Sensex and Nifty recorded 1.5 week highest

Indian markets surged highest in one and a half week as steep growth in banks pushed up the benchmark indices. S&P BSE Sensex opened 205.40 points up at 25846.96 and the Nifty rose 54.15 points or 0.71 percent at 7718.05. Major reasons buckling up the markets include higher foreign investments and improved monsoon reviews.

 

Foreign portfolio investors (FPIs) invested in Indian shares worth a net Rs 574.47 crore on Friday, 18 July 2014, as per provisional data from the stock exchanges.

Union Minister of State (MoS) Science and Technology (Independent Charge), Earth Sciences (Independent Charge), MoS in Prime Minister's Office (PMO), Department of Personnel and Training, Atomic Energy, Space and Earth Sciences, Dr. Jitendra Singh said on Sunday, 20 July 2014, "There has been significant increase in the monsoon during the last one week beginning from 13 July 2014." He added that although rains during the month of June and first two weeks of July, recorded deficiency of 43%, in the week beginning 13 July 2014, the figures contracted to 32%, recording 11% improvement in the monsoon level." 

The monsoon forecast for next two weeks is very good, particularly in Central India and coastal regions of South India. There is, therefore, no reason to unnecessarily alarmist on the issue of monsoon, Dr. Singh said

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee swung with an average at 60.20, compared with its close of 60.275 on Friday, 18 July 2014.

The market pulse stayed positive as the gainers showed up for every loser on BSE. In figures, 1,439 shares surged and 405 slugged.

BSE Mid-Cap index climbed 1.2 percent and BSE Small-Cap index jumped 1.31 percent in the morning report. Both the indices exceeded predictions indicating healthy strong potential growth in the market.

Stocks in the Asian market poised the growth trend with optimistic foreign portfolio investors walking in and improved monsoon predictions as rains hit towns boosting domestic stock exchanges. Key benchmark indices in Taiwan, Singapore, Indonesia, Hong Kong, and South Korea rose by 0.01% to 0.7%. China's Shanghai Composite fell 0.18%.

Shares of Banking sector pushed up domestic growth channels. Axis Bank set a new record in its portfolio hitting highest values ever. Axis Bank climbed 0.98 percent to Rs 2,015.65 after hitting record high of Rs 2,022.65 in intra-day trade.

Kotak Mahindra Bank announced its entrant in Share Purchase Agreement with FTIL purchasing 76.49 lakh shares aggregating to 15 percent equity stake in Multi Commodity Exchange of India (MCX) for Rs 459 crore. Though, the final closing is waiting for regulatory approvals. Kotak gained 2.63 percent as the news came into light.

ICICI Bank moved up 0.72 percent, IndusInd Bank hiked 1.38 percent, Yes Bank surged 1.09 percent, and Federal Bank climbed 1.11 percent.

HDFC Bank boosted 1.52 percent ahead of its Q1 results today, 21 July 2014. After first quarter results, the bank grew further up 129.58 points or 0.51%, off close to 90 points from the day's high and up about 40 points from the day's low.

Among PSU bank stocks, State Bank of India (SBI) stepped up 2.34 percent, Canara Bank walked up 2.48 percent, Union Bank of India rose 1.53 percent, Bank of India climbed 1.12 percent, Bank of Baroda jumped 1.03 percent and Punjab National Bank gained 0.89 percent.

Trading in US index futures indicated that the Dow predict falling 11 points at the opening bell on Monday, 21 July 2014. US stocks grew on Friday, 18 July 2014, where better earnings from Google Inc., the world's third-largest company, refocused investors on economic growth amid crises in the Middle East and Ukraine. 

 

RBI modifies payment bank guidelines

The central banking authority of India drafted modification in the guidelines for setting up a payment bank. New guidelines ease the procedure widening reach to every individual having minimum 10 years experience in financial or banking sector. The payment bank must hold two conditions, first minimum paid up capital of Rs 100 crore, second individual founder's contribution minimum 40 percent. 

India central bank, Reserve Bank of India proposed allowing everyone including super-market chains and telemarketing companies, anyone with any kind of experience of financial markets to set up a payment bank.

"Existing non-bank pre-paid instrument issuers (PPIs), non-banking finance companies (NBFCs), corporate BCs, mobile telephone companies, super-market chains, companies, real sector cooperatives, and public sector entities are eligible to set up a payments bank," according to notification issued by the RBI.

Issuance of license for payment bank have to fit the preset criterion. There will be no flexibility in cases if any of credentials are lacking. RBI stated, "we are analyzing eligibility of individuals their past records of integrity, credentials, track record and financial soundness of least five years working of their businesses."

RBI holds both the conditions of minimum contribution and minimum paid up capital mentioned above for sanctioning a payment bank license.  After commencement of business of the bank, certain a time-line following the percentile of shareholdings by the promoter. In the first three years, shareholdings of the promoters  come down to 40 per cent, further 10 percent down to 30 percent in a period of 10 years, and to 26 per cent within 12 years (Computation of years from the date of commencement of the bank).

RBI said, "both payment banks and small banks are "niche" or "differentiated" banks, having similar objective of facilitating financial involvement".

Structure of small banks is accommodating all the basic banking services like deposits and supply of credit in a limited area of functioning.

From expansion point of view, payment banks with limited products in banking have access to a wider network of access points especially remote areas, either through their own branch network or through Business Correspondents (BCs) or through networks provided by others.

The first two differentiated bank licenses issued in April after a decade of the promises made to the sector. The ruling government in 2004 brought up hopes of interested investors but did not issue any license until Modi government took over the charge of governance in India.

RBI disclosed its future planning would involve reforming licensing exercise based on the learned experience it gets from the revised guidelines for differentiated small banks. 

The central bank said it would make suitable changes to the current regulations and put in place a structure for on-tap authorization of universal banks in the private sector in the current financial year itself.

Small banks and other differentiated banks serving niche interests, local area banks, payment banks etc are meeting the demands of credit and remittance of small businesses, unorganized sector, low-income households, farmers and migrant work force, RBI stated.

RBI sought views and comments on the proposed guidelines from all interested parties and general public, latest by 28 August 2014.

FTIL Cuts 4% Stake in MCX, Now Holds 20%

Promoter of Multi Commodity Exchange of India Ltd (MCX), Financial Technologies India Ltd. (FTIL) reduced its stake in MCX to 20 percent base value on Thursday. 

FTIL sold off shares having 4 percent stake at the company. MCX's four percent stake accounted for 20,40,901 shares holding worth of Rs 154 crore. 

Dissolution of the shares took open market route as disclosed by stock exchanges. The average price of shares is estimating to Rs. 752.83 per share since overall valuation of the stake computed is Rs 153.64 crore. 

Identity of buyer (s) is anonymous as it is not possible to trace them immediately. During the sale proceedings, the interested buyers and highest bidders were Reliance Capital and Kotak Group. Jigesh Shah, the promoter of FTIL in MCX, owned  24 percent stake in MCX before the proceedings. He decided to reduce the stake to 20 percent after thinking on all the aspects. 

A problematic scenario hit the stake sale when bidders exclaimed full disclosure demanding "special audit" reports of MCX. However, the selling procedure was successful, resulting in closing FTIL shareholdings at 20 percent. 

The 20 percent stake FTIL holds at MCX is promoting locked in amount which cannot be sold off by the promoter till March 2015. SEBI ICDR regulation 2009 disallowed divestment of promoter's contribution for the locked in period agreement signed at the time of investments.

Prior to this sale hitting rock bottom value of 20 percent minimum contribution holdings by FTIL, earlier in the month FTIL held 26 percent stake. In the previous week, FTIL offloaded 2 percent stake in MCX. Expert investor Rakesh Jhunjhunwala grabbed the opportunity pulling in shares in his portfolio.

In December, commodity markets regulator Forward Markets Commission (FMC) called off FTIL from running any exchange after the Rs 5,600 crore payment crisis at group company National Spot Exchange Ltd (NSEL). The regulator ordered FTIL to decline its stake in MCX to 2 per cent from 26 per cent.

The MCX counter fell by 2.5 per cent at Rs 749.75 on the BSE, whose main index jumped 321 points today. On the other hand FTIL counter climbed 10 percent at Rs 286.05. 

Indian exports exceed 10.2%; Economy rebounds

India's merchandise exports exceeded the extension by more than 10 percent according to the latest reports of June, successive second month increase. The optimistic signals of reviving Indian economy are confirming with double-digit growth in the exports.

Export data presented in May bumped up 12.4 percent surprising the world after 5.3 percent recorded growth in April. The suspicious rebounding confirmed with June exports reporting at 10.2 percent higher compared to last year figures. The cumulative amount jumped to $26.48 billion in June end.

The trade ministry explored imports which climbed up 8.3 percent after May's downfall at 11.4 percent. The latest figure of imports stood at $38.24 billion. Trade deficit is fluctuating since April but overall on a stand figure around $ 11.5 billion.

Trade deficit hiked by $0.46 billion year on year basis in June, May trade deficit was lower than last year's June closing. Interpretation shows increase in imports is the basic reason for widening trade deficit and rising exports are clearly showing improvement in the performance of Indian economy.

"The whole gamut of data announced lately points to one thing, which is that an economic recovery is already under way and the pace will strengthen going forward," said Sujit Kumar, an economist at Union Bank of India. "What has mainly anchored India's exports is a recovery in India's main trading partner nations such as the U.S., some African and even South Asian economies."

Data over the past week disclosed that India's industrial output reached to a 19-month high, and on the other hand consumer inflation dipped to its lowest level in more than two years. After the tough time India has been through in the preceding two fiscal years of declining growth and rising prices, finally positive signals are coming after the new government took over. 

Narendra Modi is holding up hopes of investors who are willing to see pro-growth policies from the ruling government. Since Modi took charge of governance in the country in May, he fought inflation and invited foreign investments bringing up the markets.

One negative combat for Indian economy came in the form of soaring gold imports at 65 percent touching a margin of $3.1 billion in June. Rising imports are inflicting fear concerning the expansion in India's current account deficit. 

Expectations that the government might come back with some of the measures it took last year to curb gold imports are speculating further jump in gold imports. 

The government added an import tax on gold and imposed other restrictions on the import of the precious metal.

 

 

Reliance owes another $579 billion as penalty

The new-government of India charged Reliance Industries Ltd. (RIL) another Rs 3,474 crore (at the rate of 1 USD= Rs 60, i.e. $579 billion) more for under performing. RIL failed to reach the target of Andhra offshore field to keep the plant functioning profitably. The company is missing the production commitment since the last four fiscal years in a row starting April 1, 2010. 

India's biggest private oil company is due on paying Rs 14,200 crore or $2.37 billion as of now including previous noncompliance and penalties. This fourth penalty stands apart from the previous ones as UPA intervened to stop the action. 

The fine is following RIL's initiation in the proceedings of the arbiter in the arbitration proceedings after receiving the intimation of previous charges. An additional profit on petroleum of $115 million is queuing demand of the ministry. The amount computed is on the basis of pro-rata basis of the loss incurred by the government on the committed quantity promised by RIL. 

Oil Minister Dharmendra Pradhan told Lok Sabha, "These actions are increasing government's profit share by $195 million". Justifiying the action, Pradhan said that RIL noncompliance with the terms of the contract with government without a reasonable explanation make it eligible to pay the penalty. The gas production plan was initially set up for developing the field, utilization of infrastructure and inventory management.

For example, Reliance installed facilities to produce 80 mcmd (million cubic metres per day) of gas but "failed to adhere to the approved field development plan, in terms of drilling and putting on stream the required number of wells."

S Jaipal Reddy's, prior oil minister had issued total penalty of $1.79 billion; $457 million for 2010-11, $548 million for 2011-12 and $792 million for 2012-13. Reliance tried arbitration proceedings against these fines. Partners in crime including KG-D6 field, UK major BP plc and Canada's Niko Resources, joined the arbitration. Government issued a notice regarding gas price revision to the conglomerate.

Companies are debating at the point stating "the contract does not allow penalty for drop in production", adding that the reason for drop majors on geographical factors such as water and sand choking wells. Another argument put forward is that drilling more wells is a waste of money as they won't help raise production.

Pradhan said output from the Dhirubhai-1 and Dhirubhai-3 gas fields in the KG-D6 block stood at 35.3 mcmd in 2011-12, 20.8 mcmd in 2012-13 and 9.7 mcmd in 2013-14. This year, production is 8 mcmd.