A boon for Zinc....!!!

Mine closures – a boon for zinc

NAVEEN MATHUR

September 23, 2014:  

Zinc is used principally for galvanising iron and more than 50 per cent of metallic zinc goes into galvanising steel.

Zinc is the primary metal used in making American pennies and rising prices of this bluish-white metal this year have forced the US Mint to reduce manufacturing costs to offset higher prices.

Zinc prices have soared to three-year highs in 2014 on intensifying deficit in the global market as one of the biggest mines, Century open pit in Australia, is due for closure next year and the delayed start of its Dugald River project. MMG’s Century mine is expected to run dry in 2015, removing about 5 per cent of global supply.

Several large, aging mines are also scheduled to close next year as miners need higher prices to justify the cost of finding and developing new sources of metal. Miners may not produce enough zinc to meet the needs of steel companies and coin-makers until 2018. Owing to this, zinc production is expected to fall short of demand this year for the first time since 2007.

According to the Lisbon-based International Lead and Zinc Study Group, zinc demand is up 7.7 per cent globally in the first six months of this year to 6.8 million tonnes. As a result, users are drawing on stockpiles of the metal to make up for production shortfalls.

Supplies of the metal in LME-licensed warehouses fell to a three-and-a half- year-low in July, and are down 15 per cent this year. The warehouses contain enough zinc to meet 19 days of demand, down from 24 days at the start of the year.

Chinese factor

Moreover, China’s MMG Ltd, owner of the world’s third-biggest zinc mine, said the global deficit in the metal had increased faster than expected, spurred partly by demand growth in China to rust-proof steel for cars. Chinese demand had picked up as companies sought galvanising technology, following a push by the International Zinc Association to tout the benefits of coating steel with zinc to prevent rust.

As a result of this, Chinese imports of refined zinc have jumped by 39.3 per cent through July, given the solid underlying demand growth, up about 7 per cent in 2014, boosted by strong auto production (+9.4 per cent year to date), rising content of galvanised steel in cars to prevent rust.

After a surplus of six years, supplies of the metal would be in deficit this year, coinciding with world major economies struggling for a breakout from recession, propelled by forecasts of annual demand growth of five-six per cent.

The Zinc study group has estimated that demand for zinc exceeded output by 248,000 tonnes in 2014 through July’14, compared with a 15,000-tonne production surplus in the same period a year earlier.

Prices to rise

Strong demand growth at a time when a number of big mines are approaching the end of their lives will lead to increase in physical deficit and a rundown in stocks at registered LME and Shanghai warehouses, thereby boosting prices further.

For the coming months, prices will continue to surge as some of the world’s largest zinc mines run dry just amidst spurt in demand.

In addition, MMG Ltd, which owns Century, had planned to open a new mine in Australia next year, but it’s being delayed back to late 2016 due to technical issues. This will fuel supply concerns.

However, higher shipments from China, the world's top consumer and producer of refined zinc, in the fourth quarter as tight credit crimps domestic demand at a time of increased imports to LME warehouses in Asia could cap LME zinc prices, which gained around eight per cent this year.

LME Zinc (CMP: $2,222) prices can head higher towards $2,500/tonne, while zinc on the MCX (₹135.5) can head higher towards ₹152/kg.

The writer is Associate Director-Commodities & Currencies, Angel Commodity Broking. Views are personal.

(This article was published on September 23, 2014)

BANKS SEE GOOD FUTURE...!!!

Here's why banks will rally againBroking firm Jefferies says Indian financial system is now flooded with the kind of liquidity witnessed in 2005-07 and 2009-10Shishir Asthana  |  Mumbai  

September 22, 2014 Last Updated at 18:22 IST

Recently announced non-food credit and GDP data suggested that India is on the path of a credit-less growth. While some businesses are starving for low-cost funds, banks are flushed with liquidity, prompting them to cut down interest rates on deposits.

None of this seems to bother analysts who continue to remain bullish on the sector. Morgan Stanley in a report titled ‘Correction: The upcoming second leg of bank rallies’ says Indian banks have rallied nearly 42% on a year-to-date basis mainly on account of growing confidence in the Indian economy which would in-turn improve asset quality. But the next leg of stock performance will be fundamental driven asloan growth picks up.

Morgan Stanley says that historically bank stocks have rallied in two cycles. Indian banks are currently in the transition phase between the two cycles. The first leg is driven by expectations around better asset quality. The second and more sustained leg is driven by a loan growth pick-up, which sets an earnings upgrade cycle in motion. Banks now have the liquidity to fuel the next round of growth.
Broking firm Jefferies says Indian financial system is now flooded with the kind of liquidity witnessed in 2005-07 and 2009-10. Ample liquidity and lower overnight rates are also showing up in falling risk spreads - BBB-minus bonds are now at their lowest levels. Both commercial paper and certificate of deposit markets are showing signs of life and no liquidity stress.
Several banks have cut home loan rates. If allowed, this trend will be seen across products and in banks' Base Rate sooner than later. Banks, it seems, are waiting for a signal from the central bank to announce a rate cut. As reported in Business Standard in a recent interaction between members of the banking community and RBI, lenders have asked the central bank to cut repo rate to spur loan growth.

RBI Governor has however ruled out any reduction in interest rate in the month-end monetary policy announcement. Analysts are expecting a rate cut from the central bank to take place sometime in 2015. A Bank of America Merrill Lynch report says that a supportive Balance of Payment situation and a stable rupee – though on account of low gold and oil prices should see the central bank reducing interest rates by around 75 basis points in 2015.

Banks however, are now facing a problem of plenty. Liquidity is at such high levels that the amount the banking system needs to borrow from the Central Bank through Liquidity Adjustment Facility (LAF) and other windows (term repos, Marginal Standing Facility or MSF) has declined, reaching near zero, says Jefferies. Without a significant RBI intervention, it is quite possible that the net liquidity balances slip back in to the negative territory or a surplus.

Morgan Stanley says that a capex cycle is needed for loan growth to go back to more than 20 per cent levels, from the current levels of less than 10 per cent. This looks tough in the near term and might happen over the next 1-2 years. However, Morgan Stanley feels retail to be strong and SME (small and medium enterprises) working capital demand to pick up – helping system loan growth to trend to 15% by FY15. This will drive the second leg of this rally.

PSU-BANKS NEED --$ 37 bn

State-run banks in India need $37 bn in fresh capital to meet Basel III: Moody's

Press Trust of India | Mumbai | Updated: Sep 22 2014, 17:03 IST

Public sector banks in India will need to raise up to $37 billion over the next 4-5 years to meet Basel III compliance norms, credit rating agency Moody's said today.

The estimate is based on assumptions that there would be a moderate recovery in the Indian economy and a gradual decline in the non-performing loans from the current levels.

"Our rated public-sector banks in the country will need to raise Rs 1.5-2.2 trillion, (USD 26-37 billion) between FY15 and the full implementation of Basel III in FY19," Moody's said in a report titled, 'Indian banks could need USD 26-37 billion in external capital for Basel III compliance'.

A significant part of the required capital-- Rs 800-900 billion (USD 13-15 billion) -- could be in the form of additional tier I (AT1) capital.

The rating agency rates 11 public sector banks in the country, representing 62 per cent of net loans in the banking system.

Basel III raises the minimum required levels for both total tier I capital to 7 per cent and common equity tier I (CETI) capital to 5.5 per cent. They will also need to meet a capital conservation buffer in order to pay dividends.

"Public sector banks barely meet current minimum capital requirements, and we anticipate that they will find it difficult to raise capital quickly in the current environment," Moody's vice-president Gene Fang said.

According to Moody's, low capital levels remain a key credit weakness for the public-sector banks.

Fang said weak asset quality has depressed profitability and internal capital generation, leaving public-sector banks reliant on periodic capital injections from the government.

"With Prime Minister Narendra Modi's administration looking to reduce the budget deficit, the amount available for such injections is not likely to grow," he added.

Moody's said banks may tap the equity markets to raise capital, but with still-low bank valuations, banks could struggle to raise the required amount.

http://www.financialexpress.com/news/staterun-banks-in-india-need-37-bn-in-fresh-capital-to-meet-basel-iii-moodys/1291618

CHINA INVESTMENT- $20 bn over 5 years...!!!

President Pranab Mukherjee, Chinese President Xi Jinping and Prime Minister Narendra Modi and Xi's wife Peng Liyuan during a ceremonial reception at Rashtrapati Bhawan in New Delhi

The expectation of a $100-billion Chinese investment in India got reduced on Thursday as the country committed itself to investing only $20 billion here over five years. The issue of border tension between India and China also came up during Chinese President Xi Jinping’s meeting with Prime Minister Narendra Modi, on the second day of the former’s maiden visit to the country.

Modi, though, did not harp much on the issue of defining the line of actual control (LAC) and incursions as strongly as was expected, a top official in the know of what transpired behind closed doors told Business Standard.

Modi had appeared unusually relaxed in a beige kurta and an off-white Nehru jacket as he sat for the much-awaited bilateral talks with an exuberant Xi at the swish Hyderabad House here.

The prime minister said it was imperative to settle the issue of border dispute soon, as that would help gain mutual trust and confidence. “Clarification of LACwill greatly contribute to our efforts to maintain peace and tranquility. We should seek an early settlement of the boundary question,” Modi said, adding in the same breath, border-related agreements and confidence-building measures between the two sides “worked well”.

Many said the new stance — without the usual rhetoric, in a departure from the practice of previous prime ministers — signalled pragmatism. According to another official, Modi was “determined” that this time he would show the Chinese government that India meant business and not just crying foul over border issues.

On his part, Xi said many incursions took place due to non-demarcation of the border. “China has the determination to work with India through friendly consultation to settle the boundary question at an early date.”

He also said China believed in having “peace and harmony” with its neighbours and would be ready to support India’s permanent membership to the United Nations Security Council, provided the border dispute was settled. “We will support India’s seat in the UN Security Council. But both neighbours might have to encounter some problems before that. We would first like to settle the border issue in a way that is fair, mutual and acceptable to both,” Xi said while addressing an event organised by the Indian Council of World Affairs (ICWA).

Apart from signing as many as 15 memoranda of understanding (MoUs) over two days — plus the 27 that were signed among private firms of both countries — China committed itself to investing $20 billion in India over five years across all sectors of the economy.

Earlier, there were reports that China might commit $100 billion worth of investments in India’s infrastructure development, though there was no official word from Beijing. Had it been so, the Chinese commitment would have been more than the $35 billion promised by Japan during Modi’s recent visit to Tokyo.    

Ahead of Xi’s visit, Chinese embassy officials had briefed Indian scholars that the investment promised would be $100 billion. How this figure came down to $20 billion remained a mystery, the scholars confessed.

The $55 billion investment by Japan and China is 5.13 per cent of the $1.07 trillion the Confederation of Indian Industry reckons India would need to build its infrastructure over the 2014-19 period. The Chinese commitment is 1.86 per cent of this requirement.

In the past 10 years, China has invested $400 million in India. “We agreed that our economic relations did not do justice to our potential. I expressed concern over the slowdown in trade and the worsening trade imbalance. I sought his partnership in improving market access and investment opportunities for Indian companies in China. President Xi assured me of his commitment to taking concrete steps to address our concerns. I have invited Chinese investments in India's infrastructure and manufacturing sectors. I also apprised him about our new policies and administrative steps in this area,” Modi said after his meeting with Xi.

China said it would set up two industrial parks — one each in Gujarat and Maharashtra — which would act as both manufacturing and export hubs. The initial plan is to manufacture power equipment and then gradually expand to making electronic goods and telecom equipment. These parks are expected to be spread over 1,250 acres.

China will also actively participate in developing the country’s rusty rail network. For this, the Chinese seem to have developed a two-pronged strategy. On the one hand, they will increase speed on the existing railway line from Chennai to Mysore via Bangalore, with the Chinese side providing training in heavy haul for 100 Indian Railway officials. On the other, the two sides will cooperate in areas like redevelopment of existing railway stations and setting up of a railway university here. India is also considering cooperating with China on a high-speed rail project.

According to Modi, these measures would open a “new chapter in our economic relations”. He later tweeted a wide range of issues were discussed over two days and both countries decided to “deepen the engagement”.

The issue of soaring trade deficit was highlighted by Modi in the strongest terms possible, sources said. The prime minister also sought improved access to Chinese markets for Indian products and easy investment opportunities for Indian companies.

An agreement was signed between Commerce & Industry Minister Nirmala Sitharaman and her Chinese counterpart Gao Hucheng to address the problem of trade deficit by giving enhanced market access to Indian agricultural and pharmaceutical products, besides services. Ronen Sen, India's former ambassador to the US, said the Xi visit had changed the tone of India-China bilateral relationship. “We should stop looking at China from the way we used to. Today, trade and investments have become an integral part of the bilateral relationship. We need to economically integrate with them more, for our own benefit. We should, as Prime Minister Modi this time rightly did, change the predictability factor in our bilateral ties,” Sen said.

Earlier in the day, Chief of Army Staff Dalbir Singh Suhag and other generals had gone armed with detailed maps ahead of Defence Minister Arun Jaitley’s participation in a meeting with Xi. They had briefed the minister on the standoff in Chumar and about the ground situation on the demarcation of the border along the LAC.

MAJOR AGREEMENTS

India and China agree to resolve border dispute and define the Line of Actual Control soon Both sides agree to look at greater cooperation on the issue of shared rivers Take positive steps towards rebalancing bilateral trade and addressing the existing structural imbalance in trade China to set up two industrial parks for 1,250 acres each in Gujarat and Maharashtra China to invest $20 billion in various industrial and infrastructure development projects Increase speed on the existing railway line from Chennai to Mysore via Bangalore Chinese side will provide training in heavy haul for 100 Indian Railway officials Cooperation in High Speed Rail project Annual visits at the level of Heads of State/Government City in each country would be identified for a smart city demonstration project BCIM (Bangladesh, China, India, Myanmar) Economic Corridor to be expedited Chinese side decided to open a new route for the Mansarovar Yatra through Nathu La Pass China will be the partner country at the Delhi International Book Fair 2016.

ACTION ‘PACT’ DAY Documents signed between India & China on Thursday

MoU on new route for Mansarovar pilgrimage MoU to strengthen cooperation in railways Action plan for cooperation in railway projects Trade and economic development plan (includes $20-billion Chinese investment over five years) Agreement on minutes of the 10th session of India-China joint economic group, for specific measures to enhance market access to Indian agricultural and pharma products, besides services Agreement for audio-visual co-production Agreement for cooperation in Customs Agreement for peaceful use of space Agreement for cooperation between cultural institutions MoU for book fairs, etc Work plan for cooperation in pharma standards, traditional medicine and drug testing Agreement for sister city relationship between Mumbai and Shanghai

http://www.business-standard.com/article/economy-policy/china-dashes-100-bn-hope-to-invest-20-bn-over-5-years-114091800557_1.html

===========

THE STORY OF OVER 5 YEARS IS NOT A VISIBLE SIGN AS WE DON"T TRUST EACH OTHER....

THE 12 AGREEMENTS ARE NOT IN SPECIFIC PROJECT PROPOSALS BUT FOR CONFIDENCE BUILDING ONE....

THE PM's JAPAN VISIT IS MORE CONSTRUCTIVE THAN THIS ONE...

ANY ONE THING IS SURE THAT OUR INFRA STRUCTURE FUNDING NEEDED IS THAT THE REQUIREMENT IS $1.07 trillion the Confederation of Indian Industry reckons India would need to build its infrastructure over the 2014-19 period, SO EVEN IF WE GARNER ONE THIRD IS MORE THAN 300 BILLION DOLLARS...HUGE POTENTIAL TO INFRA COMPANIES.....BET ON ...SELECTIVELY...!!!
THE UTILITIES LIKE CEMENT, STEEL, CONSTRUCTION EQUIPMENT AND OTHER SERVICES WILL SEE BRIGHT FUTURE..!!!

Sensex still 20% from all time highs...Dollar-adjusted one...!!!

Dollar-adjusted Sensex still 20% from all time highs
Currency has depreciated from around Rs 40 to Rs 60 since previous high in 2008Sachin P Mampatta  |  Mumbai  

September 18, 2014 Last Updated at 12:44 IST

The The S&P BSE Dollex 30, an index which looks at Sensex returns adjusted for changes in the dollar exchange rate, is currently at 3,626.08.
The highest level for the index was 4,365. It will need to gain another 738.92 points or more than 20% to reach its previous all time highs. The Sensex has been touching new all-time highs repeatedly. It crossed the 27,000 mark earlier in the month.
The difference between the two indices is because of the difference in exchange rates during the two times. The going rate for a dollar during January 2008 was around the Rs 40. This is now near Rs 61, a 50% difference.
While a falling rupee erodes the gains of existing foreign investors, it makes Indian stocks cheaper for fresh money.
Foreign institutional investors or FIIs(now called Foreign Portfolio Investors or FPIs) have been net buyers in Indian equities by over Rs 84,000 crore in this calendar year.  Theseforeign flows are expected to continue to be strong, according to Karvy Stock Broking's 'India Equity:Diwali Strategy' note
"The revival in global risk appetite has resulted in fresh FIIinflows into emerging market equities with India turning out to be a big beneficiary. India has been one of the top performing equity markets since January this year with fresh equity inflows of 12.5 billion dollars. We expect the remaining months of this fiscal to witness similar amount of inflows," it said.

http://www.business-standard.com/article/markets/dollar-adjusted-sensex-still-20-from-all-time-highs-114091800331_1.html

NIFTY AT CROSS ROADS...

THE STORY OF FAITH AND POSITIVE BUSINESS ENVIRONMENT IS WANING FAST AS THE OTHER DEVELOPMENTS ARE POSTPONING THE FUTURE COURSE OF ACTION AT THE GOVT. LEVEL.

THE SUPREME COURT JUDGEMENT MAY NOW BE DISCOUNTED BUT WILL BE POSITIVE BOTH TO CORPORATE SECTOR AND THE BUREAUCRACY.....

NOW MARKETS ARE TECHNICALLY AT THE CRUCIAL JUNCTURE AS THE 8030-42 RANGE WAS BROKEN DECISIVELY. NOW THE RELIEF RALLY FAILS TO CROSS 8072 LEVEL IS A SERIOUS THREAT TO BULLS. THE CONTINUOUS UNWINDING IS MAKING NERVOUS TO NEW BUYERS AS THE DEEP-POCKETS ARE SELLING THEIR LONGS....

THE FALL STARTED FROM 8-14 AUGUST, THE JP ASSOCIATES MASSACRE BUT MANAGED TO STOP THE WILD FIRE SPREAD, TOOK SMALL CAP PHENOMENAL RISE AS GUARD TO KEEP THE RETAIL INVESTOR INTEREST INTACT...

THE BOTTOM SUPPORTS ARE FAR AWAY AS THE NIFTY CAN DANCE A WHILE AT EACH SUPPORT LEVEL AT 7800, 7480 BUT THE SOLID SUPPORT WILL COME WHEN IT TOUCHES 7200 RANGE...CAN WE EXPECT FAST...IS IT ACCEPTABLE...!!!...NO...SIMPLY GRINDING LOWER AND LOWER......

THE TEST OF BOTTOM CAN BE ASCERTAINED WHEN YES BANK TOUCHES 420-430 RANGE, ICICI TOUCHES 1240-1180 RANGE.... AND THE BANK NIFTY WILL FIND SUPPORT AT 12500-800 LEVEL....
THE SEPTEMBER RESULTS, OCTOBER POLL RESULTS WILL ADD WAIT ON RISE RATHER THAN SUPPORT TO BULLS..SO TILL BUDGET...SIMPLY WAIT FOR LONG-TERM INVESTMENT...

Truant monsoon -11 % DEFICIT..!!!

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

INDUSTRIAL GROWTH CONCERNS...!!!

Industrial growth falters

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

BS Reporter  |  New Delhi  

September 13, 2014 Last Updated at 00:40 IST

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

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

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

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

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

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

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

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

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

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

OTHER INDICATORS

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

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

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

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

Puneet Wadhwa  |  New Delhi  

September 10, 2014 Last Updated at 22:47 IST

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NPA's haunt banks...

Loan quality pressure continues to haunt banks

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

(This article was published on September 6, 2014)

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

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

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

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