Now, economy can only become stronger, says Chidambaram

Asserting that the economy is going to become stronger due to efforts of the present UPA government,Finance Minister P Chidambaram on Friday said the CAD has been brought down significantly to $32 billion and fiscal deficit contained within the target in 2013-14.

Chidambaram, however, said there has been shortfall in overall tax collection in the last fiscal.

"We are completely satisfied that we will achieve the fiscal deficit target as projected in the interim budget (4.6 per cent of GDP during 2013-14). The news on Current Account Deficit is of course extremely good. The CAD for the year that ended will be only $32 billion as against the previous year's $88 billion," he said in a media briefing at Congress party office in New Delhi.

The CAD has not only been fully and safely financed but $28.5 billion has also been added to the reserves, he said.

The CAD in 2012-13 was at 4.7 per cent of GDP and in 2013-14 it will only 1.7 per cent, the Finance Minister said.

"So these are good signs...The economy going forward can only become stronger," the Finance Minister said.

To a query on recent rise in stock market and Modi factor, Chidambaram said: "if you attribute every rise to quote unquote to borrow your language 'Mr Modi is coming' then every dip must also be attributed to Mr Modi is coming. Please don't make that fatal mistake. What has this got to do with who is going to be elected on May 16 (the vote counting day)".

He said what is happening in the capital market is a reflection that investors are becoming more confident about the stability and strength of India's economy.

Talking about tax collections, Chidambaram said the revenues are "more or less as expected".

In the direct taxes segment, government has collected about Rs 5,500 crore more than the revised estimate (Rs 6,41,835 crore) during 2013-14.

On indirect taxes, government has achieved the target for Customs, but in the Central Excise and Service Tax segments there has been a shortfall "resulting in a net shortfall of indirect tax of about Rs 17,000 crore", he said. 

Chidambaram further said the slowdown in the economy was caused by high government expenditure, fiscal deficit and CAD, and consequent inflation.

"So in the last 20 months my job has been to attack the problem. We have attacked the problem of fiscal deficit. We have attacked the problem of CAD. Both have been contained.

Once these two problems are contained, going forward you will find that investment would pick up, both domestic and foreign investment will pick up," the Finance Minister added.

He also said the Cabinet Committee on Investment (CCI) chaired by Prime Minister Manmohan Singh has speeded up implementation of large infrastructure projects.

The CCI and project monitoring group (PMG) has been an outstanding success, he said.

"I am very happy that the idea of CCI has now been vindicated. The greater vindication is coming from the fact that 15 states have come to the Cabinet Secretariat seeking advice and guidance on how to set up similar PMGs in respective states. I sincerely hope that every state will set up a cabinet committee and a PMG for projects that are being implemented in their states, he added.

Out of these 169 projects taken up by the CCI, in 108 projects "we have almost completely resolved the outstanding issues... (and) as a result... these projects are moving forward", he said.

Fresh loans to the extent of Rs 1,02,292 crore have been released to the project promoters.

Of all the 169 projects, the total project cost is Rs 8,37,632 crore and the loan sanctioned by banks to these projects is Rs 2,92,658 crore.

The outstanding loan as of Feb 28, 2014, was 2,28,288 crore, which means roughly 70 per cent of the sanctioned loan has been disbursed, Chidambaram added.

A tough sell: insurance against a China financial crisis

(Reuters) - Selling insurance against a financial crisis should not be difficult, five years after the last one nearly wrecked the global economy.But when it comes to China, the world's second-largest economy, the probability of a full-blown crisis is apparently so remote that hardly anyone will buy an insurance policy against it, no matter how cheap.Financial wizards have been trying to sell peace of mind to investors in China for years, but fewer and fewer of those investors are interested, despite some worrying headlines.In the past few months alone, China has seen its first domestic bond default, a small bank run, its weakest export performance since the global financial crisis, a marked slowdown in its property market and a rise in labour unrest.Steve Diggle, a Singapore-based hedge fund manager who crafts strategies to protect investors against financial catastrophes, says investors have faith that the Chinese government, armed with almost $4 trillion in foreign exchange reserves, will simply not allow things to get out of hand.He had to close down a fund that used to bet on doomsday outcomes in Asia last year."There's a sense you are playing poker against a guy who makes his own chips," Diggle said.Before the 2008-09 global financial crisis, he had run a successful fund, Artradis, which thrived on volatility in financial markets. Now, he says, hedging against a catastrophe seems to be passe - and not just for China.Governments and central banks around the world have shown themselves willing to deploy vast sums of money - China alone launched a 4 trillion yuan ($643 billion) stimulus package in late 2008 - to avert a financial meltdown."You are no longer in an environment where market forces will play themselves out because you have an extraordinarily powerful and motivated intervention in the market process from someone, such as a central bank or government, who has a strong ability to influence those processes," said Diggle.BETTING ON A BLACK SWANThere are still some hedge funds that take out insurance against extreme, improbable events - such as the notion that China's economic miracle will end in tears.Andrew Wong, co-chief investment officer of Fortress Convex Strategies Group, runs a fund that aims to make money from these so-called "black swan" events."A pattern we've seen through long cycles is that in the period leading up to a systemic crisis, people buy hedges, lose money and unwind those hedges. Because it hasn't been efficient and has lost money, by the time the real thing happens they may end up being completely unhedged," said Wong."It's very hard to time the market precisely, so in general you need to have the insurance before the house is on fire."For cautious or contrarian investors, taking out insurance on such apparently unlikely events as a China crisis has to be cheap. It is futile to spend large sums of capital on so-called tail-risk bets, waiting for such long odds to pay off.Hedges can be expensive, though one relatively cheap method is to buy put options on the yuan or on Chinese stocks at strike prices well below current market levels.Typically, though, the cheapest hedging strategies can also be the most complex. One such strategy involves variance swaps, a financial instrument that tends to pay the investor when volatility of an underlying bond or stock spikes.In hedging against the risk of a major outbreak of defaults, a straight-forward approach such as buying credit default swaps (CDS) is not the most cost-effective. Instead, funds will offset the cost of buying CDS insurance against a distressed company by also selling CDS protection against a more creditworthy one."If they want to hedge, it is relatively cheap," said Camiel Houwen, head of equity derivatives trading at ING Asia. "But not too many people are setting up the trade."In China's case, some fund managers think investors may be overestimating the hold Chinese authorities have on markets."A China hard landing is not our base-case scenario, but if it were to happen, it is one of these events that would have significant implications for a wide number of assets," said Viktor Hjort, head of Asian fixed-income strategy at Morgan Stanley.

"So it is a low-probability, high-impact type of scenario, and against those it always makes sense to consider hedges."($1 = 6.2190 Chinese yuan)

MARKET EYE -Indian lenders gain on bond rally, earnings hopes

* Lenders gain for a second consecutive day with the NSE banksub-index up 0.6 percent after its 1.8 percent gainon Friday.

* A rally in bonds after the central bank fully sold the 200billion rupees ($3.31 billion) worth of debt on offer onThursday sparking gains in banks, while hopes of sturdierearnings also help.

* Punjab National Bank is up 2.2 percent, Bank ofBaroda rises 1.9 percent and State Bank of India is up 1.3 percent.

* HDFC Bank gains 0.8 percent ahead of its results onTuesday, while ICICI Bank and Axis Bank areup marginally ahead of their results later in the week.

For further help :http://in.reuters.com/article/2014/04/21/idINL3N0ND0RD20140421

Sensex loses over 100 pts; Infy, BHEL, TCS under pressure

2:00 pm Interview: Speaking to CNBC-TV18, JustDial CFO Ramkumar Krishna Machari said the company will invest Rs 60-90 crore on advertising and marketing next year with around Rs 40-60 crore being a one-time spend. The company will continue to have a normal ad spend of around 5 percent of the revenue thereafter, he said. Just Dial is confident of good revenue growth in FY15 on recent initiatives. Excluding the one-time ad spend, Krishna Machari expects margins to improve by around 150 bps in FY14-15. Just Dial is confident of good revenue growth in FY15 on recent initiatives. Excluding the one-time ad spend, Krishna Machari expects margins to improve by around 150 bps in FY14-15. 1:50 pm Market outlook: Elections are usually a good time for the market, which is evident from the fact that nearly 80 percent of the Sensex returns in the last 30 years have come in during the two years of a new government. Saurabh Mukherjea CEO, Institutional Equities, Ambit Capital who believes Indian equities are in midst of a similar run. Typically, post elections, cheaper stocks tend to rally. Mukherjea advises investors to focus on buying decently run companies available at attractive valuations. “We expect 15-20% returns on Indian market in next 2 years,” he told CNBC-TV18 in an interview. 1:40 pm Poll: HCL Technologies, the fourth largest software services exporter in India, will announce its third quarter (January-March) results on Thursday. According to CNBC-TV18 estimates, profit after tax of the company may increase 3.7 percent sequentially to Rs 1,551 crore during the quarter. Revenue (in rupee terms) is likely to grow 2.5 percent quarter-on-quarter to Rs 8,388 crore and dollar revenue may rise 2.7 percent to USD 1357.5 million. "The company continues to remain very well-positioned in the infrastructure outsourcing space despite rising competition. The software services segment is now showing signs of revival. Finally, we see industry-wide positive momentum in discretionary spending," says Credit Suisse. According to poll, earnings before interest and tax (EBIT) may fall 0.7 percent to Rs 1,927 crore and margin may slip 70 basis points to 23 percent on quarter-on-quarter basis. 1:30 pm Market outlook: Anish Damania Head-Institutional Equities, IDFC Securities believes the market is hopeful of a stable government on May 16 and that optimism is converting into bank’s performing. However, he says fundamentals of public sector undertakings are still not great and are done rallying for the time being. He expects a correction of about 10 percent for public sector banks.  In an interview to CNBC-TV18, Damania says the sell-off by the foreign investors in the last two days is not worrisome. But if it continues for a few more sessions then FIIs may possibly be booking profits. However, he does not see a sell-off kind of a situation at least till election results are out or at least the polling is concluded. Meanwhile, Damania is bullish on Infosys and recommends buying the stock. 1:20 pm Buzzing: Shares of Crompton Greaves touched 32-month high at Rs 188 per share, up 5 percent intraday. Investors are excited about the stock as reports indicate Hitachi is likely to pick up promoter’s 42.7 percent stake in the company. The deal is expected to value the company at over Rs 15,000 crore while the current market cap is only Rs 11500 crore. Gautam Thapar owns 42.7 percent of the power transmission and distribution company. According to the media report, the entire stake is on the block. Don't miss: Is it best to exit USL post Diageo open offer: Brokerages say why not! The market is losing strength as the Nifty struggles at 6700, weighed by profit booking. The Nifty is down 32.35 points at 6700.75 and the Sensex is down 109.00 points at 22375.93. About 988 shares have advanced, 1376 shares declined, and 193 shares are unchanged. IT and realty stocks drag markets and FMCG stocks gain. Infosys, TCS, BHEL, Hero Motocorp and HDFC are under heavy selling presurre. Maruti, ITC, Tata Steel, GAIL and ICICI Bank are among the gainers in the Sensex. Market's focus is firmly now on earnings corner with TCS releasing March quarter results today. TCS is witnessing some profit booking on expectations of a muted quarter. The rupee is marginally lower taking cues from dollar's broad strength and inflation data. Bond yields touch 6-week lows on lower core consumer price index. Suspected RBI bond buying and big bond redemptions may have led to the fall. Asia trades higher after China GDP bet estimates. China's economy grew at 7.4 percent in the first quarter of this year, above estimates of 7.3 percent, but still slower than the 7.7 percent clocked in the previous quarter.

India's money market rates surge ahead of end of fiscal year

(Reuters) - India's short-term interest rates are surging, as the stress in interbank lending markets typically seen at the end of the fiscal year in March is being exacerbated by a holiday on the last day of the month.
The one-month overnight indexed swap hovered near a more than five-month high of 9.47 percent on Tuesday, up from 8.49 percent on February 26. The three-month certificate of deposit was trading at 10.25 percent, up from 9.10 percent in January.Meanwhile, month-end rupee forward contracts surged to about 17 percent on Tuesday compared with around 9 percent last month, reflecting a spike in the overnight benchmark known as Mumbai Interbank Offered Rate (MIBOR)

Spikes in short-term rates are typical towards the end of fiscal years in India. Banks abstain from lending in interbank money markets on the last day because of a domestic accounting rule that mandates capital adequacy ratios for the following year be set based on the funds disclosed on that date.
The last day of the fiscal year in 2013-14 falls on Monday, which coincides with Gudi Padwa and is a local holiday for Mumbai, effectively meaning the last day from an accounting point of view is on Friday, March 28.
"The problem is more to do with the rule on capital charge than liquidity because no bank wants to lend uncollateralised even if they have excess cash," said a private bank dealer.
The lack of lending at the end of fiscal years has long led to volatility, as banks needing cash at the end of the year act early, knowing funds will dry up as March progresses.
That can have a knock-on impact across short-term interest rates.
Based on the spike in currency forwards, analysts predict MIBOR could climb to around 15 percent by the end of the month from near 8 percent currently.
The call rate also tends to spike towards the end of the fiscal year, even when the Reserve Bank of India injects liquidity via repo transactions. Last year, for example, the call rate rose to 16 percent on March 28, the last day of 2012-13.
"It is a nightmare for those who need to borrow on the last day and also for those who don't. Because all the products linked to MIBOR go up," said another foreign bank dealer.

Indian Rupee – Gainer among Losers

Online Provident Fund transfer for workers under private trusts from July

NEW DELHI: The organised sector workers covered under private PF trusts, which manage their employees' retirement fund themselves, will be able to transfer their PF accounts online from July this year.

     There are over 3,000 private Provident Fund (PF) trusts which are managing the accounts as well as retirement fund of their workers. These trusts are regulated by the Employees' Provident Fund Organisation (EPFO)."The EPFO has planned to launch the facility of online transfer of PF  .. 

Read more at:

http://economictimes.indiatimes.com/wealth/savings-centre/savings-news/online-provident-fund-transfer-for-workers-under-private-trusts-from-july/articleshow/33911582.cms