Truant monsoon -11 % DEFICIT..!!!

Truant monsoon could hit Rabi crop prospects too
TOMOJIT BASU
NEW DELHI, SEPT. 17:  With deficit rainfall at 11 per cent, Union Agriculture Minister Radha Mohan Singh stated on Wednesday that parts of the country that had been acutely affected by the erratic monsoon this year will find the Rabi (winter) sowing season challenging.Major wheat producing states like Uttar Pradesh (UP), Haryana and Madhya Pradesh, have had shortfalls in rain with UP declaring 40 districts as drought-hit this week. Haryana had declared all 22 districts drought affected on September 2. Wheat, barley, potato, mustard and maize, are the primary Rabi crops and are sowed at the beginning October and harvested in spring.“Regions that received deficit rainfall will be affected during sowing for the Rabi season. However, despite 11 per cent deficit in rainfall, the situation is not like during 2009 and acreage is down only 3 per cent,” said Singh at the inauguration of a national event highlighting various aspects of the Rabi season.“We managed to institute timely policies to face the challenges of the delayed monsoon. We implemented a diesel subsidy scheme, increased ceiling of the subsidy on seeds, waived duties on the imports of various feed ingredients and provided financial support for horticultural crop growers etc. Contingency plans were prepared for 565 districts,” he added, stating that States would be provided all assistance to achieve production targets.Singh reiterated that prices would be kept under control, using the example of prevailing prices for potatoes and onions at Rs. 30-35 per kilogram (kg) as compared to Rs. 80 per kg under the previous government at this time last year.Fallow land utilisation & production targetsState governments have been asked to utilise nearly 3.37 million hectares of land that was left unsown during the kharif season due to the shortfall in rain. Production of pulses and oilseeds on such land where moisture content had improved would be concentrated on.J S Sandhu, the Agriculture Commissioner, informed that the production target for wheat had been set at 94 mt and that the Government would attempt to utilize 3.37 million hectares of land that had been left fallow during the kharif due to the shortage of rainfall. The year’s targets for rice (14 mt), barley (1.75 mt), maize (6 mt), millets (2.5 mt), pulses (12.5 mt), oilseeds (11 mt) and foodgrains (130.75 mt) were also released.“We are trying to enforce seed certification standards and also further the area application of micronutrients in the soil. The promotion of seed production during the off-season to make up for deficiencies is something we are trying as well planning in advance for summer pulses,” said Sandhu. Strategies to tackle wheat crop diseases like Yellow Rust and Karnal Bunt were underway as well, he added.​(This article was published on September 17, 2014)http://www.thehindubusinessline.com/industry-and-economy/agri-biz/deficit-rainfall-hits-rabi-sowing/article6419713.ece?homepage=true

INDUSTRIAL GROWTH CONCERNS...!!!

Industrial growth falters

Friday's data present a mixed picture - while CPI inflation falls to 7.8%, IIP growth of 0.5% and low indirect tax collections remain concerns

BS Reporter  |  New Delhi  

September 13, 2014 Last Updated at 00:40 IST

In July, India's industrial growth fell to 0.5 per cent, the lowest this financial year, owing to contraction in manufacturing after three months, official data showed on Friday. While industrial growth in June stood at 3.9 per cent, it was 2.6 per cent in July 2013.

For the first four months of this financial year, the Index of Industrial Production (IIP) expanded 3.3 per cent, against contraction of 0.1 per cent in the corresponding period last year. The rise in IIP in the April-June period was primarily due to a low base.

In August, Consumer Price Index (CPI)-based inflation fell to 7.8 per cent from 7.96 per cent in July. During this period, CPI-based food inflation, however, rose from 9.36 per cent to 9.42 per cent. It is expected the sub-normal monsoon this year will raise food inflation further.
While food inflation rose, core inflation (which does not take into account food and fuel inflation) declined to 6.89 per cent in August (the lowest since the series was launched) from 7.41 per cent in July, said a note by YES Bank. This showed pressure on inflation was from food items alone, as inflation for fuel fell to 4.15 per cent in August from 4.47 per cent in June.

The Reserve Bank of India is targeting CPI-based inflation of eight per cent by January, 2015.

If excise duty collections are any indication, the outlook for the IIP for August isn't bleak. In August, excise duty collections rose eight per cent, against 7.5 per cent in July. During the same period, overall indirect tax collections rose from 4.9 per cent to nine per cent. But this growth, as well as that in the April-August period (4.6 per cent) pales in comparison to the 20 per cent pegged in Budget 2014-15. July IIP data didn't have a one-to-one relation with excise duty collections.

"It (IIP data) is not such a negative surprise for us. We were expecting one per cent growth, but it turned out to be 0.5 per cent. Sustaining IIP growth at 3.5 per cent was difficult. The recovery from the second half will be meaningful," said YES Bank chief economist Shubhada Rao.

The IIP for July was primarily dragged down by manufacturing, which contracted one per cent, against 2.4 per cent in the previous month. Of the 22 manufacturing sub-groups, 10 saw contraction, against seven in June.

Consumer durables contracted 20.9 per cent, against 23.4 per cent in June, even as automobile sales are seen rising. Consumer non-durables rose just 2.9 per cent in July, against 4.8 per cent a month earlier. To assess any positive impact on both categories of consumer goods, one has to wait for the festival season to begin.

The capital goods segment contracted 3.8 per cent in July, against 23.26 per cent in the previous month. This segment has traditionally been volatile.
"The disappointing IIP growth and the contraction in capital goods output in July reinforce our view that the pick-up in GDP (gross domestic product) growth in the June quarter did not signify the start of a broad-based economic revival," said Aditi Nayar, senior economist, ICRA.
For the quarter ended June this year, India's economy grew at a two-year high of 5.7 per cent, prompting the finance ministry to exude confidence that this financial year, growth would be 5.8 per cent, against sub-five per cent growth in the previous two financial years. Nayar projected FY15 GDP growth at 5.3-5.5 per cent.

Rao said while she was watchful of the emerging trend in the consumer goods segment, her optimism on a gradual improvement in the Indian economy in FY15 remained intact. "We believe the government's policy measures, amid a revival in the investment sentiment, are likely to guide a recovery in industrial production during the second half of 2014-15," she said.
In July, only the basic goods segment and the electricity sector provided a boost to the IIP. While basic goods rose 7.6 per cent, against 9.8 per cent in June, generation in the electricity sector increased 11.7 per cent, against 15.7 per cent in June. The mining sector expanded 2.1 per cent, against 4.54 per cent in June. Continued uncertainty over coal block allocations might dampen sentiment in the sector further.

OTHER INDICATORS

• HSBC Purchasing Managers' Index (PMI) for manufacturing down to 52.4 points in August from 53 points in July
   
  • PMI services down to 50.6 points in August from 52.2in July
•  
  • Excise duty collections rise to 8% year-on-year in August from 7.5% in July
•  
  • Customs duty collections increase to 9.9% in August from 0.2% in July
•  
  • Services tax collections rise 9% in August from 8.4% in July
•  
  • Overall indirect tax collections rise 9% in August from 4.9% in July
  • • http://www.business-standard.com/article/economy-policy/industrial-growth-falters-114091300020_1.html

Shankar Sharma says...GOOD TIME...add on corrections..!!!

It's a good time to get into the market and add on corrections: Shankar Sharma

Interview with Vice-Chairman & Joint Managing Director, First Global Group

Puneet Wadhwa  |  New Delhi  

September 10, 2014 Last Updated at 22:47 IST

On a year-to-date basis, Indian markets are among the top-performing ones. Shankar Sharma, vice-chairman and joint managing director of First Global Group, believes the rally is a continuation of the bull market that began in 2004. In an interview with Puneet Wadhwa, he says in India, small-caps seem the best bet. Edited excerpts:

How is India as an investment destination, given the macroeconomy might shape up and have a bearing on the markets? Do you expect the markets to consolidate till the next Union Budget, or will the run-up continue at the same pace?

In my view, the markets in India will remain strong in the foreseeable future. Of
course, it is important to remember we are in the middle of a global bull market, which was rekindled from March 2009 and has picked up pace in the past three months, since emerging markets (EMs) started catching up with US markets. So, while we should be happy that India is doing well, it is not in isolation; every major market has been in a bull phase. In terms of performance, India ranks sixth within EMs since May 16. Also, since May 16, the rupee has been the second-worst performing currency, after the rouble. But Russia has had major problems in the past few months, while India hasn’t. Despite record flows and low oil prices, the rupee seems very fragile. This is something to be a tad concerned about.

Overall, I think India will do well on the economic front, owing to a combination of the lagged effect of the United Progressive Alliance (UPA) government hastening clearances in 2013 and the National Democratic Alliance (NDA) government improving efficiencies now.

Do you think the pace of flows will slow, as foreign institutional investors (FIIs) look for alternative destinations within EMs? What are the next triggers for India? Which sectors and stocks will FIIs look to park their money in?

This is not a new bull market; it is merely the continuation of the bull market that began in 2004. The reason is in the current market, the sectors that should have done well because of the BJP (Bharatiya Janata Party) government (power, infrastructure, etc) have actually petered out after the initial burst. So, it is back to old favourites such as automobiles, consumer goods, pharmaceuticals, information technology; these are driving the markets. These have driven the markets for 10 years!

By definition, a new bull market has to be driven by a new list of stocks/sectors, not old ones. If the same ones are still driving the market, we can conclude we are basically seeing a continuation of the bull market that began in 2004.

Even in the aftermath of the 2008 crisis, India’s performance, compared to that of its peer group (Brazil, Russia and China) was off the charts. That was because India managed the crisis better than any country I know of. We didn’t bust our national balance sheet in stimulating growth; we kept our internal and external debt ratios low; we narrowed our current account deficit considerably, albeit a bit belatedly.

Basically, the NDA government has inherited a pretty good economy; now, it only has to straighten some kinks, and we should be well past six per cent annual growth. The April-June gross domestic product numbers, which can obviously be attributed to the UPA, since the current government had assumed power in June, is a pointer of things to come.

Do you think given the run-up seen in the frontline stocks and indices, the next six months will belong to mid- and small-cap stocks?

In my view, India looks fine; within India, what looks the best are small-caps. We have been very bullish on these through the past few months, with a number deeply undervalued areas, and have been rewarded handsomely. I see this as being the sweet spot in markets. Small-caps had been crushed during the 2008 crisis. With the return of liquidity, these were ripe for a re-rating. We like several stocks in this segment.

What is your advice to a) an investor who has already been invested in the markets since the beginning of this year and; b) one sitting on the fence, who wants to jump in now?

It is a good time to get in now and add on every correction.

How will earnings growth take shape through the next few quarters? Have you revised your estimates in the wake of the June quarter results? Which sectors and companies will lead a recovery and why?

We don’t pay any attention to aggregates such as ‘market P/E (price/earnings) multiple’ and ‘market earnings growth estimate’; we don’t spend any time calculating nonsensical ratios and metrics such as these. It never fails to surprise me how the entire financial world continues to rely on such absurd measures to gauge the direction of markets.

As I have said earlier, in large caps, we have liked automobiles, consumer goods and pharmaceuticals for years. We continue to like those. On the other hand, we haven’t liked infrastructure, power etc, and continue to dislike those. So, we are still stuck to a rather boring investment style, with the only departure being our big liking for small caps through the past few months.

In terms of policy, India is still undecided on retrospective tax issues. The banking sector, especially public sector banks, has, of late, seen skeletons tumbling out of the closet. Isn’t all this making foreign investors wary of investing in India, despite all the euphoria surrounding acche din (good days)?

FIIs aren’t blessed with a mind of their own. In 20 years of our dealing with them, we have seen there aren’t more than a handful of really independent thinkers in this space. The rest chase momentum (and there is nothing wrong with this, as long as you know when to jump off the roller coaster). Therefore, things such as retrospective tax and non-performing assets don’t matter as long as markets keep running. Deep, core analysis is a luxury we have only in bear markets. In bull markets, there is no time to be reflective and thoughtful about issues such as these. Or, for that matter, any issues at all.

The Supreme Court’s decision on coal block allocation will have far-reaching implications on the power, banking, metal and mining sectors. Despite the possible roadblocks, are the long-term prospects attractive enough for you to look at these in terms of a two-three year horizon?

I have maintained the Supreme Court’s decision on 2G telecom licence cancellations was a complete travesty, based on
patently wrong understanding and wrong facts. It should have been overturned completely (it was only partially overturned insofar as auctions were concerned). The coal block allocation order is on the same lines.

I have never believed courts are the best places for commercial matters, as such matters are terribly complex and chances of arriving at wrong conclusions by non-business experts are always high. And, such orders have the effect of destroying the business confidence of domestic and foreign investors alike.

As I have mentioned earlier, there are many better places in the market to spend one’s money on than power, coal and infrastructure.

As an investment theme, how do the capital goods, automobiles and oil & gas sectors look from a fresh-investment perspective? Among these sectors, which stocks make it to your investment list?

The automobile segment is our preferred area, and old favourites such as Tata Motors, Bajaj and Maruti Suzuki continue to entice us. We don’t have a great deal of interest in oil & gas, capital goods, etc.

How will you approach real estate and infrastructure as an investment theme, given the run-up in these stocks? Are there any potential multi-baggers here on a two-three year horizon?

These sectors are for the young and fearless. Now, we are too old, too hidebound, and too gun-shy to start dreaming of multi-baggers in these spaces.

http://www.business-standard.com/article/markets/q-a-shankar-sharma-vice-chairman-and-joint-managing-director-first-global-group-114091000147_1.html

Stake sale in Coal India, ONGC, NHPC; may get Rs 43,000 cr..!!!

Govt clears stake sale in Coal India, ONGC, NHPC; may get Rs 43,000 crPTI | New Delhi | Updated: Sep 10 2014, 22:51 ISTClearing the decks for mega disinvestment drive, the government today approved diluting its equity stake in bluechip companies Coal India, ONGC and NHPC, which is likely to fetch Rs 43,000 crore to exchequer.The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi approved the disinvestment of 10 per cent paid-up equity capital in Coal India (CIL), an official statement said.At present, the government shareholding in the coal mining company is 89.65 per cent."The decision to disinvest would help the government realise an optimum price for the offer for sale of 10 per cent of the government's shareholding in the company," it said.The CCEA also cleared selling government's 5 per cent paid-up capital in ONGC and "this would further broad base the shareholding of the company and would enhance disinvestment receipts". Government's stake in the company stands at 68.94 per cent.Besides these two, 11.36 per cent disinvestment in hydro power generator NHPC was also approved. Government holds 85.96 per cent stake in company.At current market prices, the sale of shares in state- owned CIL, ONGC and NHPC could garner over Rs 23,000 crore, Rs 18,000 crore and Rs 2,800 crore respectively, helping the government meet its disinvestment target of Rs 43,425 crore for this fiscal.Meanwhile, sources said the stake sale in the three companies would be done through the Offer For Sale (OFS) process, popularly known auction route.The government has already selected merchant bankers for managing ONGC and NHPC disinvestment and is in the process for doing so for CIL.ONGC shares closed at Rs 445.30, down 0.79 per cent at BSE. CIL shares last traded at Rs 373.85 (down 1.80 per cent) and of NHPC at Rs 22.40 (down 0.44 per cent).The previous government had cleared disinvestment in SAIL and according to sources the 5 per cent stake sale in the state-owned steel maker is likely to hit the markets this month.The sale of 5 per cent stake or about 20.65 crore shares of SAIL at the current market price of around Rs 80.95 a piece would fetch the exchequer over Rs 1,600 crore.The Cabinet had in July 2012 approved 10.82 per cent stake sale in SAIL. Accordingly, the first tranche of disinvestment of 5.82 per cent was completed in March 2013.The government has missed its disinvestment target for five consecutive financial years.In 2010-11 and 2011-12 fiscals, the government had raised Rs 22,144 crore and Rs 13,894.

http://www.financialexpress.com/news/govt-clears-stake-sale-in-coal-india-ongc-nhpc-may-get-rs-43000-cr/1287654   ===============

THE GOVT. DISINVESTMENT IN BLUE-CHIPS IS A WELCOMING SIGN TO BRIDGE THE FISCAL DEFICIT BUT WILL SUCK MORE THEN 45000 CR FROM THE MARKETS MEANS A THREE MONTH AVERAGE FII INVESTMENTS. THE TELECOS WILL SPEND CLOSE TO 50000 CR FOR BUYING AIRWAYS IN FEB-MARCH-2015 MEANS THE MARKETS WILL GET DRY SPELL OF FUND IN FLOW. NOW THE OTHER EMERGING MARKETS ARE ALREADY WITNESSING THE OUT-FLOWS DUE TO USA RATE HIKE AND THE BETTER OPPORTUNITIES IN OTHER ASSET CLASSES.

THE NIFTY HAS WITNESSING HUGE UNWINDING AT CURRENT LEVEL MEANS, NEXT LEG IS RIPE FOR SHORTING. THE EXPERTS ARE EXPECTING 5-7% CORRECTION MEANS CLOSE TO 700 POINTS CORRECTS AT NIFTY MEANS 7200 LEVEL SUPPORT WILL HOLD OTHERWISE 7000-6900 IS A RIPE PLACE TO INVEST.....UNTILL THEN TRADE AND EARN...!!!!==================

NPA's haunt banks...

Loan quality pressure continues to haunt banks

OUR BUREAUMUMBAI, SEPTEMBER 5:  Loan quality pressures continue to haunt public sector banks despite the improved sentiments in the market after measures were taken to revive the economy from policy paralysis, said rating agency ICRA in a report.The rate of generation of fresh non-performing assets (NPAs) remained elevated for public sector banks (3.5 per cent), and as a result their gross NPAs increased by 20 basis points (bps) to 4.6 per cent in Q1 FY2014; the NPAs of private banks also increased by 20 bps to 2 per cent for the same quarter, ICRA said in the report.ICRA analysed the performance of 26 PSBs and 15 private banks for the quarter ended June 30, 2014.“Going forward, ICRA expects PSBs’ gross NPAs to be at 4.4–4.7 per cent as on March 31, 2015, as against 4.4 per cent as on March 31, 2014 and 4.6 per cent as on June 30, 2014. Overall, the Gross NPAs of the banking sector (PSBs + private banks) could be at 4–4.2 per cent in March 2015, as against 3.9 per cent as in March 2014 and 4 per cent as in June 2014,” the report said.Drop in CDR referralsHowever, ICRA highlighted that there was a significant drop in fresh referrals to the CDR (corporate debt restructuring) Cell for restructuring during Q1 FY2015. If the current trend were to continue, one may expect some containment of the standard restructured book.Overall, the Gross NPA percentage plus 30 per cent of standard restructured advances remains large at 5.5–5.7 per cent (around ₹3.5-3.7 lakh crore as of June 2014) and may continue to impact profitability over the short term.Moreover, new investment norms for asset reconstruction companies too could add to the NPA pile-up.

(This article was published on September 6, 2014)

http://www.business-standard.com/article/finance/monetary-stimulus-may-backfire-provoke-savings-glut-says-rajan-114090600831_1.html

Monetary stimulus ...RATE HIKE by USA..!!!

Monetary stimulus may backfire, provoke savings glut, says Rajan
Fears that the world might be setting the stage for a repeat of the years after the Asian crisis of the '90sBloomberg  |  Washington  September 6, 2014 Last Updated at 23:05 ISTAggressive monetary policy by developed economies might hurt global growth by pushing emerging markets to pile up foreign-exchange reserves, instead of spending, Reserve Bank of India (RBI) Governor Raghuram Rajan said.
A regular critic of the unprecedented monetary stimulus the world's richest nations have put in place, Rajan said the world was "setting the stage for a repeat" of the years that followed the Asian financial crisis of the late 1990s. At that time, developing economies, traumatised by capital outflows and painful bailouts, started accumulating reserves as insurance, leaving it to US consumers to buoy global consumption.
"Any emerging market today is going to look at the currency volatility and say 'whatever money comes in, I am going to be careful about it, I am going to build some reserves,'" Rajan said in a speech in Chicago on Friday. "That kind of policy will depress global demand."
Overseas investors pulled $8 billion from rupee-denominated debt last year, pushing the currency to an all-time low, as theUS Federal Reserve signalled it would begin paring its record monetary stimulus. Rajan, who took office a year ago, has overseen a recovery of the currency, raising interest rates three times in his first five months, as he also seeks to tame Asia's fastest inflation.
"We have had six or seven years of this and we still have a weak recovery, so you have to ask if this is the answer," he said of developed economies' stimulus policies, such as record low interest rates and asset purchases.
How much more?
"How much more can you do of this stuff and of course what is the payback when you are unwinding," he asked at the event, organised by the Chicago Council on Global Affairs.
Indian policy makers have now rebuilt foreign-exchange reserves to near a record high as investors weigh the timing of an interest-rate increase by the Federal Reserve. India will probably be less vulnerable to a global shift of funds, Rajan said last month.
"I don't want to jump up and down," Rajan, a former chief economist at the International Monetary Fund, said of data released last month that showed India's economy grew 5.7 per cent in the quarter ended June. Still, the figure is "reassuring" and should help the country meet a 5.5 per cent (growth) forecast for the (current) financial year, and "maybe a little better".
Expansion might be in the six per cent range next year and about seven per cent after that, he said.
BUILDING THE CUSHION
Raghuram Rajan has been building foreign exchange reserves since he took over as the RBI governor last September, amid a currency crisis. From a 39-month low of $274 billion on September 6 last year, the country's forex reserves had risen to $318.64 billion as on August 29, a level close to an all-time high. Rajan pushed the average duration of bond holdings to three years and built up an adequate level of reserves to curb exchange-rate volatility. The reserves would help in times when there are outflows from the domestic market on account of a rate increase by the US, expected in the first half of 2015.

http://www.business-standard.com/article/finance/monetary-stimulus-may-backfire-provoke-savings-glut-says-rajan-114090600831_1.html

Rs 20,000-cr NPAs ...No takers --PLEASE...!!!

No takers for Rs 20,000-cr NPAs as banks, ARCs spar over valuationsShayan Ghosh | Mumbai | Updated: Sep 06 2014, 14:09 ISTClose to Rs 20,000 crore of non-performing assets (NPAs) that banks want asset reconstruction companies (ARCs) to pick up have found no takers as the two continue to spar over valuations. ARC senior executives that FE spoke to said that 25 banks have put assets on sale in the past month or so.The head of a large ARC said reconstruction companies were not ready to buy assets unless banks offered them loans at attractive reserve prices. “Lenders should realise that since we have to pay 15% upfront now compared with 5% earlier, the reserve price should be lower. However, banks appear to be unwilling to drop the value of the assets," he observed.Last month, Reserve Bank of India (RBI) had asked asset reconstruction companies (ARCs) to increase the mandatory upfront investment in security receipts (SRs) to 15% from the earlier 5% to ensure ARCs have 'more skin in the game'.Eshwar Karra, chief executive officer at Phoenix ARC, said he expected the prices of security receipts (SRs) that are issued when an NPA is 'sold' to come down. For their part, banks say they are not in a position to take a big hit in terms of lowering the value of the asset. “It may be true that the ARCs have to spend more upfront but we cannot reduce the price,” said an executive director at a public sector bank. ARCs, however, maintain the reserve prices should be more practical, considering the increase in their upfront payments.“Some banks have set their reserve price at a level equal to that of the size of the loan,” said Siby Antony, MD & CEO, Edelweiss ARC.Owing to a jump in NPAs, banks have of late been selling very aggressively to ARCs to clean up their books and this has prompted RBI to step in. “A spurt in the activities of asset reconstruction companies (ARCs) driven by banks’ efforts for cleaning up their balance sheets, calls for a closer look at the extant arrangements between ARCs and banks,” RBI said in its financial stability report.Though the ARC industry has been dominated by ARCIL, which was India's first ARC, other players like Edelweiss ARC and JM Financial ARC have become more aggressive of late.According to sources, Edelweiss issued SRs worth Rs 9,000 crore in FY14 whereas ARCIL had Rs 4,500-crore SRs in FY14 and JM Financial ARC had Rs 2,500 crore in their bag. In FY14,ARCs bought assets worth Rs 22,000 crore, sources said.Phoenix asset reconstruction company, sponsored by group companies of Kotak Mahindra group has receipts of Rs 1,750 crore in FY14, sources added.

http://www.financialexpress.com/news/no-takers-for-rs-20000cr-npas-as-banks-arcs-spar-over-valuations/1286062

INDIA ECONOMIC GROWTH UP-TICK- a “dead cat bounce”...?

FROM THE VIEWSROOMDead cat bounce

It is absurd to say that our economy has 

recovered 

September 5, 2014:  

The optimism over first quarter growth figures seems misplaced. The 5.7 per cent growth in April-June is a result of election spending rather than a pick-up in investment. The enhanced growth in construction, power, manufacturing, hotels and restaurants seems to bear this out. The demand generated in these labour-intensive sectors would have resulted in higher off-take of industrial goods. Besides, the election campaign would have generated its own demand for bulbs, gensets, fittings, vehicles and numerous other goods. Power generation is likely to have improved as a pre-election measure. (Strangely, the Q1 core sector growth of 4.1 per cent does not really bear this out.) At the same time, the deceleration in the financial sector, including realty, affirms an election trend — that funds might have been pulled out of real estate to fund poll campaigns.
In other words, we might be seeing what economist Nouriel Roubini in the context of the US economy earlier called “dead cat bounce”. An enduring revival would have been backed by a turnaround in investment.
Gross fixed capital formation has, in fact, dipped as a share of GDP from 28.7 per cent to 28.6 per cent. Government spending as a share of GDP has shown a sharp rise from 12.9 per cent to 13.4 per cent, perhaps a result of election spending on law and order. So, where is the pick-up in investment?
Strangely, economists predict a 6-6.5 per cent growth in 2014-15, against 4.7 per cent in 2013-14, despite our being in the midst of a monsoon-deficient year. Europe and the US continue to struggle. The Finance Minister seems serious about containing the fiscal deficit at 4.1 per cent of GDP with a view to keeping inflation and interest rates in check; this could peg back demand.
The policies of the new government, as well as the mysterious “confidence fairy” (to borrow Paul Krugman’s expression), could drive investment in asset classes such as equities and land. The wealth effect could give rise to little more than a demand for luxury goods.
Whether the liberalisation of land, environment and labour laws leads to greenfield investment over the next few years, in a climate of global recession, remains to be seen.
Deputy Editor
(This article was published on September 5, 2014)
http://www.thehindubusinessline.com/opinion/columns/dead-cat-
bounce/article6383866.ece?homepage=true

A SRINIVAS

Too much trading leads to mistakes...!!!

In volatile markets, too much trading leads to mistakes Santosh Kamath of Franklin Templeton Investments India talks about the debt market opportunity Lisa Pallavi Barbora 

First Published: Mon, Sep 01 2014. 05 51 PM IST

Santosh Kamath, managing director, local asset management, fixed income, Franklin Templeton Investments India, is unperturbed by the near-term volatility in yields and prefers to remain invested to see a view play out over a period of time. We caught up with him to talk about the debt market opportunity and the challenges that fund managers face. He is not too enthused about frequent trading in bonds. Investing in corporate bonds, he says, requires a lot of in-depth research by the fund management team which can help investors understand the credit risk better. 

Over the last year or so, bond yields have been volatile. Did you have to change your strategy accordingly? We don’t believe in too much trading and churning. When a market is too volatile, it may look easy to make returns by navigating the volatility through buying and selling; but you may end up making more mistakes. For example, last July, we were very negative on the currency. We didn’t know that it would go to the levels of Rs.68 per dollar. Nevertheless, we were sitting on low maturity (in our funds), and that stayed for a long time, till the benchmark yield went up to levels of 8.60-8.70%. We don’t think that strategy needs to be changed just because markets are volatile. We need to take a medium- to long-term view. As variables such as inflation, crude prices and fiscal deficit are turning positive now, we are long on bonds and will remain so for some time. We don’t want to move too much in the interim. Which parts of the market have opportunity today? We have to look at the yield basket. Clearly, the yield on corporate bonds is likely to be better than on government bonds. Depending on how much the spread is, it becomes more or less attractive. 

Typically, the “normal” level should be 70-80 basis points between an AA (rated) bond and a government bond. If the spread increases to 130-140 bps, it’s more attractive to own corporate bonds. (One basis point is one-hundredth of a percentage point.) This will happen when markets are volatile, since liquidity for corporate bonds is not high. When markets go through a volatile phase, spreads tend to widen. Secondly, during times of fear around economic growth and corporate earnings, the spreads can widen. Lastly, when there is selling by, say, mutual funds, even if everything is normal, the spreads can go up. At present, both corporate bonds and government securities (G-secs) are looking attractive. Till some time back, corporate bonds were looking much more attractive as spreads were high. But now that G-sec yield has moved up, the spread has narrowed, balancing both segments. What are the challenges of managing a portfolio that is predominantly focused on corporate bonds? The market itself is big. The entire credit space in the banking industry will be about Rs.50-60 lakh crore. 

Unfortunately, liquidity in the corporate bond space is not good. Hence, any negativity tends to impact yields sharply. So, you can run a fund in this space only if you get enough retail investors; with corporate investors you should be cautious playing this theme as they can be volatile. Credit risk can also have an impact. When the economy is doing better and the equity markets are doing well, companies are able to raise funds easily. When things are not good, even if companies have good assets, they would find it difficult to get good buyers. A year ago, the credit risk was high. But now it’s come down. The two big risks are liquidity and credit. Liquidity risk can be handled by encouraging more retail money in the fund, and credit risk by ensuring you lend to good quality companies. 

The good part is that most ratings typically move with a lag—credit rating normally goes up six to nine months after a company starts doing well. If you are an active investor and understand that a company’s fundamentals are going to change, you can actually lock in a higher yield. Over time, when the rating goes up, you can benefit. (But) it requires a lot of research and meeting company managements to identify good credit. When you talk to distributors and investors, how do you decide which product is suitable? There are two ways to tranche all debt schemes, on interest rate risk and credit risk. Interest rate risk means you have short, medium and long maturity. If you can take volatility and stay invested for long, you can look at long maturity products; else, stick to short and medium maturity funds. So the first question the investor has to answer is how long are you willing to wait and are you okay with the volatility. The second question is, whether you want a very high credit, AAA kind of portfolio, or if you are okay with AA exposure, too.

All our funds are mapped like this, and the investor can take her pick. Investors are beginning to understand the difference between benchmark yield and corporate bond yields. Over the past year, performance has been quite varied across categories, which has shown them that different funds can behave differently. When managing a large corpus, how do you personally bring discipline to your everyday life? It really depends on the person. However, a lot also depends on the organization you work for. If the organization believes in long-term fund management, then it is likely to give its portfolio managers extra time to implement their strategy. If the organization understands what you are trying to do, then life becomes easier. Some may want performance every month or every three months, then obviously things become harder to manage.

As a company, we understand investments and their long-term nature. For many asset management companies, what matters is the mad rush to increase assets under management (AUM). If the entire objective is to be the No.1 or No.2 in terms of AUM, the behaviour expected from the sales and the investment teams will be very different. So, the way an organization thinks can have a big impact on employees. First Published: Mon, Sep 01 2014. 05 51 PM IST

Read more at: http://www.livemint.com/Home-Page/Zhvq9olv5r1W81bP8gNdeJ/In-volatile-markets-too-much-trading-leads-to-mistakes.html?utm_source=copy

Purchasing Manager Index (PMI) and it stood at 50.6

Services sector slows for second month in a rowSHISHIR SINHA
Business expectations have deteriorated slightly: HSBC reportNEW DELHI, SEPT 3:  

What could be seen as reality check after above 5 per cent growth in the first three months, a survey by HSBC indicated a slowdown in the growth of services sector in India. But the good news is that index is still 50.Result of survey is known as HSBC India Service Purchasing Manager Index (PMI) and it stood at 50.6 in August as against 52.2 in July. The index is calculated on the basis of response received from 350 purchasing managers of private companies. These companies comprise hotels & restaurants, transport & storage, financial intermediation, renting & business activities, post & telecommunication and other services. Index above 50 reflects expansion while below 50 means contraction.

Since, it was announced on September 1 that manufacturing PMI (based on response from 500 companies) stood at 52.4 in August against 53 in July, it also affected composite output index. This came down to 51.3 in August from 53 in July. While this indicated a slowdown in output growth across the private sector, it remained consistent with a moderate expansion in activity.“Output growth weakened from July at both services and manufacturing companies, although manufacturing production increased at the second quickest pace since February, 2013,” a HSBC statement said. On services specifically, it mentioned that the latest PMI data indicated a slowdown in growth of Indian service sector activity in August, as new business expanded at a weaker pace. Employment remained stable, while future expectations regarding activity growth fell to the weakest level since September 2013.

Since, the index was above 50, it mean expansion for fourth consecutive months. Among various sectors, the Post & Telecom firms showed best growth, while Hotel & Restaurants reported reduction. However, both the sectors did not reduce the manpower, while other service sector did.

“Services activity is once again turning down following a swift post-election uptick suggesting that an improvement in reform momentum is needed to lift sentiments in the sector,” Frederic Neumann, Co-Head of Asian Economic Research at HSBC said while adding that, on positive side, weaker activity has softened inflation indicators within the survey.(This article was published on September 3, 2014)

http://www.thehindubusinessline.com/economy/hsbc-

services-sector-pmi-falls-to-506-in-

august/article6375769.ece?homepage=true

India's bright GDP

India's bright GDP growth just a small step in long road to sustained revival

Reuters | New Delhi | Updated: Sep 03 2014, 09:59 IST

Optimism that sunny growth figures herald an economic revival in India is probably misplaced - in fact there is little hard evidence to support the idea that Asia's third-largest economy is heading for a broader and sustained rebound anytime soon.

India's economy grew 5.7 percent in the June quarter compared with a year earlier, the strongest pace in 2-1/2 years, accelerating from 4.6 percent in the March quarter thanks to a rebound in industrial activity.

But the encouraging headline numbers masked the deeper malaise gripping the economy, which is being hobbled by slack consumption, weak business investment, creaking infrastructure and painfully slow structural reforms, economists say.

"The uptick in GDP growth was mainly driven by front-loading of government expenditure," says Izumi Devalier, an economist with HSBC in Hong Kong. "A curtailment in expenditure will make it challenging to sustain this pace of growth."

Prime Minister Narendra Modi, who won power in May's general election with a promise of "good times", trumpeted the growth data on a visit to Japan, saying it had "generated huge positive sentiment".

And economists at Citi declared after the GDP figures that the recovery was a matter of when, and not if: "While there is plenty of debate on pace and timing, India is on its way back to 7 per cent growth and 6 per cent inflation."

But there is a difference between sentiment and ground reality. Based on the evidence at hand, Modi's goal of scripting a broader, lasting upturn appears some way off.

Much of the growth in the last quarter came from robust government spending, the pace of which could slow down as Finance Minister Arun Jaitley seeks to stick to this year's ambitious fiscal deficit target of 4.1 percent of gross domestic product.

A pickup in private spending could help offset the slowdown in government spending. But stubborn inflation, which at nearly 8 percent is too high for the Reserve Bank of India to cut policy rates, and weak employment are hurting consumers.

The HSBC purchasing managers' index (PMI) for manufacturing in August showed no improvement in employment or inflation, clouding the consumer outlook.

A late monsoon and coal supply crunch that has depleted fuel supplies to just six days of forward cover at India's thermal power stations could undermined rural spending and constrain output at energy-intensive businesses.

CONSUMER CONFIDENCE

Consumers power nearly 60 percent of the economy, so getting them to spend more is essential for India to end its longest spell

of sub-5 percent growth in a quarter of a century.

It needs at least 8 percent annual growth to create enough jobs for the 200 million Indians who will be reaching working age over the next two decades, the largest youth bulge the world has ever seen.

However, without an overhaul of India's strained public finances, stringent land acquisition laws, chaotic tax regime and rigid labour rules, economists say, it will struggle to consistently grow beyond 7 percent.

Modi's record as a leader of Gujarat has fuelled hopes among investors he can carry out these changes. But in his first 100 days in office, the prime minister has shown little appetite for structural reforms and has focused more on cutting bureaucratic discretion and speeding up decision making.

Shilan Shah, an analyst at Capital Economics, says there is no alternative to more serious and deeper reform because piecemeal measures collectively do not amount to much.

A slowdown in infrastructure output growth in July and the manufacturing sector last month suggests further moderation in industrial activity, which could drag down economic growth for the current quarter.

Worryingly, capital investment, which barely grew in the past two years, has still to show tangible signs of an upturn. Although capital investment rose 7 percent in the last quarter over a year earlier, it fell 7.4 percent from the previous quarter.

In a poll by the Economic Times last week, 46 percent of the respondents in a poll of 50 chief executives said they were watching for improved economic conditions before making planned investments that would help revive growth.

Last year, bumper harvests boosted sales of tractors, motorbikes and other consumer goods in rural areas, helping to compensate for weaker urban demand.

In a sign of things to come, tractor sales at India's largest utility vehicle maker Mahindra and Mahindra fell 1 percent year-on-year between April and August compared with 22 percent growth during the same period a year ago.

"We think that Q2's (April-June quarter) pickup in growth might be as good as it gets for the Indian economy for some time," said Shah of Capital Economics.

http://www.financialexpress.com/news/indias-bright-gdp-growth-just-a-small-step-in-long-road-to-sustained-revival/1285139/2

Sensex could reach 45,000'...!!!!

'Projects worth $ 60 bn can be put back on track by govt; Sensex could reach 45,000'

PTI | New Delhi | Updated: Sep 02 2014, 20:59 IST

Government is expected to revive projects worth USD 60 billion, around 45 per cent of all the stalled projects, a move that could lead to a sustainable improvement in GDP and market rally, says a Societe Generale report.

In its optimistic scenario, a much higher rate of stalled project revival and faster than expected reform implementation, India's GDP growth rate could potentially reach 8.5-9 per cent in five years and the Sensex could potentially reach 45,000 by December 2016.

According to the global financial services major, concerns around the stalled projects have already peaked, indicating that the worst may be over.

"Our base case scenario is that the government will be able to revive projects worth USD 60 billion," the report said, adding that "this should lead to a sustainable improvement in GDP growth and corporate earnings and to a structural rally in the Sensex".

On the other hand, in a pessimistic scenario the GDP growth rate could stay close to current levels (around 5-5.5 per cent) over the next five years and the Sensex could potentially fall to 20,000 by December 2016.

The report further noted that if the government is able to revive the long-term investment cycle, the current bull run in Indian markets may well outlive the term of the current government in office (beyond 2019), and we can expect much higher GDP growth rates and Sensex targets.

The report noted that the biggest concern for India is also its biggest opportunity.

"We note that the biggest concern is about stalled projects which we identify as the biggest opportunity for the government to immediately kick start the investment cycle," the report said.

An analysis of all the projects announced since 2000 across India, where implementation has been stalled for various reasons shows that the total value of these projects stood at a staggering USD 134 billion, about 7 per cent of GDP.

http://www.financialexpress.com/news/projects-worth-60-bn-can-be-put-back-on-track-by-govt-sensex-could-reach-45000/1284956--------------------=================------------------------

EFFORTS TO PUT ECONOMY BACK ON TRACK IS A GOOD SIGN TO INDIA BUT THE MARKETS ARE DRIVEN BY THE FII INVESTMENTS AND SOME DRIVE MADE BY THE HNIs. THE RETAIL PARTICIPATION IS VERY LOW AND THE PUNTERS NOT ABLE TO OFFLOAD...SO THE NEWS AND RECOMMENDATIONS....THE MARKETS ARE POISED FOR GOOD TIMES BUT NOT NOW, THE PRICES ARE FULLY PRICED IN ...

WHO WILL GET WHAT IF SO BODY BUYS MARUTI AT THIS PRICE, LT, SUN PHARMA, CIPLA, AURO PHARMA....THE LIST IS LONG...PLS DON'T BUY NOW, THE NIFTY WILL TOUCH 6700-6900 RANGE COMFORTABLY, WITH OUT MUCH SUPPORT...

THE US QE-TAPERING, INTEREST RATE HIKES, GEO-POLITICAL UNCERTAINTIES AND OTHER NEGATIVE NEWS WILL EMERGE...IT IS JUST ON IT'S WAY,

US MARKETS SAW A SERIOUS SELL OFF  A WEEK BACK, SO IS THE OTHER MARKETS, IN INDIA ALSO, SERIOUS SELLING TOOK PLACE IN THE SECOND WEEK OF AUGUST, BUT TO COVER THE HAPPENINGS, THE MOVE IS CRAWLING....

THE HEADLINES WILL SEE THE STORIES OF OTHER HAPPENINGS....WAIT, WAIT WITH MONEY, OR TRADE AS OTHERS ARE DOING...NO INVESTMENTS AT THESE LEVELS...

Indian stock markets to double in 4 years

Indian stock markets to double in 4 yearsfe Bureau | Mumbai | Updated: Sep 02 2014, 06:04 ISTWhile the Nifty soared past the 8,000 mark on Monday and stocks hit lifetime highs on the back of encouraging economic data, experts believe there’s room for more upside, reports fe Bureau in Mumbai. A BofA-ML report said markets are likely to double from current levels in the next four years, tracking the trajectory of corporate earnings in the same period. India’s GDP growth for the three months to June came in at 5.7%, the fastest rise in 10 quarters, up from 4.6% in the January-March period.“Our bullishness is driven by our view that the earnings have turned the corner and we will see earnings doubling over the next four years. We think market returns could mirror earnings growth,” BofA-ML wrote on Monday.The brokerage believes that while market returns have outpaced earnings growth in the past, in the current rally earnings and markets will move in tandem on account of higher valuations. “In the four years from FY02-06, earnings more than doubled for the Indian markets and for the six years to FY08 earnings tripled. During the same period markets tripled between FY02-06 and went up 5x between FY02-08. In this cycle, market returns far exceeded earnings growth since we started with a low PE of 7x and hence saw the PE re-rating as well. We are presently at PE levels of 15x already and hence market returns to mirror earnings growth,” the report added.

http://www.financialexpress.com/news/indian-stock-markets-to-double-in-4-years/1284701