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Straight from the Specialists

India Markets Weekahead: Prudent to hold cash

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Indian markets ended steady on Friday after rising to its highest intraday level in nearly two months. The Nifty closed up 0.33 percent at 6029, marking its fourth weekly gain.

A weakening rupee led to intervention by the Reserve Bank of India (RBI), which tightened liquidity and lifted short-term interest rates on Monday. Though the central bank’s stance against currency speculation has made it all the more difficult for speculators, it also sent bond yields soaring and led to concerns that an increased cost to borrowers would curtail growth that is already limping at 5 percent. Bond portfolios recorded losses, wiping out gains over the last few months.

The rupee remained weak at 59.33 to the dollar on fears that the RBI’s measures could fail. The moves also weighed on banking stocks with the Bank Nifty falling 6.4 percent for the week. The results of a few private banks such as Kotak Bank, HDFC Bank and Axis Bank revealed they could also be plagued by worsening credit quality.

The government announced a slew of economic measures last week in order to boost sluggish economic growth and support the rupee. The relaxation of foreign investment rules, aimed at attracting capital, fell short of market expectations due to lingering doubts over caveats and long-term inflows in times of political uncertainty.

Why the rupee is linked to jobs in the U.S.

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

It appears odd that an increase in job offers in the United States should pull the rupee down in India. After all, any improvement in the U.S. economy should benefit the rest of the world. It means an increase in imports by the U.S. and exports by other countries. But there is more to it than that.

A blame game conundrum over Ranbaxy

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Ranbaxy Laboratories pleading guilty in a U.S. Department of Justice probe in May has led to fresh concerns about the company and its generic pharmaceutical peers. Japanese drugmaker Daiichi Sankyo Co, which owns Ranbaxy, has talked of possible legal action against the company’s former Indian owners.

In 2008, the U.S. Food and Drug Administration banned imports of products made at two of Ranbaxy’s factories in India over safety issues. That’s where the company’s battle to return to the world’s largest drugs market began.

India Markets Weekahead: Volatility to continue in results season

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

After a spirited rally the previous week, the Nifty moved in a band of 150 points between 5750 and 5900, ending with modest gains of 0.53 percent at 5868. It may seem small but the extreme volatility within this band caught traders on the wrong foot.

Time and again, markets prove that predicting them in the short run is hazardous. Investors welcomed the government’s bold decision to increase gas prices but reacted negatively to its ordinance on the food security bill. The already weak rupee cracked further to 60.35 against the dollar as the election gimmick could cost the state exchequer over $20 billion.

Chinese general warns India even as Antony visits Beijing

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

India’s Defence Minister A. K. Antony is in Beijing on an official visit and a provocative curtain-raiser was provided by a retired major general of the People’s Liberation Army (PLA) who cautioned India not to “provoke new problems and increase military deployments at the border area and stir up new trouble.”

Predictably, this statement by Major General Luo Yuan, who is associated with the PLA’s Academy of Military Sciences, hit the headlines in both countries. Luo is no stranger to such controversy and has in the past made shrill and hostile remarks to local media and in Chinese cyberspace about Japan, Vietnam and the Philippines. One assertion – since denied – was that China should bomb Tokyo if Japan stepped out of line in relation to the long-standing island dispute between the two East Asian neighbours.

Where the rupee is headed after 60

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(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Reuters)

A sharp fall in the Indian rupee seems to have taken the markets by surprise. In just over 45 days, the rupee depreciated by 10.5 percent against the dollar to 60.7 (June 26) from 54.35 (May 9).

An Indian pivot in Afghanistan after troop drawdown

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Notwithstanding Afghan President Hamid Karzai’s disinclination to participate in talks, the Taliban retain the ability to calibrate violence levels in large parts of the country. But even if an understanding is reached with the Taliban, it does not hold the promise of lasting peace. Breakaway factions will find support and funding to continue bloodletting.

It is necessary to take stock of Kabul’s problems and find strong regional partners as anchors in unison with the depleted NATO/American establishment after the International Security Assistance Force (ISAF) drawdown. Kabul’s foremost problem is fielding well-trained forces. The ISAF has apparently reached the numbers it had set as its target but the forces fail to inspire confidence. Continued intensive training is required.

India Markets Weekahead: A spirited rally may be a distant dream

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The week began with the Reserve Bank of India (RBI) maintaining status quo on rates as expected at its mid-quarter monetary policy review. The trade deficit widened to $20.14 billion, a seven-month high and up 13.18 percent over the previous month. Gold seems to be the culprit again and government restrictions don’t seem to deter Indians from buying gold.

The markets held on to hopes that U.S. Federal Reserve chief Ben Bernanke could bring cheer but the indication of a roadmap for a QE3 pullback saw the dollar rally against most currencies. The rupee was among the worst performers, falling close to 60 against the dollar.

Making the most of a mini-crisis

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

It all looked promising at the beginning of the year: the Indian rupee, like other Asia ex-Japan currencies, was appreciating against the dollar, to an extent on par with the Chinese yuan and just behind the Thai baht and Malaysian ringgit. Then came chatter in early May that the Federal Reserve was near gradually ending its money-printing program. The selloff in the rupee was rapid, and the currency lost more value than most of its Asian peers.

On Wednesday, Federal Reserve Chairman Ben Bernanke said the central bank will begin slowing the pace of its bond-buying stimulus later this year, triggering a global selloff that sent the rupee crashing to a record low on Thursday morning.

Indian insurers can now go international

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Global insurers have been participating in the Indian insurance market for nearly 12 years. We may soon see the trend reversing.

The Insurance Regulatory and Development Authority (IRDA), the country’s insurance regulator, has laid down rules for Indian companies to start overseas operations. The criteria being: net worth of 5 billion rupees for life insurance companies, 2.5 billion rupees for general insurance companies and 7.5 billion rupees for re-insurance companies. In addition, the companies should have made a profit in at least three of the last five years.

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