Economy
Finance ministry looking at possibility of launching sovereign bonds

“They have given us a lot of suggestions including sovereign bond issue. All options are on the table and we will examine as and when the need comes,” chief economic advisor Raghuram Rajan told reporters after a meeting with foreign bankers

Faced with outflow of foreign funds and deteriorating current account deficit (CAD), the finance ministry today discussed the possibility of floating sovereign bonds after a decade to shore up forex reserves.

 

“They (have given) us lot of suggestions including sovereign bond issue. All options are on the table and we will examine as and when the need comes,” chief economic advisor Raghuram Rajan told reporters after a meeting with foreign bankers.

 

India had in the past on several occasions floated sovereign bonds to tide over the balance of payment crisis.

 

The meeting called by Rajan was attended by representatives of several banks including Citi Bank, Bank of America and Barclays.

 

Besides the bond issue, Rajan said bankers gave suggestions on making debt markets more liquid.

 

“They (made) suggestions on a number of issues ranging from ways we can make the markets more liquid. What kind of funding needs India might have? How this could be brought in? We will take note of them.

 

“This was not a meeting to take decisions, it was to take inputs. This dialogue will continue. We now have bunch of ideas to reflect on”, he added.

 

India's CAD touched a record high of 4.8% of the GDP in the 2012-13 fiscal due to high imports, including that of gold. The situation deteriorated further after the initial statement of US Federal Reserve Chairman Ben Bernanke suggesting gradual withdrawal of stimulus.

 

His statement had led to sudden outflow of foreign funds, which in turn pulled down the value of rupee to all time low of 61.21 to a dollar. Things, however, stabilised after Bernanke said that stimulus programme would continue for some more time.

 

In order to tide over the balance of payments crisis, the government in 1991 issued India Development Bonds and raised $1.6 billion.

 

In 1998, it launched the “Resurgent India” bonds soon after the announcement of nuclear tests and sanctions that followed. The scheme raised $4.2 billion.

 

Two years later in 2001, the government rolled out “India Millennium Deposits” on the back of rising fuel prices and slowing capital flows. It was able to garner $5.5 billion.

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Infosys stock price rockets 15% despite poor quarterly result

Infosys quarterly net profit dipped, barely met analysts estimates but the stock price reacted differently and jumped instead giving way to speculation for a stock that was once consistent

On its results day, Infosys has once again moved the market. Last time (12th April), it had taken the market down sharply. Today, the stock has shot up to the day’s high of Rs2,905 on Bombay Stock Exchange (BSE), up 15%. Were its results simply great? Dollar-earning Infosys was expected to do well given that the rupee has depreciated. Despite this, revenues and net profit were stagnant. In fact, its net profit for the first quarter of the 2014 fiscal was actually less than the previous quarter i.e. January-March 2013. Infosys consolidated net profit for the June quarter was Rs2,374 crore while in the March quarter was Rs2,394 crore. Standalone results were worse, and declined by more than 2% to Rs2,250 crore. During the same period, the rupee depreciated by 9.26%. Clearly, without the rupee depreciation, Infosys would have done quite badly.
 

So what drove its share price higher? It ‘beat’ analysts’ expectations. Infosys has also been getting a lot of positive attention after founder NR Narayana Murthy returned at the helm again, this time with his son in tow.
 

A CNBC-TV18 poll of analysts had expected Infosys to record consolidated net profit at Rs2,315 crore. Infosys had barely surpassed this and the share price has rocketed up. The stock that was once the beacon of consistency is now something else. We had written how stock prices react to analysts estimates over here: When will analysts be realistic in their expectations about Infosys? A look at the bar chart below illustrates how Infosys has fared over the last eight quarters. It struggled to gain any earnings momentum.
 


Rajiv Bansal, Infosys chief financial officer announced increases in compensation which is expected to affect Infosys' margins. “We have announced compensation increases for FY 14 effective July which will affect our margins in the future quarters,” said Rajiv Bansal.
 

But as today’s rally shows, the market is obviously looking beyond the negatives such as no growth and rising costs. Following Narayana Murthy's return, many fund managers and analysts are hopeful that Infosys will be able to record higher revenues and profits.
 

Poor showing over the last few quarters resulted in a fall in its price earnings ratio, and for good reason. Governance and leadership were crucial issues that the company had to resolve. This was the cause for Narayana Murthy’s return.
 

It is pertinent to note that the day before Infosys announced Narayana Murthy’s return, someone may have bought its shares. Moneylife had reported this first. The story can be accessed here: Someone knew Narayana Murthy is coming back and traded on it. The Indian securities market watchdog, the Securities Exchange Board of India (SEBI) is investigating the matter.

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COMMENTS

Suiketu Shah

3 years ago

none of the "wealth management companies suggest Infosys to buy(as clearly they get more commission making investors buy Infosys's competitors stock.The price of Infosys from April 2013 to now speaks for itself.

One stock broker HDFC Securities has ,in the press,recently come down heavily on Infosys,inspite of the hugh rise in share price,thereby making a fool of themselves.Wait and watch Infosys next 2-3 yrs:)

Tremors in Thimpu: Enter the Dragon?

Everything was calm and quiet until recently, when India’s finance ministry suddenly decided to withdraw its subsidy on petroleum products and excise duty refund to supplies to Bhutan


Tomorrow, 13 July 2013, some 400,000 eligible Bhutanese voters will take an active part in the elections, in which India supplied Electronic Voting Machines will be deployed.

 

The Bhutanese people will vote to elect a 25-member National Council and a National Assembly of 47 members.  Presided by the 5th king of the Wangchuk dynasty, Bhutan is a constitutional monarchy with a democratic system of government.  In effect, it is a parliamentary democracy.

 

Bhutan is ruled by 28-year old King Jigme Khesar Namgyal Wangchuk whose father abdicated the throne in 2008. King Wangchuk and his wife, who recently visited India, were given a royal treatment. The King has appreciated the tremendous progress India has made in all the fields. To the peace-loving Bhutanese, India is a big brother, on whom they can depend for literally anything.

 

Because of its special treaty with India and the relationship from time immemorial, the Election Commission of India has extended all the assistance that was required of it to enable the Bhutanese to conduct the elections.

 

Everything was calm and quiet until recently, when India’s finance ministry suddenly decided to withdraw its subsidy on petroleum products and excise duty refund to supplies to Bhutan.

 

Apparently, the trouble began to brew in May last year when an audit found that there was a massive discrepancy in what Bhutan claims to have imported from India as against the Indian charge of (possibly?) inflated bills on export. Here, we must remember that exports are taking place from India to Bhutan, and so, the epicentre of trouble lies here, at home!

 

It is not really relevant to discuss the figures claimed and disputed but in a world of advanced computer technology available in the country, and assuming records are carefully kept methodically, it should not take months to discover where the fault lies!

 

A new government is expected to be formed after the election results are announced, possibly on 14th July, but there is great despair and distress in the minds of Bhutanese people by their Indian counterparts.

 

Simply put, it is a bureaucratic bungling of the worst kind.  While full details have not been made public on either side, it is clear that, prima facie, there is the urgent need to:

 

 a) route all supplies of these essential products through government organizations on either side, and eliminate private enterprise

 b) ban export of any subsidy-oriented product by private parties with immediate effect, and resume supplies, putting the so-called disputes in the backburner

 c) request the Bhutanese government to nominate a central government organization in their country which will take the responsibility of receiving and distributing such essential products

 d) refrain from making such unilateral moves on any product or service, without prior consultations

 e) with Bhutanese assistance, plug loopholes in the border customs through which products have to pass into that country.  Or is it the border porous enough to permit cargo movement freely?

 

As mentioned earlier, the sentiment in Bhutan, as reported in the press, is the indirect arm-twisting method employed, as a sequel to former prime minister Jigme Thinley’s reported meeting with Chinese premier Wen Jiabo last year. Such moves are to be accepted with a pinch of salt and no action should be taken that may hurt the sentiment of the people on either side.

 

We must remember that it is in India’s interest to keep both Nepal and Bhutan free from such pin-pricks and assist them in every possible way.

 

China is waiting for such an opportunity.

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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COMMENTS

Gurparkar Singh

3 years ago

Wake up India,before it becomes late

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