FALLING NIFTY TARGETS......

How India went from Jolly January to Sober September

MEERA SIVA

BL RESEARCH BUREAU

September 7, 2013:Market gurus prune estimates for the index, profits and rupee
  Investors stepping into 2013 were greeted with optimistic forecasts from market gurus. But the mood has since gone rapidly downhill with the same people drastically pruning their forecasts for the Sensex, profit growth and rupee.From reports that wanted us to be “prepped for a rally” early in the year, we are now mournfully asked “How much worse can it get?” What triggered this change of mood? The analysts advance reasons ranging from the absence of interest rate cuts to capital outflows and the steep fall in the rupee.
Ridham Desai of Morgan Stanley trimmed his 12-month Sensex target to 18,300 this week, from 23,000 at the beginning of the year. In its report ‘Trimming Earnings and Index Target, again’, he says “earnings trajectory will weaken in the near term and the ensuing recovery is likely to slow”.Against the original estimate that corporate profits would grow 12 per cent, he now thinks they may decline six per cent this fiscal.
This week, Manishi Raychaudhuri, strategist for BNP Paribas Securities, cut the Sensex target for this year from 21,300 to 17,000. “What we had not anticipated was the extent and pace of rupee depreciation, which has not only raised the cost of capital but also portends sharper earnings cuts than we had foreseen,” he laments.
He says that while sectors that benefit from a falling rupee make up a fourth of the Sensex, those that lose due to it make up 30-35 per cent. As a result, original estimates that Sensex company profits would grow by 13-14 per cent now seem ‘incongruous’.He points out that sales growth has been low for 15 quarters, margins have been flat and Sensex profit growth has been only 1.4 per cent.Bank of America-Merrill Lynch now thinks that a Sensex target of 16,000 is reasonable for the year. Recently, it cut its Sensex earnings estimates for the current fiscal to Rs 1,260, down from Rs 1,305.
Most forecasters cited concerns such as the sluggish economy, sharp capital outflows, rupee depreciation and high cost of capital, for their drastic downgrades.
Bank of America’s ‘India: How bad can things get?’ feared the rupee may not stabilise even at 63-69 but could slide further to 75, if there were any rate hikes. Nomura Securities revised its 2013-14 GDP growth estimates down to 5 per cent, from 5.6 per cent in its ‘India Turbulent Times Ahead’ report in September.That’s why most brokers have not just reduced their profit growth estimates, but also pruned the price-earnings multiple they expect for the Indian market.They now believe India will enjoy much less global fancy than before.
These sentiments are a striking contrast from January when many market players were in a buoyant mood.In January, ICICI Securities’ report ‘Year of consolidation’ assigned a Nifty target of 6,550 for the year. It said, “Some revival in growth, interest rate cut on the back of likely lower inflation and more reform announcements drive the optimism.”BNP Paribas, estimating that profits for Sensex companies would grow by around 12 per cent, said, “Strong earnings growth delivered by autos, consumer staples and healthcare will largely come on the back of margin improvements.”
The optimism then came from the view that India’s slowdown had bottomed out, interest rates would decline through the year and that food, manufacturing and wage inflation would ease. The US and China were also expected to recover.While the latter has played out perfectly, it is the India story that didn’t play out according to script.
meera.siva@thehindu.co.in
(This article was published on September 7, 2013)

http://www.thehindubusinessline.com/markets/how-india-went-from-jolly-january-to-sober-september/article5104517.ece?homepage=true

GOVT. PAID NO SALARIES.....

Sreelatha Menon  |  New Delhi  September 7, 2013 Last Updated at 22:48 ISTSreelatha Menon: The bankruptcy of MGNREGSUttar Pradesh hasn't paid salaries of administrative personnel under the scheme for about two yearsA few month ago, when Samajwadi Party leader Mulayam Singh Yadav told Parliament the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) should be scrapped, he was expressing desperation at the state's failure to implement a scheme aimed at helping the poor in rural areas.
Probably, he was also thinking of the fact that the scheme was virtually bankrupt in his state---not only had it failed to pay wages to workers on time, it had also been hauled up in court for not paying the salaries of administrative staff hired under the scheme.
A fortnight ago, the Lucknow High Court had asked the state government to pay the salaries of about 40,000 personnel, including gram rozgar sewaks, technical assistants and computer assistants, whose wages were pending for eight months to two years, across districts. The state said the funds meant for salaries had been spent by district administrations for other purposes.
Thousands of these workers whose salaries are pending are set to protest in Delhi. Raghunath Patel, president of the Uttar Pradesh Technical Association of MGNREGS and a junior engineer employed under the scheme in Banda district, says he hasn't been paid for a year. Junior engineers in Gonda, Pratapgarh and Varanasi, where workers have gone to court against the state, haven't been paid for two years. The district administration had admitted the money meant for these salaries was used for its fuel expenses, said Patel. Salaries are paid out of the six per cent administrative costs allowed under MGNREGS. Since the total allocation for the scheme in the state had halved from Rs 5,000 crore in the past year, the administrative cost allocation had also been cut to half, said Sanjay Dixit, a Congress leader from the state and former member of the Central Employment Guarantee Council. Also, the Centre has cut the administrative cost allocation from six per cent to five per cent, setting one per cent aside for audit costs.
Mulayam Singh Yadav's demand to scrap the scheme is based on his conclusion that the scheme is the root of corruption in the state and that district officials are making off with money meant for the poor. As the former chief minister's statement comes at a time when his own party is in power and his son is the chief minister, there is a desperate need of a review of the working of the scheme under the Mahatma Gandhi National Rural Employment Guarantee Act, which promises 100 days of wage employment to the rural poor.
The workers hired to run MGNREGS are not just denied salaries, they are also paid below-minimum wages. While a junior engineer such as Patel gets Rs 8,000 a month, Madhya Pradesh pays Rs 21,000, Rajasthan pays Rs 12,000 and Bihar pays Rs 11,000 a month to technical assistants. While Uttar Pradesh pays gram rozgar sewaks Rs 3,500 a month, Bihar pays Rs 5,000 and Madhya Pradesh Rs 8,000. K S Gopal, social scientist and an MGNREGS activist based in Andhra Pradesh, says the problem is a shortage of funds in states. This forces states to provide less work, which reduces the funds further. Therefore, the percentage of funds allowed for administrative costs comes down, and salaries aren't paid, he says.
Whether the scheme should continue in its current form, as a central top-down model, is a question that needs to be looked into; Mulayam Singh Yadav's cry of desperation deserves attention. Rural Development Minister Jairam Ramesh's response to this was Uttar Pradesh Chief Minister Akhilesh Yadav had often written to him, seeking funds for the scheme; this showed the chief minister didn't agree with his father.
However, the fact that a state has to write to a central minister for funds often is another measure of the same desperation.
According to a study by a parliamentary standing committee, MGNREGS has fared the worst in states such as Bihar, West Bengal and Uttar Pradesh, with Uttar Pradesh's average workdays a household standing at a dismal 26. If the scheme can't help the poor, it either needs urgent reform, as the committee suggested, or should be wound up, as proposed by Yadav.http://www.business-standard.com/article/opinion/the-bankruptcy-of-mgnregs-113090700806_1.html

STOCK MARKETS RESILIENCE ......!!!!

T N Ninan  |  New Delhi  September 6, 2013 Last Updated at 22:50 IST
T N Ninan: The Great Market Non-Crash
It is other financial sectors that need attentionWhile people fret about the fall in stock prices, the reality seems strangely disconnected when viewed at a slight distance from immediate events. In early 2011, when the quarterly economic growth rates began sliding from 9.2 per cent to eight per cent and then lower, the Sensex was at 20,500. Today, more than two-and-a-half years later, the quarterly growth rate has averaged a miserable 4.6 per cent for the last three quarters. But the Sensex is at 19,270 - barely six per cent lower than what it was at the start of 2011. By any normal yardstick, that would suggest market resilience. Indeed, the price-earnings ratio on the Indian market is now within five per cent of its 10-year average, lower than in Indonesia, about the same as in Thailand and Malaysia, and significantly better than in China. So, contrary to what the headlines might make you think, the market is holding up pretty well in the face of a lot of bad news.
What about the foreign institutional investors (FIIs)? Well, what about them? They pumped $71 billion into India's stock market in the four-year period 2009-2012, and a further $15 billion till May this year. Since then, over three months, they have pulled out all of $3.8 billion. That may be a worrying change of direction when the country needs dollars to keep flowing in, but it is not by any means a flight of capital. Just as we have not seen a real crash that matches the crash in economic growth rates, we have not really seen capital flight. It would seem that people have not yet given up on the India story, or more money would have gone out by now. The debt market, driven by simpler dynamics, has seen $9 billion go out, but that is a different story.
The stock market gets disproportionate attention because the human eye tends to focus on what moves, compared to what is stationary. Since stock prices move up and down every day, excited commentary matches the bustle even though it often signifies very little. So, while the market is important in many ways, it is useful to remember that the market attracts only one per cent of annual household savings. In comparison, just under a half of individual savings goes into bank accounts. About a quarter goes into life insurance. Something like one-tenth goes into a long-term savings option like the provident fund. As for "non-financial" savings, money has gone substantially into real estate and recently into gold. For most people, the stock market is someone else's playground.
It makes sense then to focus on the sectors where the money really goes. The new pension law will help put more money into long-term savings. Then, bank deposits have been seeing slower growth even as the money going into gold has trebled from one per cent of GDP to three per cent. One result is that, over the past three years (till end-August), fresh loans have equalled 90 per cent of new deposits. That is an unsustainable ratio when the Reserve Bank of India's reserve requirements should leave banks with no more than 73 per cent of new deposits for giving out as new loans. Conclusion: the demand for fresh credit is outstripping the inflow of deposits that can be lent out. But if you want more bank deposits, you have to do something about the money going into gold. If people prefer gold to bank deposits, blame sustained fiscal profligacy that has eroded faith in the value of the currency. Control government borrowings, and many things (including currency value and interest rates) will fall into place.http://www.business-standard.com/article/opinion/t-n-ninan-the-great-market-non-crash-113090601126_1.html

BANKING CRISIS MAY EMERGE.....

The crisis that engulfs the Indian economy is expected to spread. This will immediately hit corporates and infrastructure projects burdened with large debts that are now far more expensive to service. In the process, India’s banks will be affected.

September 2, 2013:  

With the collapse of the rupee and the stock market capturing attention, and corporate and media anger directed at the Food Security and Land Acquisition Bills, attention is diverted from much else that is wrong with the Indian economy. Except for occasional and startling reminders. One such came from Credit Suisse that pointed to the debt overload among leading Indian corporates. Another came from Reserve Bank of India Deputy Governor K.C. Chakrabarty on the losses building up in India’s infrastructural sector, including in its privately operated component.

These are problems in themselves. But they are also problems that spill over into other sectors, especially banking. Consider, for example, the Credit Suisse India report tracking borrowing by 10 leading Indian business groups that are among the biggest corporate borrowers.The groups covered are Adani, Essar, GMR, GVK, Jaypee, JSW, Lanco, Reliance ADA, Vedanta and Videocon. These groups have been on a borrowing spree with their liabilities rising six-fold over the six years ending March 2013 to touch Rs 6.31 trillion (Chart 1).This amounts to close to 35 per cent of the gross bank credit outstanding from scheduled commercial banks to large industry (Chart 2), and 28 and 11 per cent, respectively, of bank lending to industry and all sectors. Bank exposure here is large enough to trouble the banks if the firms concerned are in trouble.

HIGH INTEREST BURDEN

There are wide variations across these groups with Reliance ADA, Vedanta, Essar and Adani leading the pack.But it is not the level of gross debt that matters most but its relation to the net worth of the company or group concerned.

The difficulty is that leverage in many cases has been high and rising. There is only one among these groups that has a debt equity ratio of less than one, two have ratios between 1 and 1.5, three have ratios between 2 and 4, another three between 4 and 5 and one with a ratio of 9.4 (Chart 3).As compared with this the average debt equity ratio of the RBI’s sample of 3,041 non-government non-financial public limited companies for the financial year 2011-12 stood at just 0.71 per cent. Leverage is clearly high. The result is some of these groups (such as Essar, GMR, GVK and Lanco) are carrying an interest burden that exceeds their earnings before interest and taxes.

This vulnerability is now being significantly aggravated by the sharp depreciation of the rupee, since in the case of at least half these groups, between 30 and 70 per cent of their debt is foreign currency debt.With the rupee having depreciated by more than 15 per cent in recent months, the impact this would have on interest and repayment commitments on forex loans would be substantial. The possibility of default or major restructuring is indeed substantial.Either way, banks exposed to these and other such groups are likely to take a hit that would affect their bottom line and their capital adequacy.

SPUR FOR INFRASTRUCTURE

What needs to be noted is that a number of the groups tracked by Credit Suisse are infrastructure companies.This is an area of much concern to the Government, partly because wrong decisions, bad governance, cost overruns, stalled projects and pricing constraints, besides rising input and raw material costs, are affecting the viability of many of the companies involved.Meeting end-August, as the rupee collapsed, the Cabinet Committee on Investment decided to get departments concerned directly or indirectly with infrastructure to clear bottlenecks within a month.

The basic idea is to provide access to fuel through fuel supply agreements with Coal India for power plants, expedite environmental clearances, facilitate land acquisition and allocate iron ore and coal mines. Among the projects being targeted by such measures of promised support are those in the power, steel, coal, shipping and ports sectors.This threat of activism on the part of the Government is not explained just by bottlenecks to operation, expansion or implementation of new projects.Rather, the Government is clearly concerned about the poor profitability of infrastructural projects and the need to restore the credibility of an important aspect of the liberalisation agenda: public-private partnership (PPP) projects in infrastructure managed largely by the private sector.

If top corporates are overleveraged, it is partly because many of them have entered into an area where the Government had promised major concessions and backed the projects with credit from the public banking sector.According to Chakrabarty, there were, by end December 2012, over 900 PPP projects at different stages of implementation in the infrastructure sector involving a total project cost of Rs 5430.45 billion.Growth has been scorching. The figure on March 31, 2010, for example, stood at 600 projects with project costs of Rs 3330.83 billion.

Clearly, the private sector was not capable of financing that kind of expansion in such a short time.Not surprisingly, actual implementation had depended on state-organised financing. The problem with financing, however, is that India has a poorly developed bond market and development financial institutions that could contribute (such as IDBI and ICICI) had been eliminated during reform by conversion into commercial banks.Hence, the Government had to prod the banks to lend to this sector. Conventionally, banks, which mobilise resources from the public through relatively small deposits that promise safety and liquidity, do not lend to projects involving lumpy, illiquid investments, with long gestation lags and relatively high risks.

Not surprisingly, as recently as March 2000, bank lending to infrastructure amounted to just 3.6 per cent of bank credit to industry and 1.6 per cent of total bank credit. Since then, however, there has been a dramatic change (Chart 4).The share of bank lending to infrastructure had, by March 2013, risen to as much as 35 per cent of bank credit to industry and 13.4 per cent of total bank credit.The difficulty is that this exposure has been concentrated in a few sectors. Bank lending to power, which rose from 45 per cent of infrastructure lending in 2000 to 70 per cent in 2003, has since come down but still stands at around 50 per cent.

TAKE-OUT FINANCE RISKS

There were two, among many, important strategies the Government adopted to ensure this. The first was, of course, to pressurise public sector banks to provide the bulk of this funding.Private banks, especially foreign private banks, looking to their non-performing asset and profitability record have been almost absent from this area. The second, is to spread the myth that bank exposure is only a stage in “take-out financing”.This is meant to be an innovative financing method for long-term projects in which one set of institutions provide loans for the initial phase of the project (say, five years), with the promise or commitment that the loans would be taken over by another set of institutions.

These may be long-term financing institutions or other banks, and there could be more than one such transfer during the lifetime of the loan.As is to be expected, institutions engaged in such take-out financing are often government-owned (such as the India Infrastructure Finance Company Ltd) and mobilise resources based on implicit or explicit government guarantees.The problem with take-out financing is that, while banks take on the credit risk in the first instance, there is no guarantee that the loans would be moved out of the books of the bank that is the original funder. Further, it is often unclear at what price other institutions would be willing to take out the loans given to infrastructure companies that are not performing well in terms of profitability.

In the event, as India’s PPP projects, especially in areas such as power, are ridden with problems, banks find their loans turning sour.Desperate to protect their books and succumbing to pressure, banks have restructured their loans.As a result, while the ratio of Gross Non-performing Assets to total infrastructural has risen from 0.61 per cent to 1.45 per cent between March 2009 and March 2013, the ratio of gross NPAs and restructured advances to infrastructural loans has risen from 4.66 per cent to 17.43 per cent (Chart 5).

That is quite dramatic, and ominous, when we recognise that many restructured advances turn non-performing in time.Thus, while the Government had been successful in diverting credit to infrastructure in a period when total bank credit relative to GDP had risen dramatically, it was less successful in ensuring the profitability of the PPP projects it had promoted as part of its neoliberal strategy.

In the event, the probability of default by large firms with excess leverage in these and other areas has increased considerably.In sum, Indian banking is on the verge of what could be a crisis. But that goes unnoticed because of the other more visible problems that afflict the economy.

(This article was published on September 2, 2013)

http://www.thehindubusinessline.com/opinion/columns/c-p-chandrasekhar/the-looming-banking-crisis/article5086242.ece?homepage=true

War fears, DOWN GRADES..SELL..SELLLLLLLLL...

BS Reporter  |  Mumbai  September 3, 2013 Last Updated at 19:42 IST
War fears, S&P warning wound markets
While the currency registered its third steepest fall of the financial year on Tuesday, the Bombay Stock Exchange Sensitive Index snapped its four-day winning run by dropping 651.47 points or 3.45% to close at 18,234.66.
The rupee fell 2.6% against the dollar to close at 67.73 after breaching the 68/$ mark at which point the Reserve Bank of India reportedly intervened.
"We have a negative outlook on India. We think the chances of a downgrade in the next one to two years is one out of three," said Kim Eng Tan, an analyst at S&P said at a news briefing in Seoul. Tan called the chances of a downgrade on India higher than on Indonesia where the rupiah fell to a four-year low on Tuesday.
The S&P warning was largely a repeat of what the agency had said in late August, and no missiles were reported to have landed inSyria, but Indian investors were so unnerved that the reports exacerbated a sell-off in the rupee and local stocks. The broader Nifty fell more than 4% at one point.
Foreign Institutional Investors (FIIs) sold their holdings in domestic markets with the news of missile launches in the Mediterranean which resulted in further rise in the price of crude oil. According to currency experts, the rupee is probably heading towards new lows going ahead unless the government announces some concrete measures to revive the economy.
“Markets got jittery about a possible sovereign rating downgrade by S&P. However, the possibility of a downgrade has been around for the past six months,” said Amish Munshi, senior fund manager and head of research-equities, Tata Mutual Fund.
The rupee has emerged as Asia's worst performing currency and since the start of this fiscal it has depreciated by almost 25% against the dollar.
“The domestic woes have emerged stronger; in addition to structural issues revolving around the current account deficit (CAD), now outlook on growth and fiscal deficit is weak pulling in the risk of rating downgrade. RBI's extreme support to rupee through liquidity squeeze, high short term money market rates and foreign exchange swap window to absorb oil demand have made no positive impact on rupee,” said J Moses Harding, executive director and chief business officer at Lakshmi Vilas Bank.
The near-term outlook of the rupee is heavily dependent on the next meeting of the US Fed as the market is concerned about the tapering of quantitative easing.
BS Reporter  |  Mumbai  September 3, 2013 Last Updated at 19:42 IST
War fears, S&P warning wound markets
Rupee breaches 68 intra-day, closes 2.6% lower against dollar; Sensex snaps four-day winning run
“The US Fed meeting in mid-September would define the future course for the rupee. If it is materially more hawkish, the rupee could breach Rs 70 per dollar. Conversely if it is dovish compared to market expectations, then we could even the rupee strengthen,” said Brijen Puri, executive director and head of markets, JP Morgan.
Fund managers and analysts said there was more pain in store for investors, who remained concerned over the stability of the rupee and the slide in economic growth.In the equity markets, stocks slumped tracking the sudden decline in European markets and rise in crude oil. The clarification that the missiles had landed in the Mediterranean Sea and not in Syria helped markets in Europe erase a portion of their losses. But it had little impact on Indian financial markets.
“We expect further downside in the markets from current levels because worsening macro-economic conditions have raised the possibility of a sovereign downgrade,” said Tirthankar Patnaik, director & strategist, Religare Capital MarketsForeign institutional investors (FIIs) net sold shares worth Rs 716.16 crore, while their domestic peers were purchasers to the tune of Rs596 crore on Tuesday, according to provisional data. In August, FIIs had sold shares worth almost Rs 7,500 crore, while domestic institutions bought to the tune of about Rs6,300 crore.
“The outlook for now continues to be cautious and volatility is expected to continue until the rupee stabilises,” said Munshi.Rupee breaches 68 intra-day, closes 2.6% lower against dollar; Sensex snaps four-day winning runThe recovery of the rupee and the equity markets over the last couple of trading sessions has proved to be short lived after Standard & Poor's said there was a more than one-in-three chance of a ratings downgrade for the country and as fears of war in West Asia roiled global markets.

http://www.business-standard.com/article/markets/war-fears-s-p-warning-wound-markets-113090300928_1.html

ALL TROUBLES.....India Inc jittery.....

Clifford Alvares & Dev Chatterjee  |  Mumbai  September 2, 2013 Last Updated at 12:25 IST
Is this the end of the India story?A sagging economy, Indian rupee is making India Inc jitteryWalk into any CEO's office nowadays and one can sense the gloom in the air. Everyone is worried about India right from bankers, economists to corporate leaders both in India and abroad. The signals from India is not very encouraging as Indian companies are making plans to set up shop abroad as things go from bad to worse with the economy and currency. The Indian economy is falling short on just about everything that it needs to do to see it sail through this choppy weather. The latest casualty is the dip in the GDP growth numbers that came in at 4.4% for the first-quarter as against an expected 4.7%. Thirty basis points might not look like a lot when the sailing is smooth, but against the backdrop of slowing numbers, it's a huge set back; and a tremendous under-achievement for a country that was pacing growth at close to 7% even after the Lehman crisis.The shocker has come at an especially fragile moment. Since May this year, the Indian foreign exchange market has been a scene of carnage. Against the once sufficient cushion, millions of foreign exchange reserves have been wiped out as the Indian currency fell from Rs 54 to a dollar to Rs 68 last week. The import cover that finances our food and oil has halved in a few months from 10 months of supply to five. The circulation of money from banks to India Inc and the other way around has been tightened to save therupee, but it leaves businesses and the economy to suffocate slowly.Worried India IncAlmost on a daily basis, corporate leaders are warning that things are getting worse and the government must get its act together.Normally a reclusive, former chairman of Tata group Ratan Tata went public to say that the leadership deficit is aggravating economic problem. Almost all India Inc leaders including Rahul Bajaj, Anand Mahindra, Kiran Majumdar Shaw, Krish Gopalakrishnan, Deepak Parekh have said the government has lost control over the direction of Indian currency and it needs to expedite reforms. A $20 billion bill to feed India’s hungry will further deepen the economic crisis, they say.“I am disappointed not surprised with the way rupee is falling”, says Rahul Bajaj, Chairman of Bajaj Auto and one of Corporate India’s vocal voices. “We are paying for the last four years of inaction and absence of reforms. The government has spent a lot of money in loan waivers, NREGA and Food Security Bill and all these populist measures have now added to the deficit”, he said. “We are not opposing pro-poor moves. We are against populist measures. We should be treating the disease and not the symptom. Now is the time to change policies,” he said.Corporate chiefs raised the alarm bells when the rupee sank to an all-time low of Rs 68 a dollar last week and together echoed a highly critical view of the economy. India, once a poster boy of growth and democracy going hand in hand together, is now losing its gleam in the global economy.Analysts are pondering over the usual questions: How much impact the rupee's fall will have on the Indian economy and companies? How much will the Indian economic growth slowdown? Will there be a revival?But that sidesteps the big picture. Is this the end of the India story?Recession ahead?Interest rates in the short-term are higher than long-term interest rates, and in classical economics when this happens, the yield curve usually points to a recession.Says R Sivakumar, head fixed income, Axis MF: “Whenever the short-term rates shoot up in classical economics, it is usually followed by a recession. There's clearly a case that we should be worrying now.”Everywhere you look, the signs of a tapering growth are visible. Companies that borrowed heavily to build new roads and bridges are being crushed under the burden of heavy debt as revenues taper off and interest costs pile up. Banks are facing the tailwinds of the slowdown as their gross non-performing assets ballooned 75%.It's a bill that could cost India Inc a lot. Any good banker will tell you that rising delinquencies have to be priced into the new loans so that bad loans can be written off. If that happens, the interest rate cycle could be in a prolonged upswing, further jeopardising the recovery.Rising ratesIndian companies are also worried about rising interest rates which has made loans costlier. With the rupee falling, raising dollar bonds is a good option but only for those companies which have sizeable exports.Rising finance costs have made many Indian companies sell assets abroad to recast their loans in India. This includes Videocon selling its oil assets in Mozambique for $2.5 billion, and JSW planning to sell its pipe making unit in the United States. Many other Indian companies are looking at selling assets so that they can pay back loans in India.Delhi-based Jaypee group is close to selling its Gujarat cement units at a discount to the Birlas to cut its massive Rs 59,000 crore of gross debt. DLF and Adani have already sold assets to pay loans early this year.As it is, profit growth in the first quarter for the Nifty companies has slowed down to 4% as against 15% two years ago. Analysts contend that if the high interest rates continue, the Indian economy could be heading for further trouble as companies will not be able to borrow to finance their working capital requirements during the busy season policy that starts around the festive season of October and goes on till March.What's worrying economists and CEOs is the rising fiscal stress that the government finances are going through. On the one hand, India's expenditure is rising and some of it will be fueled by the rising government expenditure. Moody's recently warned that the food security law is negative development for the country's sovereign rating.“The measure is credit negative for the Indian government (Baa3 stable) because it will raise government spending on food subsidies to about 1.2% of GDP (gross domestic product) per year from an estimated 0.8% currently, exacerbating the government’s weak finances.”As if that's not enough, India's current account that was running a surplus of $14 billion in 2003-04 has raked up a deficit of close to $90 billion, and is now equal to nearly 5% of the GDP, twice more than the sustainable levels. Further, FDI has dipped from $48 billion to nearly $27billion last year. Finance minister said that the immediate priority of the government is to contain the fiscal and current account deficits in the current fiscal year to around 4.8% of GDP and the current account deficit at $70 billion this year.But the fiscal deficit numbers in the April to July period is already at 62.8% of the budget estimate and it does not take into account the food subsidy expenditure of food bill and the rupee depreciation impacting the oil imports.On the other hand, the government's income from various sources such as corporate tax has slackened. For instance, corporate tax growth was 2.7%, however, it’s far short of the budgeted growth rate of 17%. Excise duty fell by 18% as against a rise of 17% expected. Analysts expect that it's more than likely that there will be a mismatch in governments finances, which it can ill-afford now. If the income falls short, and expenditure rises, the government runs the risk of clocking a higher deficit by the time the next year's budgets are announced. Rating agencies will be watching these numbers. If there's a sharp deterioration in these numbers, the government might be faced with a default. When the government’s fiscal excesses are accounted for. This would also be the time when the rating agencies would re-assess the Indian government's financial situation. Says Amandeep Chopra, group president, head fixed income, UTI Mutual Fund: “There's an outside chance that India's ratings could downgraded. By the year end we will know how the government can manage its finances and whether there's a risk of a downgrade. But the risk is on the table.” The Indian economy is in a very fragile state. For long, the country has been relying heavily on hot money that chases only yields and is never permanent. Foreign investors will not hesitate to pull out money when the going is tough, and they did. India needs more permanent foreign dollars and that will only come if businesses are allowed to grow and prosper.The road aheadWith a general elections coming, CEOs and analysts are not very optimistic that the Prime Minister Manmohan Singh will be able to get any reforms off the ground. FDI in retail has been a non-starter; no news of hiking FDI in insurance, and there are no takers for FDI in defence.In spite of PMO’s clearance of stalled projects – now at a massive $120 billion – none have taken off so far. Corporates are not bidding for billion dollar infrastructure projects like Sewri-Nhava Sheva sea link project as they say the land acquisition laws and environmental clearances are making projects unviable.The only good news so far this year has been good monsoon rains which will boost agriculture production. Companies, across all sectors, meanwhile, are either cutting jobs or are freezing appointments.  The CEOs are already warning that the lag impact of a falling rupee and rising crude oil prices will stoke inflation."The Indian economy is in a sorry state and we are now paying the price of a confused and conflicted coalition that has prevented any meaningful economic reforms. Added to this is the lack of political will to implement key infrastructure projects in power and transportation, thanks to various green lobbies. Activism rather than evidence/data is driving decision making which is reflective of weak leadership. Any corrective action will only realise results when the next government takes charge," says Kiran Majumdar Shaw, CMD of Biocon.The government officials, meanwhile, are saying that the rupee fall is in line with a similar fall in currency in other emerging markets. The Finance Minister P Chidambaram said the economic growth is still far higher than other countries and government is taking all steps to revive the economy.But, as of now, no one is listening.http://www.business-standard.com/article/companies/is-this-the-end-of-the-india-story-113090200250_1.html

CONSOLIDATION WITH POSITIVE BIAS......

The Sep-13 series opened with high open interest both in Nifty and Bank Nifty. A phenomenal increase seen in OI generated in IDFC and AXIS. The other counters also see some increased activity but the over all positioning favouring the Bulls.The Nifty fell from 6093 on July 23 rd, reached to 5119 on August 28^th. A fall of 974 points. The sharp rise from 5118 to 5493 in 3 days provides some confidence to Bulls to maintain their longs for a sharper short covering rally above 5530 level. The rally may need some extra support from IT and Pharma stocks along with RIL and ONGC.The RIL counter is now in Bull grip so long it trades above 803-809 level. The very sharp recovery from 763 level is a good sign but the Bears could exert press to make the stock to trade below 793 level by cuting the 785 support. The energy sector especially RIL will cross the Yearly high and may lead the rally above 5760, but the catch is it has to trade above 875-83 level comfortably, otherwise the counter may cut the yearly low may not be a surprise.

The counters now favoured by Bulls are metals, Sesa Goa, Cairn, RIL and Pharma lot. The IT sector will test their valuations with their Sep-13 results. TCS has much better scope to rise upto 2240-80 level with ease. HCL tech may touch 1140-60 levels. Infy is finding dificulty to stay above 3120 level may come to 2930-2880 level before they publish the results. In this journey, the ANIL group stocks will be re-rated will out-perform the market by large margin.The Telecom giant Bharti has some issues with the rupee fall but also has the advantage of Dollar earnings like Tata Motors. The M&M is facing the slow down heat may touch 685-640 level. The Tractor division may save but not enough.The ITC and HLL are the prime drivers of earlier rally may now can offer supprt to Bulls but ITC is losing steam to stay above 320 levels.

The ICICI and AXIS counters may see some news based activity in the coming days. The HDFC and HDFC bank also could recover from their lows but still in Bear grip.The Banking counters may once again bring the INSURANCE arms Value-Unlocking on to the table to stop the relentless slide. The SBI may touch 1780 level and other PSUs may follow the suit. The Bank Baroda has lost all supports at 550-600 range now has become a distance dream for the stock to cross the 600 mark. But the stock is consolidating around 430-450 range is a good sign. The BOB counter will see define support at 380 level like PNB. PNB though looks week at 440-450 range will test 365 range but a definite Banking stock to buy at the current prices.The GDP numbers are definitely positive given the agriculture growth. The rural economy will do well in this fiscal year. The problem is the RUPEE depreciation: most probably the GOVT may knock the IMF doors. The way the Rupee battered can through some thoughts on the game plan of  those wild/cruel FIIs and Foreign Banks which are recovering at their end but also need some extra interest on the loan amounts they offer to EMERGING Economies shall yield higher returns. The desperate request from the Indian Govt may leave no bargain space while raising funds. They dictate the “Road Map” of Liberalization at their TERMS.However we can see some good up move on the bourses.

Index Outlook: Poised on the brink...

Index Outlook: Poised on the brink
LOKESHWARRI S. K.The rupee was again at the epicenter of the turmoil last week as it hit an astounding level of 68.8 against the dollar on Wednesday. Equity markets reacted predictably with the Sensex declining to the intra-week low of 17,449, while Nifty declined to 5,119 in that session.
With crude on the boil, the Food Bill threatening to derail the fiscal deficit and the Land Bill spelling further hurdles for infrastructure projects, the markets had little to cheer about last week. It was the derivative expiry that came to the rescue of stock prices, helping the bulls defend the 18,000 bastion in the Sensex.
The week ahead too promises oodles of volatility as the June quarter GDP numbers announced on Friday evening was a shocker. Neither the equity nor the currency market is likely to accept quarterly GDP growth of 4.4 per cent with equanimity. Foreign institutional investors are already appearing quite squeamish and inclined to move towards the exit door.
Net sales by these investors last week was around $400 million. Weak macro numbers could accelerate their selling.
With the US all set to attack Syria by itself, crude prices are going to be impacted next week, which, in turn, can make the rupee gyrate further. In short, an interesting week (as the Chinese mean it) is on the cards.
August was relatively innocuous with just 3.7 per cent lost in the Sensex and 4.7 per cent in Nifty.
We are now in the much-feared month of September, when the FOMC is scheduled to spell out its plan for QE tapering. Equity market is likely to be nervous in the run-up to the meeting that is scheduled on September 18.
The presence of a Fibonacci time-cycle line, at September 2013, also tells us to expect a major reversal in market in this month.
Both the Sensex and the Nifty have closed on a flat note after a volatile week. The formation of yet another hammer formation in the weekly chart is a positive as it implies that buyers are willing to buy at lower levels.
Sensex (18,619.7) Despite the roller-coaster ride witnessed last week, net weekly loss in the Sensex was less than one per cent.
The index is moving sideways in the range of 17,800 and 18,700 over the last two weeks. But as per E-wave counts, we are getting some ominous signs.
The rally that began last week has immediate resistance around 18,560. The index is already past this level.
If it reverses lower before moving above 19,000, it could mean that there can be a steep decline in the offing.
Downward targets in this event will be 16,885 and then 15,777.
Since this will be the third wave down from the 20,351 peak, it can be pretty swift and devastating. The index needs to close above 19,242 to mitigate the bearish short-term outlook.
Nifty (5,471.8)
The Elliott wave pattern on the Nifty too is foreboding to say the least. A zigzag pattern appears complete in the index from the peak of 6,093 recorded in July 2013. If the pull-back since last week is the second wave, it has already achieved its minimum target at 5,493.
Inability to make any progress on Monday morning will mean that the third from the 6,093 is unfolding. This wave has the targets of 4,887 and 4,515. If the index manages to move higher next week, resistances will be at 5,605 and 5,720. Short-term trend will turn positive only on a strong close above 5,720.
The index has already tested the 61.8 per cent retracement of the previous up-move from the December 2011 low.
This support at 5,180 will be the first halt if the index starts sliding next week. If this level is breached, the targets mentioned above will come into play. Since the third leg of any move is the swiftest and deepest, if the index starts sliding early next week, it will mean that the Nifty could be back at its 2011 low before the end of September.
Global cues
Many global benchmarks reversed their short term up-trends last week. All the European, emerging market and the US benchmarks recorded steep declines. CBOE volatility index moved above the medium-term trend deciding level of 16.9 and managed to close above this level for the week.
If the index continues moving above 17, it will mean that the down-trend in US markets is here to stay. The VIX might then be able to move to its June high of 21.9.
The Dow closed 200 points lower last week to end below the key short-term support at 15,000. As indicated earlier, next short-term target for the index is 14,500. The medium-term trend will reverse lower only on a close below 14,500. Next target for the index is 13,700.

lokeshwarri.sk@thehindu.co.in(This article was published on August 31, 2013)

http://www.thehindubusinessline.com/features/investment-world/index-outlook-poised-on-the-brink/article5079647.ece

TATA STEEL ...GLOBAL ADVANTAGE..!!!!

Tata Steel eyes $ 70 bn Thai infrastructure projects
PTI BANGKOK, AUG 21:  Tata Steel Thailand, a major steel producer here, today said it foresees a high demand for its products due to the country’s planned $ 70 billion investment in major infrastructure projects. Tata Steel Thailand (TSTH) President Peeyush Gupta said if the ambitious infrastructure projects were approved, his company “will stand to gain as all these projects need steel and cement“. “We will have two and a half years worth of extra demand being created over a period of seven years,” he told PTI. Gupta said Thailand was a good market to make steel as domestic scrap was available. “With the regional market growing, Tata rebar steel was selling well,” he said, adding that the company had started “cut and bend” steel solutions for construction companies here. TSTH’s big export markets are neighbouring Laos and Cambodia for its rebars and wire rods to Indonesia.
Commenting on the company’s performance, he said the sales were better leading to reduction in inventory. Gupta added that the company had taken the issue with the authorities of China steel flooding the market under the guise of Alloy steel and subsequently being used by the consumers of Carbon steel. Tata Steel produces Carbon steel. The Thai government plans to borrow 2.2 trillion baht ($ 70 billion) to finance four new high-speed train routes and extend mass transit lines in Bangkok. The government also intends to improve water infrastructure to prevent floods like the ones that inundated Bangkok and surrounding areas in 2011. TSTH is the largest producer of long steel products in Thailand with a manufacturing capacity of 1.7 million tonnes per annum. TSTH operates as a holding company with three subsidiaries. Through its subsidiaries, TSTH manufactures rebars, wire rods and small sections. Rebar products comprise round bars and deformed bars for use mainly in the construction industry, including roads, bridges, buildings and houses.
Wire rod products include both low carbon wire rods (LCWR) and high carbon wire rods (HCWR). LCWR products are used as raw materials for construction parts such as binding wire, nails, wire mesh, galvanised wire, barbed wire, welding wire, cold draw wire, and screws and nuts. HCWR products are used as raw materials for manufacturer of pre-stressed concrete (PC) such as PC wires and PC strands, compressing spring, extension spring, torsion spring and sling among others. Small sections products comprise angles and channels, used in roof structures, electricity poles, billboards, etc.
(This article was published on August 21, 2013)
http://www.thehindubusinessline.com/companies/tata-steel-eyes-70-bn-thai-infrastructure-projects/article5045018.ece

Another Asian financial crisis.........SOON!!!!!!!!!

Another Asian financial crisis to hit in next 12-18 months, there's no way FM can stop it now
By Swaminathan S Anklesaria Aiyar, ET Bureau | 29 Aug, 2013, 06.30AM IST

Make no mistake, a second Asian Financial Crisis is on its way. This storm will not blow over soon. It originated in the US, when the Fed proposed to taper and end quantitative easing.The frightening thing is that this will happen in stages over the next 12-18 months, and each turn of the liquidity screw can cause a fresh financial storm. Nothing Chidambaram or Raghuram Rajan says can avert the storm.Learning from the 1997-99 experience, allAsian countries (including India) have built up large forex reserves, reduced leverage compared with 1997, and shifted to floating exchange rates. This makes them far more resilient, so they should not collapse as in 1997-99. But they will suffer severe damage regardless.Depreciation raises the price of all items that can be exported or imported. Estimates differ, but a 10% depreciation probably sucks out 1-1.2% of purchasing power through inflation.At Rs 68 to the dollar, currency depreciation is around 25% since May, implying a loss of purchasing power of 2.5-3% of GDP. That is hugely recessionary. It will be reflected in much higher prices of petroleum products, fertilisers, most commodities, and knock-on transport and material costs.Chidambaram wants people to invest, but the coming recession will induce every corporate to postpone investment. A falling rupee keeps making Indian assets cheaper in dollar terms, so foreigners thinking India has good long-run prospects will wait till the Fed's storm ends.
The fall in purchasing power created by a falling rupee cannot be offset by a huge fiscal and monetary stimulus, as in 2008.
Storm will Continue
Chidambaram has sworn to hold fiscal deficit at 4.8% of GDP. With slowing revenues and rising subsidies, only slashing Plan spending can check fiscal deficit.
Money must be kept tight to check inflation. So, the crashing rupee will generate pro-recessionary fiscal and monetary forces. This in turn means corporate earnings will crash, a good reason to dump shares.Corporates with large unhedged dollar borrowings will suffer huge balancesheet losses, jeopardising banks that have financed them. International rating agencies will have good reasons to downgrade India, worsening the climate further.Rohini Malkani of the finance minstry wrote in this newspaper on Tuesday that using a model based on relative inflation with trading partners, India's equilibrium exchange rate should be the July level of Rs 58-60 to the dollar.Many experts say the rupee has overshot and will come back. Really? Remember the same thing was said about the Indonesian rupiah when it depreciated from 2,500 to 3,000 to the dollar in 1997, but it eventually went all the way to 18,000.Estimates based on fundamentals quickly become meaningless because a crisis changes fundamentals hugely. The crashing rupee has already changed the economy's fundamentals. Do not think that the rupee has just temporarily overshot, and will revert soon to Rs 60 per dollar. The storm is going to continue well into 2014.

http://economictimes.indiatimes.com/opinion/columnists/swaminathan-s-a-aiyar/another-asian-financial-crisis-to-hit-in-next-12-18-months-theres-no-way-fm-can-stop-it-now/articleshow/22128202.cms

INDIA-Land Acquisition Bill

Sreelatha Menon  |  New Delhi  August 30, 2013 Last Updated at 00:35 IST

Things you must know about the Land Acquisition Bill

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012 –

 The Bill will replace the existing Land Acquisition Act, 1894. 

State still holds crucial strings The first steps towards drafting a new Bill that includes relief and rehabilitation (R&R) began under the NDA government a decade earlier. The government fell after readying the R&R policy. The first UPA government introduced two proposed laws in the Lok Sabha in 2007. But these were redrafted after Jairam Ramesh took over as minister for rural development. The present version — The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012 — underlines the government's stated focus on fair compensation rather than fast acquisitionWhen land can be acquired: For private projects, public-private partnerships (PPPs) and for government projects, provided it is for a public purposeWhat is public purpose for land acquisition: Strategic use by the armed forces, paramilitary, state police; for national security; for infrastructure projects, including activities listed under the department of economic affairs (infrastructure section), excluding private hospitals, private education institutions and private hotels; projects related to industrial corridors, mining, national investment and manufacturing zone, sports, healthcare, tourism and space programmes; housing projects for income groups specified by government, projects planned for development of village sites, residential areas for lower income groups in urban areas; projects involving agro-processing, warehousing, cold storage, marketing infrastructure, dairy, fisheries and meat processing cooperativesPre-condition for acquiring: For a private entity or a PPP project, state has to conduct a social impact assessment (SIA) and an environmental impact assessment (EIA), to identify the families who would be affected if land was acquired. The private entity seeking land must then get the consent of 80 per cent of the affected families before it gets the government to acquire land for it. In the case of PPPs, the entity has to secure consent of 70 per cent of affected families. The third condition for getting possession of land acquired through state intervention is payment of compensation and fulfilling of R&R requirementsCompensation package: Up to four times the market value in rural areas and twice the market value in urban areas; the Bill provides compensation to those dependent on the land for livelihood; where acquired land is sold to a third party for a higher price, 40 per cent of the appreciated land value (or profit) will be shared with the original owners. This would be exempt from tax and stamp dutyR&R package: The definition of affected family includes farm labourers, tenants, sharecroppers and workers in the area for three years prior to acquisition. The compensation would be Rs 5 lakh or a job, if available, to the affected family; subsistence allowance of Rs 3,000 a month for one year; miscellaneous allowances of up to Rs 1.25 lakh for each familyDispute authority: A Land Acquisition and Rehabilitation and Resettlement Authority to be establishedRetrospective clause: Applicable on cases where no land acquisition award made. In cases where land was acquired five years ago but no compensation has been paid or no possession happened, the acquisition process to start againLease option: The Bill allows industry to take land on lease, instead of buying. But the decision rests with the state rather than the landownerWhy industry is upset: Make the land acquisition process slower; compensation would raise costs of projects fivefold; retrospective application clause not favourableMulticrop farmland: Irrigated farmland out of acquisition ambit for non-farm uses. But state can decide to what extent farmland should be protected. The farmer does not have any say in the matterProblematic clauses: No guarantee of jobs in R&R package; compensation calculated according to circle rates much less than market prices; no protection to farmland; state government to decide if unused acquired-land should be returned to the farmer or added to its land bank. This applies even if owners return the compensation

http://www.business-standard.com/article/economy-policy/things-you-must-know-about-the-land-acquisition-bill-113082900824_1.html

FIIs - RELENTLESS SELLING

Akash Prakash  |  New Delhi  August 29, 2013 Last Updated at 21:50 IST
Why are FIIs selling?
The catalyst is the run on emerging market equities, but many investors are just tired of waiting for India to get its act togetherSelling by foreign institutional investors (FIIs) has clearly accelerated. Almost $4 billion (Rs 24,000 crore) exited India's equity markets in the past three months. In the last two days alone, global investors sold equities worth over $400 million (Rs 2,400 crore). It is no longer just hedge funds shorting stocks or even selling based on exchange-traded funds. We are now seeing large, long-term capital providers selling down their holdings in India, as evidenced by the price damage in stocks like the HDFC twins, ITC and Sun Pharma.
Why are FIIs giving up on India? Why are they willing to exit now, even though the markets are down over 30 per cent in dollars for the year? It is not because it is hot money, prone to running at the first sign of stress. Instead, investors now finally seem to be throwing in the towel. They are unable to deal with India's volatilityor the need to constantly defend the country internally to an investment committee. Investors fear that a crisis is brewing, thanks to Indian policy makers' inability to bring the situation under control.
First of all, there is great fear surrounding the fiscal deficit given the fact that, in rupee terms, the Indian oil basket (for imports) is at an all-time high. It is inconceivable that Finance Minister P Chidambaram could have any chance of meeting his 4.8 per cent fiscal target. Oil and fertiliser subsidies have multiplied. The projected revenue targets seem unrealistic (tax revenue is already down to single-digit growth) and the revenues projected from disinvestment and spectrum sale are nowhere in sight. Moreover, the food security Bill will only add to the burden.
Yet, the finance minister will have to deliver on the fiscal target to avoid a ratings downgrade. The road to a ratings downgrade is a path no one wants to even contemplate. The only route open to him to meet the deficit target is to once again savagely chop all Plan expenditure, as he did in 2012-13. Yet, if he slashes Plan expenditure, how will we get the push to kick-start investment? There is absolutely no confidence, balance sheet strength or willingness on the part of the private sector to make fresh investments in the country. So the investment cycle can only be kick-started by the government. But if we are going to slash Plan expenditure, this push to investment cannot happen. The skewed mix of growth (consumption at the cost of investment) will also remain unchanged, and surely there are limits to how long this growth imbalance can continue. India's problem is more supply-side than demand-side, and a savage cutting of Plan expenditure will do nothing to remedy the supply-side issues. Without a push from the public sector, we will remain stuck at five per cent growth.
Investors also worry about inflation. Any attempt to cut fuel subsidies will lead to a spike in inflation, as we align diesel prices to global levels. Besides, rising prices of imported coal will also cascade through the system. And what if China starts recovering and commodity prices move up in tandem? Imported inflation is going to be a major issue; it seriously reduces any space the central bank may have to cut rates. Again, without rate cuts, how will we get the economy moving again?
The banking system is a huge pain point. Financial stocks were over-owned and have got battered in the last three weeks. None of the banks had expected the reversal in interest rates and the tightening of short-term liquidity (to defend the rupee) engineered by the Reserve Bank of India (RBI). Consequently, we have huge marked-to-market losses of almost Rs 40,000 crore on the portfolio of government securities the banking system holds. Add to these the losses on corporate bond portfolios. Asset quality continues to deteriorate. Also, now that the rupee is near 70, more than a few large groups are in stress on their unhedged foreign currency borrowings. The RBI has already given some dispensation and will have to give more to allow banks to not report these large marked-to-market bond losses. One should also expect the RBI to be lenient on restructuring and recognising non-performing assets. "Extend and pretend" will have to be the mantra, so that there is no loss of confidence in the banking system. Banks' net interest margins are also under pressure since wholesale funding costs have moved to 10.5 to 11 per cent. System credit growth is, at best, going to be 12 to 13 per cent. Investors are beginning to look through all the regulatory dispensation and focus on economic earnings, which do not look pretty.
The government lacks credibility in the eyes of investors. The finance minister, in trying to get the economy out of its funk, continues to cut a lonely figure. No one else in government seems to have any sense of urgency as to how close to the edge we are.
It is amazing that no public sector undertaking has yet tapped global capital markets. What are we waiting for? If the rupee keeps sliding, the markets may shut for Indian paper. We cannot wait for weeks for boards to meet - the Indian government is the majority owner, and it should act. Why are we delaying putting in place swap lines and non-resident Indian bonds? To stabilise the rupee in the short term, we need to rebuild confidence. The markets are still open for India to access capital, but this can change quickly.
On politics, it is amazing that the only thing to have come out of the monsoon session of Parliament so far is the food security Bill. Political parties cannot agree on the goods and services tax; coal block auctions; pension and insurance reforms; environmental issues or foreign direct investment; and judicial, police and governance reforms. There is, however, unanimity on the food security Bill. The Bharatiya Janata Party and Narendra Modi even wanted to universalise the legislation and raise the amount of grain to the poor to 35 kilogrammes. Investors are questioning the political class' priorities and the willingness to appear populist at any cost. What about jobs and income growth? Are these factors not politically relevant? No one seems capable of looking beyond populism and hand-outs, let alone improving governance and carrying out structural reforms to regain growth. The political system in India seems either incapable or uninterested when it comes to taking tough decisions. Why invest in a country where the entire political system seems to be in denial?
Investors are beginning to lose hope and give up on the country. Redemptions out of the emerging market equity asset class are the catalyst, but many are just tired of waiting for India to get its act together. With zero returns in dollars over a five-year period, many are asking how much longer they are expected to wait to see positive numbers.
Nothing they see inspires confidence. Growth is slowing; inflation and the fiscal deficit remain high; the government lacks co-ordination; and there seems to be no end to India's currency woes. We should maybe hope for another crisis in the West. That could perhaps give us the breathing space to continue.

http://www.business-standard.com/article/opinion/why-are-fiis-selling-113082901166_1.html