|
Current Economic Statistics and Review For the
Week | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Theme
of the week:
Issue and Management of Currency by Reserve Bank of India 1.
Introduction As
emphasized in earlier parts, currency management is a central banking
function, which has a high degree of public credibility in Although
the counterfeit notes detected have been miniscule as compared with the
notes in circulation, the widespread appearance of comparatively good
quality forged notes in high denomination notes has become an issue. Hence
this note tries to put various anti-counterfeit measures taken by the RBI in
perspective. 2.
Magnitude of Forged Notes Table
1 shows the number of forged notes detected in the RBI offices
denomination-wise. Though the number and amount appear miniscule as compared
with total number and value of notes in circulation, the widespread presence
of comparatively good quality forged notes especially in higher
denominations in recent years is a cause for concern . There has been a
decline in the total number of forged notes detected in the RBI offices, the
value of such detected notes has been on the rise because of the rise the in
detection of higher denomination banknotes, viz., Rs. 1,000 and Rs. 500 bank
notes (Table1).
This may be due to introduction of sophisticated and technically advanced
Currency Verification and Processing Systems (CVPSs) and continuous review
of the security features of banknotes and their updating periodically.
3.Security
Features in Banknotes In
the wake of increasing circulation of high value counterfeit banknotes,
particularly Rs.100 and Rs.500 denominations, the Government of India
appointed a High Level Committee in February 2000. The Committee inter
alia recommended incorporation of additional/new security features and
improvement of certain existing security features in banknotes. The
recommendations have been accepted and the new notes have already been put
into circulations. The
proposed security features to be incorporated in banknotes are as under:
Source: RBI (2007), RBI Annual Report 2006-07 and previous issues 4.Ongoing
Process of Improving Security Features in Bank Notes Security
features of bank notes need to be reviewed and upgraded from time to time in
order to take advantage of research and technology in the field to combat
counterfeiting. The notes issued in any series/design by the Reserve Bank
continue to be legal tender for all time, although over a period, notes in a
particular series/design may not be seen any more because of discontinuance
of printing issues in that series/design. In some countries, where the
volume of notes in circulation is small, a new design replaces an old design
every 5-6 years and the old design is discontinued as legal tender. In such
a situation, prevention of counterfeiting is strengthened. In Although
the predominant reason for new security features is to make counterfeiting
difficult, they also assume importance in the context of the mechanised cash
processing activities by high-speed currency verification and processing
systems (CVPSs). The success of these systems in achieving the authenticity
and rated capacity depends greatly on the notes having machine-readable
security features. The
Government of India and the Reserve Bank are currently in the process of
introducing additional security features in the existing design of bank
notes. However
the RBI also like other central banks changes the design of bank notes from
time to time as an anti counterfeit mesure. 5.Phasing
Out of Ashoka Pillar Series Portraits of human beings have been recognised as a strong security feature on bank notes all over the world. The watermark with a human face is a unique and an inimitable feature which provides the desired light and shade effects. In particular, a human face brings into focus the shine/gleam in the eyes. The portraits involve deep engravings with very minute details and are difficult to counterfeit. The choice of the personality from the security point of view should be such that the face should be expressive and should have lots of lines and folds so that there is an ample scope of engravings of different depths, which would be difficult for counterfeiters. The Government and the Reserve Bank, therefore, introduced a portrait of Mahatma Gandhi on bank notes as well as in the watermark window. The
notes in Mahatma Gandhi series were introduced in 1996. Some additional
security features like windowed security thread, latent (hidden)
denominational image, micro printing, registration mark and raised
identification mark for identification of a denomination by visually
impaired were also incorporated in these notes as anti-counterfeiting
measures. The printing of notes with Ashoka Pillar emblem on notes and in
watermark window was then discontinued. The notes in Ashoka Pillar series
circulating among the public had deteriorated in quality. Moreover, in the
absence of advanced security features in the Ashoka Pillar series notes, the
public was finding it difficult to identify counterfeit notes of this
series. The Government and the Reserve Bank, therefore, decided to phase out
the Ashoka Pillar series notes from circulation. Accordingly, the Reserve
Bank Issue Offices and currency chest branches of commercial banks have been
instructed not to re-issue these notes to the public. These notes shall,
however, continue to be legal tender. Furthermore, the Ashoka Pillar emblem,
a national symbol and pride, continues to be printed on the notes of Mahatma
Gandhi series. A
new series of note styled as the ‘ Mahatma Gandhi Series’ was introduced
in 1996. A changed watermark, windowed security thread, latent image and
intaglio features for the visually handicapped are amongst new features. 6
Latest Mahatma Gandhi Note Series: Security Features
Watermark: The
Mahatma Gandhi Series of bank notes contain the Mahatma Gandhi watermark
with a light and shade effect and multi-directional lines in the watermark
window. Security
Thread: Rs.
1000 notes contain a readable, windowed security thread alternately visible
on the obverse with the inscriptions ‘Bharat’ (in Hindi), ‘1000’ and
‘RBI’, totally embedded on the reverse. The Rs.500 and Rs.100 notes have
a security thread with similar visible features and inscription ‘Bharat’
(in Hindi), and ‘RBI’. When held against the light, the security thread
on Rs.1000, Rs.500 and Rs.100 notes can be seen as one continuous line. The
Rs.5, Rs.10, Rs.20 and Rs.50 notes contain a readable, fully embedded
windowed security thread with the inscription ‘Bharat’ (in Hindi) and
‘RBI’. The security thread appears to the left of Mahatma Gandhi’s
portrait. Latent
Image: On
the obverse side of Rs.1000, Rs.500, Rs.100, Rs.50 and Rs.20 notes, a
vertical band on the right side of Mahatma Gandhi’s portrait contains a
latent image showing the respective denominational value in numeral. The
latent image is visible only when the note is held horizontally at eye
level. Micro
Lettering: This
feature appears between the vertical band and Mahatma Gandhi’s portrait.
It contains the word ‘RBI’ in notes of Rs.5 and Rs.10. Notes of Rs.20
and above also contain the denominational value in micro letters. This
feature can be seen better under a magnifying glass. Intaglio
Printing: The portrait of
Mahatma Gandhi, the Reserve Bank’s seal, the guarantee and promise clause,
the Ashoka Pillar Emblem on the left and the Governor’s signature are
printed in intaglio, i.e., in raised prints,which can be felt by touch in Rs.20, Rs.50,
Rs.100, Rs.500 and Rs.1000 notes. Identification
Mark:
A
special feature in intaglio introduced on the left of the watermark window
on all notes except the Rs.10/- note assigns different shapes for various
denominations (Rs. 20-Vertical Rectangle, Rs.50-Square, Rs.100-Triangle,
Rs.500-Circle and Rs.1000-Diamond) to help the visually impaired to identify
the denomination. Fluorescence: Number
panels of the notes are printed in fluorescent ink. The notes also have
optical fibres. Both can be seen when the notes are exposed to ultra-violet
lamp. Optically Variable Ink: A new security feature was incorporated in
the Rs.1000 and Rs.500 notes with revised colour scheme introduced in
November 2000. The numerals 1000 and 500 on the obverse of Rs.1000 and
Rs.500 notes, respectively, are printed in optically variable ink, viz., a colour-shifting ink. The colour of the numeral 1000/500
appears green when the note is held flat but would change to blue when the
note is tilted. See
Through Register: The
small floral design printed both on the front (hollow) and back (filled up)
of the note in the middle of the vertical band next to the watermark has an
accurate back to back registration. The design will appear as one floral
design when seen against the light. 7.
The RBI’s Anti-Forgery Measures The
Reserve Bank of The
security features of bank notes are reviewed and updated from time to time,
taking advantage of the research and technology in the field. Approach has
been to improve the security features on the existing design so as to combat
counterfeiting and to incorporate a mixture of security features on a
completely new series of notes. With the advancement of reprographic
techniques, traditional security features are deemed inadequate. Other
measures undertaken by the RBI are training of the Bank officials as well as
other government officials and bank employees. A public awareness program
were disseminated by making a film on security measures of Rs. 100 and Rs.
500 denomination and was telecast on Dooradarshan and other TV channels and
other media. A forged note vigilance cell has been set up in the department
of currency management for effective monitoring of bank note forgeries.
Banks were advised to establish forged note vigilance cells at their head
office for dissemination, monitoring and implementation of the RBI’s
instruction on forged notes to their branches and compiling of data on
ditection of forged notes and follow-up cases filed with police etc. The RBI
also issued a master circular regarding detection of forged notes and
procedure to be followed on detection of forged noted. Incidently the number
of counterfeit notes detected was high in Tracking
of new type of forgeries and scrutiny in association with the security paper
mills and note printing presses is an important step in this direction. Additional
security features added recently include: a)
Dematallised magnetic and machine-readable windowed security thread with
colour shift from greens to blue in Rs. 100, 500 and 1000; b)
Improved intaglio printing; c)
Improved see through feature incorporating the denominational numeral
instead of floral design; and. d)
Electrotype watermark featuring the denominational numeral alongside
Mahatma Gandhi Portrait in watermark window.
* This not has been prepared by R.Krishnaswamy
Highlights of Current Economic Scene AGRICULTURE As
per the fourth advance estimates of agricultural output for 2007-08,
released by ministry of agriculture, total foodgrain production would touch
a record of 230.67 million tonnes, as against third and second advance
estimates of 227.32 million tonnes and 219.32 million tonnes, respectively.
Experts opine that the higher minimum support price (MSP) for various crops
along with other government efforts under the National Food Security Mission
(NFSM) have provided incentives to the farmers to expand the area under
production. Of the total foodgrain production, output of rice, wheat and
coarse cereals have been pegged at all-time high levels of 96.43 million
tonnes, 78.40 million tonnes and 40.73 million tonnes, respectively. The
most striking upward revision has been witnessed for maize, which is 28 per
cent more than the 15.10 million tonnes during the corresponding period last
year. Among oilseed, production of
soyabean and groundnut is estimated to have touched a record level of 9.99
million tonnes and 9.36 million tonnes, respectively. Production of tur,
urad and moong has surge to 3.09 million tonnes, 1.52 million tonnes and
1.56 million tonnes. Cotton
production is estimated to be at 25.81 million bales of 170 kg each.
Production of sugarcane is
pegged at 340.56 million tonnes during 2007-08, which is lower than 355.52
million tonnes produced in 2006-07. The
central government agencies have so far procured 26.3 million tonnes of rice
and procurement is further expected to reach 27 million tonnes, falling
short of 500,000 tonnes to achieve the target of 27.5 million tonnes in
2007-08 marketing season ending in September. The total rice procurement
stood at 25.1 million tonnes in the previous season. Farmers have started
sowing paddy and the government is expecting the acreage to go up marginally
during the current kharif-sowing season. By the first week of July 2008,
acreage under paddy has stood at 5.5 million hectares as against 4.7 million
hectares in the year-ago period. On
the other hand, wheat
procurement till the date has reached to a record quantity of 22.3 million
tonnes as against the targeted 15 million tonnes. The government had decided
to create a strategic reserve of 5 million tonnes of foodgrains comprising 3
million tonnes of wheat and 2 million tonnes of rice. Out of the procurement
made in the rabi season this year, 3 million tonnes of wheat is available
for strategic reserve. The reserve would be created only after meeting the
buffer stock requirement.
As
per reports of Crop Weather Watch Group, released by Agricultural Ministry
as on July 10,2008 the sown acreages under all major kharif crops like rice,
oilseeds, pulses and coarse cereals have increased so far during the current
kharif season 2008-09, except for cotton and sugarcane. Acreage under rice
so far, raised by 6.3 per cent to 92.35 lakh hectares as against 86.90 lakh
hectares last year. The coverage under coarse cereals increased to 87.35
lakh tonnes as compared to 78.34 lakh tonnes a year ago. Experts are of the
view that part of jowar acreage is going to maize and bajra, because both of
them are fetching very attractive prices in the domestic as well as
international market. The
central government has planned to introduce a regulator for tea industry.
This would help to check the quality of the tea exported to the overseas
countries, as quality control of Indian tea is becoming one of the important
issues in the international markets.
According
to Solvent Extractors’ Association, The
central government, on July 9, 2008, has scrapped import duty on cotton and
also has withdrawn the export incentive under the duty entitlement passbook
scheme. The government has abolished the import duty of 14 per cent on raw
cotton, i.e., customs duty of 10 per cent on all types of raw cotton imports
along with special additional duty of 4 per cent. This move would increase
domestic availability of cotton and also help to control prices of cotton;
it is expected that this would have an indirect impact on controlling
inflation. Cotton prices have risen by more than 30 per cent since last one
year to around Rs 28,000 per tonne, from around Rs 21,000 per tonne, mainly
due to strong demand and surging exports. Industry estimates that the
country might export around 8.5 million bales of cotton in the current crop
marketing year ending on September 2008, displaying a rise from around 5.8
million bales (1 bale=170kg). The
global sugar surplus is likely to end by the next marketing year ending
October 2009 on strong ethanol demand and a fall in sugar output. The global
sugar output is likely to be around 165 million tonnes in 2008-09 marketing
year as compared with 169 million tonnes in the current marketing year
2007-08. Consumption would rise to 164-165 million tonnes in 2008-09 as
compared with 161 million tonnes in 2007-08. Sugar production in one of
Asia’s major producers,
Exports
of spices for the first two months of the current financial year 2007-08,
has risen by 20 per cent in volume terms and 28 per cent in value (Rupee)
terms, as compared to the performance of the corresponding period of last
year. Spices exported during April- May 2008-09, are estimated to be at
98,570 tonnes valued at Rs 885.04 crore ($ 214.88 million) as against 82,210
tonnes valued at Rs 690.74 crore ($ 166.67 million) in the corresponding
period of last year. Spice oils and oleoresins including mint products
contributed 35 per cent of the total export earnings. While, Chilli
contributed 27 per cent, followed by pepper 11 per cent, cumin 7 per cent
and turmeric 4 per cent. The export of pepper, chilli, coriander, cumin,
celery, other miscellaneous seeds, vanilla, curry powder, spice oils and
oleoresins and mint products are higher in terms of both quantity and value
as compared to the same period of last year. However, cardamom (large),
ginger and fennel have witnessed decline in terms of both quantity and
value.
Industry Index
of Industrial Production (IIP) with base 1993-94 for the month of May 2008
registered a growth of 3.8% higher as compared to the level in the month of
May 2007. The cumulative growth for the period April-May 2008-09 stands at
5.0% over the corresponding period of the pervious year. The
Mining, Manufacturing and Electricity sectors for the month of May 2008
registered growth rates of 5.2%, 3.9% and 2.0%, respectively, as compared to
May 2007. The cumulative
growth during April-May, 2008-09 over the corresponding period of 2007-08 in
the three sectors have been 5.6%, 5.3% and 1.7% respectively, which moved
the overall growth in the General Index to 5.0%.
In
terms of industries, as many as eleven (11) out of the seventeen (17)
industry groups (as per 2-digit NIC-1987) have shown positive growth during
the month of May 2008 as compared to the corresponding month of the previous
year. The industry group ‘Beverages, Tobacco and Related Products’ have
shown the highest growth of 31.1%, followed by 12.3% in ‘Transport
Equipment and Parts’ and 9.5% in ‘Basic Chemicals & Chemical
Products (except products of Petroleum & Coal)’. On the other hand,
the industry group ‘Wood and Wood Products; Furniture and Fixtures’ have
shown a negative growth of 30.7% followed by 10.4% in ‘Rubber, Plastic,
Petroleum and Coal Products’ and 9.0% in ‘Jute and Other Vegetables
Fibre Textile (except Cotton)’. As
per Use-based classification, the Sectoral growth rates in May 2008 over May
2007 are 3.0% in Basic goods, 2.5% in Capital goods and 1.2% in Intermediate
goods. The Consumer durables and Consumer non-durables have recorded growth
of 4.4% and 8.1% respectively, with the overall growth in Consumer goods
being 7.2%. Infrastructure The
Index of Six core-infrastructure industries having a combined weight of 26.7
per cent in the Index of Industrial Production (IIP) (base 1993-94)
registered a growth of 3.5% (provisional) in May 2008 compared to a rise of
7.8 % in May 2007. During
April-May 2008-09, the growth of 3.5% (provisional) was almost half to that
of 6.9% during the corresponding period of the previous year. Crude
Oil production (weight of 4.17% in the IIP) registered a growth of 3.2% (provisional)
in May 2008 compared to a negative growth rate of
1.6% in May 2007. The Crude Oil production registered a growth of 2.1%
(provisional) during April-May 2008-09 as against a decline of 0.1% during
the same period of 2007-08. Growth
in Petroleum refinery production (weight
of 2.00% in the IIP) at 0.1% (provisional) in
May 2008 is miniscule compared to growth of 14.9%
in May 2007. The Petroleum refinery production registered
a growth of 2.1% (provisional) during April-May 2008-09 compared to 15.0%
during the same period of 2007-08. Impressive
growth of 8.3 per cent in coal (weight of 3.2% in the IIP) in May 2008
compared to growth rate 0.5% in May 2007 has been the only silver lining in
an otherwise bleak performance.. Coal production grew
by 9.3% (provisional) during April-May 2008-09
compared to an increase of 0.5% during the same period of 2007-08.
Electricity
generation (weight of 10.17%
in the IIP) registered a growth of 2.0% (provisional)
in May 2008 compared to a growth rate 9.3% in May 2007. Electricity generation
grew by 1.7% (provisional) during April-March
2008-09 compared to 9.0% during the same period of 2007-08. Cement
production (weight of 1.99%
in the IIP) registered a growth of 3.8% (provisional)
in May 2008 compared to 9.9% in May 2007. Cement
Production grew by 5.4% (provisional)
during April-March 2008-09 compared to an increase of 7.8% during the same
period of 2007-08. Finished
(carbon) Steel production (weight
of 5.13% in the IIP) registered a growth of 5.2% (provisional)
in May 2008 compared to 8.4% (estimated) in May
2007. Finished (carbon) Steel production grew by 4.5%
(provisional) during April-May 2008-09 compared to an increase of 5.6%
during the same period of 2007-08. Inflation The
annual rate of inflation calculated on a point-to-point basis, rose by 11.89
per cent for the week ended June 28,2008 as compared 4.42 per cent as on
June 23,2007.Over the week the growth was 04 per cent . Rise
of 0.9 per cent in the index of Primary Articles group during the week can
be attributed to increase in prices of food and non-food articles by 0.5 per
cent and 1.8 per cent, respectively. The
price index of the major group Fuel, Power, Light and Lubricants remained
stationary at previous week level of 374.4. The
rise in the price index of manufactured products by 0.4 per cent was mainly
due to increase in the prices of many edible oils, yarns, fertiliser,
medicines, cement The
final WPI for all commodities had been revised upward from 228.6 to 230.5
for the week ended May 3, 2008. As a result the rate of inflation calculated
on a point-to-point basis stood at 8.73 per cent as compared to 7.83 percent
provisional. Banking The
Reserve Bank of India (RBI) has imposed a penalty of Rs 1 lakh on the Nashik-based
Nasik Zilla Sarkari & Parishad Karmachari Sahakari Bank for violating
its directives under the Banking Regulation Act, 1949. The bank has paid a
dividend of 5 per cent without the RBI’s approval. The
Special Undertaking of UTI (SUUTI) is planning to sell around 17 per cent
out of its 27.11 per cent stake in Axis Bank through block deals on the
stock market and will continue to retain 10 per cent shareholding in the
bank. However, SUUTI will also hold on its stake in L&T and ITC. SUUTI
took over the non-net asset value-based schemes of the erstwhile Unit Trust
of India in 2003. The move to sell these stakes is prompted by the fact that
SUUTI will cease to exist by next June, having paid all unit-holders for
their units under a 2003 mandate following a payments crisis in UTI.
Anil Dhirubhai Ambani Group (ADAG) promoted Reliance Money has entered into an agreement with the Ahmedabad-based National Multi-Commodity Exchange (NMCE) is acquiring up to 26 per cent stake in the bourse. NMCE, is the third largest commodity exchange in the country. Financial
Sector Capital
Markets Primary
Market Stock
exchanges seeking to list their own shares in a demutualised environment are
not likely to be allowed to do so without first making a public offer of
shares. The Bombay Stock Exchange (BSE) proposal of listing its shares
without an initial public offering (IPO) may not pass muster with markets
regulator Securities & Exchange Board of India (SEBI) as the issue of
listing stock exchanges has come to the forefront. As per media sources, BSE
has made a request to list without a share sale to the public, the regulator
might not be inclined to make an exception, as it does not want to be seen
as setting a precedent. UTI
Asset Management Company has put-off its proposed IPO, which has been
expected to hit the market durng July. According to media sources, with
equity market in turmoil the sponsors of the AMC have decided to deffer the
IPO plan.
The
IPO of Birla Cotsyn has been subscribed by 1.1 times on July 09, across the
price band on the last day. The issue received 9.9 crore bids against the
8.9 crore shares on offer. The portion reserved for the QIBs has been
subscribed 0.013 times, whereas the portion reserved for the
non-institutional investors has been subscribed 5.74 times. And the portion
reserved for the retail investors has been subscribed 0.91 times. The issue,
which supposed to close on July 4, has been extended due to poor response
and the price band also revised downwards. Secondary
Market SEBI
is planning to make the know-your-client (KYC) procedure more stringent for
the secondary market. In a letter to all stock exchanges, including BSE and
the National Stock Exchange (NSE), SEBI has asked them to direct its
member-brokers not to outsource KYC through third parties and carry out the
verification only through its own compliance department. Poor
industrial output growth in May, higher crude prices and rising inflation
for the week ended June 28 forced the BSE Sensex to give up the gains over
the week, which ended 15 points higher to 13,470. The NSE Nifty on the other
hand gained 33 points to end the week at 4,049.
While at the beginning of the week, the markets were upbeat about the
government's decision to go ahead without the support of the Left, with the
hopes of resuming the economic reforms, which the Left had stalled for past
four years. Increasing turmoil
in the The
SEBI has proposed several changes in the Clause 41 of the listing agreement,
which came into force since July 10, 2007 with a view to bringing further
transparency. The regulator has proposed that the existing timeline may be
extended from one month to two months, from the end of each quarter, for
companies that opt to submit consolidated financial results to the stock
exchanges in addition to the standalone financial results. In a discussion
paper, SEBI said that, following the July 10, 2007, circular of the revised
Clause 41 of the listing agreement coming into effect, it received various
opinions from various quarters suggesting amendments or seeking
clarifications to certain provisions of the revised Clause 41. These
suggestions were placed before the SEBI committee on Disclosures and
Accounting Standards (SCODA). After taking into account SCODA’s view, it
has further proposed changes in Clause 41 of the listing agreement. On
July 12, 2008, the BSE board took a detailed review of two important deals
entered into by the exchange—a proposed acquisition of 26 per cent in the
National Multi Commodity Exchange (NMCE) and a major technology contract for
clearing and settlement systems for derivatives trading with Swedish firm
OMX. The board decided to delve deeper into the NMCE deal and also seek some
clarifications from OMX on the technology contract. As per Board sources, no
decision on the PricewaterhouseCoopers (PwC) report would be taken without
consulting the SEBI. On the proposed listing plans of the exchange, the
bourse has decided to seek some clarifications from SEBI on how it should be
taken forward. Over
59 per cent of stocks traded on BSE and 22 per cent of stocks traded on the
NSE have been identified as illiquid by both the exchanges based on their
trading activity during June 2008. The monthly turnover on BSE and NSE in
these stocks has plummeted sharply from over Rs 6,000 crore in January 2008
to Rs 2,950 crore in March 2008 and to Rs 562 crore in June 2008. The list
of illiquid stocks has been drawn up as per the direction of the SEBI based
on criteria agreed upon between the two bourses and the market regulator.
The exchanges provide the list of illiquid stocks to the trading members on
a monthly basis and advise them to exercise additional due diligence while
trading in these securities either on own account or on behalf of their
clients. The BSE has come out with a list of 1,585 scrips and NSE a list of
304 shares as illiquid securities. Some of the shares are listed on both the
exchanges. Mutual
funds have substantially trimmed their exposure to banking and financial
services stocks due to uncertainty on interest rates.
Over the last six months, some of the country's top 10 mutual fund
schemes in terms of assets under management (AUM) have cut their holdings in
financial services stocks by as much as 14 per cent, while scaling their
investments in pharmaceutical and healthcare, telecom and metal scrips. As
per media sources, the country's two largest banks - State Bank of While
mutual funds are looking at sectors like IT, pharmaceuticals, FMCG and
capital goods for investments reeling under the pressure of high inflation
and volatile markets. According to Sanjay Prakash, chief executive officer
of HSBC Asset Management ( The
Ministry of Corporate Affairs has asked market regulator SEBI to examine
whether there are any issues of conflict of interest occurring between
sponsors of mutual funds, trustee companies and asset management companies (AMCs).
A self-proclaimed fund industry expert Vijay Gokhale has written to the
ministry and SEBI arguing that many AMCs carry out practically all
activities pertaining to the fund on behalf of the trustees and the AMC is
virtually the face and mouthpiece of the fund. Pointing out that there
should be an arm’s length relationship between the trustee company and the
AMC, Gokhale has stressed this is not the case in many mutual funds. While
according to Dhirendra Kumar, head of mutual fund tracking firm Value
Research, the mutual fund industry is structured as per SEBI rules and there
is nothing substantial in the complaint. The summary of operation is
released every month and that takes care of everything. That the ministry is
asking SEBI to examine the matter, maybe nothing more than a routine
‘forwarding’ of a letter. Similarly, A P Kurian, Chairman of Association
of Mutual Funds of India (AMFI), also said there is no conflict of interest
occurring in the industry. Government
Securities Market Primary
Market On
July 09, 2008, Reserve Bank of India (RBI) auctioned 91-day and 182-day
T-bills for the notified amounts of Rs.3,500 crore (out of which Rs.3,000
crore under MSS) and Rs.1,500 crore (out of which Rs.1,000 crore under MSS),
respectively. The cut-off yields for 91-day and 182-day T-bills were 9.02
per cent and 9.34 per cent, respectively. Punjab
State Government auctioned 10-year paper maturing in 2018, through an yield
based auction using multiple price auction method on July 10, 2008, at
cut-off yields of 9.81 per cent for a notified amount of Rs 500 crore. Secondary
Market Inter-bank
call rates remained slightly above 9 per cent, at 6-month highs, as one-half
of the 50-bps increase in the CRR took effect on July 06, 2008 and outflows
towards the previous week’s bond auctions drained liquidity from the
system. Concurrently, portfolio divestments from the equity market
continued. At the Liquidity Adjustment Facility, the RBI lent an average of
Rs 37,521 crore through the repo window reflecting the depth to the tight
cash conditions. Bond
yields hit a high responding to the galloping inflation and rising oil
prices. The prices of the 10-year government bonds declined further, pushing
the yield to seven-year high at 9.55 per cent which ended at 9.46 per cent.
A brief period of relief gains have been seen amid the broad-selling,
induced by a mid-week retreat in crude prices and some clarity on the
political front. It also raised concern that the RBI may hike interest rates
in its review of the monetary policy 2008-09, scheduled on July 29. The bond
price fell by 1.81 per cent to 92.34. Average
daily trade volume remained low at a little over Rs 3,000 crore during the
week, but higher than the previous week largely on account of the RBI’s
special market operations (SMO). The weak undertone has also evident from
the high bid-offer spreads, and the short inter-yield spreads. Bid-offer
spreads remained above 20 basis points. The spread between the 91-day T-bill
and the 10-year weighted YTM towards the weekend has just 45 basis points. Derivatives Overall
trading volumes in the derivatives market are on the low side, which haven't
diminished evidently. The high volatility is reflected in the VIX, which hit
record levels and is running at above the danger mark of 30. In
the index futures market, the Nifty, the BankNifty and the CNXIT futures are
all trading at significant discount to respective underlyings. The Junior
and Midcap 50 are trading at premiums to underlyings but these two futures
are both illiquid. The CNXIT has gone exceedingly bearish. The overall Nifty
option put call ratio (PCR) in terms of open interest (OI) is in neutral
territory at about 1.2. But the July PCR is at 1.1 which is heading into
bearish terrain. The July put option chain has a lot of OI at 3800p and
above but it dries up completely below 3700p. The call option chain has
massive OI locked in from 4200c upwards. The market has responded badly to
Infosys' results and guidance and every IT major crashed on July 11. This is
despite the fact that Infy's results apparently beat expectation. The
boardroom battle at Bond
Market Tata
Sons Ltd tapped the market by the issuance of bonds to mobilise an amount of
Rs 500 crore by offering 10.80 per cent for 5 years. The bond has been rated
AAA by crisil. IDFC
Ltd tapped the market by the issuance of non-convertible bonds (NCD) by
offering 10.75 per cent for 3 and 5 years for an amount of Rs 100 crore.
The bond has been rated A by icra and fitch. Fitch
has assigned ratings to 13 municipal corporations including Greater
Mumbai'AA( The
country’s largest bank, State Bank of India (SBI), may end up taking a
bigger hit compared to its peers in the first quarter of FY09 on its
treasury portfolio due to mark-to-market (MTM) losses on bonds. SBI had
received bonds aggregating Rs 10,000 crore from the government on March
2008. The government had issued these bonds as its contribution to the
rights offering of the bank. The government issued special bonds worth Rs
9,996 crore to SBI, which matures in 2024, offering a coupon rate of 8.35
per cent. As interest rates moved northwards, the value of the bonds
depreciated. For the quarter ended March 2008, the bank had posted a loss of
Rs 168 crore on these special bonds. SBI will have to peg the MTM value of
the special bonds at 9.50 per cent for the quarter ended June 30, as against
the valuation of 8.62 per cent in March 31. Fixed Income and Money Market
Dealers Association (Fimmda) has declared a yield-to-maturity (YTM) of 9.25
per cent on G-Secs maturing in 2024. Thus for June 30, the MTM on special
bonds would be 9.50 per cent (9.25 per cent plus 25 bps). In March, SBI had
mark-to-market these bonds at 8.62 per cent (8.37 per cent plus 25 bps). In
the quarter ended March 2008, the bank had to provide Rs 168 crore over the
depreciation of special bonds. The losses would have been double if RBI had
not given SBI a special dispensation on valuation of the bonds. The central
bank has allowed SBI to mark-to-market the bonds at a mark-up of only 25
basis points (over the yield on comparable g-secs of same tenor) against the
normal practice of 50 bps. This helped the bank to cut losses by 50 per
cent. The
finance ministry has made out a case for a major revision in the policy on
foreign borrowings to allow an investment of over $15 billion by foreign
portfolio investors in rupee-denominated bonds issued by Indian corporates.
The ministry’s argument is that allowing higher investment by foreign
portfolio investors (FIIs) in local corporate bonds would make better
economic sense rather than consistently raising the limit for Indian firms
to borrow from the overseas loan and capital markets. Increasing the
allocation for investment in local corporate bonds and cutting down on the
entitlements for Indian firms to borrow abroad would mean shifting the
currency risk on to foreign investors. According to a senior government
official, the ministry had suggested that instead of an annual ceiling of
over $20 billion for overseas borrowings, foreign portfolio investors should
be allowed to invest between $15 billion and $20 billion in corporate bonds
in Foreign
Exchange Market The
rupee recovered back to sub-43 area late during the week. Rupee ended at
42.88 per dollar, from 43.16 per dollar. The level of 43 per dollar has
probably returned as the key level for the short term. If the rupee sustains
gains, it is likely to move in a small range around 42.90-43. The rupee was
also buoyed by non-resident and current account inflows. Forward premia
remained almost steady for one, three, six and 12 months at 4.49 per cent
(5.55 per cent), 5.34 per cent (5.28 per cent) 4.49 per cent (4.44 per cent)
and 3.96 per cent (3.96 per cent) respectively. Commodities
Futures derivatives Multi
Commodity Exchange (MCX) launched the Aviation Turbine Fuel (ATF) futures
contract on July 08, 2008. As per traders, trading volumes reached Rs 34.8
crore on the first day, and airlines and oil companies actively participated
in the trading activities. MCX is the second commodity exchange in the world
to launch ATF futures after the Tokyo Commodity Exchange. ATF contracts for
July, August, September, October, November and December are being offered in
the MCX platform. The trading unit for ATF contract is 100 barrels, with the
maximum order size is fixed at 10,000 barrels. According to MCX official,
the launch of ATF futures on MCX, aviation companies can hedge their ATF
requirement plus refiners can hedge their refinery margins by crack spread.
Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Indian Oil
Corporation, National Aviation Company of Despite
the government's imposition of ban on futures trade in eight commodities,
the turnover of 22 commodities exchanges grew up by more than 25 per cent
during the first quarter of the current financial year, in comparison to
corresponding period. According to data released by Forward Markets
Commission (FMC), the cumulative value of trade during the first quarter of
2008-09, across all the exchanges rose to Rs 11,15326 crore, as against Rs
89,1816 crore recorded during the same period. Similarly,
the total value of trade also grew by more than 66 per cent in the fortnight
ending June 30, 2008. The cumulative turnover during last fortnight of June
in all the commodity exchanges went up to Rs 2,21,888 crore, against Rs
1,31,754 crore recorded same period last year. Active trade has been seen in
gold, crude oil, silver, and copper in the energy and the metals pack during
the fortnight period. Rapeseed, guar seed, soybean, jeera, turmeric, and
pepper saw maximum trade among the agri commodities. Trade in crude palm
oil, turmeric, soybean, certified carbon emission, and steel ingot picked up
significantly. For the August contract, the prices of gold recorded highest
at Rs 12,996 per 10 gram on June 30, while the price of the yellow metal has
been lowest at Rs 12,055 per 10 gram on June 16, 2008. On
July 09, 2008, the Financial Technologies India Ltd (FTIL) promoter of the
country's biggest commodity bourse MCX, announced setting up of an
electronic exchange in Singapore, called Singapore Mercantile Exchange (SMX),
which would offer trading in metals, currencies, carbon credits and
agricultural items. According to Ang Swee, chairman, SMX, the new exchange
will add to the stature of The
FMC is unlikely to derecognise any of the defunct single-commodity
exchanges, which have seen no trade since either inception or after the
emergence of national online trading platforms. The regulator, which had
formed a committee of directors comprising FMC officials to study the
prospects of single commodity exchanges, has submitted the report to FMC
Chairman B C Khatua, which is not encouraging. According to Kewal Ram,
member, FMC, the regulator is going soft on single-commodity exchanges as
they are rich in domain expertise and, importantly, help keep futures
trading alive in According
to B C Khatua, the government is not contemplating a ban on future trade in
any more commodities as eight of them on which such trade was suspended have
not helped in checking rising prices, and gave enough evidence that futures
market is not responsible for the prices rise. There is market talk that
steel futures may be banned because the sector has been one of the main
contributors of high inflation over the last few months. There were also
representations from various stakeholders to ban maize futures after a 30-35
per cent rise in prices over the last two months. Corporate
Sector The
new land allotment policy for the industrial development in Uttarakhand has
envisaged special focus on the marginal and small industries. Under this
policy, 25 per cent of the available land in any particular area would now
be reserved for marginal and small industries. Besides this, 25 per cent of
the available land would also be reserved for industries which can promote
special impetus to the scientific entrepreneurship and technology
development of the backward areas. L&T,
an engineering, technology and construction firm has bagged an Rs 1048 crore
order from the Indian Railways (IR) for setting up a cast steel wheel
manufacturing plant in Saran (Chhapra) district of Bihar. The plant when
commissioned will have the capacity to manufacture around one lakh cast
steel railroad wheels per annum. The new plant will help the IR meet the
huge shortage of wheels for rolling stocks and also reduce the dependence on
imports. Reliance
Industries (RIL) has signed an agreement with The
US government has filed a suit against Ranbaxy Laboratories, India’s
largest pharmaceutical company, and its US-based consultant Paraexel
Consulting for concealing and forging crucial data to get a favourable
judgement on an ongoing investigation into the sale of sub-standard drugs in
that country. The suit, filed with the District Court of Maryland, has
sought a direction to Ranbaxy and Paraexel to submit all relevant documents
for verification. If proved, the allegations could have a serious impact on
Ranbaxy’s
Despite
a rough global scenario, a falling rupee against the US dollar has helped
Infosys Technologies to register a 20.7 per cent increase in its
consolidated (Indian GAAP) net profit at Rs 1,302 crore during the first
quarter of the current financial year. Total income increased by 28.7 per
cent to Rs 4,854 crore during the same period. HCL Technologies, India’s fifth largest IT services firm, may incur forex losses between Rs 280 crore and Rs 320 crore ($65-75 million) for the fourth quarter ended June 30, 2008, owing to a weak rupee that fell 7.3 per cent (end-of-period) in the April-June 2008 quarter. The company has hedged $2.5 billion as of March 2008, but unwound its position reducing its exposure to $1.7 billion as on June 30. The unwinding resulted in a loss. External
Sector Exports
during May 2008 had been US $ 13782 million as against US $ 12210 million in
May 2007 registering a growth of 12.9 per cent. As against this Imports was
valued at US $ 24548 million as against US$ 19313 million recording a growth
of 27.1 per cent. In
rupee terms, while export increased by 16.6 per cent , import flared up by
31.3 per cent.As a result trade deficit was estimated at US $ 10766 in May
2008 million higher than the deficit at US $ 7103 million during May 2007Oil
imports were estimated during May 2008 at US$ 8465 million
and non-oil imports at US $ 16083 million was 50.8 per cent and 17.4
per cent higher than that in last year Telecom The
Ministry of Home Affairs has raised objections to extending Singtel
Australia Holdings security clearance for a joint venture for national and
international long-distance and internet services in
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
We will be grateful if you could kindly send us your feed back at epwrf@vsnl.com | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
