Amidst gloomy news about dropping industrial production and the sharp fall in the rupee, there was a silver lining. Rating agency Fitch sees hope for India and upgraded the country’s outlook from ‘negative’ to ‘stable’. The optimism stems from the Government’s efforts to curtail fiscal deficit and remove supply constraints.
An improved outlook means lower risk of investing in Government debt which could see more foreign capital flows. Viewed against the background of the recent hike in the limit for FII investments in Government bonds by $5 billion, this upgrade could help attract foreign capital and support the sagging rupee.
Cautious World Bank
The World Bank struck a cautious note in its Global Economic Prospects report. It said that even as risks from developed nations receded, developing nations were going to face challenges linked with capacity constraints.
It has listed risks to global growth emanating from relaxation of fiscal and monetary policy in Japan, withdrawal of quantitative easing in the US, domestic challenges including inflation and asset price bubbles, and impact on commodity exporting companies due to softening commodity prices.
The World Bank has forecast that global GDP will expand 2.2 per cent in 2013 with developing-country GDP projected to grow at 5.1 per cent this calendar. The GDP growth for India in fiscal 2013 is pegged at 5.7 per cent, a slight improvement from the 5 per cent growth recorded last year. Growth in 2014 is projected to improve to 6.5 per cent.
MMTC’s bargain sale
On Thursday, the Government kick-started its divestment programme for 2013-14 with offer for sale of 9.33 crore shares in MMTC representing 9.33 per cent in the company. The sale price of Rs 60 was at a discount of 70 per cent to the previous day’s closing price. The issue was subscribed 1.5 times. The Government raised around Rs 560 crore from the divestment.
The stock had been trading at an unreasonably high valuation due to its low public float of less than 0.7 per cent. It has been continuously hitting the lower circuit filter last week since its valuation was considered too expensive. Even at the floor price of the offer, the trailing price-earning multiple for the stock was around 89 times.
The Government plans to raise Rs 40,000 crore through its divestment programme this fiscal. Last fiscal, through the sale of stake in public sector companies, it had raised Rs 24,000 crore against a budgeted Rs 30,000 crore.
One window please
The Chandrashekhar Committee set up by market regulator SEBI has recommended doing away with the existing classification of foreign investors into three categories – Foreign Institutional Investors, Sub Accounts and Qualified Foreign Investors. All three will now be clubbed under one category called Foreign Portfolio Investors (FPIs).
The committee has also suggested that registration of foreign investors should take place through dedicated depositories. FPIs are to be split into three categories based on their risk. The entry process will also be simplified. The time taken for foreign investors to start investing in Indian markets is likely to reduce considerably if these proposals are accepted.
FIIs desert debt
This fall was triggered not by stock markets but by bonds. In the first week of June, foreign institutional investors (FIIs) pulled out more than Rs 7,600 crore from the Indian debt market. This was in contrast to the heavy FII inflows in debt since the beginning of 2013. Market watchers attributed the sharp pullout to the rupee’s weakness.
No comments:
Post a Comment