven-month low hit last week when the Fed decided not to trim its bond buying.

The dollar was also helped by the euro's fall amid renewed concerns Italy's fractious coalition government could fall apart.

Italian centre-right deputies supporting former Prime Minister Silvio Berlusconi renewed threats to resign if their leader is expelled from Parliament following a tax fraud conviction.

The euro traded at $1.3487, off seven-month high of $1.3569 hit last week while the dollar fetched 98.87 yen, maintaining its 0.6% gain on Thursday.

The yen showed no reaction to data that showed Japan's core inflation rose to five-year high.

US weekly initial claims for unemployment benefits dropped 5,000 last week despite economists' expectations of a rise, helping US shares to end a five-day losing streak.

The claims data's four-week moving average, a key gauge that smoothes out weekly volatility, dropped to 308,000, the lowest level since June 2007.

That fall could add to the case that the Fed is safe to go ahead with winding down its bond buying programme later this year.

Indeed, Fed Board Governor Jeremy Stein, who voted for keeping stimulus in place at the September 17-18 meeting, said on Thursday he would have been comfortable with tapering at that meeting, adding the decision was, for him, a "close call".

An end to US monetary stimulus could, however, hurt emerging markets that rely on foreign capital, such as India and Indonesia. Overnight, most Latin American shares eased.

An impasse in US congressional negotiations over the budget and increasing the federal borrowing limit is likely to cap global shares.

"The market thinks default will be averted in the end, as usual. Yet this is not something that makes the markets go risk-on," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.

The cost of protection against US sovereign debt default in the credit default swap market has risen to its highest level in four months.

Republican lawmakers in the US House of Representatives refused to give in to President Barack Obama's demands for straightforward bills to keep the government running beyond September 30.

The move makes does not bode well for prompt resolution of these fiscal battles that could lead to a government shutdown on October 1 and at the very extreme, a default in mid-October, when the Treasury will have run out of money.

‘Banks should exert influence to help SMEs get their dues’

“Banks should exert their influence over big companies to settle their dues to small and medium enterprises (SMEs) on time,” said Uma Shankar, Regional Director, Reserve Bank of India (RBI).

Addressing the ‘SME CEO Knowledge Forum’ sponsored by UTI Mutual Fund, in association with  SIDBI and KPMG as knowledge partners, Uma Shankar pointed out that SMEs have no muscle power to tell big companies to pay on time or a voice to tell them to pay their dues on time. “It is here the banks should step in to help them for their survival.”

She pointed out that most SMEs are a ‘one-man-show’ units and they face hindrances such as lack of manpower, lack of ability to market products, prepare financial statements, adhere to norms or get technical support or know-how. Also, these SMEs lack resources to advertise their products or have constraints in getting funds.

Uma Shankar said several institutions such as SIDBI (Small Industries Development Bank of India) have been set up in the country to help SME units/entrepreneurs, while commercial banks have been specifically instructed to set aside some portion of lending to the SMEs.

She also advised SMEs that after getting financial assistance, they should adhere to fiscal discipline in their daily business functioning so that the repayment schedule is not violated.

They should also prepare financial statements according to ICAI norms, and internally they should seek the co-operation of their employees to adhere to production timelines and quality.

Bharath L. Ghia, Country Head, SME & Distribution Channel of UTI Mutual Fund, said SMEs should explore the option of investing in mutual funds which provide better returns. B.P. Shashidar, President of Kassia (Karnataka Small Scale Industries Association), said from his experience, operating a small unit was not an easy task. “It is a mix of risk, tension, pressure, anxiety, progress, thrill and satisfaction too as they contribute to the society at large.”

Ram Nath, Chief General Manager, SIDBI, said SMEs should stop asking for subsidies and instead seek competitive rates.

Market expects OMOs to resume from Oct

So far in FY14, RBI has infused Rs 30,000 cr via open market operations

With the Reserve Bank of India (RBI) assuring market participants that it will ensure adequate liquidity to support flow of credit to the productive sectors, the bond market expects RBI to conduct open market operations (OMO) for infusing liquidity in October.

“The next OMO may happen in the second week of October. From then, banks will be busy for the lending season. At that time, some liquidity support can come. After yesterday’s (Wednesday) assurance by RBI, sentiments in the bond market improved,” said N S Venkatesh, chief general manager and head of treasury, IDBI Bank and chairman of the Fixed Income Money Market and Derivatives Association of India.

So far in the current financial year, RBI has infused liquidity by about Rs 30,000 crore through OMOs.

OMO is the buying and selling of government securities in the open market by the central bank, in order to expand or contract the amount of money in the banking system

“OMOs will be based on RBI's assessment of liquidity. One has to be patient. Traditionally, RBI did more OMOs in the second half of a fiscal. The busy season and the festive season will drain cash out of the system, that is when we can perhaps expect (OMOs). The second half of October may be the time for initiation of OMOs, based on RBI”s assessment of systemic liquidity,” said Dhawal Dalal, executive vice-president and head of fixed income at DSP BlackRock Mutual Fund.

Liquidity will remain tight owing to sluggish deposit growth, while credit growth has picked up thanks to festival-related demand. The gap between deposit and credit growth has widened with credit expanding at 18.2 per cent, while deposits are growing at 13.4 per cent, on a year-on-year basis. Bond yields had hardened following RBI’s liquidity tightening steps announced on July 15. Of late, banks have been borrowing heavily from the central bank. Apart from capping borrowing from liquidity adjustment facility at 0.5 per cent of banks’ net demand and time liabilities, the marginal standing facility (MSF) rate was also raised by 200 basis points (bps) to 10.25 per cent.

In the mid-quarter review of monetary policy last week, the MSF rate was reduced by 75 bps and RBI is expected to withdraw the steps in an calibrated manner.

Currently, RBI is injecting about Rs 1.5 lakh crore into the banking system on a daily basis through the LAF, the export credit refinance facility (ECR) and the MSF taken together. The government has announced a gross borrowing programme of Rs 5.79 lakh crore for the current financial year. Out of which, the market borrowing will be Rs 2.35 lakh crore in the second half.

According to the central bank, despite the liquidity infusion, liquidity conditions have been tightening due to uncertainties around the government borrowing programme for the second half of FY14, as well as the prospective effects of banks’ half-yearly account closure, the seasonal pick-up in credit demand, festival-related demand for currency and sluggish deposit growth.

On Thursday, the yield on the 10 year government bond closed at 8.72 per cent, which has risen by about 150 bps in the current quarter. In August, yield had touched 9.23 per cent.

WHY IS LIQUIDITY TIGHT?

* Growth gap between credit and deposit growth

* Two bond auctions this week. On Monday, close one-third of Rs 15,000 crore auction devolved and another Rs 14,000 crore auction scheduled tomorrow

* Banks borrowing capped at 0.5% of NDTL

* Advance tax outflow for second quarter of about Rs 50,000 crore

* Festive season credit demand

* Only 4 OMOs conducted in H1, the last one on Aug 30