Friday, June 29, 2012

FM Manmohan Makes Investor Richer by Rs 1.17 trillion with Stimulus Hidden to Boost Recycled Black Money in the Economy!GAAR Lost the Teeth and Market Bullish once again without fundamentals Addressed at all!

FM Manmohan Makes Investor Richer by Rs 1.17 trillion with Stimulus Hidden to Boost Recycled Black Money in the Economy!GAAR Lost the Teeth and Market Bullish once again without fundamentals Addressed at all!

Indian Holocaust My Father`s Life and Time - Eight HUNDRED FORTY THREE

Palash Biswas
FM Manmohan Makes Investor Richer by Rs 1.17 trillion with Stimulus Hidden to Boost Recycled Black Money in the Economy!GAAR Lost the Teeth and Market Bullish once again without fundamentals Addressed at all!We all know that Dr Manmohan singh as Politician has no role to play and he is remote controlled by the Dynasty Queen.

The Hegemony Field Marshall Pranab Mukherjee said adieu to the Finance Ministry in turmoil inflicted with indecision and dilemma to rest in the Risina Hills and Dr Manmohan, the father of Indian Emerging Open Market Neo Liberal has got the helms of Indian Economy once again. The First Day first Love Sight with the India Incs entity helped to bloom the Flower valley in Indian Market as he ensured Hidden stimulus for the Capitalists and killed GAAR, the bone of contention which drove away  the Investors recycling Black Money in Indian Economy.

Now the Finance Ministry has got rid of elected Politicians and ruled by Extra constitutional elements led by Montek singh Ahluwalia and C Rangrajan, an all World bank IMF team!

Helped by a rally in the stock market where the Sensex surged by a whopping 439 points, its biggest single-day gain in 2012 so far, investors became richer by Rs 1.17 lakh crore on the back of clarity on tax-avoidance rules and bullish global sentiment.Mind you, Sensex has gained nearly 550 points in the last four days coinciding with Prime Minister Manmohan Singh taking over charge of Finance portfolio and signaling speedy revival of the slowing economic growth! The rupee posted its biggest daily gain in three years on Friday after the government confirmed it will not impose retroactive taxes on foreign investors and as global risk asset rallied. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the United Stock Exchange and the MCX-SX all ended at 56.0550. The total volume was at $4.9 billion. Lo! Morgan Stanley upgraded Indian equities to 'equalweight', in a recent report titled 'Asia/GEMs strategy', after being 'underweight' since the first quarter of 2011.

After Prime Minister Manmohan Singh stepped into the Finance Ministry, hopes of reforms or policy decision in the short term seems to have kept the market afloat, resulting in key benchmarks outperforming global perers. Clarification on GAAR guidelines boosted market sentiment, but analysts said the gains may be temporary as market participants would await complete details of the changes in the contentious General Anti Avoidance Rules. While,Euro zone leaders agreed on Friday to take emergency action to bring down Italy's and Spain's spiralling borrowing costs and to create a single supervisory body for euro zone banks by the end of this year, a first step towards a European banking union.Traders and investors shifted a greater percentage of bullish derivative bets to July series than they did during the previous expiry as the undertone turned more optimistic on hopes Prime Minister Manmohan Singh, who took charge of the finance ministry, will push through economic reforms and set aside some controversial tax policies.

To address investor concerns over taxation issues, the Finance Ministry on Thursday proposed a monetary limit for invoking the controversial General Anti-Tax Avoidance Rules (GAAR) in its draft guidelines issued late in the night.

Although the draft did not specify the monetary limit, it said that those deals which are over a prescribed limit should be covered by GAAR provisions.

The guidelines further said that GAAR provisions would be invoked only in cases where FIIs choose to take the benefit of double tax avoidance treaties.

"Where an FII chooses to take a treaty benefit, GAAR provisions may be invoked in the case of the FII, but would not in any case be invoked in the case of the non-resident investors of the FII," the draft guideline said.

The provisions, it said will apply only to the income arising to taxpayers on or after April 1, 2013. The draft guidelines also proposed setting up a three-member Approving Panel to decide whether a particular case would attract the provisions of the GAAR.

The guidelines has proposed time limits for completion of various actions under the GAAR. The GAAR provisions were proposed by former Finance Minister Pranab Mukherjee in his budget to prevent tax evasion.

The provisions, however, invoked sharp criticism from the foreign and domestic investors, following which the government constituted a high-level committee to look into their concerns.

The committee, which is headed by Director General of Income Tax (international taxation), looked into the concerns of the investors and came out out with draft guidelines to seek comments of the stakeholders.

"We have finalised the GAAR draft rules after three meetings with the stakeholders. The draft will have examples for what would be deemed as permissible and impermissible arrangement," Finance Secretary R S Gujral had said earlier in the day.

On the other hand, NO Fiscal exercise is expected to address the Fundamentals of the Economy and the Economy in reality remains into the Deep despite Boom Boom market Bullish to boost the Black Money Hegemony.India's net international liability rose 20% to $244.8 billion at end-March this year over the December 2011 quarter, Reserve Bank of India said on Friday.This was the steepest jump at least in the last eight quarters. Net international investment position is the difference between an economy's external financial assets and liabilities. RBI said such balance sheet analysis helps in understanding sustainability and vulnerability of the economic structure.RBI data showed that direct and portfolio investments in India rose by $15.7 billion and $19.2 billion, respectively. Among other investments, mainly ECBs and currency and NRI deposits rose by $2.2 billion and $ 6.2 billion, respectively.On the other hand, the rise in international financial assets was just about $5.5 billion.

However, in a chat with ET Now, Ashwani Gujral, ashwanigujral. com, shares his views on markets and the rupee.Gujral was the man responsible for the  tough stance against VODAPHONE resultent in GAAR Era and is destined to be replaced with someone like sudip Bose. Gujral said,Now you would see the kind of day you want to participate. So this is the kind of day that I was waiting for where the market breaks out of a narrow range and shows good follow through and the breakout sustains. So chances are that we will get fairly close to 5350-5400 in this move. Bank Nifty will get closer to 10700-10800. So overall, this is the beginning of a trend because this is coming out of a good base. Several stocks are showing fresh breakouts post consolidation. So for the day, some sort of reforms have started in the power space. That seems to be leading the move. Obviously it was a beaten up area. So the bounce will be fairly hard.

ET Now: What is the call on the Bank Nifty and also given the sharp appreciation in the rupee, have you taken a look at the rupee dollar chart as well?

Ashwani Gujral: All this is related. Once the government wakes up and starts doing things, the market will head higher, flows will come in, hence rupee will move up. So, it had hit a fresh low at about 57.50 and now if we are able to break through the 56 kind of zones, a rally all the way up to 54 is possible on the rupee but again probably these expectations need to be fulfilled by the government. The global environment seems to be a bit more positive. So the first couple of weeks in the July series could be positive given today's breakout. (

Amid a controversy over the Prime Minister distancing himself from draft guidelines issued by the Finance Ministry on General Anti-Avoidance Rules, BJP today raised questions on the review of the decision and sought an open debate on the issue.BJP also said that the review of the decisions taken by outgoing Finance Minister Pranab Mukherjee indicates that either he did not listen to Prime Minister Manmohan Singh or Singh did not have idea that these decisions were having the desired effect on economy.

"Now soon after assuming charge of Finance, the Prime Minister has started review of the decisions taken by Finance Minister. PMO has given such indications that there is a need for changes in the present policy. Not even 24 hours have passed that the Finance Minister left his chair, the chair is still hot, he (Singh) has started review and changes!

However,Prime Minister Manmohan Singh has distanced himself from the draft guidelines on the General Anti Avoidance Rules (GAAR) released by the revenue department late Thursday evening, saying these have been put out at the official level and are only meant for consultations and stakeholder feedback.

"These have not been seen by the Prime Minister and will be finalized with the approval of the Prime Minister, who holds the finance portfolio, only after considering the feedback received," the PMO said in a statement issued Friday morning. The release came despite the stock markets opening firmly with the BSE sensex rising 325 points to 17325 points around 10.15 am.

PMO spokesperson was not immediately available to comment on what prompted Singh to issue the statement. The PM has already announced his intent to rework the tax framework.

"There have been many factors that have contributed to this general negative mood. There are problems on the tax front which need to be addressed," he had said during his first meeting with the finance ministry brass on Wednesday.

On Thursday, finance secretary RS Gujral, who is incharge of the revenue department and is seen to be the driving force behind several controversial tax law changes, had said that the PM had sought clarifications on certain issues including the vodafone tax law changes.

Within hours of his statement, the revenue department released the draft GAAR rules, with safeguards to check against possible harassment of tax payers.

The proposals include keeping FIIs ( Foreign Institutional Investors), who pay tax in India outside the ambit of GAAR and ensuring that the anti-tax avoidance rules are not invoked against the users of participatory notes.

Multi Brand retail FDI isall set to be the reality very soon as in the wake of Kerala Chief Minister Oommen Chandy denying his support to FDI in multi- brand retail, Commerce and Industry Minister Anand Sharma today said states which want to allow global retailers to open stores "cannot be prevented".Contrary to his earlier statement that seven Chief Minsters, including Chandy, have given their written commitment on allowing FDI in the politically sensitive sector, Sharma said Kerala has its reservations over the issue.

"What Chief Minister of Kerala had said, that is in public domain, he had made a statement...That there are states who have reservations and Kerala has its reservations, and Kerala may not implement it. However, he did say that they also respect the rights of the other states," he said.The Minister said that those states who want to allow global retailers to open stores "they cannot be prevented".

The government could cut the subsidies on fuel and fertilisers soon to contain the ballooning fiscal deficit, C. Rangarajan, who heads the Prime Minister's Economic Advisory Council ( PMEAC), said Friday in Kolkata.

"Subsidies have been growing. While there are some, like food subsidies, we cannot trifle with, there is scope for reducing subsidies on fuel and fertilisers," Rangarajan said at an event to mark the birth anniversary of P.C. Mahalanobis, founder of the Indian Statistical Institute, here.

"We must ensure that fiscal deficit is contained at the budgeted level," added Ranagarajan, who is speculated to take over the finance portfolio in the next cabinet reshuffle to be held sometime in Septemeber.

The government is targeting to bring the fiscal deficit, which stood at 5.76 percent of the gross domestic product (GDP) in 2011-12, down to 5.1 per cent in the current fiscal.

Rangarajan said there is a scope for reducing subsidies in liquid petroleum gas (LPG or cooking gas), diesel and fertiliser. "But we must build up a political consensus for good economics."

"With kerosene, I can understand that there is a sentiment (for increasing price), I am of the opinion that diesel and LPG prices have to increase," he said, and added that LPG price decontrol should "protect" the low-income groups.

The prime minister's adviser also said that because of the high fiscal deficit it would be difficult for the government to provide a general stimulus package for the industry. But there could be some possibility of providing "some selective stimulus" to certain sectors.

"I think the stimulus package which was introduced in is a bit difficult. Because we now have a high fiscal deficit."

"But within the framework of containing the fiscal deficit, it is possible to provide some selective stimulus," he said.

The change of regime in the finance ministry following Pranab Mukherjee's resignation has raised hopes of an economic stimulus package.

Indicating its unhappiness with the fiscal deficit position, the Reserve Bank of India (RBI) Thursday said the government did not have the headroom for a fiscal stimulus.

"On the domestic front, slowing growth, elevated inflation and large fiscal and current account deficits are serious concerns. The already high fiscal deficit leaves little room for the government to stimulate the economy," said Governor D. Subbarao in his foreword to the Fiscal Stability Report.

Due to rupee appreciation during end-December 2011 to end-March 2012, equity liabilities for December 2011 were revised upwards by $17.7 billion when valued at end-March 2012 exchange rate. Net claims of non-residents on India as reflected by the Net IIP (International financial assets less International financial liabilities) rose by $40.0 billion over the previous quarter to $244.8 billion as at end-March 2012.

The declining trend in the ratio of India's international financial assets to international financial liabilities continued during the latest quarter and the ratio stood at 64% in March 2012 (67.8% in December 2011)

The improved global risk environment comes as investors are growing more hopeful of meaningful policy reforms at home after Prime Minister Manmohan Singh, a former central bank governor, took charge of the finance ministry.

The government released draft rules on Thursday and said the general anti avoidance rules, or GAAR, would not apply retroactively, a big concern for portfolio investors.

"The INR may outperform as well as India seems to be backtracking on its plans to retroactively apply new tax rules that would penalize a major foreign direct investor," said Dariusz Kowalczyk, senior economist & strategist for Asia ex-Japan at Credit Agricole.

The rupee settled at 55.6050/6150 as per State Bank of India data, rising 3.1 percent over its previous close. It rose 2.7 percent on the week, its biggest weekly gain in over two and half years. That marked a turnaround after the rupee tumbled to a record low of 57.32 against the dollar a week ago.

"I will wait for more clarity on the euro measures. The dollar/rupee broke a very important support at 56. If it sustains below that, we can see a further fall," said Abhishek Goenka, chief executive at India Forex Advisors.

India has been buffeted by various macroeconomic concerns, primarily the twin fiscal and current account deficits, leaving it vulnerable to capital outflows at a time of global risk aversion.

However, with Singh, widely credit with ushering in economic reforms in India in the 1990s, taking charge of the finance portfolio, investors are hoping he will push some much awaited reforms and address concerns on tax issues.

Global risk aversion has also improved. The euro surged following relief after the statement from European leaders, raising hopes it could help ease a big recent overhang in global markets. One-month offshore non-deliverable forward contracts were quoted at 56.02.

The BSE benchmark index settled at 17,429.98 - a level last seen in April 19, higher by 439.22 points, or 2.59 per cent.

Following the surge in the market, the total investor wealth moved up by Rs 1.17 lakh crore to Rs 61.52 lakh crore. Across the market, around 1,870 stocks rose. All the 13 BSE sectoral indices also ended in green in range of 1-3 per cent.

Among the 30-share Sensex stocks, as many as 29 counters ended higher with gains led by Jindal Steel that rose 8.74 per cent, followed by Tata Power, ICICI Bank and Bhel which rose 5-6 per cent each. The 50-share National Stock Exchange index Nifty spurted by 129.75 points, or 2.52 per cent to 5,278.90.

Analysts said the sentiments became buoyant as market players cheered Finance Ministry's proposal that the controversial General Anti-Tax Avoidance Rules ( GAAR) would not be applicable below a particular limit.

"The underlying bias has improved but further gains will hinge on policy interventions by the Centre to restore investor confidence. Any encouraging development out of Europe or any other developed markets will also support Indian stocks.

"The euro-zone crisis continues to keep investors on the edge. Therefore, all eyes are on the EU summit which could throw up some more positive initiatives to tackle the two-and-a-half-year-old debt crisis," Amar Ambani, Head of Research, IIFL said.

Sentiment also improved on reports from Europe suggesting a new plan is being worked out to support the ailing banks of the debt-ridden trading bloc. Asian indices, including Hong Kong, Taiwan, Japan and China, closed with gains of up to 2 per cent while European indices were trading 1-2 per cent higher in early trade on the news.

Morgan Stanley upgraded Indian equities to 'equalweight', in a recent report titled 'Asia/GEMs strategy', after being 'underweight' since the first quarter of 2011.

According to the global investment bank, Indian markets are now trading at a price-to-book multiple of 2.1x, close to the trough valuations of 2.0x in the 2002 and 2008 cycles. The investment bank has a Sensex target of 19,954, representing an 18 percent upside from the current levels.

Indian stocks tend to perform well versus MSCI emerging market indexes after a period of oil price declines despite the poor topdown domestic macroenvironment, the report said.

The Morgan Stanley India Strategy team remains focused on stock picking. It prefers mid caps and small caps over large caps.

Technology and consumer discretionary are its preferred sectors and it continues to avoid state-owned banks. At the stock level, large cap top picks include Maruti, Infosys and ICICI Bank. Among mid caps, it prefers Dish TV, Tata Motors, DVR and Mindtree.

"The Indian equity market has been through a pronounced period of underperformance weighed down by persistent downward revisions to GDP growth expectations, negative revisions to earnings expectations and more recently significant currency weakness have taken a heavy toll on absolute and relative performance.

This is an indicator of the extent to which the India market is already pricing in the adverse global environment and the current domestic situation of high inflation and slower trend GDP growth," it added.

External borrowing has become costlier for India Inc. after the depreciation of the rupee against the dollar, it noted. The currency has fallen over 20 percent in the past 12 months.

Morgan Stanley is of the view that external funding vulnerability during a period of dollar strength and European banks deleveraging is a key concern.

The global investment bank is confident of Indian corporates "which have attractive business models facing both global and internal demand".

This upgrade comes after Deutsche Bank and JPMorgan upgraded Indian stocks to 'overweight' from 'neutral'.

Last week JPMorgan upgraded Indian equities, despite acknowledging the risk factors facing the economy, encouraged by what it called a number of more positive factors, including historic valuations.

The bank said its year-end target for the BSE index was 19,000 points, a nearly 12 percent upside from current levels.

Deutsche Bank upgraded Indian stocks saying the market is close to its cheapest in two decades from an EBITDA and sales perspective. Deutsche Bank's India strategists have an end-year target for the Sensex of 18,000 points.

"Echoing similar sentiment, Standard Chartered said it sees an upside in some Indian stocks in which bad news has had a 'disproportionate impact,'" Reuters reported.

The bank's top picks, which it identifies as potential gainers, include cement makers ACC and Ambuja Cements as well as mobile operators Bharti Airtel and Idea Cellular. While among gas utilities, it is betting on Petronet LNG and GAIL, IRB Infrastructure and Apollo Tyres are the top picks in their respective sectors.

The Forward Contracts (Regulation) Amendment Bill, 2010 is likely to be passed by Parliament during the Monsoon session, said a senior government official who requested anonymity as the bill is before the Parliament.

"The Food Bill will probably be taken up in December only, while FCR Bill has already been cleared by the department related Standing Committee and could be passed," he said asking not to be named.

The bill to amend the FCRA Act 1952 has been lying in limbo since 1998, according to sources. It has faced opposition on account of political differences with Left vociferously blocking it under UPA I.

Now, the situation, say sources, is more conducive for its passage but high inflation could still play spoilsport. The bill aims to provide sweeping powers to commodity market regulator FMC, which currently functions as a department under the Consumer Affairs Ministry.

It also facilitates institutional participation in commodity futures, which currently attract retail interest largely.

India's economic growth, which dipped to 9-year low of 6.5% in 2011-12, is expected to rebound from October, chief economic advisor Kaushik Basu said on Friday.

He also said the government was working to remove "trust problems" with the industry. "We are hopeful that economy is going to bounce back within 4-5 months. I mean its October. Before that I can't realistically say that there will be an improvement, but October onwards," he told reporters at the Statistics Day 2012 meet organised by the government.

He also said that inflation, which is hovering at over 7.5%, will start moderating from September onwards.

Basu further said, "We want to work hand in hand with the industry. There is element of trust problem between industry and government that has happened. Over the last several months we were trying to correct it and we will try to correct this as much as possible in the coming months."

Basu further said that while economic growth will pick up any way, "if we can together a couple of reforms" things would speed up.

"We have been stressing that we will have to get a couple of reforms in place for which the big stumbling block has been getting all the political parties in the coalition together. So that we have been working," he added.

Without specifying about the reforms, Basu just said "these have been part of government agenda for the last 2-3 months".

His comments come amid hectic activity to spur the economy following Prime Minister Manmohan Singh's taking charge of the finance portfolio after Pranab Mukherjee resigned this week to contest presidential election.

Without specifying the reforms, Basu said "these have been part of government agenda for the last 2-3 months".

The industry as well as investors have been critical of the government for not pushing through economic reforms, accusing it of policy paralysis.

Amid opposition from ally Trinamool Congress, the Centre has not been able to press ahead with its decision to open the multi-brand retail sector to foreign direct investment.

The commerce and industry ministry has been working to bring states on board on the issue.

Also, the government has not been able to move ahead with increasing the FDI limit from the current 26% in the insurance sector.

Earlier, at the function, Basu said while measures are required to arrest the rupee slide, but some depreciation in the domestic currency was an advantage for exporters.

The domestic currency has depreciated sharply in the recent weeks, going below Rs. 57 to a US dollar.

Will Manmohan Singh achieve what Pranab could not as FM?

Published on Thu, Jun 28, 2012 at 14:00 |  Source : CNBC-TV18

Updated at Thu, Jun 28, 2012 at 19:34  

As India is awaiting for some strong economic revival measures, pressure is mounting on if Prime Minister Manmohan Singh will deliver as the new finance minister.

In an interview to CNBC-TV18, AK Bhattacharya, Editor, Business Standard and Yogendra Yadav, Political Analyst discuss if Singh could achieve what Pranab Mukherjee could not.

Here is an edited transcript. Also watch the accompanying video for the full interview.

Q: I was reading your article yesterday which gave a summary of what Pranab Mukherjee managed to achieve and did not achieve. The question now is that Pranab Mukherjee and the astute politician that he was could not achieve consensus around a lot of these political hot potatoes of the FDI or diesel price hikes. Do you think whether the PM or any other new candidate that he tries to bring in will be able to achieve it or has UPA too been largely written off?

Bhattacharya: I think the problem that the UPA2 is suffering from is also a problem of not focusing on the kind of ideas that he itself had promoted. For example, what has been the progress on the UPA2's idea of the Aadhaar project. For a moment, let us understand that this Aadhaar project was to have delivered subsidies to the targeted groups in a focused manner by reducing the overall cost of subsidies. Now we still don't know what has been the progress on this project and this was UPA2's big idea.

Now my point is that whether you have a politician finance minister or whether you have the prime minister taking charge of the finance ministry for a short period, it is important for the UPA rulers. UPA guys need to get down to this basic job of focusing on what they need to do to bring down the overall subsidies level, bring down overall government expenditure. So, that the fiscal deficit position is better and at the same time, initiate a set of reformist measures, which revive sentiment in the market.

I don't think that it is such a difficult not to crack, it is important that the PM sets a ball rolling with his initial statements which he did yesterday. But that will not be announced because this will perhaps keep the market happy for sometime but you need action on the ground, you need to bite the bullet.

Q: One thing is perhaps positive with two former Reserve Bank of India (RBI) governors in-charge of the finance ministry. Now we understand that Rangarajan will play a key role, you don't have to explain to them the importance of bringing down the deficit and the deleterious impact it has on inflation, on current account deficit indeed on the whole economy. With that wisdom now having been established do you think definitely they will be able to deliver better on fiscal deficit than the previous regime? Do you think that just understanding the political experience is going to be inadequate because they are seriously lacking political clout?

Bhattacharya: To believe that Rangarajan and Ahluwalia, the two names that you mentioned, have just joined this government will be wrong. They are very much in the scene. Rangarajan has been the chairman of the prime minister's economic advisory council for several months.

Q: I meant more hands on in the finance ministry.

Bhattacharya: My belief is that what you see is that there is no team that has been built at the implementation level for the last three years. The last three years ,one of the major progresses the UPA2 has been, the connect between the prime minister's office (PMO) and the finance ministry have not been that strong. I think for any successful reforms programme or management of the macro economy it is important that the PMO and the finance ministry act in sync.

I think that connect had been very weak in the last three years. So the one good thing that will happen now is that the connect between PMO and the finance ministry will be better and so you can see some more guided action towards managing the macro economy.

Q: Do you think the Prime Minister will keep the finance portfolio for good or is he likely to keep this as a stopgap arrangement and look for an alternative pretty quickly?

Yadav: There is ofcourse no official confirmation as yet but my expectation is that once the PM has taken this, he might wish to keep it for sometime, sometime could mean something like four-six months. He has had experience in this.

This is a field in which the government has not done very well. He has good reasons to believe that he has some expertise in the matter and this provides him with a golden opportunity to leave a certain stamp of his personality and his governance before he demits office in 2014. So he might wish to keep it for sometime. It is not clear at all whether that sometime would be something like six months. Usually PMs do not keep such an important portfolio for a longer period than that.

Vodafone had earlier sent a trigger notice for arbitration under the bilateral investment treaty with Netherlands to the government saying that why has the retrospective amendment being brought in and that it is against the investment spirit of the treaty.

To this, the government has replied saying that the tax refund has been made as per the Supreme Court order and hence there is now no case for arbitration.

Vodafone has now sent a rejoinder on this reply of the government saying that if that is the case and if there is no case for arbitration then give us an undertaking saying that the retrospective amendment will not be applied to us because if that is not the case then according to Vodafone there is a case for arbitration.

This was sent on June 5 to the government. However, as of now, the government has not prepared any reply to this and IMG will meet on July 22 to discuss its reply.

This inter-ministerial group was set up earlier to respond to the BIPA notice and it comprises officials from the law ministry, telecom and finance ministries. So, this group is going to meet and finalize what the government is going to say and that is going to be key in deciding the road ahead for Vodafone because if the government does not give an undertaking to this effect, it means that the tax battle with Vodafone is very much on.

It remains to be seen how the government handles this. As of now, sources in the finance ministry are saying that they do not want to do anything to annoy foreign investors. That seems to be the latest line in the finance ministry.

Here is what happened in the past one week, starting Monday, in a chronological order.

RBI hikes ECB limit to USD 10 billion: Concern over the ailing rupee had been nagging the RBI and the country as a whole, for quite some time now. The final trigger came last Friday when the Indian currency hit a new record lifetime low of 57.22 per dollar. In an effort to boost the free-falling rupee, the central bank on Monday raised the limit of external commercial borrowing (ECB) to USD 10 billion. The regulator also hiked the limit of overseas investment in government bonds by USD 5 billion to USD 20 billion.

The RBI also reduced the lock-in period of investment to three years from five for foreign investment in government bonds up to USD 10 billion, including the additional USD 5 billion.

Moody's maintain stable outlook on India: Amidst the rating downgrades, Moody's on Monday stepped up and said that it was maintaining a stable outlook on India's Baa3 rating as problems such as slower growth and higher inflation have hounded the Indian economy for a long time. Although, the ratings agency said that global and domestic factors, including potential shocks in agriculture, could keep India's growth below trend for the next few quarters, it was unlikely to become permanent features of the Indian economy.

Sesa Goa approves merger: In another development, shareholders of iron ore miner Sesa Goa have approved of the Sesa-Sterlite merger, against analysts' expectation of some opposition. Company shares reacted to this piece of news and were up 1.26% at Rs 188.25.

Nomura cuts India's GDP forecast: So far it was a ratings downgrades that was following India. Whether it was Standard and Poor's (S&P) or Fitch, international rating agencies had raised question on India's growth potential in the absence of structural reforms. On Tuesday, Nomura cut India's GDP forecast to 5.8% in FY13. Citing high inflation, policy inaction and a weakening global environment, Nomura pointed out the rationale behind its bearish outlook on India.

FM Pranab Mukherjee resigns: The UPA's presidential nominee, Finance Minister Pranab Mukherjee called it a day and resigned from office on Tuesday to compete for the post of the 13th president of India.

Kingfisher engineers quit: The already crippled Kingfisher airlines is now seeing a steady flight of engineers on account of non-payment of salaries. The near-bankrupt carrier had to already deal with pilots and other staff quitting over salary issues. About 80 engineers have left the beleaguered carrier over the past four to five months and news reports on Wednesday suggest, more engineers could quit the company.

PM takes stock of economy: Prime Minister Manmohan Singh, who now holds the finance portfolio after Pranab Mukherjee's resignation, met Deputy Chairman of Planning Commission Montek Singh Ahluwalia and PMEAC Chairman C Rangarajan on Wednesday to take stock of the economy amidst slowing growth, high inflation and damp investor sentiment.

NTPC signs FSA with Coal India: Adhering to the directives issued by the Prime Minister's office, state run NTPC agreed to sign the fuel supply agreement with Coal India at a minimum assured supply of 65% on Wednesday.

PM's first day as FM: Prime Minister Manmohan Singh's first day in office as the country's new finance minister was nothing short of an action packed day. A host of issues ranging from clarifications on the controversial General Anti-Avoidance Rules (GAAR) to slashing petrol prices by Rs 2.46 per litre and Rs 3.1 litre. Along with it, the the finance ministry had asked market regulator SEBI to relook its stance on entry load charged by mutual fund (MF) distributors, in order to make MFs attractive to distributors.

Clarification on GAAR: After reports of a clarification being issued by the Finance Ministry on the retrospective amendment of section 9 of the General Anti-Avoidance Rules (GAAR), it was learnt that the controversial rules would be deferred till after the 2014 elections or may be completely dropped. Global investors and business firms were quite apprehensive about this clause and led to some concerns. By, Friday it was known that GAAR was to be finalised only after consultation with the Prime Minister's Office.

MFs to be attractive for distributors: The finance ministry may ask market regulator SEBI to relook its stance on entry load charged by mutual fund distributors. It was known on Thursday that the two will think of ways to make incentives for mutual fund distributors more attractive, which in course of time will revive the industry. Former SEBI chairman CB Bhave had scrapped the entry charges, a move which benefitted the customers, but put mutual fund houses under financial duress.

RBI's Fifth Financial Stability Report: The Reserve Bank of India on Thursday released its Fifth Financial Stability Report in which it chalked out concerns regarding deteriorating asset quality and domestic & global macro worries. The report, however, said a banking crisis was unlikely.

HSBC Mauritius sells stake in Axis,Yes Bank: HSBC's Mauritius arm, registered as an Foreign Institutional Investor (FII) in India sold nearly 5% of its stake in Axis Bank and Yes Bank. The deal worth Rs 2400 crore was a major block deal announced on Thursday.

Cairn UK to sell 3.5% in Cairn India: In another major deal, Cairn Energy of UK is scheduled to sell 3.5% stake in Cairn India for about USD 370 million. The deal is most likely to be one of Cairn UK's series of deals to sell its residual stake in the Indian company because it needs money to develop oil fields in other parts of the world.

Year's biggest single day gain for Sensex: A cheerful market ended the week on Friday with the biggest single day gain of 439 points in 2012. Upbeat global market sentiments and clarification on the tax-avoidance rules seems to have caused this major rally.

First day of EU summit: The much awaited European Union summit started on Thursday and on Friday European leaders came up with good news. They not only agreed to stabilise the debt and funding woes of Italy and Spain, the 17-nation currency bloc agreed that euro-area rescue funds could be used for sovereign debt purchases without forcing countries to adopt extra austerity measures. Discussions are on for creating a single supervisory body for the euro zone banks by the end of this year.

Vodafone sends rejoinder to government: Seeking an undertaking on the retrospective amendment, telecom biggie Vodafone has sent a rejoinder to the government on Friday. Vodafone had earlier sent a trigger notice for arbitration under the bilateral investment treaty with Netherlands to the government asking why the retrospective amendment was being brought in and highlighted that it is against the investment spirit of the treaty. The government had replied saying that the tax refund has been made as per the Supreme Court order and hence there is now no case for arbitration.

Proposal for 49% FDI in pension & insurance: A draft bill that will lead to enhanced FDI in the insurance and pension sectors is likely to be taken up by the cabinet shortly. It was known on Friday that the finance ministry has sent a final cabinet note which proposes 49% FDI in both these sectors.

HDFC Bank cuts base rate and BPLR by 20 bps: India's second largest private sector lender HDFC Bank on Friday reduced its base rate by 20 basis points to 9.80%, effective from June 30. With this, its benchmark prime lending rate (BPLR) too decreased to 18.30%. After the Reserve Bank of India (RBI) slashed key policy rate by 50 bps in its April annual monetary policy, it is perhaps the first big lender to cut its key lending rates.

Hence, the week ended on a positive note for the market and would probably keep sentiments buoyed on hopes of further policy action and reforms.

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