WTO to affect FOREX markets

India is experiencing a tough time in handling world relations as members of World Trade Organization (WTO) expressed their anger over the failure of Trade Facilitation Agreement (TFA) blaming the country for last-minute demands.

US Trade Representative Mike Froman expressed his anger over the collapse of deal, quoted, "US is entirely committed to the multilateral trading system embodied in the WTO. But the WTO system reckons on its Members, for implementing to the agreed commitments."

Further, US showered the failure of agreement as an "uncertain grounds" for WTO where all the members are facing a hard position at their end because of disagreement from "India with a handful of (WTO) Members".

ICC Secretary General John Danilovich said, "Our message is clear. We should get back to the table, save this deal bringing the multilateral trade agenda back on consideration to complete it soon."

Diplomats are predicting that such violent statements are indication of going forward with the Bali agreement without India. "Geneva is going to stay quiet for the coming several weeks. It is a good time for all of us to ponder on these developments considering the implications if we go forward. We will consult with our trading partners on potential paths possible," Froman added.

Indian government's official explained the reason behind objection as justification of benefits to the countries' who will be giving their consent for this agreement. "A clear assurance needs declaration before signing a deal aiming at mutual benefits for the countries," the official said.

India's demand  gained agreement from G-20 members who signed the assurance including Australian head but some other countries are thinking over the agreement and therefore still lagging in the agreement.

Indian official disclosed the need for assurance as the major element contributor, Food security assurance was not considered until now. "Specifically, there was an effort to re-negotiate elements of the agreement on food security that had been arduously negotiated over a period of  months over in the year," official said.

An expert in world trading Peter Gallagher found predictions about the explosion in WTO and disagreements from the normal course of a big decision. He felt that now is an immature time to take immediate impulsive decisions, rather countries need to understand each other's point of view. "It is an organization 153 member countries. We can't all move at the same pace on the same things, and it's time to let those that want to do it, do it," he said.

 

July closing- Rupee and Market Indices Low

Market

On the last day of July, the market indices fell short of gains and reported lowest in the month. National Stock Exchange's benchmark Nifty dropped 0.9 percent which equals 70 points recording the end of day at 7,721.30. Oldest stock exchange of India, i.e. BSE (Bombay Stock Exchange) slipped below the newly 26,000 line ending at 25,894.97 declined by 192.45 points equals 0.7 percent.

The growing and shrinking shares were close in numbers, 57 shares fell over the growing ones. Overall, 1,488 shares fell down, 1,431 expanded and 122 shares stood same in the trade today.

Banks sunk the trading boat today pulling down Nifty by more than 1 percent. The top losing firms in the market included top banks of India, namely SBI, ICICI, HDFC, HDFC bank and Axis bank. Other sector laggards in Sensex included Tata Power, NTPC and M&M.

News in the Day

In the major events of the day, Maruti Suzuki India Limited published net profit of Rs. 762 crore in the first quarter of FY-14. On yearly comparison, the company over performed to the expectations of researchers, recording 20.7 percent growth against FY-13's first quarter results.

Company quoted, "Our localization initiatives with aggressive strategy to lower cost extended sales volume, and new foreign exchange policy improved the bottom-line performance in June."

Maruti's revenue expanded 11 percent amounting to Rs. 11,369 crore in the first quarter of FY 2014 growing over the last year's data of Rs 10,237 crore in corresponding quarter. The rising revenues resulted with surged sales volumes at the rate of 12.6 percent.

The other company sharing the spot light is large scaled engineering major, Hindustan Construction Company (HCC) for positing 41.1 percent higher growth with an extending net profit at Rs. 27.1 crore in the first quarter report of 2014. Company jumped high backed with strong performance at operational level. Operational efficiency of the company improved significantly showing profits overcoming losses.

"It is our fifth consecutive quarter when company is coming out with affirmative reports, hence re-approving the functional strategy of cost controlling, efficient project management and clear focus on asserting management is paying off in consistent performance."

Company's balance is showing a decline in total income from Rs. 1,149.6 crore in the first quarter of last year to Rs. 1,043.5 the corresponding quarter this year. Expenses side of the balance sheet summed up lowered by 25.8 percent to Rs.823.9 crore in the quarter.

Rupee

Indian currency reported lowest in the past three-months as the state bank continued to buy dollars to balance the peg marked for INR. Rupee recorded 60.56 per dollar at its three-month low. In the last script, the currency traded at 60.5150/52.

 

Market Indices Trading Low

Market indices of India are trading low in the market as retail investors are closing profits on selling their position before the monthly expiry dated tomorrow in the derivative dealings. Corporates are reporting unexpectedly lower profits which triggered high sales of positions in the market during the week of July.

Nifty and Sensex opened flat on Wednesday morning as Tuesday night flew off peacefully without any big global cues shaking the markets. Nifty opened red at 7,746 lowered by three points whereas Sensex was green hiked by 14 points valued at 26005.

Further, in the morning trade both the indices of fell down marking red pointers. Nifty lost 7.55 points testing the limits at 7,741.15 points, BSE Sensex dropped steeply by 25.85 points as sellers infused in the market using their positional advantages bringing sensex to 25,965.38 points.

Cumulative reports by market investors and researchers said that markets are looking at further falls in the market as stocks of India are losing benchmarks in global markets as well.

Asian stocks are running the bulls becoming star players in the world markets for the fourth-day in a row. Asian country's benchmark indices broke six-year records expanding gains before US central monetary authority updated the markets. European markets, overshadowed Asian markets, rising above Russian stocks.

BSE segmented indices reflected biggest dip in capital goods as the index shed 4.22 percent in a day. Other major contributors in the red zone included metals falling by 0.63 percent, health care services slipped 0.19 percent and auto segment dropped by 0.17 percent.

Oil, Gas and Consumer Durables topped in the green list of BSE Sensex climbing up by 0.87 percent and 0.99 percent respectively. FMCG and TECk jumped up by 0.52 percent each supporting the falling index.

Top gainers in Sensex listed ITC, Bharti Airtel, ONGC, GAIL and Hero Motocorp and SSLT, Tata Power, L&T, Tata Steel and Tata Motors topped the laggards list on Wednesday.

Economical compilations showed an improvement in customer sentiments in the American markets though, the home loans experienced the same slow flow hampering its growth.

The Federal Reserve raised speculations that it might interfere in bond dealings and entering the bond-buying program again.

US is going to publish its second quarter growth report today amid government is preparing the labor report hiked by more than 231,000 jobs in the month of July.

Highlighting in the Asian Trade, Nikkei 225 climbed 31 points, i.e. 0.2 percent standing firm at 15,649. Hong Kong's benchmark index HSI flew 185.16 points, i.e. by 0.75 percent stopped at 24,825.69.

Spice Jet takes over Third spot from Air India

Spice Jet expanded its market reach inflating its to 19 percent crossing over the third largest airline, Air India closing at 18.5 percent in the first quarter report of the current financial year. IndiGo stood as the star player holding 31.6 percent of the market.

Spice Jet ranks among the most affordable carriers in India. The airline is moving forward with aim to increase its market coverage resulting in higher profits and expansion of the business.

Data complied in the beginning of FY 2014-15 shows budget carrier's extension and Air India's compression over the same period of time. In the month of June, Spice Jet explored variants in the market offering high discounts formulating lower air fares which attracted budget concerned customers to switch over to the best deals available.

Spice Jet flew off racing for the third place in the market winning over the customers of Air India, the national carrier. While analyzing the trend, Spice Jet set a goal to overpower market coverage of Air India, as the charts show in the month of March 14 over February 14.  

Directorate General of Civil Aviation (DGCA) disclosed, SpiceJet's market share hiked 1.1 percent on monthly basis from 17.9 percent in May to 19 percent in June, walking over the record of Air India, which reported market share closing at 18.5 percent. IndiGo headed the Indian skies leading with 31.6 percent market share under its grip during the last month. Jet Airways along with Jet Lite faced major issues with a steep decline in its market share to 19.6% in June from 21% in May.

One one hand shares of renowned airlines, i.e. IndiGo and Air India sank hitting marginal lows, small-scale airline GoAir stood apart hiking its share in the aviation sector, along with the budget carrier amid rise in market share to 10.1 percent in June over 9.8 percent in May. GoAir set a new benchmark as it resulted a double-digit growth for the first time since it commenced flying in the sky of India.

Considering the load handled by the airlines, GoAir lead the market reporting 81.5 percent traffic in its air route, Spice Jet seconded at the position recording 81.4 percent loaded airlines in June. IndiGo's air load fell from 82 percent in May to 79.1 percent in June.

With increasing competition in the aviation skyline, airlines are offering regular discounts and memberships to retain their customers. Analysts stated, "As per our computations, airlines offered around 15 to 16 flash sales to bump up their loads."

Jet Airways, in which Abu-Dhabi based Etihad Airways holds 24 percent ownership, announced their merging plans in the previous week to grow their operations in the Indian markets. 

Airline major Jet is giving a special fare offer as following its strategic alliance stating "last week fare is having an introductory discount off at flat 20 percent to 50 percent on regular fares on the joint network of the two airlines covering more than 135 destinations worldwide."

The joint special fare has a travel validity effective September 1, 2014 till June 15, 2015, for flights within India and from September 1 till November 30, 2014 for flights to international destinations.

 

 

Indian Rupee to stick at 60/$ in the coming decade

The currency of India is standing firm at the exchange rate of 60 Rupees per 1 dollar as per the records of recent months. Last year, with the falling economy and unstable reforms of the government brought the value of Rupee closing at 69 rupees in exchange of a dollar in August last year. 

The new Modi-led government changed the scenario of markets in the past few months boosting the market indices, i.e. NSE Nifty and S&P BSE Sensex and appreciating the value of INR to 60 rupees per dollar. Indian economy fell magnanimously during the last year, therefore the recovery reforms are acting up quickly promoting hastened growth. The good news about positive balance of payment overview, business friendly structural reforms and rapid growth are raising hopes of investors.

Forex investors are looking forward to growth in the value of rupee. Other investors inspired from the growing trend in the markets, outperforming companies in the first quarter are hoping to secure higher profits with increased value of INR.

"Investments in the India determined to climb will most probably jump up to $1.9 trillion from $600 billion in the coming decade," an American multinational financial services provider said. 

In reports of the coming decade, gross domestic product (GDP) is rising with an average growth of 2.5 percentile in the year 2024, starting at 1.5 percent as reported now. Current Account Deficit predictions are painting trend at 2.5 percent of GDP over the coming next 10 years.

Financial analysts at the American service provider said, "Foreign direct investment (FDI) is the major player pushing up the one of the worlds fastest growing economy's currency." These are the supporting factors of the economy which are appreciating the value of Rupee.

The other side of the coin holds strong with the central bank of India pressurizing the currency to stick low. According to the world-renowned research and financial corp. of America, Reserve Bank of India (RBI) will continue purchasing dollars over the coming years safeguarding rupee from external volatility, such as unexpected hike in oil prices or splurging interest rates in the US. After INR rises stably, India will receive the benefit of having a sponge back to support its prevailing rates in the events of external shocks. 

"The country's import cover depreciated much after the global financial crisis, and RBI needs to build up $100-150 billion of reserves to bring back the import support crossing 12 times... Similarly, India's external coverage ratio at 2.26 times is far behind the average set at 4 times for EM economies, forcing the country to work on increasing its forex reserves," an economist explained.

Growing inflation is one of the biggest challenges for rupee as it has a direct effect on the purchasing power of the country. Countries with steeply growing inflation, like India are depreciating their currency exchange rates to fight the growing prices but it does not solve the root problem.

"Assuming that US CPI inflation levels to its target of 2 per cent and India follows a dis-inflationary passage in the coming years, the inflation differential compared to US is going to stand 30-35 per cent decline in the purchasing power parity fair value for the Indian currency, our computation over the minimal value estimated over a decade points out a 75-85 range," an investment bank said.