Tuesday, 30 June 2015

Despite Lagarde's Initial Reluctance, IMF on the Hook for Greece

As French Finance Minister in 2010, Christine Lagarde opposed the involvement of the International Monetary Fund (IMF) in Greece.

Now as the country stands on the edge of defaulting on a 1.6 billion euro ($1.8 billion) payment to the International Monetary Fund, Ms Lagarde's tenure at the head of the fund since 2011 will be shaped by Greece, which holds a referendum on Sunday that could pave the way to its exit from the euro.

By its own admission the Washington-based institution broke many of its rules in lending to Greece. It ended up endorsing austerity measures proposed by the European Commission and European Central Bank (ECB), its partners in the troika of Greece's lenders, instead of leading talks as it had done with other countries such as Russia and in the Asian financial crisis.

"I think the IMF has missed the opportunity (on Greece), because it has not fully leveraged the lessons it learned from the previous crises it was involved in, due to this asymmetric relationship within the troika," said Domenico Lombardi, a former IMF board member.

That the IMF lent to Greece at the behest of Europe, which has nominated every IMF Managing Director since the inception of the fund in 1946, may expose the institution to greater scrutiny, especially as it has $24 billion in loans outstanding to Greece in its largest-ever program.

"When it was clear that the Greek program was underperforming, they did not push back sufficiently against the Eurozone, which had at the time a misguided policy emphasis on only austerity," said Jacob Funk Kirkegaard, a fellow at the Peterson Institute in Washington.

The involvement of the fund in Greece and its continued support for decisions driven by Eurozone governments caused a deep split in the institution.

Some IMF economists had misgivings about lending to Greece in 2010 within the constraints of the so-called "troika" of lenders, where the Fund would be the junior partner to the European Central Bank and the European Commission.

IMF board members also protested the "exceptional" size of the program, as Athens did not meet the fund's criteria for debt sustainability, meaning it would have trouble repaying.

Yet swayed by the fear that contagion in Athens could spread to French and German banks, the IMF agreed to participate in a joint 110-billion-euro bailout of Greece with the Europeans.

"The Europeans have a third of the voting rights (at the IMF), and they have appointed the managing director since the beginning, so essentially it is the governance that has driven the Greek program," said Mr Lombardi who is now with the Canada-based Center for International Governance Innovation.

Later, the fund admitted that its projections for the Greek economy had been overly optimistic. Instead of growing after a year of austerity, Greece's economy plunged into one of the worst recessions to ever hit a country in peacetime, with output falling 22 per cent from 2008 to 2012.

While the Eurozone's insistence on drawing a direct link between euro membership and Greece's debt sustainability and the negotiating tactics of the Greek government have exposed both to questions of credibility, the Fund stands charged as well.

"The IMF's reputation, too, has been shaken from widespread criticism of the Greek programme, including its own admission of its failures," Lombard Street Research economist Konstantinos Venetis said.

Temptation to go big

If Greece does default on all $24 billion it owes to the Fund, that will dwarf previous delinquencies from countries like Sudan, Zimbabwe and Somalia.

While the IMF was worried about contagion when it made the loans, it also had institutional incentives for wanting to bail out troubled countries, said Andrea Montanino, a former IMF board member who left the fund in 2014 after participating in reviews of Greece's second bailout in 2012.

"The IMF is in a preferred creditor status; the more you lend, the more you earn," said Mr Montanino, now with the Atlantic Council.

The IMF's heavy involvement in large bailouts for euro zone countries, which included Ireland and Portugal, have enabled it to build up its reserve buffers in recent years. It is now aiming to store away some $28 billion by 2018.

From interest and charges on the Greek program alone, the IMF has earned some $3.9 billion since 2010, according to figures on the IMF's website.

"I think the Greek lesson is in the future, the IMF will be much more careful," said Mr Montanino.

In? Out? In Between? A Greek Legal Riddle for European Union

The president of the European Commission, Jean-Claude Juncker, has told Greeks that saying 'No' to a bailout deal would be a vote to ditch the euro. Greece's Finance Minister Yanis Varoufakis has said Greece had no intention of quitting and cannot be forced out.

The conflict is driving the European Union into legal limbo and no one has a clear answer as to what could happen next.

The government in Greece, where a majority of people say they want to retain the euro currency and their 35-year-old membership of the European Union, correctly points out that neither the treaty creating the now 19-member Eurozone nor the agreement binding the 28 member states of the EU contain provisions for expelling any country.

Only the European Union treaty that came into force in 2009 imagines any departure, and that only when a state asks to leave.

In constructing the euro, European leaders were anxious to underline the message that the new currency was forever. The question that has now arisen is what happens if member state breaks the rules.

Even determining such a breach is problematic.

On Monday a senior European Central Bank official said that a Greek exit from the euro could not be ruled out, especially if voters backed the government in a referendum on Sunday and rejected creditors' offer of cash in return for budget cuts.

The leftist government in Greece, elected in January with a mandate to end austerity imposed as a condition for bailout funds, has infuriated its partners by refusing to accept new terms. That means its programme runs out on Tuesday, just when an International Monetary Fund loan matures. Athens now says it will not make the payment.

The prospect of default has jeopardized Greece's access to euros under the control of the ECB in Frankfurt. Officials speculate that the Washington-based IMF and the ECB will delay actions that could trigger an abrupt cut-off of euros to the Greek banking system, at least until after Sunday's referendum.

On Monday, Greece imposed capital controls to stem the flow of cash out of the country as it looks for short-term monetary stability. If the situation persists, however, notably beyond July 20 when Greece must repay bonds held by the ECB itself, Eurozone institutions may find it even more difficult to keep supplying Greece with cash

Marksans Pharma acquires US-based Co Time-Cap

Marksans Pharma through its subsidiary acquired the company.


Marksans Pharma

Marksans Pharma Limited has, through its wholly owned subsidiary, MarksansPharma lnc.acquired 100% of the outstanding shares of Time-Cap Laboratories, Inc., a New York corporation having its principal office at 7 Michael Avenue, Farmingdale, New York.


  • Kev Highlights
  • Time-Cap has a US FDA-approved manufacturing facility in Farmingdale, New York.
  • It has an experienced research and development team which over the years has optimized its production processes and introduced a number of new products.
  • Time-Cap has developed differentiating manufacturing expertjse, resulting in a key competitive advantage in the market place for extended and delayed-release prod ucts, and coating services.
  • The company has substantial growth opportunities with a robust new product line in the pipeline. Its capabilities with respect to extended-release products offer opportunities to pursue ANDA s for high margin products.
  • Time-Cap has an expert management team comprised of industry pioneers with deep expertise, as well as a loyal and technically sophisticated employee base.
 
With its acquisition of Time-Cap, Marksans is strategically increasing its presence in the US market, which is the largestpharmaceutical market in the world. This transaction will be EPS accretive.
 
On this occasion, Mark Saldanha, Managing Director and CEO of Marksans Pharma Limited, offered the following remarks: "Time-Cap offers Marksans an ideal platfonn to expand its operation in the US. Thjs strategic acquisition helps Marksans to expand its manufacturing capabilities along with product portfolio and penetration into the US"

What Happens if Greece Defaults on IMF

What Happens if Greece Defaults on IMF

 Greece could take a risky step into the unknown Tuesday if it misses, as expected, a 1.5 billion euro ($1.7 billion) debt payment to the International Monetary Fund (IMF).

Already on its second International Monetary Fund crisis bailout program, if Athens does not make the payment it would immediately be cut off from access to IMF services and facilities.

It could also theoretically be placed on track for expulsion from the IMF. But only one country in IMF history has been kicked out: Czechoslovakia, during the Cold War in the 1950s.

That prospect though would likely take time to play out, under IMF procedures, and give Greece and its creditors time to right the situation.

Greece has borrowed about 32 billion euros from the global crisis lender since 2010, some of which has already been repaid. It is committed to repay the IMF 5.4 billion euros this year.

To help fund a budget shortfall and keep current on all its obligations, Athens has been negotiating to get another 7.2 billion euros in bailout funds from the IMF and European Union. About half of that is IMF money.

The talks have broken down, and the Greek government - which was allowed to bundle together several IMF payments due this month into one - is not expected to have enough money on its own for the June 30 payment.

If the Greek government misses the payment Tuesday, it will be declared "in arrears" by the Washington-based institution.

Immediately Athens would see its access to International Monetary Fund resources suspended, freezing the IMF portion of the 7.2 billion euros.

Although the Greek government has put the deal offered by creditors to a referendum vote next Sunday, IMF Managing Director Christine Lagarde said earlier this month that "there will be no period of grace" for the country.

Thirty days after a missed payment, Ms Lagarde has to formally inform the IMF executive board, which represents its 188 member countries. Given the visibility of the case, that would probably happen much more quickly, according to an IMF spokesman.

For the moment, credit rating agencies though would not declare Greece officially "in default" on its debt, because the missed payment is to an official lender and not the commercial funding market.

Still, Ms Lagarde would then send a formal complaint to the board, which, three months after the missed payment, would have to consider it. Accepting it could deprive Greece of its right to use SDRs (special drawing rights), the IMF currency.

If the situation persists over months, the board would make a declaration of non-cooperation, which could lead to a suspension of the borrower's IMF voting and representation rights, further isolating the country within the IMF.

Within six months of the suspension of voting rights - or up to 24 months after the default - the board would have to begin procedures on expelling the country from the IMF.

But that fate is unlikely. Expulsion would require support of a large majority of the IMF's members, who usually prefer to avoid extreme outcomes. Long in default on their IMF loans, Sudan, Somalia and Zimbabwe have kept their memberships. Czechoslovakia remains the one exception

S&P Lowers Greece Sovereign Credit Rating

People line up to withdraw cash from an ATM on the island of Crete, Greece on June 28, 2015 (Reuters)
People line up to withdraw cash from an ATM on the island of Crete, Greece on June 28, 2015

Standard & Poor's Ratings Services lowered its sovereign rating on Greece to 'CCC minus' from 'CCC', saying the probability of Greece exiting the Eurozone was now about 50 per cent.

Greece's bailout talks with lenders collapsed over the weekend, intensifying fears that the country could soon exit the Eurozone.

A Greek official told Reuters on Monday the country would not pay a 1.6 billon euro loan instalment due the International Monetary Fund (IMF) on Tuesday.

S&P said according to its assessment, Greece would likely default on its commercial debt during the next six months.

Should Greece exit the Eurozone, there will be a serious foreign currency shortage for the private and public sectors in the country, which may lead to rationing of key imports, according to the rating agency.

S&P's outlook on the country is negative.

The agency said it could lower its long-term ratings on the country within the next six months in case of a distressed exchange or nonpayment of commercial debt. 

With Default Looming, Europe Offers Greece a Last-Minute Deal: Report

Greece has pay IMF $1.8 billion on Tuesday to avoid default
Greece has pay IMF $1.8 billion on Tuesday to avoid default

European Commission President Jean-Claude Juncker made a last-minute offer to Athens in a bid to reach a bailout agreement before the deadline expires on Tuesday, European Union and Greek government sources said.

Under the offer, Prime Minister Alexis Tsipras would have to send written acceptance by Tuesday, in time for an emergency meeting of the Eurogroup of Eurozone finance ministers to be held and agree to campaign in favour of the bailout in the planned July 5 referendum.

However, there was little sign that Mr Tsipras was prepared to drop his repeated rejections of the bailout offer, which he has dismissed as a "humiliation" for Greece.

A Greek government official said that it listened with interest to what was being proposed but said: "Alexis Tsipras will vote "no" on Sunday".

Mr Tsipras would have to send a written acceptance of the version of proposals from the lenders published on Sunday, with a pledge to campaign for them to be accepted in the planned July 5 referendum.

The offer published on Sunday incorporated a proposal from Greece that would set value-added tax (VAT) rates on hotels at 13 per cent, rather than at 23 per cent as originally planned in the lenders' proposals. It was not immediately clear whether there would be any additional changes.

If the offer were accepted, the Eurozone finance ministers could adopt a statement saying that a 2012 pledge to consider stretching out loan maturities, lowering interest rates and extending an interest payment moratorium on euro zone loans to Greece would be implemented in October.

The offer would be conditional on a letter to Mr Jncker, Eurogroup chairman Jeroen Dijsselbloem, German Chancellor Angela Merkel and French President Francois Hollande arriving in time to arrange an emergency meeting of the Eurogroup on Tuesday

Euro Holds Gains vs Dollar as Greek Debt Saga Plays Out

Euro Holds Gains vs Dollar as Greek Debt Saga Plays Out
The euro held on to gains on Tuesday after surging against the dollar as the initial shock of seeing Greece heading for a debt default eased slightly, but tensions remained high as the market awaited further developments in the deepening crisis.

The euro stood at $1.1216 after surging from a four-week low of $1.0955 struck overnight, helped in part by the sharp flight-to-quality drop in U.S. debt yields that dented the greenback.

The common currency hit the low in a knee-jerk reaction to developments over the weekend that saw Greece's creditors lose patience and freeze a credit lifeline after Athens opted for a national referendum on a bailout that would bring them much-needed cash.

Meanwhile, Greece is on its way to default on 1.6 billion euros of loans from the International Monetary Fund due on Tuesday and faces the possibility of exiting the euro zone.

"It is difficult to describe in one breath why the euro rebounded, but we can say that bargain hunters were waiting when it fell below $1.10. The 'troika' showing some willingness for further dialogue has also helped a little," said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

"All in all many in the market had already factored in the likelihood of Greece defaulting. But there is no guarantee the stability will last. What is worrying is the volatility in the risk asset markets, which could impact currencies," he said.

Equities around the globe tumbled overnight, spooked by fears of Greece becoming the first country to exit the euro zone and the negative impact that could bring on the global financial system.

The CBOE Volatility "fear" index, a measure of the premium traders are willing to pay for protection against a drop in the S&P 500, jumped 34.5 per cent to 18.86, its highest level in almost five months.

With a default now looking inevitable, the focus fell on how popular opinion takes shape in Greece before the country heads for the polls on Sunday to vote on the bailout.

The euro was down 0.1 per cent at 137.65 yen, but away from a one-month trough of 133.80 hit overnight.

The Swiss franc was little changed at 1.0385 francs after being forced off a four-week high of 1.0315 on market intervention by the Swiss National Bank.

The dollar was steady at 122.68 yen. The safe-haven yen had advanced as far as 122.11 overnight, its highest since late May.

No smoke! It's true, ITC food business up 12%, crosses billion as mark

A report says that Hindustan Unilever (HUL) has a turnover of Rs. 5,522 crore in the foods segment.


ITC's foods business has registered a billion-dollar-revenue mark with the Indian multinational posting a revenue of Rs. 6,411 crore for 2014-15, according to reports.

A report says that Hindustan Unilever (HUL) has a turnover of Rs. 5,522 crore in the foods segment. 
ITC's bumper revenue from foods last fiscal elevated to the elite category of top-five food companies in the country. 

The others in this list are Parle, Britannia, Nestle and Mondelez India (formerly Cadbury), says report.


Kotak Bank jumps on shareholders nod for bonus issue

The stock is up around a percent in opening trade this morning.


kotak bank-1
Kotak Mahindra Bank has jumped over a percent to touch a high of Rs. 1,389 in opening trades on the BSE after the shareholders approved the bank's bonus proposal.

According to a release issued by the bank to the BSE, the bank's shareholders at the Annual General Meeting held on Monday approved issuance of 'bonus shares' in the ratio of 1:1, as per the decided record date.

The stock is now up 0.8 percent at Rs. 1,384, and 8,650-odd shares have changed hands in the first few minutes on the BSE.

Meanwhile, the Sensex has added 64 points to 27,710.

Sensex, Nifty open in green; capital goods, pharma stocks gain

The BSE Mid-cap Index is trading up 0.72% at 10,616, whereas BSE Small-cap Index is trading up 0.67% at 11,032. Asian markets are mostly lower. US market witnessed a sell-off with S&P 500 cracking over 2%, Dow recording its biggest drop in two years plunging 2% and Nasdaq nose-diving by 2.4% to sub-5000 levels.


sensex- green
At 9:25 AM, the S&P BSE Sensex is trading at 27,720 up 75 points, while NSE Nifty is trading at 8,345 up 26 points.

The BSE Mid-cap Index is trading up 0.72% at 10,616, whereas BSE Small-cap Index is trading up 0.67% at 11,032.

All sectors are in green except IT sector is down.

HUL, Coal India, Vedanta, BHEL, L&T, Bajaj-Auto, Tata Steel, Maruti Suzuki, HDFC, ITC and Hero Motocorp are among the gainers, whereas NTPC, Dr. Reddy's Lab, TCS, Cipla, HDFC Bank, M&M and Tata Motors are losing sheen on BSE.

China’s stock market has officially entered bear territory after falling for three days in a row.  Asian markets are mostly lower.  US market witnessed a sell-off with S&P 500 cracking over 2%, Dow recording its biggest drop in two years plunging 2% and Nasdaq nose-diving by 2.4% to sub-5000 levels.

Moody's Investors Service expects India's weakened rural economy to remain subdued through the fiscal year ending March 2016 (FY2016), particularly if the risk of below-average monsoon rainfall materializes. "A sustained soft patch for India's rural economy would weigh on private consumption and non-performing assets in the agricultural sector, a credit negative for the sovereign and banks," Moody's.

HSBC Holdings PLC, which is dropping sponsorship of its closely watched China manufacturing and services gauges, will be replaced by Caixin Media Co., the index’s compiler Market said.

Greek banks and the stock exchange were shut on Monday after creditors refused to extend the country’s bailout and savers queued to withdraw cash.

Indian economy is not really centric to Greece directly but if it defaults in its debt obligation and situation takes the form of a crisis in Europe, India could also feel the tremors like rest of the world, the ASSOCHAM said. 
 

Top corporate news of the day- June 30, 2015

HDFC Bank has “exceeded” the single-borrower limits prescribed by regulator RBI in case of its credit exposure to corporate giant Reliance Industries Ltd (RIL). The bank, however, said its board of directors approved “the said excess in respect of this exposure” and it was within the 20% ceiling of capital funds.


Corporate News
Leading private sector lender HDFC Bank has “exceeded” the single-borrower limits prescribed by regulator RBI in case of its credit exposure to corporate giantReliance Industries Ltd (RIL). The bank, however, said its board of directors approved “the said excess in respect of this exposure” and it was within the 20% ceiling of capital funds. 

L&T has secured orders totally valued at Rs. 20.35 bn across various business segments this month.

Leading media player Zee Entertainment Enterprises has said it is eyeing a five-fold growth in viewership in the next five years.

JSW Group is considering new investments in the ports sector on the Eastern coast of the country. The Group has already invested about Rs10bn on the West coast.

Shoppers Stop Ltd has informed the stock exchanges that the company has opened two Shoppers Stop stores at Royal Meenakshi Mall, Bengaluru, and at Mangalore Airport, Mangaluru. With this, the company has now 73 Shoppers Stop stores (including four airport stores) under its operations. 

Emami Ltd said it has launched Zandu Gel Balm Junior, a mild version of the pain reliever for kids. 

Godrej Group’s Godrej Appliances forayed into the healthcare refrigeration space. The company announced the launch of medical refrigerators under a technology licensing agreement with the UK-based The Sure Chill Company.

JSW Steel has sought shareholders' approval to raise Rs40bn through qualified institutional placement.

Country's largest real estate player DLF is leaving no stone unturned to attract buyers in a slow market. After giving discounts in its various projects, DLF has now started organic farming in one of its projects in Gurgaon to sell vegetables to the residents at a cost lower than the market rates.

A year after the last recall of its generic hypertension drug Metroprolol, Hyderabad-based Dr Reddy's Laboratories Limited has initiated a nationwide voluntary recall of two more drugs earlier this month -Divalproex Sodium extended release tablets and Amlodipine Besylate and Atorvastatin Calcium tablets- from the US.

Ashok Leyland said that it is committed to light commercial vehicle (LCV) business and will work with its partner to improve the profitability. The LCV business, for which it had joined with Nissan, is under pressure due to high loss that stood at Rs7.91bn in 2014-15.

Food Safety & Standards Authority of India (FSSAI) in its affidavit filed in the Bombay high court has submitted that there was no anomaly in its order to recall Nestle’s Maggi noodles from outlets across India as well as to stop its production. 

The special economic zone unit of Jamnagar refinery of Reliance Industries Limited is planning to shut down one crude distillation unit for routine maintenance and inspection activities in the first half of July for about 10 days. 

Adani Enterprises said it has suspended engineering work at USD16.5bn Carmichael mine in Australia on account of delay in approvals. 

Top economy news of the day - June 30, 2015

Indian and Mauritian officials will hold talks starting June 30 on proposed amendments to their bilateral tax treaty.

Economic News
The economic crisis in Greece may trigger capital outflows from India and the government is consulting the RBI to deal with the situation, Finance Secretary Rajiv Mehrishi said. 

Indian and Mauritian officials will hold talks starting June 30 on proposed amendments to their bilateral tax treaty. 

To control spiralling prices of pulses and other essential food items, the Centre will hold a meeting of all state food ministers on July 7 to chalk out strategies to jointly tackle the crisis in the backdrop of possible deficient rains this year. 

Rupee opens at 63.77/$

Asian markets are mostly lower. US market witnessed a sell-off with S&P 500 cracking over 2%, Dow recording its biggest drop in two years plunging 2% and Nasdaq nose-diving by 2.4% to sub-5000 levels.


rupee- opens
The rupee today opened at 63.77 against the US dollar. The local unit hit a low of 64.13 and a high of 64.09 against the US dollar.

On Monday,  rupee ended at 63.84 against the US dollar. The current implied volatility suggests market is not anticipating bigger fallout from the Greece event though bouts of intraday volatility are a given. On the call front, 8500 continues to hold the maximum OI, indicating traders are buying options to hedge their portfolio.

China’s stock market has officially entered bear territory after falling for three days in a row.  Asian markets are mostly lower.  US market witnessed a sell-off with S&P 500 cracking over 2%, Dow recording its biggest drop in two years plunging 2% and Nasdaq nose-diving by 2.4% to sub-5000 levels.