Sensex slumps 855 points..!! Seventh worst Single-day....!!!

Sensex slumps 855 points; seventh worst single-day fall in history

ONGC, Sesa Sterlite, Tata Steel, RIL and HDFC emerged as the biggest losers

Faraan Tarique  |  Mumbai  

January 6, 2015 Last Updated at 17:43 IST

The Sensex posted its seventh biggest single-day fall in history, amid weak global cues, after the sharp fall in global crude oil prices raised worries over global growth slowdown and the political uncertainty in Greece also weighed on market sentiment.

The 30-share Sensex ended down 854.86 points or 3.1% at 26,987.46 and the 50-share Nifty ended down 251.05 points or 3% at 8,127.35.

On July 6, 2009, the Sensex had slumped 869.65 points while the Nifty had ended 258.55 points lower.

ALSO READ: Investors lose Rs 2.75 lakh crore as Sensex slumps 855 points

 
In the broader market, both the BSE Midcap and Smallcap indices ended largely in-line with the front-liners with losses of around 3% each.  Market breadth in BSE ended heavily neagtive with 2,253 declines against 644 advances.  
 
Oil prices slumped to new 5-1/2-year lows on Monday on worries about a surplus of global supplies and lacklustre demand. The two crude oil benchmarks - Brent and U.S. light crude, also known as West Texas Intermediate - have now lost more than half of their value since mid-2014.
 
Globally traders also turned risk averse over apprehensions of Greece defaulting on its loans and losing its status as a Euro zone country which became more pronounced with the leftist Syriza party, committed to roll back austerity measures, emerging as the front-runner for the January 25 election.
 
Domestic factors too weighed on sentiments as analysts expect the BSE Sensex companies to report a flat net income growth on a year on year basis in the third quarter with metals and real estate companies pulling down the earnings of Corporate India.
 
India's HSBC PMI for services was down to 51.1 points in December against 52.6 points in November. Though, the services sector has shown growth since October when the PMI reading was 50, indicating stagnation, the pace was slower in December compared to the preceding month.
 
Meanwhile, foreign institutional investors were net buyers in Indian equities worth Rs 472 crore on Monday, as per provisional stock exchange data.
 
Buzzing Stocks
 
All the 12 sectoral indices ended in red with losses around 1.4% to 4.2%. BSE Oil & Gas index, down 4.2% ended with highest losses followed by BSE Realty, BSE Metal and BSE Capital Goods indices closing down 3.6%, 3.5% and 3.2% respectively. BSE FMCG index, down 1.4% lost the least.
 
22 out of the 30 constituents of Sensex ended with losses over 2%. HUL was the sole gainer in the Sensex and gained around 2% after Deutsche bank upgraded the stock to "buy" from "hold."
 
Coal India ended flat. The five-day strike announced today by the Coal India union is likely to have a cascading effect on the country’s power sector.
 
Bank stocks remained under pressure on the absence of any significant reform centric announcements during the two-day banking conclave which was held in Pune and attended by Prime Minister, RBI Governor and top officials from the banking and insurance sector.
 
Mortgage lender HDFC declined the most among financials and ended down by 4.7%. ICICI Banklost around 4.2%. Axis Bank lost over 3.5% while SBI ended down around 4%.
 
Metal stocks were under pressure. Hindalco lost around 2.5% while Sesa Sterlite and Tata Steel lost over 5% each.
 
Oil shares were under pressure as crude oil prices plunged to fresh 5-1/2-year lows on rising concerns about a surplus of global supplies and lacklustre demand. GAIL declined 3.2% while RIL and ONGC  lost around 5% to 6% each.
 
BHEL and Tata Motors declined over 4% while Hero Motocorp, L&T, NTPC ,TCS and Tata Power lost over 3%.
 
Bharti Airtel lost around 1% on concerns about the cost of acquiring mobile phone airwaves at the government auction as the Union Cabinet on Monday finalised the reserve prices for the 800-, 900- and 1,800-MHz telecom spectrum bands and said the 2,100-MHz band would be auctioned simultaneously with the other bands in February.
 
Global Markets
 
Among Asian markets, Japan’s Nikkei dropped 3%, its largest fall in almost 10 months as uncertainty surrounding Greece's future in the euro zone and slumping oil prices dampened risk appetite, while a stronger yen hit exporters' shares. Hang Seng index ended 1% lower while Shanghai Index closed flat.
 
European markets have opened lower tracking overall weak global sentiments. CAC 40 and FTSE 100 indices have lost 0.2% and 0.7% each while DAX index is marginally down by 0.1%. Despite concerns over political uncertainty in Greece expectations that the European Central Bank could start buying government debt to shore up the economy as soon as this month have kept the losses capped in the  European markets.

http://www.business-standard.com/article/markets/sensex-slumps-855-points-seventh-worst-single-day-fall-in-history-115010600547_1.html

EURO-ZONE- GREECE -Toxi Debt- PROBLEMS..!!

5 reasons Greece will be worse than the Lehman Brothers crash

Markets fear that the Greece crisis will be worse than Lehman's collapse, except this time Eurozone nations are holding the toxi debt

Shishir Asthana  |  Mumbai  

January 6, 2015 Last Updated at 17:34 IS

The year 2015 has started on a wrong note for equity markets. Oil prices continue to fall and have breached the $50 barrel mark on oversupply issues and fight for market share by the OPEC countries. But the bigger and immediate worry for markets is the crisis brewing in Greece. The country prepares for elections on January 25th 2015. Fear in the market is that the Greece crisis will be much bigger than the Lehman crisis. Unlike Lehman where bankers were holding toxic debt, this time Eurozone countries are the investors. 

Here are five reasons why Greece can be a bigger threat to the market.

1. Two years after a threat of default by Athens sent global markets world into panic mode, thethreat is once again looming on the horizon. The likely winner of the Greece’s January elections seems to be left-aligned opposition Syriza party led by Alexis Tsipras who wants to renegotiate the terms of a 2012 European bailout that rescued his country from default. The problem is that in the last two years European bankers have sold their Greek debts which have in turn been purchased by European government which now hold 90% of that country’s debt. A default by Greece will hit interest rate of the countries that hold the country’s debts.

2. Tsipras has pledged that if his party wins the election he would ‘tear’ up Greece’s memorandum with the European Union and IMF. He says [ “We will cancel austerity. Under a Syriza government Greece will exit the bailout. This is not negotiable.” He is seeking the same level of debt relief – 50% -- that Germany secured in 1953, which Greece signed up to despite the death of some 300,000 of its citizens under Nazi occupation.

3. Germany and France are opening discussing Greece’s exit from the Euro Union. Sigmar Gabriel, Germany’s economics minister and vice chancellor warned that Berlin wouldn’t be blackmailed into offering concessions on Greece’s debt or the terms of the international plan that rescued the country’s finances. This event comes at a time when Eurozone is in a precarious economic and political state, after years of little or no growth and amid a surge in anti-establishment parties that are challenging governments in many countries.

4. Eurozone is now on a triple dip recession combined with deflation and a Greece exit from the Euro zone will only make matters worse. Greece will have to print its own currency which would be pegged against the Euro. Given the current economic scenario Greece’s currency would immediately fall making its debt repayment and imports even more costly to service. Youth unemployment in Greece has already touched 62 per cent and its debt as a percentage of the GDP is 177. Dirk Schumacher, senior European economist at Goldman Sachs in Frankfurt says “A Greek exit would create a precedent and it’s very hard to say what the impact on financing costs for other peripherals would be.” The countries that are expected to be hit the most are Italy and Spain.

5. The crisis may come to a head in March when Greece is due to run out of cash  The ultimate showdown could come in July and August, when Greece must repay €6.7 billion to the ECB. A report in Bloomberg says that any country exiting the euro would throw the common currency's continued existence into doubt. Greece’s exit would spark similar demand from other smaller countries in the zone. The Bloomberg’s report is titled ‘If Greece goes, so goes the Euro’ which can be a reality.

http://www.business-standard.com/article/economy-policy/five-reasons-why-greece-will-be-worse-than-the-lehman-brothers-crash-115010600605_1.html

At the beginning of a Multi-Year Bull Run....

We may be at the beginning of a multi-year bull run: Lalit Nambiar

Interview with senior vice president and fund manager (equities), head - research, UTI Mutual Fund

Tulemino Antao  |  Mumbai  

January 5, 2015 Last Updated at 14:44 IST

In the midst of markets picking up pace in the new calendar year Lalit Nambiar, senior vice president and fund manager (equities), head – research, UTI Mutual Fund, tells Tulemino Antao that any correction will be an opportunity to enter for the medium term to long term

What is your call on the market in the near to medium term and what strategy can one adopt at current levels?

Global news flow indicates volatility and thus a correction of 7-8% cannot be ruled out. But for a disciplined long-term investor this would be a good time to enter. Equity markets never move in a straight line, corrections are inevitable scenarios in a bull market. Our studies of previous bull markets indicate that as this the bull market coincides with a cyclical economic recovery, it could likely run over more than two-three years. In other words we may well be at the beginning of a multi-year bull run based on macroeconomic tailwinds. So any correction will be an opportunity to enter for the medium to long term.

What trends do you see for capital intensive sectors after December factory growth picked up pace?

The long term economic trajectory is favourable for the segment as a whole but one must differentiate between industries. There are early cycle plays such as cement and construction and late cyclical plays such as heavy equipment and they have to be treated differently. There are very early signs of pick-up in sectors like roads and infra which should result in some eventual recovery in capital intensive sectors. Market sentiment usually runs ahead then corrects and then recovers provided the early promise of business and earnings recovery is not belied. We feel that with the economic cycle bottoming out, demand (thus volumes) and eventually profits will step in to defend any correction in some of these stocks. That said it is better to go for strong companies, doing badly due to overall demand than trying to ace the market by punting on special situation stocks.

Despite the recent interest rate hike by Russia, its currency seems to be on a weak trajectory. What impact do you see especially on pharma companies exporting to Russia?

Listed corporate India's overall exposure to Russia may not be much. In pharma, there are a few companies with a chunky exposure to Russia and some to Latin America but barring those there is no major issue in the sector. The rest of Indian pharma is largely exposed to the US and domestic sales, so there seems to have been an overreaction in the market or it could just be an excuse for a correction.

In a bullish market generally defensive sectors such as pharma and FMCG take a back seat. What would be your advice to an investor who wishes to invest in defensive sectors?

Their cash flows are steady and business models are resilient. Long term they are always good bets given their franchise values. But valuations are also important, at present one will have to be very choosy about the stocks to be bought in this space. It may make more sense to invest in a defensive fund such as those playing a consumption or lifestyle theme.   

Among the rate sensitive sectors such as auto, realty or bank, which sector seems to be most compelling at current levels and why?

Given the way the economy is likely to recover, we like banks and auto at this stage. As demand recovers, banks will lead through increased credit growth. In auto pent-up demand in cars and policy action in demand segments for commercial vehicles should help see volume pick up.
 
What would be your strategy for retail investors who have missed out on the current rally with regards to investment in mutual funds in the new year?

At the risk of sounding simplistic, it is important to diversify, so I think it will always be important, irrespective of market level, for retail to increase participation mainly through large cap diversified equity funds with smaller allocation to sector funds such as banking, auto and infra balanced by some exposure to consumer and healthcare thematic funds.
http://www.business-standard.com/article/markets/we-may-be-at-the-beginning-of-a-multi-year-bull-run-lalit-nambiar-115010500368_1.html

NIFTY -RANGE BOUND MOVE TO BEARISH SIGNAL...!!!

Fall below 7,960 will indicate bearish pattern

The index has meandered between 8,150-8,450. It would be hard to discern a directional trend until there is a move that pulls outside that zone

Devangshu Datta  

January 5, 2015 Last Updated at 20:04 IST

Volumes are still thin after the New Year. FII allocations toEmerging Markets in 2015 and to India in particular may not have been determined yet. The Nifty has meandered within a trading range since the US Fed Reserve concluded its Policy Meet in December.

The superstitious will note that the Nifty fell 666 points from its all-time high of 8,627 to a low of 7,961 on Dec 17. It bounced back above 8,200 and it has since maintained values of above 8,150. On the upside, there has been profit-booking above 8,450.

So, the index has meandered between 8,150-8,450. It would be difficult to discern a serious directional trend until there is a move that pulls outside that zone. The Nifty moved very quickly from 7,900 to 8,600 and then the December correction retraced that entire 700-point zone.

Thus, there has been a fair amount of trading. The next bounce must beat 8,627 to register higher tops and confirm that the bull market remains in force. On the downside, a fall below 7,960 would be significant in setting up a bearish pattern of lower lows. Short-term traders may assume congestion at every 50-pt interval.

Given the Fed's policy statement, traders expect the RBI to cut rates more or less immediately after the Budget, and that will be long before the Fed hikes USD rates. The Bank Nifty and other financial stocks have moved up sharply to a succession of new highs on the hopes of rate cuts and also assurances of less political interference for PSU banks from the PM. This could drive the overall market up, given the high weight (and high-beta nature) of the financial sector. But the rupee remains under pressure versus USD and rate cuts could also lead to the rupee sliding.

The FII attitude will be crucial to market direction and to USD-INR rates as well. In December, FIIs started buying Indian debt in quantity, which indicates expectations of rate cuts. If they push sufficiently large investments into India, that could also counter-balance rupee weakness. Otherwise, a long USD-short INR stance may be worth taking.

The Bank Nifty has hit new alltime highs, rising above 19,100. This uptrend may be worth trading with a long futures position. Short-term traders should assume support/ resistance zones at 150-point intervals on the BankNifty. The futures closed Monday at 19140 with spot at 19017. A short strangle of short 18500p (152) and a short 19500c (216) fetches a net inflow of 368 in premium. This would lose money only if the BankNifty moved outside 18132, 19868. It may be worth holding for 3-5 sessions in the hopes of premium decay.

The Nifty Call chain has open interest peaking in the range between 8400c-9000c. The Put OI peaks between 7800p-8400p. The put-call ratio is quite healthy at about 1.2 for both January, and also for the 3-month range.

The spot Nifty closed on Monday at 8378, with the futures at 8,424. The close-to-money bearspread is tempting for January with a long 8,300p (62) and a short 8,200p (39) costing 23 and offering a maximum return of 77. The CTM bullspread is much closer to money and not attractive with long 8,400c (119) and short 8,500c (71) costing 48 and paying maximum 52. Bulls should consider a wider long 8500c (71) and short 8,600c (38) costing 33 and paying a maximum 67. Even this has a less attractive risk:reward ratio than the CTM bearspread.

The asymmetric premiums indicate the optimism. A strangle combination of long 8,500c, long 8,300p, short 8,600c, short 8,200p, costs 55, and breaks even at 8,245, 8,555.

http://www.business-standard.com/article/markets/fall-below-7-960-will-indicate-bearish-pattern-115010500777_1.html

BANKS RESPONSIBILITY--ON LINE FRAUD..!!

The Reserve Bank of India (RBI) has come up with norms that can give consumers a big relief if they become victims of online fraud.

Its Banking Codes and Standard Board of India (BCSBI) has proposed that in case of electronic fraud, the onus will be on banks to prove it occurred due to negligence of the customer. The customer's liability in such cases will be up to Rs 10,000 only. Banks will be responsible for any amount above this.

"As of today, banks make the account holder or card user responsible. This means, if a customer decides to prove his or her innocence, the only recourse is litigation. And, if even one wins, the compensation is inadequate," says Bejon Misra, a consumer rights activist.

Take the example of Ashish Thakur, a private firm employee based in Mumbai. He received an alert from his bank that there's a transaction on his credit card worth Rs 14,000 with a US merchant. He immediately called up customer service to block the card and informed that he had not done any such transaction.

Later, the bank charged him for this fraud and Thakur went to court. "I got the alert after the transaction was done but there was no One-Time Password (OTP) sent. RBI has made OTP mandatory," Thakur said.

Consumer rights activists say even with limited resources, it is not possible for customers to take on banks and prove they are at fault.

"In case of online fraud, the first thing one needs to do is lodge a complaint with the cyber cell of the police," said a cyber security expert. If there's no result within a month's time, go to court. Also, send a legal notice to the bank asking it to preserve all the original records concerning the case.

There two scenarios where the affected party can drag the bank to court and possibly get a positive outcome. Just as in the case of Thakur, if the transaction occurs without the one-time password, or the extra layer of security as mandated by the RBI, the case can turn in your favour.

Courts have also favoured customers when the card or password was not delivered to them. Instead, the courier delivery boy or bank employees falsely claimed to have delivered the card or password to the victim's place. "In such cases, the bank needs to prove someone in your family took the delivery to win the case," says Jehangir Gai, a consumer activist.

However, there's nothing you can do if you are at fault. Most frauds occur when someone close to the victim makes transactions. This can be your relative or maid or accountant. In such cases, there's failure on the part of the customer to protect information and the victim is held responsible.

Similarly, if you transfer money based on the fraudulent emails that say you have won prize money or you give your account or card details to someone, there's little you can do.

The most difficult case for the consumer is when your card is cloned and used online. Most customers lose such cases.
http://www.business-standard.com/article/pf/victim-of-online-fraud-here-s-what-you-can-do-114123001178_1.html

NPA ISSUES MAY IMPACT PSU BANKS...!!!

RBI Guv Raghuram Rajan sets deadline for banks to clean up bad debts

By: PTI | Pune | January 3, 2015 9:49 pm

Reserve Bank Governor Raghuram Rajan today made a strong case for cleaning up bad debts of banks and restructure other possible NPAs within a year to put the economy back on track.

He also favoured channelising “full savings” of the households into the financial system so that requisite resources for growth are made available.

“In the short term (up to 12 months) there is need to clean up the NPAs and then restructure other stressed loans so as to put the economy back on the track,” Rajan said at the two-day Gyan Sangam here.

Total Gross Non Performing Assets of public sector banks stood at over Rs 2.43 lakh crore as on end-September 2014. The top 30 NPAs account for Rs 87,368 crore or 35.9 per cent of total gross NPAs of PSBs.

Rajan said the bona fide mistakes made by the bankers while taking commercial decisions should be protected by the government.

“If the officers are hauled up for such decisions this would to lead to delay in good decisions because of avoidance of risk,” he said.

The governor also stated that there was a need for internationalisation of the banking system in the current global environment.

“The Capital base of the banks may need to be enhanced,” Rajan said while emphasising on the need for consolidation in ownership, improvement in governance, and enhancement of management capability.

With the licensing of the small banks and the payment banks, there would be new players in the industry and competition amongst the PSBs will also grow to meet these challenges.

“Accordingly, PSBs have to develop differentiated products,” Rajan said.

Stressing on the need for PSBs to recruit young talent, train, and retain them, Rajan said: “And that the government needs to have a re-look at the campus recruitment which at present is banned because of Supreme Court ruling.”

Finance Secretary Rajiv Mehrishi, raised the question whether bank nationalisation has been able to achieve the objectives of reaching out to all people and expansion of credit as necessary.

He urged that banks need to be healthy to drive 7-8 per cent growth in GDP.

Additionally, to provide that magnitude of financing, the PSBs need to enhance their capital base. Non-Banking payment solutions like Mobile Banking could be used to reach out to poor people.

“This may help cashless transactions and thus reduce black money in the system,” Mehrishi said.

He further said the government may take a relook at the legal system to deal with wilful defaulters.

In his address, Chief Economic Advisor Arvind Subramanian suggested ways by which the banking system can generate and efficiently allocate domestic savings to sustain the investment rate of 35 per cent of GDP to achieve the growth of 8 percent in medium term.

He proposed that the PSBs should be differentiated into weak, good and strong categories and accordingly consolidation and restructuring measures could be applied to them.

“There should be diversification both within and outside the banking system. There should be better bankruptcy procedures. The current overhang of stressed assets should be resolved by distribution of the pain between promoters, creditors and tax payers,” Subramanian said.

http://www.financialexpress.com/article/economy/rbi-guv-raghuram-rajan-sets-deadline-for-banks-to-clean-up-bad-debts/25800/

AGRICULTURAL IMPACT- Monsoon failure...!!

India experiences twin monsoon failure, first time in 10 years

By: Harish Damodaran | New Delhi | January 3, 2015 8:19 am

For the first time in a decade, India has experienced deficient rainfall in both the main south-west as well as the north-east monsoon seasons.
According to data from the India Meteorological Department (IMD), the country as a whole received an average rainfall of 85.2 mm during October 1 to December 31, 33 per cent below the “normal” long period average of 127.2 mm for this period.

That translated into a deficient north-east monsoon, which follows the main south-west monsoon season from June 1 to September 30. The latter had registered an overall rainfall deficit of 12.3 per cent, thereby amounting to a deficient monsoon. Any shortfall above 10 per cent at all-India level is termed as “deficient”.

This is the first time since 2004 that rainfall deficiency has been recorded in both south-west and north-east monsoon seasons.

In 2009, the south-west monsoon had totally failed with an almost 23 per cent nationwide deficit. It was, nevertheless, partly compensated by a surplus north-east monsoon. This time round, even that has not happened.

While the north-east monsoon is important for the southern states — particularly Tamil Nadu, which gets less rain from the south-west monsoon — in other parts, it helps to partially make up for any lack of precipitation in the main monsoon season.

India’s kharif harvest suffered a setback due to a deficient regular monsoon. It was hoped that this would be somewhat offset by a better rabi crop that is normally sown from November. But since even the north-east monsoon turned out to be poor, rabi crop plantings have also got affected, raising the possibility of India’s farm sector posting negative growth for 2014-15 — the first time in five years.

According to the Agriculture Ministry, farmers have so far sown 293.16 lakh hectares (lh) area under wheat this time, compared to 294.30 lh during the same period of 2013-14. There have been acreage drops even for gram or chana  (79.65 lh versus 95.03 lh), rapeseed-mustard (64.24 versus 68.04), jowar (30.59 versus 35.91), lentil or masur (14.79 versus 15.01), and maize (12.22 versus 12.63).

The heartening news, however, is that there has been good rainfall in the past couple of days, including in Madhya Pradesh, the Marathwada and Vidarbha regions of Maharashtra, and Gujarat, which were facing extended moisture stress.

“These have been real life-saving showers for the crop already planted. They are most timely, given that the wheat crop is now in the tillering stage, while in mustard, flowering initiation has begun,” said J S Sandhu, Agriculture Commissioner at the Department of Agriculture and Cooperation.

Sushil Kumar Yadav, a farmer from Rajoula village in Amarwara tehsil of Chhindwara in Madhya Pradesh, said the dry weather through November and December was a major source of worry. “But the Naya Saal  (New Year) has brought cheer. The rain in the last two days have ensured I don’t need to give any irrigation to my wheat for the next 20 days,” he said.

http://www.financialexpress.com/article/economy/india-experiences-twin-monsoon-failure-first-time-in-10-years/25588/

Solar investment- $100 bn, LIGHT AT THE END...!!!

PM Narendra Modi raises solar investment target to $100 bn by 2022

By: Reuters | New Delhi/bangalore | January 2, 2015 3:32 pm

Prime Minister Narendra Modi has ramped up his target for solar energy as he bets on renewables to help meet rising power demand and overcome the frequent outages that plague Asia’s third largest economy, a senior official told Reuters.

India gets twice as much sunshine as many European countries that use solar power. But the clean energy source contributes less than 1 percent to India’s energy mix, while its dependence on erratic coal supplies causes chronic power cuts that idle industry and hurt growth.

Modi now wants companies from China, Japan, Germany and the United States to lead investments of $100 billion over seven years to boost India’s solar energy capacity by 33 times to 100,000 megawatts (MW), said Upendra Tripathy, the top official in the Ministry of New and Renewable Energy.

That would raise solar’s share of India’s total energy mix to more than 10 percent. In Germany, a leader in renewable energy, solar accounted for about 6 percent of total power generated in 2014.

India had earlier set an investment target of $100 billion for the next five years for all types of renewable energy, with wind taking up two-thirds of the total. In an interview, Tripathy said Modi’s new solar target was ambitious, “but if you do not have a higher goal, you will not achieve anything”.

Canadian Solar and China’s JA solar told Reuters they are looking at making cells or modules – used in solar panels – in India. JinkoSolar Holdings said recent announcements have also raised their interest.

U.S.-based First Solar and SunEdison Inc  have sizeable businesses in India, and together with local firms will invest $6 billion in India for the fiscal year to March 31. Tripathy expects new and existing companies to invest about $14 billion annually starting next fiscal year through to 2022.

Among First Solar’s top projects are two plants with Kiran Energy Solar Power and Mahindra Solar One totalling 50 MW in Rajasthan.

SunEdison is working on a 39 MW project in India and hopes to participate in the solar expansion plan, said regional managing director Pashupathy Gopalan.

Solar energy in India costs up to 50 percent more than power from sources like coal. But the government expects the rising efficiency and falling cost of solar panels, cheaper capital and increasing thermal tariffs to close the gap within three years.

Modi promised on high-profile visits to Japan and the United States last year to help solar companies overcome barriers to entering the Indian market.

“Their basic problems are who is the buyer, where is the land and can India have a regime where they can raise low-cost capital?” Tripathy said.

“These three issues have to be addressed and we are addressing them.”

To create sufficient demand, power distributors will have to  raise renewable energy purchases to 8 percent from 3 percent by 2020. There is also a plan to require new thermal plants to have a 10 percent renewable mix, which they can generate or buy from solar companies as credit.

India recently signed a $1 billion agreement with the Export-Import Bank of the United States for companies willing to ship equipment from that country. India is also thinking of solar bonds and helping foreign firms raise rupee bonds to cut costs.

Foreign companies say they are enthused by Modi’s personal interest, but red tape is still an issue.

“The policy framework needs to be improved vastly. Documentation is cumbersome. Land acquisition is time-consuming. Securing debt funding in India and financial closures is a tough task,” said Canadian Solar’s Vinay Shetty, country manager for the Indian sub-continent.

http://www.financialexpress.com/article/economy/pm-narendra-modi-raises-solar-investment-target-to-100-bn-by-2022/25389/

Indian hedge funds...

Investors unlikely to make a beeline for Indian hedge funds despite 

sterling 2014

ARVIND JAYARAM

BL RESEARCH BUREAU:  

India-focused hedge funds delivered a solid 38.95 per cent return in January-November, 2014, trumping the BSE benchmark Sensex and NSE Nifty indices in what has been a very good year for equities. But investors aren’t expected to make a beeline for these funds in 2015 despite the outperformance on account of the high volatility of returns of Indian funds, according to Hassan Mohamad, an analyst with alternative investments data provider and research house Eurekahedge.

“India dedicated managers will need to repeat their performance of 2014 much more consistently going forward to attract any serious attention from investors,” says Mohamad.

Volatile performance

According to Eurekahedge, Indian hedge fund performance leaves much to be desired, given that they were down 50.66 per cent in 2008, up 49.42 per cent in 2009, down 22.9 per cent in 2011, up 12.84 per cent in 2012, down 8.52 per cent in 2013 and up 34.34 per cent in 2014. The allure of Indian hedge funds is also limited when viewed from the perspective of performance relative to underlying markets over the last seven years.

“For investors, the added fees of a hedge fund set-up cannot adequately justify this performance,” says Mohamad. Hedge fund investors, while desirous of high returns, also seek such funds as a hedge against market vagaries and in this sense, the India-focused funds have failed to keep up to expectations.

“The much valued downside protection that hedge funds traditionally offer to investors has also been absent in the case of Indian hedge funds. Thus, investors could be better off putting their money in a simple long-only investment fund that charges lower fees and usually more upside,” says Mohamad.

India-focused hedge funds utilise three main strategies, according to Eurekahedge. These are a long-short strategy on equities, a commodity trading advisor (CTA)/managed futures approach laying emphasis on futures contracts in their overall investment strategy and a multi-pronged approach that utilises both these strategies as well as a fixed income hedge. The clear winner in 2014 were the long-short equity funds, which delivered an astounding 53.9 per cent return in the first 11 months of the year, in comparison to 27.2 per cent return from managed futures funds and 26.1 per cent from multi-strategy funds.

Dwindling corpus

Consequent to the poor performance in past years, the size of the Indian hedge fund industry has fallen well below its peak of $5.2 billion in 2008 to approximately $2.91 billion now. That’s just a fraction of the total global industry, which has $2.13 trillion of assets under management. A total of 65 funds are operational in the country and the average size of a fund is $44 million, with their median size pegged at $19.5 million, according to Mohamad. “The Indian hedge fund industry… is composed of mainly small-tier funds and for the last couple of years has been recovering primarily on the basis of performance-driven gains. Investors still have some key concerns when allocating to an India dedicated hedge fund,” says Mohamad.

Nevertheless, the fact remains that Indian hedge funds’ sterling performance in 2014 is likely to have attracted the eyeballs of many investors. A perusal of the returns of the global hedge fund industry reveals that their average return during the January-November, 2014, period in dollar terms was 4.37 per cent.

It is more likely that hedge fund investors will take exposure to the Indian market through an alternate route, he adds. “Investors generally want to avoid concentrated country specific exposure, hence the recent inflows have been directed towards Pan-Asia funds which can carry some exposure to Indian markets,” says Mohamad.

(This article was published on January 1, 2015)

http://www.thehindubusinessline.com/markets/stock-

markets/investors-unlikely-to-make-a-beeline-for-indian-hedge-funds-

despite-sterling-2014/article6745029.ece?homepage=true

Hits and Misses..2014...NATURALLY...!!!

Our hits and misses of 2014

LOKESHWARRI SK

Stocks we rated ‘buy’ averaged 54 per cent, but some of our ‘hold’ calls were too conservative

It is that time of the year again when we look back at our performance score-card. There was a marked shift in investor sentiment from pessimism to optimism in 2014. As the year unfolded, it became apparent that the economy was on the mend and the positive impact from this could help company fortunes too. The stock market too seemed to have embarked on a multi-year up-move.

But our task of recommending stocks was complicated by two factors. One, as investors took heavy bets on the Modi Government ushering in fast-paced changes, there was a sharp run-up in the prices of many stocks. With little improvement in earnings, valuations became stretched. In many companies it, therefore, was a Hobson’s choice between taking the leap of faith before the numbers began improving or to lose out on a large part of the rally.

Two, the maximum gain in the rally was made in mid- and small-cap stocks. Sifting through the chaff in this space, avoiding companies with governance issues and zeroing in on those that had the potential to grow over the next two to five years was the other challenge.

Since our stock recommendations are given with a two-year horizon, we have considered the calls made between October 2012 and September 2014 for this performance review. Of the total stock recommendations, 58 per cent of the calls (buy, sell and hold) have worked, or have outperformed benchmark returns.

While that is not something to rave about, the average return of the stocks we recommended is 54 per cent, well above the benchmark return of 36 per cent. This is, of course, partly a function of the bull market currently in place.

The buys, the sells and the holds

Our analysts have taken a positive view on the prospects of India Inc and this is reflected in the fact that ‘buy’ recommendations accounted for over 70 per cent of our stock calls given. Around 58 per cent of these recommendations came good. So, where did we fall short? Our bet on PSU companies with monopoly in their segments, such as NMDC, did not deliver. Stocks in the oil and gas sector too have underperformed, thanks to regulatory issues and the adverse commodity cycle. Real estate and aviation stocks did not do too well due to the problems besieging those sectors.

Our portfolio of ‘buy’ recommendations has delivered 54 per cent returns, thanks to our multi-baggers. One-fifth of the stocks where we recommended a ‘buy’ have gained more than 100 per cent. Of these, seven have gained more than 200 per cent. JK Lakshmi Cement is our best pick, with 440 per cent gain. Infrastructure companies such as IRB Infra and Kalpataru Power Transmissions, Amara Raja Batteries and Persistent Systems are among our other top picks.

Since the market was in such a gung-ho mood, only 20 per cent of our calls were ‘sell’ recommendations. Of these calls, 56 per cent worked or managed to under-perform the benchmark. We were able to give some timely exit calls in stocks such as Bhushan Steel and DLF. But some stocks which were recommended for exit have rallied sharply. This resulted in an average return of 31 per cent in these calls against 33 per cent gains of the benchmark. Stocks of FMCG companies that continued to rally despite slowing growth and stiff valuation and some sell calls in auto and auto ancillaries, before the cycle turned for this sector, contributed to this droll situation.

Less that 10 per cent of our calls were ‘hold’ but the fact that this portfolio has gained 50 per cent shows that our cautious stance has made readers forego gains, this is something we need to address next year. That five of the ‘hold’ calls gained more than 100 per cent only accentuates this point.

IPOs, MFs and bonds

There wasn’t too much activity in the primary market in 2014. Our invest call in the IPOs of Wonderla and Snowman Logistics that debuted in the first nine months, has worked. We had also asked readers to book profit in Wonderla in September since the stock price had moved far beyond the stock’s intrinsic worth. Our hit-rate for IPO recommendations given over the last two years is 80 per cent. The advice to invest in tax-free bonds of IRFC, REC, NHB and so on would also have delivered gains as these bonds have rallied in expectation of prospective interest rate cut.

With mutual fund managers finding it easy to beat their benchmarks, our fund calls made between January and October this year enjoyed a hit rate of 94 per cent. The recommendations to ‘buy’ fared better with 97 per cent of our calls beating benchmark returns. Of the calls for selling mutual funds, 60 per cent were right. Returns on the debt funds, suggested for investment, ranged from 13 to 18 per cent, on an annualised basis.

What are the areas we need to work on in 2015? We need to broad-base the universe of stocks that we track. We will try to cover more under-researched stocks that hold value. With most stocks with visibility in earnings growth having already moved higher, this has become an imperative. We will also try and improve our hit-ratio for stock recommendations. We will also continue to cover new offerings in insurance, bonds and fixed deposits, to provide you investment options besides stocks and mutual funds.

(This article was published on December 28, 2014)

http://www.thehindubusinessline.com/features/investment-

world/our-hits-and-misses-of-2014/article6732858.ece

TOP-STOCK-PICKS FOR THE YEAR-2015

A year of stock pickers

Vishal Chhabria, Ram Prasad Sahu, Sheetal Agarwal & Ujjval Jauhari  

January 1, 2015 Last Updated at 00:43 IST

Half of the sharp rise in stocks in 2014 was driven by re-ratings - rise in price-to-earning ratios on hopes the new government would turn around the economy which will reflect in corporate earnings. While valuation of the broader market is close to long-term averages, mid-caps are in an exuberant territory. For the broader market to re-rate further, earning growth has to pick up. That is yet to happen. Against this backdrop, investors are likely to seek more action from the government in the New Year. Until then, the market could consolidate.

While the government has started taking its first reform measures - higher foreign direct investment in defence, railways and insurance, diesel price regulation and an ordinance to ease land acquistion by industry - the market has to contend with some external risks as well.

The world economic growth, barring in the US, remains fragile. While slower global growth has brought down prices of commodities and is beneficial for India, it will also hurt our exports, besides pulling down the overall Sensex earnings and limiting FII (foreign institutional investors) flows from oil-rich nations. Corporates, though, are slowly deleveraging, but the pain area - power and infrastructure - has hardly seen a significant improvement.

The good part is that India's fiscal and current account deficits have improved, and inflation is down. But with US seen raising interest rate in mid-2015, an act that could bring volatility to emerging markets like India, the Reserve Bank might not cut its policy rate in a hurry. Interest costs for companies, therefore, might not come down meaningfully anytime soon.

Given these, and even as the markets are expected to rise 9-20 per cent from their current levels - Sensex could rise from 27,500 to the 30,000-33,000 level - investors will have to be selective in picking stocks for higher returns.

Experts advise against high-beta, highly indebted firms and vulnerable mid- and small-caps. A rise in global risk could see FIIs slow down purchases. But some experts believe an improving domestic environment could bring high inflows from local investors, providing some cushion.

Here are the top 10 stocks according to India's leading research houses, such as Morgan Stanley, Macquarie, Ambit, Credit Suisse, IIFL, Angel Broking and Religare. These stocks have been selected on the basis of being recommended by more than one research house, potential returns and earnings growth. (Click here for graphics)

http://www.business-standard.com/article/companies/a-year-of-stock-pickers-115010100033_1.html

http://www.business-standard.com/content/general_pdf/010115_02.pdf

Reforms to Expect from Modi.....!!!

Six areas of reforms to expect from Modi's banking retreat

ICICI Bank Chairman K V Kamath will talk about financial architecture of medium and small scale enterprises at the retreat

Manojit Saha  |  Mumbai  

January 1, 2015 Last Updated at 17:32 IST

It’s going to be the biggest Gyan Sangam (knowledge confluence) for public sector bank chiefs who will be able to interact with some of the celebrated names in the country’sfinancial sector and present a blueprint for the next generation of banking reforms to Prime Minister Narendra Modi.

The finance ministry, which has organised the two-day retreat in Pune, has taken care to ensure that the participants comprising all heads and executive directors of public sector banks apart from the finance minister and the Reserve Bankof India governor and deputy governors are physically and mentally charged up for the big event.

That explains a ministry statement that the second day will begin with yoga and a talk by Swami Sukhbodhanand on leadership and change management. Not that the bankers need any external stimulus to put their best face forward at the event. Most Mumbai-based bankers have decided to start the “knowledge confluence” much before the event and have decided to hire a bus to go to Pune together.

On the first day, “sector experts” including RBI Director Nachiket Mor, former UTI Bank CMD P J Nayak, HDFC Bank Deputy CEO Paresh Sukhtankar and Bandhan CMD C S Ghosh will meet the bankers and make separate presentations on six areas: financial inclusion, technology, priority sector lending, risk management, people strategy and governance.

On the second day, these six groups will present their recommendations, following which ICICI Bank Chairman K V Kamath will talk about financial architecture of medium and small scale enterprises. The groups will then present the final blueprint to the prime minister at the concluding session.

Sources familiar with the event proceedings said a reforms blueprint is expected to be drawn up in the following six areas.
Banking structure & consolidation.

The previous government had mooted the idea of a holding company structure for public sector banks but not much progress was made. The idea was to enable public sector banks to raise capital more efficiently as the government, which is the majority owner of the banks, is constrained in infusing fresh capital every year due to its fiscal consolidation commitment. Public sector banks will need Rs 2.4 lakh crore of capital till 2018, if the government want to continue with the same shareholding.

Consolidation among public sector banks was pushed by P Chidambaram when he was the finance minister in the previous government. The previous government supported the move, but said it would not force banks to merge and such a proposal should come from respective bank boards.

Asset quality & recovery

The biggest worry of the banking sector at present is asset quality which declined sharply in recent years. According to RBI data, the gross non-performing asset in the banking system rose to 4.5% of gross advances in September 2014 as compared to 4.1% in March.

Total stressed asset in banks (gross NPA + restructured advances) rose to 10.7% from 10% during the six month period. One way to reduce bad loans is to have an effective recovery mechanism as the present legal system seems to be inadequate.

According to latest data, banks have referred 1.86 million cases in FY14 to Lok Adalats, Debt Recovery tribunals and under SARFESAI Act, (78% increase over the previous year), amounting to Rs 1.74 lakh crore and recovered only Rs 31,100 crore which is just 18%. The government is planning to make laws more stringent by amending the SARFAESI Act and DRT laws to effectively deal with the issue of bad loans, especially those being created by suspected wilful defaults.

Financial inclusion

Banks have already opened close to 100 million accounts under the Pradhan Mantri Jan Dhan Yogana. However, 75% of the accounts still don’t have any money. The retreat will discuss how to take the initiative forward and how to plug the loopholes that still exists.

Human resources

The central bank has termed the decade as a “human resources decade” with a huge number of middle level staff going to retire. With banks opening a huge number of accounts under the Jan Dhan scheme, they will need more branches and personnel to man them.

Priority sector lending

At present, there is a uniform rule for all types of banks regarding priority sector lending norms and the target. There is a suggestion that priorities should depend on an individual bank’s strength and should not be uniform. For example, a public sector bank with a predominantly rural presence can have direct agriculture as the main priority but a foreign bank which has limited branch presence could see more opportunity in small and medium enterprise financing. Some clarity on the issue is expected to emerge at the retreat.

Technology

While most banks are on core banking platform, some of the regional rural banks are yet to adopt CBS. In addition, it is virtually impossible to reach the vast unbanked population in the country through a brick and mortar structure and technology will play a key role in expediting financial inclusion.

A multi-channel approach using handheld devices, mobiles, cards, micro-ATMs, branches, kiosks etc, should be used by banks while ensuring that the transactions put through such front-end devices should be seamlessly integrated with the banks’ CBS. In addition, alternative channels, like using social media can help banks to understand customers better and can be used to inform marketing campaigns. A detailed roadmap on this is expected at the Pune meeting.

http://www.business-standard.com/article/finance/six-areas-of-reforms-to-expect-from-modi-s-banking-retreat-115010100535_1.html