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Informist, Wednesday, Sep 27, 2023 By Avishek Rakshit KOLKATA – Balmer Lawrie & Co Ltd is set to enter the business of manufacturing ethanol or hydrogen fuel in the coming few months and will invest 2.5-3.0 bln rupees in the project, Adika Ratna Sekhar, chairman and managing director of the state-owned company, told Informist. He said a tender to select a consultant, who will conduct a feasibility study and submit a project report, will be floated shortly, after which, the plan will be put into action. This project report will be sent to the government. "Under all circumstances, in the next six months we are going ahead with our plan of either manufacturing ethanol or hydrogen fuel," Sekhar said. EXCLUSIVE The project will mostly be funded from the company's internal accruals, which stand at 11.8 bln rupees. If needed, Balmer Lawrie could also opt for a loan at an interest rate of 6-8% which, Sekhar said, is serviceable. If the Miniratna public sector undertaking goes ahead with ethanol manufacturing, then the plant will be set up near oil refineries in Andhra Pradesh. "If it is hydrogen fuel, then we need to check and arrive at a feasible location," he said. "We will make ethanol from rice husk and not sugarcane, so Andhra Pradesh, which also has proximity to refineries, is a natural choice for us to set up the plant." Unlike ethanol, which is mostly used by oil refiners to blend fuel and used primarily by the automotive and power segments, hydrogen fuel has varied uses. Hydrogen fuel can be used to blend compressed natural gas which is used at home and distributed by city gas companies. Commercially, hydrogen fuel can also be blended with gas and used to power plants producing fertiliser, steel and cement. Thus, Balmer Lawrie will first decide on the targeted consumer segment for the hydrogen fuel project, and then select the plant's location. "We do not have land readily available at hand, but getting it will not be a problem," he said. Although the government is not issuing any new licences to companies for ethanol manufacturing currently, Sekhar said he is hopeful of getting the licence once the feasibility study and project report is completed and submitted to the government. "If we aren't able to get the licence for ethanol, then we will go for hydrogen fuel," he said. The country's ethanol market is expected to touch 600 bln rupees by 2025, Sekhar said. On the other hand, although an emerging technology in India, the green hydrogen fuel market in the country is seen at around $8 bln by 2030, he said. "The economic viability of green hydrogen production is yet to be established, but the government is ambitious about it," he said. On Balmer Lawrie running the risk due to lack of a domestic ecosystem for manufacturing hydrogen fuel, Sekhar said, "If we don't venture now, then we will miss the first-mover advantage as there are companies looking at hopping into it." Reliance Industries Ltd is considering manufacturing low-cost electrolysers for the production of green hydrogen for both domestic and global use. Indian Oil Corp Ltd is also eyeing the hydrogen production space. ONGC Ltd has partnered Greenko to invest $6.2 bln in renewables and green hydrogen, while Bharat Petroleum Corp Ltd is set to set up a 5 MW electrolyser system for green hydrogen manufacturing. GAIL (India) Ltd is also considering setting up an electrolyser for producing 4.3 MT of hydrogen per day. On the National Stock Exchange today, shares of Balmer Lawrie closed 0.5% higher at 154.10 rupees. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Wednesday, Sep 27, 2023 By Krity Ambey NEW DELHI – Trades of Indian government bonds in the JPMorgan's index suite for emerging market debt are likely to be settled on the domestic platform operated by the Clearing Corp of India Ltd, a finance ministry official said. Last week, JPMorgan announced inclusion of Indian gilts in its Global Bond Index – Emerging Markets suite over a 10-month period starting Jun 28. "The government may not need to make any changes to the regulatory norms in order to settle the bonds on CCIL. It will be done the same way it is currently being done for FPIs (foreign portfolio investors)," the official told Informist. Earlier today, another senior finance ministry official had said that the settlement of these gilts will take place onshore, but did not give any details. Most bond traders believe that foreign investors would have to trade these gilts during Indian market hours and settle them through the Clearing Corp of India's Negotiated Dealing System – Order Matching platform, bond market dealers said. Bilateral deals away from the platform may also have to be reported to the Clearing Corp, they said. Some foreign investors have flagged the issue of a slow remittance process for them under the onshore settlement mechanism. On this, the official who gave details on Clearing Corp said that the remittance process was "already very fast" and added that the only issue here was that "before repatriation, they have to give clarity that they have paid witholding tax that takes one day." Foreign investors have sought allowing remittance of at least 50?fore the tax is cleared, but the government is not looking to accede to the proposal, the official said. The dividend income of foreign portfolio investors is taxed at the treaty rate with the country where the investor is based or 20% that is India's withholding tax rate, whichever is lower. The government had initially considered settling global index-listed gilts offshore on Euroclear but that would mandate some tax incentives that the government was not willing to give, the official said. The government currently imposes capital gains tax and witholding tax on foreign portfolio investors investing in Indian gilts through the FPI-route. These taxes would apply on investments in JPMorgan indexed gilts as well, the official said. India's gilts will hold the maximum 10% weightage on the JPMorgan GBI-EM Global Diversified Index, and 8.7% weight on the flagship index for global emerging market debt. The listing process will be completed by Mar 31, 2025, with a 1% increase in weightage each month. Only bonds eligible under the Fully Accessible Route with an outstanding equivalent of $1 bln or higher and maturing after December 2026, will be added to the index. Around 27 trln rupees, or $330 bln, of India's bonds are eligible for inclusion in the JPMorgan index. End Informist Media Tel +91 (11) 4220-1000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Tuesday, Sep 26, 2023 By Sayantan Sarkar MUMBAI – Rubbishing market talk that the Centre may impose a ban on sugar exports for 2023-24 (Oct-Sep), a government official told Informist that there is no such proposal on the table. "The chatter about a sugar export ban is completely rubbish as the market wants higher prices for the sweetener," the official said. There have been concerns about a supply shortage in the next season as the Indian Sugar Mills Association, in its first estimate, pegged the country's sugar production at 31.7 mln tn, down 3.4% from the ongoing season. The estimate considers sugarcane diversion of 4.5 mln tn for the production of ethanol. Moreover, the association has estimated domestic consumption in 2023-24 at 27.5 mln tn, which would leave a surplus of around 4.2 mln tn of sugar. "The government will schedule a press conference to brief the media in due time if there are any developments on the matter," the official said. India has so far exported only 6.1 mln tn of sugar during the current season ending Sep 30. Last year sugar exports were at a record 11.1 mln tn. ISMA had earlier said that it does not think that sugar exports will be banned altogether for the next season, starting Oct 1. On Aug 2, ISMA had pegged Maharashtra's sugar output at 10.9 mln tn, down from 11.9 mln tn in 2022-23. Karnataka's output of the sweetener was pegged lower at 6.0 mln tn for the upcoming sugar season, as the state is likely to produce 6.7 mln tn this season. The lower estimates were attributed to deficient rainfall in Maharashtra and Karnataka in August. The two states are among the top producers of sugarcane in the country, after Uttar Pradesh. India witnessed the driest August since 1901 with rainfall at 36?low normal during the month, according to data by the India Meteorological Department. Ex-mill prices of sugar had risen 100–150 rupees per 100 kg in Jul-Aug, and had moderated slightly in September, traders said. Currently, the ex-mill prices of sugar in Maharashtra are quoted in the range of 3,730-3,952 rupees per 100 kg. The government has also said it has adequate stocks of sugar to cover domestic demand for more than three months. The government said it has 8.3 mln tn of sugar as of Aug 31. Informist had earlier reported that sugar stocks as on Oct 1 will be 4.5-5.5 mln tn, which traders said would be more or less sufficient to meet demand till sugarcane crushing starts in November. The crushing season typically runs from October to April, but this year mills in Maharashtra are likely to defer crushing by a month as patchy rains in August have affected growth of the sugarcane crop. On Thursday, the Department of Food and Public Distribution asked sugar traders, retailers, wholesalers, big chain retailers, and processors to disclose stock positions every Monday with immediate effect in a bid to monitor prices. Some traders, however, feel that there is no scope for exports of sugar next season. "There is no scope as estimates point to only 31.7 mln tn of output after diversion to ethanol," said Mukesh Kuvadia, secretary of Bombay Sugar Merchants Association, adding that with consumption pegged around 28 mln tn, the government may want to keep the rest as a buffer for domestic needs. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Friday, Sep 22, 2023 By Afra Abubacker and Sayantan Sarkar NEW DELHI – The Centre may increase prices of ethanol derived from sugarcane by 5% for the ethanol supply year starting November, an industry source familiar with the matter told Informist. Sugar mills manufacture ethanol, and oil marketing companies are the major buyers, using it for blending with petrol to make it a greener fuel. Ethanol derived from all varieties of sugarcane will see a flat 5% increase in prices from Nov 1, the source said. Currently, the price of ethanol derived from 100% sugarcane juice is 65.61 rupees a ltr, from B-heavy molasses 60.73 rupees, and from C-heavy molasses 49.41 rupees a ltr. "Unlike other countries, ethanol prices in India track fair and remunerative prices of sugarcane," said the source. In other countries, prices of ethanol take cues from international crude oil prices. Ethanol prices are linked to the fair and remunerative prices paid to farmers on sugarcane purchases. Fair and remunerative prices of sugarcane have been raised by 10 rupees to 315 rupees per 100 kg for the 2023-24 (Oct-Sep) sugar season. The government has been implementing ethanol blending with petrol throughout the country, under which oil marketing companies sell petrol blended with ethanol. Under the National Policy on Biofuels, the government has set a target to achieve 20% ethanol blending in petrol by 2025, against the earlier target of 2030. The government is also pushing for increased blending of ethanol with petrol as India imports more than 85% of its oil requirements, which takes a toll on the import bill. At present, 11.7% ethanol is blended with petrol, according to Food Secretary Sanjeev Chopra. The government had earlier rolled out the target of 20% ethanol-blended petrol in several states and Union territories, as part of the ethanol blending programme. In a letter in July, the Indian Sugar Mills Association had urged the government to increase the price of ethanol to 69.85 rupees per ltr from the current 65.61 rupees a ltr, considering the recent hike in fair and remunerative prices of sugarcane. "It is estimated that about 4.5 mln tn of sugar will be diverted towards the production of ethanol next season (Oct-Sep), as compared to about 4.1 mln tn estimated to be diverted this year," the association said. In its preliminary estimate, it pegged the country's net sugar output after diversion to ethanol for 2023-24 (Oct-Sep) at 31.7 mln tn, down 3.4% on year from 32.8 mln tn in the ongoing season ending September. In the letter, the association said about 12 bln ltr of ethanol was needed to achieve the 20% blending target by 2025-26. In 2022-23 (Dec-Nov), the sugar industry signed contracts for 4 bln ltr of ethanol supply, it said. The Indian Sugar Mills Association estimates that an additional 8 bln ltr of ethanol is needed to meet the blending programme target. For this, an investment of 175 bln rupees with a reasonable return on investment is required to increase the ethanol production capacity of mills. End Informist Media Tel +91 (11) 4220-1000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Friday, Sep 22, 2023 By Narayana Krishna HYDERABAD – The appraisal committee of the Ministry of Environment, Forest and Climate Change has approved Vedanta Ltd's plan to drill five onshore oil and gas wells in Assam, according to an official document accessed by Informist. Vedanta, through its arm Cairn Oil & Gas Ltd, plans to invest up to 1.2 bln rupees in the Assam hydrocarbon block to drill wells and start extracting crude oil from the five wells, the document says. The company aims to produce 3,600 bbl crude oil and 24 mln cubic feet of natural gas per day from these wells. According to the document, these wells will be drilled at four sites where state-owned Oil and Natural Gas Corp Ltd had earlier drilled wells in 2007. Further details were not given. Vedanta, the largest private oil and gas exploration and production company in India, has 58 oil and gas blocks in the country, with the Mangala onshore field in Rajasthan being the largest. At 1336 IST, shares of Vedanta traded 0.7% lower at 224.90 rupees on the National Stock Exchange. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Thursday, Sep 21, 2023 By Afra Abubacker and Sayantan Sarkar NEW DELHI – The Department of Food and Public Distribution has in principle approved loans worth 1.13 trln rupees since 2018 to 1,291 sugar mills and distillery units to increase their ethanol production capacity, according to government data with the Indian Sugar Mills Association exclusively accessed by Informist. The loans approved so far are expected to have added production capacity of 135,863 kl of ethanol a day, the Indian Sugar Mills Association said. "Of these 1,291 units, 901 are sugar mills," it said. The food ministry gives in-principle approved loans to distillery units under interest subvention schemes to increase ethanol production. In June, it extended the deadline to disburse loans for ethanol projects under interest subvention schemes to Sep 30 from Mar 31 earlier. The aim is to achieve the target of 20% ethanol blending in petrol by 2025-26. Under the government's Ethanol Blended Petrol Programme, oil marketing companies sell petrol blended with ethanol. In a letter to the government dated Jul 29, the Indian Sugar Mills Association requested the continuation of the interest subvention scheme. Further, it urged the government to increase the price of ethanol to 69.85 rupees per ltr from 65.61 rupees a ltr currently, considering the 10-rupee hike in the fair and remunerative price of sugarcane to 315 rupees per 100 kg for the 2023-24 (Oct-Sep) sugar season. "It is estimated that about 4.5 mln tn of sugar will be diverted towards the production of ethanol next season (Oct-Sep), as compared to about 4.1 mln tn estimated to be diverted this year," the association said. In its preliminary estimate, it pegged the country's net sugar output after diversion to ethanol for 2023-24 (Oct-Sep) at 31.7 mln tn, down 3.4% on year from 32.8 mln tn in the ongoing season ending September. At a press meet on Wednesday, Indian Sugar Mills Association's President Aditya Jhunjhunwala said the organisation will release its final sugar output estimates in October. "We will do satellite mapping by October-end and that should give us a clear picture of the crop condition." He also said the association had urged the government for further support to expand capacities of ethanol manufacturers. In its letter to the government, the association said about 12 bln ltr of ethanol is needed to achieve the 20% blending target by 2025-26. In 2022-23 (Dec-Nov), the sugar industry signed contracts for 4 bln ltr of ethanol supply, it said. The Indian Sugar Mills Association estimates that an additional 8 bln ltr of ethanol is required to meet the blending programme target. For this, an investment of 175 bln rupees with a reasonable return on investment is needed to increase the ethanol production capacity of mills. End Informist Media Tel +91 (11) 4220-1000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Friday, Sep 29, 2023 Team Informist NEW DELHI – The Reserve Bank of India's Monetary Policy Committee is widely expected to leave the policy repo rate unchanged at 6.50% for the fourth consecutive meeting, when the rate-setting panel meets next week, even as upside risks to inflation persist in the form of higher food inflation and rising crude oil prices. Of the 30 economists, treasurers, and mutual fund managers polled by Informist, 29 expect the committee to leave the repo rate unchanged at the end of its three-day meeting on Oct 6. Meanwhile, the poll respondents unanimously expect the panel to maintain the 'withdrawal of accommodation' stance. Crude Oil Prices Have Shot Up Since the MPC Last Met In Early August With Brent Crude Oil Prices Trading Close To $95 Per Barrel The MPC has hiked the repo rate by 250 basis points between May 2022 and February. Equirus Securities was the only poll participant that expects the committee to raise the repo rate by 25 bps. Crude oil prices have shot up since the MPC last met in early August with Brent crude oil prices trading close to $95 per barrel, nearly $10 per bbl higher than in August. Economists and bond market participants say the MPC needs to be cautious about the rise in crude prices, but it is unlikely to drive retail inflation sharply higher. "We do not expect domestic retail prices of diesel and petrol to be impacted by higher global crude prices as oil marketing companies will be under pressure to absorb part of the higher international energy prices," said Rajani Sinha, chief economist at CareEdge. "As a result, the pass-through of global crude oil prices to domestic consumption basket will be limited." Interestingly, the last two monetary policy statements have not mentioned the annual average crude oil price of Indian basket assumed to calculate CPI and GDP projections. The April monetary policy statement had last mentioned the assumed price of the Indian crude oil basket at $85 per bbl. The rate-setting committee will take comfort from the spike in vegetable prices coming under control and core inflation waning, even as broader food inflation is expected to remain high in the near future. The retail vegetable price index fell 5.9% in August after a 38.1% sequential jump in July. Core inflation, which excludes food and fuel, was at a 41-month low of 4.8% in August. Economists expect headline inflation to fall below the upper bound of RBI's inflation target range of 2-6% in September. "According to our tracking estimates, headline inflation will return to the tolerance band in September and could fall below 5% in October," economists at UK-based multinational bank Barclays said in a report. "Various supply-side measures of the government, such as restrictions on wheat and non-basmati rice exports and reductions in import duties on edible oils, have contributed to stabilising retail food prices," Sinha of CareEdge said. "At this juncture, the RBI will look to support consumption demand and economic growth in the festive season while remaining cautious about inflation." While food and crude oil concerns are not big enough to force the MPC to think about a rate hike, a few economists expect the RBI to revise its 2023-24 (Apr-Mar) inflation forecast higher by up to 20 bps from the current projection of 5.4%. On the global front, the US Federal Reserve's "higher-for-longer" interest rate stance, and projection of one more rate hike by this year's end, will keep the Indian central bank on edge. "The US dollar and bond yields have been on an uptrend. Narrowing interest rate differentials to record low levels poses severe financial instability, thereby warranting a cautious approach by the RBI," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Market participants will closely watch out for Governor Shaktikanta Das' commentary on the rupee, which has depreciated more than 0.5% since the last policy, and on liquidity conditions in the banking system. Unlike the last policy, most poll participants do not expect any significant announcement on the liquidity front this time. They expect the RBI to maintain tight liquidity to keep short-term interest rates higher and check the depreciation in the rupee. Das and other central bank officials are expected to be hawkish in their remarks at the post-policy press conference amidst the prevailing global inflationary pressures. Analysts have kept their view of no rate cuts in the current financial year intact, with most seeing the earliest possibility for a cut in early 2024-25. None of the poll respondents expect the central bank to revise its GDP forecasts. The RBI expects India's GDP to grow 6.5% in 2023-24, as against 7.2% in the previous year. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Tuesday, Sep 12, 2023 By Shubham Rana NEW DELHI – India's annual inflation rate, based on the Wholesale Price Index, is likely to rise to a five-month high in August but remain in deflationary zone for the fifth consecutive month, according to a poll by Informist. According to the median of the estimates of 13 economists in the poll, WPI inflation in August is seen at (-)0.6%, up from (-)1.36% in July. In August last year, WPI inflation was 12.48%. The commerce and industry ministry is scheduled to release WPI inflation data for August at 1200 IST on Thursday. At (-)0.6%, the overall index will rise 0.3% on month because of an increase in food prices. Data from the Department of Consumer Affairs showed that wholesale prices of onion jumped 14.0% month-on-month in August, while prices of potato were up 3.6% on month. Prices of tomato, which skyrocketed 264.4% month-on-month in July, fell 6.2% in August. Wholesale prices of other food items also rose in August. Prices of pulses increased 0.1-3.1% month-on-month, while those of cereals rose 1.2-2.3%. However, wholesale prices of edible oils declined in August on a sequential basis. "There has been some correction in domestic food prices that should keep overall wholesale inflation low in August," said Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership. "The fuel and power group index may see some stress because of rise in crude oil prices, but the stress may be spread out between August and September." Price of kerosene surged 8.8% month-on-month in August. The price of the Indian crude oil basket rose 7.5% month-on-month to $86.43 per barrel in August. WPI inflation is currently way below the retail inflation rate, primarily due to softening of non-food commodity prices, which is better captured in the WPI. Within the WPI, the manufactured products group, which largely comprises non-food commodities, carries 64% weight in the overall index. Manufactured products inflation was (-)2.51% in July. According to an Informist poll, CPI inflation in August is likely to have moderated slightly to 7.0% from a 15-month high of 7.44% in July. CPI data for August will be released at 1730 IST today. Following is a summary of details and estimates of respondents for WPI inflation in August: Organisation Forecast for Aug WPI inflation (in %) Deutsche Bank (-)1.1 ICICI Bank (-)0.82 Sunidhi Securities (-)0.81 ICICI Securities Primary Dealership (-)0.7 IndiaRatings (-)0.7 YES Bank (-)0.7 IndusInd Bank (-)0.61 CareEdge (-)0.6 Motilal Oswal Financial Services (-)0.6 Bank of Baroda (-)0.5 IDFC FIRST Bank (-)0.5 STCI Primary Dealer (-)0.5 ICRA (-)0.2 End Informist Media Tel +91 (11) 4220-1000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Thursday, Sep 7, 2023 By Shubham Rana NEW DELHI – India's retail inflation rate based on the Consumer Price Index is likely to have moderated marginally in August from a 15-month high in July, primarily on account of the statistical effect of a higher base, according to a poll by Informist. The median of the estimates of 20 economists in the poll showed headline inflation is expected to have fallen to 7.0% in August from 7.44% the previous month. The estimates ranged from 6.8% to 7.7%. The National Statistical Office is scheduled to release inflation data for August at 1730 IST on Tuesday. In August last year, inflation was 7.00%. At 7%, CPI inflation in August will be the second highest in 11 months, and the overall CPI index will rise 0.1% month-on-month, the lowest sequential rise in eight months. The decline in headline inflation in August is also on account of moderation in tomato prices. Inflation had surged to 7.44% in July, primarily on account of a 213.7% month-on-month spike in tomato prices. According to data from the consumer affairs department, prices of tomato moderated 6.8% month-on-month in August. Prices of onion and potato rose 12.6% and 2.7% month-on-month, respectively, during the month. "Tomato prices have eased significantly by the end of August, but the average price for the month is still on the higher side; therefore, bigger disinflation is likely to be seen in September," Kaushik Das, chief economist, India and South Asia, Deutsche Bank, said in a report. The surge in tomato prices is expected to subside when arrivals of the new crop start in September. As of Wednesday, the price of tomato was down 50.1% month-on-month, though onion prices were up 11.1%. Tomato and onion account for around 10?ch of the weight of the 'vegetables' index. The vegetables index, in turn, accounts for 6.04% of the Consumer Price Index. "The August inflation is still led by food as core is broadly flat," said Gaura Sen Gupta, economist, IDFC FIRST Bank. "For September, we see inflation at 5.6?cause majority of the vegetable crash will show up in September." Sen Gupta estimates inflation in August at 7.1%. Economists expect CPI core inflation, which excludes food and fuel items, to remain flat in August. Core inflation in July was the lowest in 39 months at 4.9%. The Reserve Bank of India has projected CPI inflation averaging 6.2% in Jul-Sep and 5.4% for the whole year. However, with inflation touching 7.44% in July, average inflation in Jul-Sep is likely to be significantly higher than the RBI's projection. On Tuesday, RBI Governor Shaktikanta Das said the central bank remains on guard to ensure that the spike in vegetable prices does not become generalised and lead to second-round effects. End Informist Media Tel +91 (11) 4220-1000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Friday, Sep 8, 2023 By Richard Fargose MUMBAI – The Indian rupee may hit a fresh all-time low of 83.50 a dollar this month due to prevailing global headwinds--mainly firm US dollar and rising crude oil prices. According to an Informist poll, 10 out of 12 respondents expect the Indian unit to fall to 83.50 a dollar level this month. The median of estimates of the Informist poll shows the Indian currency may end the month at 83.13 a dollar, 22 paise lower than the value seen in the poll on Sep 1. The Indian currency came under pressure this week as the dollar index surged to a six-month-high following hawkish comments from Federal Reserve officials and a slew of upbeat US economic data. The rupee settled at a record closing low of 83.21 against the dollar on Thursday. At 2000 IST, the dollar index, which measures strength of the greenback against a basket of six major currencies, was at 104.75, up 1.9% so far this month. "We will continue to see these short-term dips, but overall trend is upwards only (for dollar/rupees)," said a senior treasury official with a big state-owned bank. "Current weakness (in rupee) is majorly due to global factors--rising oil, bond yields, and dollar strength--than domestic one. So, today’s trend can change if global factors remain unfavourable." With crude oil prices surging 4.25% so far this month, oil marketing companies have stepped-up their dollar buys. Crude oil prices reached their highest level since November after the world's largest exporter Saudi Arabia and second-largest exporter Russia extended their supply cuts till December this year. A rise in oil prices increases India's import bill, which, in turn, weighs on the domestic currency. At 1728 IST, the November contract of Brent crude oil on the Intercontinental Exchange was at $90.57 a barrel as against $89.92 a bbl on Thursday. It was at $86.83 a bbl on Aug 31. The rupee is also seen tracking a fall in the offshore yuan on the back of weak economic data from China, analysts said. "I don't think rupee will be an outlier, it will fall in line with other Asian currencies..... I am not very bearish on the rupee but if we move towards a recessionary state in the early part of next year, obviously the world will prefer the dollar," said Madhavi Arora, chief economist, Emkay Global Financial Services. Market participants expect the central bank will continue to provide a cushion to the domestic currency through its dollar sales, and curb runaway depreciation of the unit. According to market participants, the central bank is estimated to have sold around $5 bln this week to support the rupee. The RBI intervention helped the Indian currency to settle above psychological level 83 a dollar today. "I think the resistance of 83.25-83.30 band thing is going to be significant, if it breaches then another 25 to 45 paise higher," said V. Lakshmanan, head of treasury at Federal Bank. POLL DETAILS Participant Sep-end DCB Bank 82.50-83.25 Mecklai Financial Services 82.75-83.80 HDFC Bank 82.80-83.50 Large Engineering Co 82.65-83.50 Emkay Global Financial Services 83.00 IBM India 83.40-83.60 IDFC FIRST Bank 83.50 Federal Bank 82.75-83.50 Big State-Owned Bank 82.50-83.50 SMC Securities 82.50-83.50 Shinhan Bank 82.40-83.60 Kotak Securities 82.80-83.50 Median 83.13 End Informist Media Tel +91 (22) 6985-4000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Friday, Sep 8, 2023 By Shubham Rana NEW DELHI - India's industrial growth is likely to have risen to 5.0% on year in July from a three-month low of 3.7% in June, mainly because of a statistical effect of a low base, an Informist poll of 17 economists showed. Industrial production grew 2.2% in July 2022. A growth of 5.0% in July will mean a 1.6% sequential decline in the overall index. Typically, industrial production declines month on month in July. In the past 11 years, barring COVID-affected 2020 and 2021, factory output declined 0.2% sequentially in July. Projections by economists for industrial growth in July ranged from 1.3% to 8.2%. The National Statistical Office will detail industrial production data for July at 1730 IST on Tuesday. There is a favourable base for industrial production in July, as growth had dipped to 2.2% on year in July last year, Kaushik Das, chief economist, India and South Asia, Deutsche Bank, said in a report. Das has forecast an industrial growth of 4.3% in July. Though core sector output growth and manufacturing Purchasing Managers' Index eased marginally in July, they still remained elevated. Growth in e-way bills generation and passenger vehicle production increased during the month. Growth in India's eight core industries, which account for over 40% of the total weight of the Index of Industrial Production, moderated marginally to 8.0% in July from a five-month high 8.3% a month ago. On a sequential basis, the overall core sectors' output declined 2.2% in July, with five of the eight industries, falling on a sequential basis during the month. The manufacturing Purchasing Managers' Index eased marginally to 57.7 in July from 57.8 in June. On the other hand, passenger vehicle production rose 9.5% on year in July compared with a rise of 2.4% in June. E-way bills, a lead indicator of economic activity and domestic trade, rose 16.4% on year to 87.95 mln in July. The number of bills generated in July was the third-highest ever. Following is a summary of estimates for IIP growth in July: Organisation Forecast for July growth (in %) STCI Primary Dealer 1.3 HDFC Bank 3.0 QuantEco Research 3.8 Deutsche Bank 4.3 CRISIL 4.4 IndiaRatings 4.5 Sunidhi Securities 4.6 Bank of Baroda 5.0 Kotak Mahindra Bank 5.0 ICRA 5.1 Care Edge 5.3 IndusInd Bank 5.3 YES Bank 5.3 ICICI Bank 5.5 ICICI Securities Primary Dealership 5.7 IDFC FIRST Bank 5.7 Motilal Oswal Financial Services 8.2 End Informist Media Tel +91 (11) 4220-1000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Thursday, Sep 7, 2023 By Shubham Rana NEW DELHI – India's retail inflation rate based on the Consumer Price Index is likely to have moderated marginally in August from a 15-month high in July, primarily on account of the statistical effect of a higher base, according to a poll by Informist. The median of the estimates of 20 economists in the poll showed headline inflation is expected to have fallen to 7.0% in August from 7.44% the previous month. The estimates ranged from 6.8% to 7.7%. According To Data From The Consumer Affairs department, prices Of Tomato Moderated 6.8% Month-on-month In August. Prices Of Onion And potato Rose 12.6% And 2.7% Month-on-month, Respectively, During The Month. The National Statistical Office is scheduled to release inflation data for August at 1730 IST on Tuesday. In August last year, inflation was 7.00%. At 7%, CPI inflation in August will be the second highest in 11 months, and the overall CPI index will rise 0.1% month-on-month, the lowest sequential rise in eight months. The decline in headline inflation in August is also on account of moderation in tomato prices. Inflation had surged to 7.44% in July, primarily on account of a 213.7% month-on-month spike in tomato prices. According to data from the consumer affairs department, prices of tomato moderated 6.8% month-on-month in August. Prices of onion and potato rose 12.6% and 2.7% month-on-month, respectively, during the month. "Tomato prices have eased significantly by the end of August, but the average price for the month is still on the higher side; therefore, bigger disinflation is likely to be seen in September," Kaushik Das, chief economist, India and South Asia, Deutsche Bank, said in a report. The surge in tomato prices is expected to subside when arrivals of the new crop start in September. As of Wednesday, the price of tomato was down 50.1% month-on-month, though onion prices were up 11.1%. Tomato and onion account for around 10?ch of the weight of the 'vegetables' index. The vegetables index, in turn, accounts for 6.04% of the Consumer Price Index. "The August inflation is still led by food as core is broadly flat," said Gaura Sen Gupta, economist, IDFC FIRST Bank. "For September, we see inflation at 5.6?cause majority of the vegetable crash will show up in September." Sen Gupta estimates inflation in August at 7.1%. Economists expect CPI core inflation, which excludes food and fuel items, to remain flat in August. Core inflation in July was the lowest in 39 months at 4.9%. The Reserve Bank of India has projected CPI inflation averaging 6.2% in Jul-Sep and 5.4% for the whole year. However, with inflation touching 7.44% in July, average inflation in Jul-Sep is likely to be significantly higher than the RBI's projection. On Tuesday, RBI Governor Shaktikanta Das said the central bank remains on guard to ensure that the spike in vegetable prices does not become generalised and lead to second-round effects. Following is a summary of the details and estimates of respondents for CPI inflation in August: Organisation Forecast for August CPI inflation (in %) YES Bank 6.80 QuantEco Research 6.83 Sunidhi Securities 6.85 Kotak Mahindra Bank 6.86 Bank of Baroda 6.9 ICRA 6.9 CareEdge 7.0 Deutsche Bank 7.0 ICICI Securities Primary Dealership 7.0 IndiaRatings 7.0 Societe Generale 7.0 IDFC FIRST Bank 7.1 Motilal Oswal Financial Services 7.1 STCI Primary Dealer 7.11 IndusInd Bank 7.15 Standard Chartered Bank 7.2 HDFC Bank 7.25 Barclays 7.3 CRISIL 7.6 RBL Bank 7.65 End Informist Media Tel +91 (11) 4220-1000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved
Informist, Friday, Sep 29, 2023 By Pratiksha and Kabir Sharma MUMBAI/NEW DELHI – This month was witness to the Reserve Bank of India's relentless efforts to keep the rupee from hitting a record low. But the central bank's intervention strategy in the foreign exchange market may have more to it than meets the eye. With the RBI already grappling with an inflation rate that is above its tolerance band, a sudden jump in crude oil prices has emerged as another impediment. Prices of crude oil have surged almost 25% since June due to a bleak supply outlook after Saudi Arabia and Russia extended their production cuts till the end of this year. While Saudi Arabia rolled over its voluntary cut of 1 mln bbl a day, Russia announced a reduction of 300,000 bpd. Considering India depends on imports to meet about 80% of its crude oil requirements, an increase in the country's import bill will weigh on the Indian currency, which in turn will lead to risk of imported inflation. As the RBI looks to limit the extent of imported inflation, it has been actively intervening across the foreign exchange market, including the spot and the offshore non-deliverable forwards market. So far this month, the rupee has depreciated 0.5% against the greenback. During the same period, other Asian currencies fell 0.6-4.0% against the dollar. The Philippine peso was the only emerging market currency that fared better than the Indian unit. Lately, RBI's presence has been felt every time the rupee has moved below 83.15-83.20 a dollar, nearing its record low level of 83.29. As of Sep 22, India's foreign exchange reserves were at $590.70 bln, down $18.32 bln from the recent high of $609.02 bln on Jul 14. According to Nomura, a 10% rise in oil prices will raise India's CPI inflation by 25 basis points on an average. Though headline inflation based on the CPI moderated to 6.83% in August from a 15-month high of 7.44% in July, it has remained outside the medium-term target range of 2-6% for the last two months. "The imperative for the RBI to prevent a sharp fall in the rupee stems from high domestic inflation, and rupee weakness has an inflationary impact," said Dhiraj Nim, forex strategist/economist, Global Research at ANZ Banking Group. "By my estimate, for a similar proportionate rise in USD/INR and Brent crude, the former is twice as inflationary as the latter in India's case." The International Energy Agency has said it foresees a substantial deficit in the crude oil market through Oct-Dec due to the extension of cuts by Saudi Arabia and Russia. The surge in crude oil prices will add to the pressure on trade deficit for the rest of the current financial year, analysts say. India's current account deficit widened to $9.2 bln in Apr-Jun from a seven-quarter low of $1.3 bln in Jan-Mar, primarily on account of a higher trade deficit. One development that has made the RBI's job easier is the inclusion of Indian government bonds in JPMorgan's Global Bond Index – Emerging Markets. The central bank can now spend the dollars at its disposal with a sense of comfort, considering the index inclusion will pave the way to considerable foreign fund inflows into the Indian debt market, which the RBI can later absorb to replenish its foreign exchange buffer. Analysts at HSBC have projected $30 bln of inflows into government bonds from the inclusion in JPMorgan's index. "RBI wants to limit volatility on both sides, they try to fill up reserves as soon as it appreciates and try to smoothen the fall when it depreciates. They are limiting the move (in rupee)," said Gaura Sen Gupta, economist, IDFC First Bank. UNCERTAINTY LOOMS However, the viability of RBI's intervention strategy is uncertain and traders need to place their long bets on the local currency with caution. Historically, traders haven't really fared well when the currency has sailed against the wind for a long period. Case in point – last year, when the central bank went all guns blazing to protect the 80-per-dollar level for the rupee, the result was the rupee moving from 80 to 83 a dollar in just a month. Considering the current headwinds to the domestic unit are not expected to go away easily, one can't rule out the possibility of a record low for the rupee in the near future. "There certainly are risks that the rupee could weaken to another record low because dollar strength is not giving up while oil prices have risen as well," Nim said. With the supply outlook for crude oil expected to remain bleak, the rally in oil prices may persist in the near term. Meanwhile, the dollar index is also unlikely to lose steam in keeping with the 'higher for longer' interest rate stance of the Federal Reserve. Considering the central bank can only protect the currency for so long, it may have to lower its guard against currency depreciation if any of these risk factors aggravate unprecedentedly. Looking at the tightrope the central bank is walking, the upcoming monetary policy statement on Oct 6 will be crucial in getting a sense of the apex bank's thinking on the Indian currency's movement. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
By Apoorva Choubey MUMBAI – Foreign portfolio investors are stepping into the October derivatives series with trepidation as high interest rates, slowing global growth, and the rise in crude oil prices have dampened the outlook for Indian equities. The September series, which expired Thursday, turned out to be a turbulent one for Indian stocks as global risk aversion came back to the fore after the US Federal Reserve indicated that interest rates in the world's largest economy were likely to remain higher for longer. The worsening macroeconomic landscape has made equity investors nervous that corporate earnings may not grow at the pace expected earlier. TREND The benchmark Nifty 50 surged over 900 points in the first half of the month and scaled lifetime highs of over 20200 points, only to nosedive more than 700 points in the second half. The index, though, managed to close over 1% higher for the September derivatives series, marking the fifth monthly gain in the last six series. The global risk aversion is expected to spill over to October, as suggested by the fact that foreign investors have increased short positions in index futures as well as single stock futures, derivatives analysts said. Foreign portfolio investors' net short positions outnumber their long bets by 57,300 contracts, Nuvama Wealth said in a report. Such investors, who form the largest category of clients in the Indian derivatives market, had been bullish till last month, with their net long positions outpacing short ones by 1,700 contracts at the start of the September series. The selling by foreign investors has been a cause of concern for the Indian market in the short term, said Ashwin Ramani, derivatives analyst at SAMCO Securities. Foreign investors pulled out around $1.9 bln from Indian equities in September, breaking a streak of six consecutive months of inflows till August. Rollovers to the Nifty 50's October futures stood at 76%, lower than the three-month average of around 79%, analysts noted. This weak rollover figure, coupled with low open interest in the contract, is seen as evidence of the prevailing caution among market participants. Options data suggests a broader trading range between 19200 points and 20000 levels for the Nifty 50 for this series, with an immediate trading range of 19400-19800 points, brokerage Motilal Oswal said in a note. The index closed 0.6% higher for the day at 19638.30 points. With companies set to detail Jul-Sep earnings soon, investors are expected to remain cautious instead of adding aggressive bets, especially in large-cap stocks, said analysts. All eyes will now turn to commentary from companies' managements about the impact of the recent rise in crude oil prices, appreciation of the dollar and the likelihood of global interest rates remaining higher for longer. SMALL, MID-CAPS Despite the global risk-aversion and sell-off in blue-chips, Indian mid- and small-cap stocks continued to shine in September. The Nifty Midcap 150 and Nifty Smallcap 250 rose 2.5% and 3%, respectively, outperforming headline indices. The resilience of the domestic economy and sustained inflows into small- and mid-cap companies from domestic institutions and high networth individual investors have made their prospects brighter, analysts said. Retail traders and high networth individual investors continued to add long bets in stock futures of mid- and small-cap companies. Their net long positions in stock futures surged by 97,000 contracts from last month, said Nuvama Wealth. However, this juncture seems to portend volatility, as long positions of these two client categories in stock futures hover close to historic highs and mid- and small-cap stocks have risen quite a lot, the brokerage warned. End Informist Media Tel +91 (22) 6985-4000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved.
By Aaryan Khanna and Nishat Anjum MUMBAI/NEW DELHI – With all the gilt auctions in Apr-Sep completed without a hitch, the government's borrowing calendar for the second half of this financial year has also hit the right notes with bond traders, addressing both the needs of gilt investors and the relatively weak demand in some tenures. The government will borrow 6.55 trln rupees through the sale of dated securities in Oct-Mar, the finance ministry said in a release late on Tuesday. With 8.88 trln rupees of borrowing already completed, the borrowing in Oct-Mar would complete the record gross borrowing target of 15.43 trln rupees for 2023-24 (Apr-Mar). The Government Will Borrow 6.55 Trln Rupees through The Sale Of Dated Securities In Oct-Mar Demand-supply dynamics have turned favourable for the bond market after the government concentrated its borrowing in the first half of the fiscal year ending March. The net market borrowing of 4.52 trln rupees in the second half will be a light snack for a market that has just bought gilts worth 7.29 trln rupees on a net basis in the first half. Much to the market's relief, the heavy lifting in the second half of the financial year will be done by long-term bonds. This means the rate-sensitive short-term bonds will have less supply pressure, in line with requests from traders. Short-term bonds may not be favoured by investors as liquidity in the banking system remains in huge deficit and uncertainty looms over interest rates, dealers said. Market participants now say that the borrowing programme will not need any significant buying support from the Reserve Bank of India, compared to the widespread view at the beginning of 2023-24 that such support would be required. Propelled by a favourable calendar, the yield on the 10-year benchmark bond is likely to decline to 7% or lower by March, dealers said. Today, the 10-year benchmark yield settled at 7.22%. The borrowing pattern is skewed in favour of long-term bonds quite firmly, as it was in Apr-Sep, and the government cited demand from investors while introducing the first-ever 50-year gilt in the second half. The novelty of the bond may have elicited some surprise, but ultimately, its 300-bln-rupee issuance is likely to be mopped up entirely by life insurers, which may have demanded the gilt, dealers said. "One of the great things about the Reserve Bank and the government of late is that they constantly engage with market participants," said Churchil Bhatt, executive vice-president at Kotak Mahindra Life Insurance Co Ltd. "Every insurer, to some or other extent, has an asset-liability demand for 50-year bond...there are (such) products in everyone's books." The skewed demand may result in less-than-optimum price discovery at the auction but ultimately, the paper is unlikely to be traded and is destined straight for investment books without any discomfort for the rest of the market, dealers said. In fact, the distribution of supply has been decided with a lot of nuance in the current calendar, dealers said. In 2022-23, the government issued the same quantum of both the 30- and 40-year gilts, which were well received. But starting this year, the 40-year bond has had a greater share of the borrowing calendar, as it was favoured by investors rather than the 30-year bond, which is a less appropriate fit for the asset-liability management of insurers. The divide between the two maturities will only increase in the second half. Not counting green bonds, the government plans to raise 1.2 trln rupees through the 40-year paper and only 700 bln rupees through 30-year bonds. Even the green bond issuance in the 30-year segment is only a token amount of 100 bln rupees, spread across two auctions. As is generally the case, the government will conduct the bulk of its borrowing through issuance of the 10-year bond. A total of 22.14% of the Oct-Mar bond issuances will be through sales of the 10-year paper, a tad higher than its 20.50% share in Apr-Sep. This has made traders averse to heavy buys of the 10-year bond, particularly with the share of the 14-year paper – another trading favourite – falling in the Oct-Mar calendar compared to Apr-Sep. To be sure, the 10-year benchmark will always be in favour with bond traders, especially as its trade volume dominates the secondary market. But come December, when its auction size goes from 130 bln rupees to 160 bln rupees every fortnight, the yield spread between the 10-year and 14-year bond is likely to shrink, dealers said. The government's redemption pattern is a strong offset to those pressures, another way that the Oct-Mar calendar is well thought out, dealers said. While there are no gilt redemptions in Jul-Oct, the government will repay 2.22 trln rupees to bond investors between Nov 2 and Dec 15. "If you look at the weekly issuances, it looks like they have kept in mind the redemption pattern for deciding how much to borrow when," a treasury official at a state-owned bank said. "It's an extremely deft move on the drafting side, where they have given up uniformity to better fit the market." Not many surprises are lined up in the Oct-Mar borrowing, which may keep buyers coming back for more, dealers said. Bank demand is unlikely to let up, with changed investment norms allowing increased bond purchases from April. Traders from mutual funds are in favour of stocking up on long-duration paper for its better capital appreciation when yields fall, while insurers and pension funds are often cash-rich in Oct-Mar and will be looking for opportunities to invest. Foreign investors are also likely to stock up on bonds maturing between five and 10 years towards the end of the fiscal year after JPMorgan announced India's gilts will be included in its emerging market debt index from June. Passive flows are expected to amount to $24 bln-$30 bln when the process completes in March 2025, while front-running from active foreign and domestic investors may start "immediately" this financial year itself once US Treasury yields and crude oil prices ease from the current highs, dealers said. "The government has correctly identified where demand is coming from, both on the insurer side and the bank side," said Marzban Irani, chief investment officer – debt, LIC Mutual Fund. "Interest rates have peaked, so people would not mind stocking up on duration. I would recommend going as long as possible, though the 10-year looks attractive as spreads are not very attractive for longer durations." While the central bank kept the borrowing pattern little changed at the short end, the share of bonds maturing in seven years or less has been trimmed to 25.95% from 28.27% in Apr-Sep, as banks had sought. The small cut would not necessitate an overhaul of portfolios, even on the asset-liability management front, dealers said. Banks had suggested lower issuance at the short end owing to the prevailing tight liquidity. From Sep 18, banking system liquidity has remained in deficit. This was the first time since Aug 24 that liquidity was in deficit, with payments for advance tax having drawn out over 1 trln rupees from the banking system. Adding to the deficit were outflows for payment of goods and services tax last week. "Banks will buy. It is just that if liquidity is tight, their (banks') short-term buying cost will go up by 10-15 bps," said Naveen Singh, head of trading, ICICI Securities Primary Dealership Ltd. "But the liquidity thing is a bit more dynamic, since say inflation cools off a bit in a couple of months or by year-end. So, liquidity might ease off." The market expects the yield spread between the benchmark seven- and 10-year papers to widen slightly going forward as the borrowing share of the seven-year paper has been reduced to 9.16% in Oct-Mar from 10.25% in the first half. This may result in a clear distinction between yields on bonds of less than seven years, followed by the 10- and 14-year bonds occupying a common part of the yield curve, and finally the 30-50-year bonds moving in line with the dynamics of long-term investor demand, dealers said. Even as another rate hike is expected from the US Federal Reserve this year, India's policy repo rate is seen as having topped out. The RBI's Monetary Policy Committee has raised the repo rate by 250 bps to 6.50?tween May 2022 and February. The panel is expected to extend its rate pause, before finally cutting rates sometime in 2024-25. "Surprisingly, the borrowing programme has gone very well, despite noise from the global market all over the place," Singh said. "G-Sec have behaved very well, the yields have largely been in the range of 20-25 bps, where other countries' bonds traded in a much wider range." In August, CPI inflation moderated to 6.83% from a 15-month high of 7.44% in July. According to preliminary estimates, the market by and large expects retail inflation for September to be below the crucial mark of 6%, gilt market dealers said. The RBI has a medium-term inflation target of 4%, and a tolerance band of 2% on either side of the target. The Oct-Mar borrowing calendar matches the uncertainties the market faces on the monetary policy front during the period, dealers said. It also gives the yield curve an impetus to steepen towards the end of the year, with gilt supply ending on Feb 16, foreign investment expected to redouble ahead of index inclusion, and more clarity on rate cuts in India and the US. Anchored as it is by firm demand from long-term investors, the steepening bias of the yield curve will have to come from short-term yields falling quicker than other parts of the yield curve, rather than an increase in long-term yields, dealers said. Not many in the market had anticipated that the government's record borrowing, its second in two years, would go without a hiccup when it was announced in the Budget. Helped by evolving market dynamics and adroit scheduling, the calendar could be considered a success for the government at its release itself – the next six months will tell whether investors have the chops to back up their words. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Thursday, Sep 28, 2023 By Akshata Gorde MUMBAI – Low rainfall in August has kept food inflation high and dealt a blow to disposable incomes, holding back a recovery in demand for fast-moving consumer goods companies, especially in rural areas. Add to that the late arrival of major festivals such as Dussehra and Diwali this year, robbing the sector of pre-festival buying, and demand in Jul-Sep may well be unchanged from the previous quarter, said Pratik Prajapati, senior manager of institutional research – consumer at a large Mumbai-based brokerage firm. "The volume can be seen in low single digits to flat, as demand has not yet revived (in Jul-Sep)," he said. "Rural demand has seen green shoots towards the fag end because of Ganpati and Onam, among others. However, it is too early to say because of the monsoon deficit." In a report dated Sep 12, Mihir Shah, vice-president of research – India consumers at Nomura, said the demand trends for the sector in Jul-Sep remained almost unchanged compared to the previous quarter. Even packaged consumer goods companies are cautiously optimistic. "While we are seeing the consumption trends to be broadly up… retail inflation for the months of July and August has averaged 7%, and August rainfall has shown an 11% negative deviation from the norm, driving caution," Gautam Kamath, vice-president of finance at Procter & Gamble India, said at the company's investor day on Sep 22. Analysts say the absence of a recovery in demand could hurt margins of companies in the sector, which expanded just last quarter after dropping for a few quarters. The earnings of companies such as Dabur Ltd and Emami Ltd, which depend more on rural areas, are likely to see a significant hit in Jul-Sep due to "an absence of recovery in rural demand", said an assistant vice-president tracking the consumer sector at ICICI Securities Ltd. RAINS & RURAL While good rainfall in September has partly compensated for the deficit in August, the extent to which it will help shore up rural demand remains to be seen. "September rainfall appears to have bounced back, and might have a big say in how the rest of the year goes," said Kamath of P&G India. Brokerage firm Jefferies pointed out in a report that rural demand has already seen significant pressure in the last 18-24 months, which now appears to be bottoming out. Going forward, growth would benefit from a low base, as evident to some extent in Apr-Jun, it said. Companies such as ITC Ltd, Dabur India Ltd, and Procter & Gamble Hygiene and Healthcare Ltd maintain that they are seeing a pick-up in rural demand amid concerns over the low monsoon, and retail inflation. Sanjiv Puri, chairman and managing director of ITC, told CNBC-TV18 in an interview on Monday that the company was seeing "green shoots" in rural demand and this, along with good festival season sales, would lead to strong consumer sentiment in the medium to long term. This year, the festival season is expected to help drive demand in both urban and rural areas only in Oct-Dec, said Mihir Shah of Nomura. Mohit Malhotra, the chief executive officer of Dabur India, told CNBC-TV18 in an interview on Sep 21 that the company had seen a resurgence in rural business over the last six months, and he expects a more significant pickup in demand over the next six months. Rural sales are likely to have been impacted in August because of deficit rainfall, he said, while adding that he expects a recovery in September. MARGIN PRESSURES Lower rainfall in August drove up already-rising commodity prices, particularly of key kharif crops such as paddy, maize, gram, tur, and other pulses, in Jul-Sep. While companies that stocked up raw materials before the increase in prices might see an impact next quarter, others may record lower gross margin expansion in Jul-Sep, analysts said. Margins of companies such as Britannia Industries Ltd and Nestle India Ltd could suffer in the near term because of higher prices of wheat, sugar, and milk, Nirmal Bang Institutional Equities said in a report on Tuesday. This is because these companies focus on items such as chocolate bars, and dairy items account for a higher proportion of the company's raw materials compared to peers like Hindustan Unilever Ltd and Colgate-Palmolive (India) Ltd. Adding to the price pressures for these companies is the recent jump in prices of Brent crude oil due to concerns around supply. Today, the price of Brent crude was up nearly 16% from a month ago at $97.69 a barrel. The spike in crude prices could dent the gross margins of packaged consumer goods manufacturers, as it has driven up prices of crude-linked derivatives including packaging, soda ash, linear alkyl benzene sulfonic acid, and titanium dioxide, Ajay Thakur, research analyst at Anand Rathi Shares and Stock Brokers, said in a report dated Sep 9. Prices of paddy have increased 9% on month in August and 2.5% so far in September, while maize prices have gone up 14% in August and 1% in September, according to Mihir Shah of Nomura. Prices of gram and tur have risen 14% and 6.9% on month in August, respectively, and are up 10% and 7.2% so far in September, he said. Pointing out that the rise in raw material prices so far this financial year is even more than in 2021-22 (Apr-Mar), Gautam Kamath of P&G India said, "Commodity prices remain high, and we have not seen the cost pressures receding as expected." This, he said, would exert pressure on the bottomline. Yet, Pratik Prajapati of the Mumbai-based brokerage firm expects companies to see gross margin expansion of 300-400 basis points in Jul-Sep. The impact on gross margins in Oct-Dec will be more, he says, as companies will experience the full impact of the recent commodity price inflation then. End Informist Media Tel +91 (22) 6985-4000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Monday, Sep 25, 2023 By Subhana Shaikh and Asmita Patil MUMBAI – The inclusion of Indian government bonds into JPMorgan's Global Bond Index after a long wait is likely to reduce crowding out and pave the way for increased demand for corporate bonds, industry players believe. A total of 23 government bonds valued at $330 bln are now eligible for inclusion in JPMorgan's Global Bond Index – Emerging Markets suite over a 10-month period starting Jun 28. This inclusion, which is expected to bring in additional inflows, is likely to buttress the Indian rupee and have a positive impact on government bond yields. "(This) will create some appetite for government bonds from FPIs (foreign portfolio investors). The expectation is that 10-year government securities yield at 7% is likely to be the new normal, and that yields are likely to go below 7%," said Ajay Manglunia, managing director of JM Financial. The expected strong demand from foreign investors will lead to a fall in gilt yields, making domestic investors–who used to heavily invest in government securities–start looking for other investment options such as corporate bonds, market participants said. Brokerages have projected inflows of $24 bln–$40 bln in government bonds from the index inclusion. Some inflows into the bond market are expected even before June, but a huge quantum is expected later in 2024-25 (Apr-Mar). Mutual funds that have discretionary funds could increase their corporate bond holdings and banks that predominantly buy gilts might start looking for other alternative opportunities in order to increase their return on investments. "A simple impact is that G-sec demand supply dynamics will improve resulting in lesser crowding out effect, so there will be space created for corporate bonds. If you see the yields falling, then obviously, more and more corporates will start accessing the bond market," said Deepak Sood, head of fixed income and partner at asset management fund Alpha Alternatives. SUPPLY SIDE DYNAMICS A fall in government bond yields is also likely to boost the primary market supply of corporate bonds as companies and financial institutions may rush to the debt market to take advantage of lower rates, market participants said. Some market participants believe a 15-20 basis points fall in government bond yields could lead to 5-10 bps fall in yields of corporate bonds, going forward. "Normally, in the corporate bond market, demand is certainly more than the supply, especially in longer tenure bonds, and if there is good demand from foreign investors, the spreads (between government securities and corporate bonds) will definitely start getting down, but it will take its own sweet time," said Laukik Bagwe, vice president at DSP Mutual Fund. Currently, the spread between the benchmark 10-year government bond and that of National Bank for Agriculture and Rural Development's AAA-rated bond is 25-30 bps. "Yields will fall and issuances will pick up. Capital markets are more efficient than bank borrowing…this year is going to be the highest amount of borrowings from the corporate bond side," Manglunia said. Market participants are of the view that the fundraising through corporate bonds will be in the range of 9.0-9.5 trln rupees in the current financial year, as compared to 8.83 trln rupees in 2022-23. "If you assume $30 bln worth of flows into government securities…maybe another 40,000-50,000 crore (400-500 bln rupees) of fresh supply (in corporate bonds) over and above normal year-on-year growth will be seen," Sood said. The push from the Reserve Bank of India to diversify their resources will also draw more non-banking financial companies to the corporate bond market amid rise in credit offtake. Bond offerings by NBFCs will also gain traction in the near future as the increased exposure of bank credit to non-bank lenders has come under the RBI's radar recently. "Corporate bond supply will also depend on whether the industry is expanding or not. Most of the credit uptick has happened on the retail side, while wholesale and corporate side is still maintenance capex rather than brownfield or greenfield capex, and I don't see it happening," said Sandeep Bagla, chief executive officer at Trust Mutual Fund. Only time will tell how the increased inflows in government bonds will help the corporate bond market. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Thursday, Sep 28, 2023 By Vivek Kumar and Reshab Shaw MUMBAI/BENGALURU – The exhilaration about large deals signed by information technology companies over the past few months seems to have failed to translate into a positive revenue growth outlook as the US and other major economies stare at higher interest rates and slowing growth. Compared to three months ago, fewer people today expect a strong recovery in the earnings of IT companies in the second half of this financial year. With interest rates expected to remain high longer, analysts expect demand to remain under pressure for a longer period. "We see a possible delay in recovery in discretionary spending of the BFSI (banking, financial services and insurance) and other customers of the Indian IT services companies, given increased risks of a larger-than-expected slowdown in the US economy," Kotak Institutional Equities said in a report. Of the top six Indian IT companies, only Infosys and LTIMindtree saw sequential growth in revenue from the services business in Apr-Jun. HCLTech, Wipro, and Tech Mahindra reported a sequential decline in the range of 1.0% to 4.2% in constant currency terms, while the topline of Tata Consultancy Services was flat. LTIMindtree reported 0.1% growth. While some were optimistic about a recovery in the second half, Infosys sharply lowered its 2023-24 (Apr-Mar) revenue growth guidance to 1.0-3.5% from 4.0-7.0%, despite registering 1% sequential growth in its topline for Apr-Jun. "We never bought this argument that the second half recovery will be very strong," said Ruchi Mukhija, vice-president, equity research – technology and internet, Elara Capital. "In our on-ground interactions/channel checks, we have not got any concrete evidence to support that recovery in the second half is going to be strong. We stand by that stance." There was a spurt in technology spending after the COVID-19 pandemic as companies invested in strengthening their digital infrastructure. Over the past few quarters, however, there has been a sharp cut in technology spending, which hit the earnings of domestic IT companies. Even in Jan-Mar, the revenue growth of these companies was muted. Infosys had reported a 3.2% sequential decline in its revenue that quarter. Though some analysts expect Jul-Sep to be slightly better than Apr-Jun, they are not betting on a significant recovery. "While Jul-Sep is usually a strong quarter for IT companies, it might not be the case this year," said an IT sector analyst from a domestic brokerage firm. "After two successive quarters of weak results, we believe that 2QFY24 (Jul-Sep) and 3QFY24 (Oct-Dec) may see QoQ growth for our coverage universe, but the next couple of quarters' performance will not herald the beginning of a sustained pick-up," Nirmal Bang Institutional Equities said in a report. The weak outlook comes amid hawkish comments from the US Federal Reserve even as interest rates in the world's largest economy stand at 5.25-5.50%, the highest level in over two decades. LARGE DEALS Though topline performance has been subdued, top-tier IT companies have bagged several large deals over the past few months. These are primarily cost-optimisation deals as companies globally look to reduce costs in an environment of high inflation. However, these large deals did not translate into revenue immediately owing to delays in ramp-ups, some companies pointed out. In August, HCLTech bagged a six-year deal worth $2.1 bln from New York-based Verizon for post-sale implementation and support services. Infosys bagged a five-year deal worth 1.5 bln euro, or around $1.6 bln, from Liberty Global, taking over "build and operations" of its Horizon entertainment and connectivity platforms. The deal with Liberty Global could be extended to eight years, taking the deal value to 2.3 bln euro, or about $2.5 bln. According to Infosys, Liberty Global will realise run-rate savings in excess of 100 mln euro, or around $106 mln, per annum, inclusive of other savings and technology investments, because of the deal. Until a few weeks ago, these large deals had been driving hopes that the consequences of high interest rates on the revenue growth of IT companies might not be so bad as feared earlier. This optimism partly led to the Nifty IT index rising over 11% so far in 2023, outperforming the benchmark Nifty 50, which has risen nearly 8% in the same period. Commenting on this, Kotak Equities said, "The recent expansion in (price-to-earnings) multiples of IT services companies reflected growing optimism around a recovery in revenues from 3QFY24 (Oct-Dec)." However, concerns relating to slow ramp-ups of large deals are not yet out of the window, said the analyst from a domestic brokerage quoted earlier. A few of the large cost-optimisation deals also need IT companies to take some of the clients' staff on their payroll. This, coupled with the fact that cost-optimisation deals have lower margins compared to digital transformation projects, has raised some concern about these deals being margin dilutive. Nirmal Bang's report said the mega deals "are fiercely competed and dilutive (of margins) not only in initial years" and a lot depends on extraction of significant productivity gains and operational efficiencies, "where companies may fall short". End Informist Media Tel +91 (22) 6985-4000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Friday, Sep 29, 2023 By Richard Fargose MUMBAI – Amid rising crude oil prices and a fall in exports, most economists have raised estimates for the 2023-24 (Apr-Mar) current account deficit by 10-20 basis points. They now see India's current account deficit in the range of 1.4-2.1%. On Thursday, Reserve Bank of India data showed the country's current account deficit widened to $9.2 bln or 1.1% of GDP in Apr-Jun from a seven-quarter low of $1.3 bln, or 0.2% of GDP, in Jan-Mar, primarily on account of a higher trade deficit, coupled with a lower surplus in net services, and a decline in private transfer receipts. This month, upward pressure on crude oil prices has risen with supply-side cuts by the Organization of the Petroleum Exporting Countries and allies and stronger-than-expected demand. Recent data show that India's exports and imports are both contracting. The trade deficit has risen because exports have contracted more than imports. In August, India's merchandise exports amounted to $34.48 bln, down 6.8% from a year ago. Imports were valued at $58.64 bln, down 5.2% on year. As a result, the merchandise trade deficit widened to a 10-month high of $24.16 bln in August. Economists said high frequency indicators show that domestic demand remains on a firm footing, supported by urban demand and capital expenditure by the government, while exports contracted, in particular non-oil exports, on weakness in external demand. This combination could maintain upward pressure on net non-oil and non-gold imports going forward. Economists see the surge in crude oil prices adding further upward pressure on the trade deficit in the remainder of 2023-24. "Q2FY24 (Jul-Sep) CAD/GDP is likely to materially worsen and may print more than double that of Q1 (Apr-Jun), with sequentially wider goods deficit led by high oil and core imports," said Madhavi Arora, lead economist at Emkay Global Financial Services Ltd. The International Energy Agency expects a significant shortfall in supply of crude oil in Oct-Dec with production cuts extended till the end of the year. Since Sep 1, the price of Brent crude on the Intercontinental Exchange has risen more than 7%, hitting $97.69 per barrel on Thursday, its highest level since November 2022. "Though the current account deficit in Apr-Jun widened less than we expected, risks to our forecasts have emerged from higher crude oil prices, given India's position as a net energy importer," said Rahul Bajoria, managing director and head of Emerging Markers Asia (ex-China) Economics, Barclays. Assuming that the Indian crude basket averages $90 per bbl in Oct-Mar, IDFC FIRST Bank expects 2023-24 current account deficit to be around 1.9% of GDP, against the earlier estimate of 1.8%. "In case crude oil prices average $100 per barrel in H2FY24 (Oct-Mar), then FY24 current account deficit could widen to 2.1% of GDP, which is within sustainable levels," IDFC FIRST Bank economist Gaura Sen Gupta said in a report. Sen Gupta said global crude oil inventories are uncomfortably low, which is increasing the chances of further upside pressure on prices of the commodity. Owing to the likely higher current account deficit, the Indian rupee is expected to remain under pressure. "Though FPI inflows from inclusion in the global bond index are likely to aid the rupee in the medium term, risks from the global side are likely to dominate and keep the rupee under pressure over the near term," Kotak Economics Research said in a note. Kotak Economics Research also said the RBI's intervention to stem any sharp volatility in the rupee would see the dollar/rupee trading in a narrow range of 82.75-83.50 over the near term, but with weak bias. End Informist Media Tel +91 (22) 6985-4000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
NEW DELHI – By sticking to the Budgeted gross market borrowing target of 15.43 trln this financial year, the government has shown that its finances are comfortable right now, a senior finance ministry official said today. The government is on track to meet the 2023-24 (Apr-Mar) overall receipts target and also the fiscal deficit aim of 5.9% of GDP, the official said. We have "retained firepower" by keeping borrowing at the predetermined level, the official said. The government on Tuesday announced it will borrow 6.55 trln rupees through the sale of dated securities in Oct-Mar, having raised 8.49 trln rupees so far, which is 55.02% of the full-year borrowing target. The government is due to sell bonds worth 390 bln rupees on Friday. A senior government official had told Informist last month that the government may have some space to cut market borrowing for the current financial year because of robust inflows into small savings schemes. While net inflows into government-run small savings schemes have jumped 46% year-on-year to 1.39 trln rupees in Apr-Jul, it is prudent on the Centre's part to not lower the market borrowing right now because of the possibility of higher spending ahead of the General Election next year. While the government maintains its stance that it will meet the fiscal deficit target this year, economists have flagged that a fiscal slippage of around 20-30 basis points is possible, taking the fiscal deficit to over 6.0% in the current financial year ending Mar 31. The government's finances will face additional pressure from the recent surge in crude oil prices. The government is not comfortable with crude oil prices staying above the $90 per barrel mark, the finance ministry official said. The Oct-Mar borrowing calendar was largely on expected lines, with the introduction of the 50-year tenure bond the only major surprise. The government is trying to elongate the maturity period of government bonds, the official said. The share of the 40-year bonds in the total issuances has also increased to 18.32% in Oct-Mar, from 17.6% in Apr-Sep. The government also released the Treasury bill calendar on Tuesday and will raise 3.12 trln rupees through the auction of Treasury bills in Oct-Dec. While the total borrowing in Oct-Dec through Treasury bills is the same as Jul-Sep, the amount of 91-day Treasury bills has gone down to 910 bln rupees from 1.3 trln rupees in the last quarter. The thinking behind lowering the 91-day Treasury bill supply in Oct-Dec is to keep the redemption in Jan-Mar in check, the official said. The official also said that the government will augment transparency in its public debt management. Additionally, the official said that the Centre has met over 40% of 10-trln-rupee capital expenditure target for this financial year, as of early September. End Informist Media Tel +91 (11) 4220-1000 Send comments to firstname.lastname@example.org © Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Friday, Sep 29, 2023 NEW DELHI – India's sovereign bonds will not be included in the bond index for emerging market economies in the present round, and will remain on the watchlist for inclusion, global index provider FTSE Russell said today after its annual country classification review. "India will remain on the FTSE Fixed Income Country Classification Watch List for the potential reclassification of its Market Accessibility Level from 0 to 1, and consideration for inclusion in the FTSE Emerging Markets Government Bond Index," FTSSE Russell said in a release. The decision comes after JPMorgan last week included Indian government bonds in its Global Bond Index – Emerging Markets. FTSE Russell said that it will continue to engage with its index users and Indian market authorities regarding ongoing market structure reforms. "FTSE Russell will continue its valuable dialogue with the Reserve Bank of India and seek feedback from market participants on their practical experiences of the evolution of the market structure," it said. The index provider said that the areas of improvement in the Indian government bond market structure include the efficiency of foreign portfolio investor registration, as well as operational issues related to the settlement cycle, trade matching, and tax clearance process, which is largely unchanged from the previous review in March. India was placed on the watchlist for the first time following FTSE Russell's review in March 2021. End Informist Media Tel +91 (11) 4220-1000 Send comments to email@example.com © Informist Media Pvt. Ltd. 2023. All rights reserved.
By Paul Hannon LONDON -- The Bank of England left its key interest rate unchanged for the first time since November 2021 amid signs that inflation is cooling and the U.K.'s economy is teetering on the brink of contraction. The BOE's decision to keep its benchmark rate at 5.25% leaves it out of step with a number of other European central banks that have continued to raise their key rates at recent meetings of policy makers. The pound weakened against the dollar, trading 0.8% lower shortly after the rate call. Earlier on Thursday, the central banks of Sweden and Norway matched last week's move by the European Central Bank in raising their key rates by a quarter of a point to 4% and 4.25%, respectively. They both signaled a further increase was possible. By contrast, Switzerland's central bank surprised economists by leaving its key interest rate unchanged at 1.75%. The Federal Reserve left its key rate unchanged Wednesday, though inflation is far lower in the U.S. than in the U.K. The BOE decision to hold rates came a day after U.K. inflation unexpectedly fell in August to 6.7% from 6.8% in July, despite climbing energy prices. Core inflation, which excludes volatile food and energy prices, also fell to its lowest level since January. Easing price pressures have also come amid a backdrop of very weak economic growth. The U.K. economy has stagnated since Russia's full-scale invasion of Ukraine in early 2022. Gross domestic product fell in July, and business surveys for August don't point to a significant rebound. Unemployment has been rising over recent months. Nevertheless, with inflation still far above its 2% target, the BOE didn't rule out a further rise in its key interest rate. The Fed on Wednesday signaled it might raise its key rate again before the end of the year. "Inflation has fallen a lot in recent months, and we think it will continue to do so," said BOE Gov. Andrew Bailey. "But there is no room for complacency. We need to make sure inflation returns to normal." The decision to hold was approved by the narrowest of margins, with four of the nine rate-setters preferring an increase in the key rate to 5.5%. Most of those who joined Bailey in voting for holding agreed that the call was "finely balanced," according to a record of the two-day policy meeting. Picking the moment at which rates have risen enough to bring inflation down, but not so much that economic activity suffers more than is needed to achieve that goal, can be difficult. Some central banks, including those of Australia and Canada, signaled a pause in recent months, only to start raising rates again. "As you potentially approach the end of a tightening cycle, it becomes very difficult to judge the balance of risks," said Clare Lombardelli, chief economist at the Organization for Economic Cooperation and Development. The OECD recently warned that inflation still has the potential to deliver unpleasant surprises, with a recent pickup in oil prices being just one development that could leave central banks with little option but to raise their key rates again. Brent crude futures, the international energy benchmark, are on track to rise by 26% this quarter, having already climbed to about $95 a barrel. But the impact on inflation will depend on whether hard-pressed consumers will accept further price rises. "With the eurozone and U.K. economies seemingly slipping into recession, European firms are soon likely to find it harder to pass on higher fuel costs to consumers," said Simon MacAdam, an economist at Capital Economics. The OECD on Tuesday said it expected the BOE to raise its key rate to 5.5% this week and by a further quarter of a percentage point in November, keeping it at 5.75% for most of next year. By contrast, it expects no further moves from the Fed or the ECB until well into 2024. The BOE says it has underestimated the scale and persistence of the U.K.'s inflation problem since consumer prices began to rise rapidly in mid-2021. It has asked former Fed Chair Ben Bernanke to conduct a review of its forecasting process, with the results due to be published in spring 2024. The BOE started to raise its key rate in December 2021, three months before the Fed first moved to increase rates and seven months earlier than the ECB. Over recent months, BOE policy makers have said that their key interest rate is already at a level that is damping demand and inflation, while much of the impact of previous rate rises has yet to be felt. In the U.S., interest rates on mortgages are fixed for between 15 and 30 years. But British mortgages typically carry a fixed rate for between two and five years, so a rising number of homeowners will see their monthly payments increase substantially over the coming years. Most European countries have seen their economies stagnate since Russia's invasion of Ukraine as household spending power is squeezed by sharply higher energy and food prices and business confidence falters. The U.K. economy was the only one of the four Western European countries making interest-rate calls Thursday to register growth in the three months through June, while Sweden saw a large decline in gross domestic product. The OECD expects the U.K. economy to grow by just 0.3% this year and 0.8% in 2024, compared with U.S. growth forecasts of 2.2% and 1.3%, respectively. Explaining its decision Thursday, the BOE said there were "increasing signs" that its previous rate rises were having an impact on economic activity. "Underlying growth in the second half of 2023 is likely to be weaker than expected," the BOE said. While leaving its key rate unchanged, the U.K. central bank has also decided to increase the pace at which it will reduce the portfolio of government bonds bought during its efforts to boost inflation in the years between the global financial crisis and the end of the Covid-19 pandemic, a policy known as quantitative tightening. (END) Dow Jones Newswires
By Ed Frankl The Bank of England unexpectedly held its key interest rate on Thursday, in one of a raft of critical central-bank meetings this week. The decision came amid growing signals of a slowing U.K. economy and steadily cooling inflation. But it also puts it out of step with most other European central banks, which hiked in the face of still-stubborn inflation, although the U.S. Federal Reserve chose to hold rates. South Africa's central bank also meets Thursday. Here are some of decisions central banks have made in recent days: --The Bank of England decided in a 5-4 vote to hold its key bank rate at 5.25%, unchanged for the first time since November 2021, citing inflation coming in lower than the bank expected in August and country's economy contracting in July. There were also signs of loosening in the labor market, though wage growth continues to be strong, the bank said. Sterling fell to a six-month low against the dollar on the news. --The U.S. Federal Reserve held rates on Wednesday, keeping its funds range at between 5.25% and 5.5%. Policymakers appear split on whether to raise rates again before the end of 2023, while officials also indicated that rates would be higher for longer through 2024 than previously anticipated. --Turkey's central bank on Thursday hiked its key rate to 30% from 25% in a fourth of a series of steep increases since the appointment of new governor Hafize Gaye Erkan, after inflation in July and August crept up above expectations. The Turkish lira slipped slightly against the dollar after the decision. --Switzerland's central bank unexpectedly held its key policy rate at 1.75%, after it said it now expects inflation to meet its target of under 2% from 2025 onward. The franc slipped to a two-month low against the euro after the decision. --The Norges Bank ticked up its key rate by 25 basis points to 4.25% as expected by economists and said another increase is likely later this year, most probably in December. The krone rose against the euro in response. --Sweden's Riksbank lifted its policy rate to 4.0% from 3.75% as anticipated, and said it could tighten further as it fights both high inflation and a weak krona. --In a decision that was seen as a toss-up, the European Central Bank last week increased its key deposit rate by a quarter point to 4.0% but signaled that rates may have peaked, leading the euro to slide against the dollar. (END) Dow Jones Newswires
New Delhi, Sep 21 (PTI) Sebi on Thursday decided to provide flexibility in the framework for large corporations to meet financing needs through the issuance of debt securities and also extended the timeline for investment advisers to comply with enhanced qualification and experience requirements. Also, the regulator will streamline the framework for credit of unclaimed amounts of investors in listed entities other than companies, REITS, and InvITs to the Investor Protection and Education Fund (IPEF) along with the process of refund from the IPEF. Besides approving these proposals, Sebi board, at its meeting on Thursday, also discussed various trends in the securities market, including technological trends, as well as the regulator's approach to proactively plan for the same going forward, according to a release. The board has given its nod for providing flexibility in the framework for large corporates to meet their financing needs from the debt market through a few changes in the existing framework. Under the new framework, Sebi said that a higher monetary threshold would be specified for defining large corporations, thereby reducing the number of entities qualifying as large corporations. Additionally, it has been decided to remove penalties on large corporations that are not able to raise a certain percentage of incremental borrowing from the debt market, and plans to introduce incentives and moderated disincentives. In a bid to facilitate ease of compliance as well as ease of doing business, the board has decided to retain the requirement that compliance with the framework will be met over a contiguous block of three years. Further, it has been decided to dispense with the requirement for large corporations to file a statement identifying itself as a large corporation and a statement regarding compliance with the framework. As per the current rules, large corporations are those that need to have an outstanding long term borrowing of at least Rs 100 crore, a credit rating of 'AA and above', and a target to finance themselves with long term borrowings (above one year). To deepen the bond market, the regulator had mandated large corporates to meet one-fourth of their financing needs from the debt market. As per the release, the board has also cleared a proposal to extend the timeline by two years till September 2025 for compliance with enhanced qualification and experience requirements for investment advisers. Individual investment advisers, principal officers of non-individual investment advisers, and persons, who are with the investment advisers and associated with investment advice, are required to comply with enhanced qualification and experience requirements. To further streamline the credit of unclaimed amounts and provide for claims of such unclaimed amounts, the board has approved amendments to rules about the IPEF, disclosure, Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This is aimed at prescribing a uniform process of a claim for such amounts in a streamlined manner for the ease and convenience of investors. Also, Sebi said that investors may approach the debt-listed entity, REIT and InvIT to claim their unclaimed amounts, thereby ensuring minimal disruptions in the claim process for investors. Further, the amendments are aimed at creating a regulatory framework for the segregation of unclaimed amounts of investors in the IPEF facilitating the utilisation and processing of such amounts in the manner prescribed by the board. The proposal for the transfer of unclaimed amounts lying in an escrow account for more than seven years, to the IPEF for debt-listed entities was approved by the Sebi board in its meeting in September 2022. Similarly, the proposal to transfer the unclaimed or unpaid amounts to investors in REITs and? InvITs to IPEF were approved by the regulator in its meeting in December 2022. Accordingly, changes were made in the REITs and InvIT Regulations. PTI