Finance Ministry takes over FMC, finally
The commodities market regulator would now be controlled by the Finance Ministry instead of Consumer Affairs Ministry
Commodity markets regulator, Forward Markets Commission (FMC), will now be under the administrative control of the Finance Ministry. With this, all the financial sector regulators, Securities and Exchange Board of India (SEBI), FMC, Insurance Regulatory and Development Authority (IRDA) and Pension Fund Regulatory and Development Authority (PFRDA), have been brought under one roof.
According to the Hindu, the union government has issued an order changing the allocation of business rules. "This enabled the Finance Ministry to get control of FMC from the Consumer Affairs Ministry. The commodity regulator will work under the Economic Affairs Department of the Finance Ministry," the report says.
This changeover intends to help the union government to have better coordination among all the regulators for resolving the Rs5,600-crore payment crisis of the National Spot Exchange Ltd (NSEL).
Although, NSEL was not regulated by any regulator after the crisis, FMC was empowered to supervise and take action in resolving the matter.
Since commodity forward is also a kind of financial transaction and Financial Sector Legislative Reforms Commission (FSLRC) has recommended to bring all financial transactions (barring banking which will continue to be regulated by RBI) under one regulator i.e. SEBI, ultimately FMC will be merged with SEBI, the report says.
The recommendation of creating unified financial authority (UFA) looks revolutionary on paper, but is neither practical nor of any use. From the consumers’ perspective, the track record of these regulators is a huge disappointment. In fact, there is hardly an example about an investor or saver receiving satisfactory redressal of his grievances from these regulators.
“This proposed UFA would also take over the work on organised financial trading from the Reserve Bank of India (RBI) in the areas connected with the bond-currency-derivatives nexus, and from the FMC for commodity futures, thus giving a unification of all organised financial trading including equities, government securities, currencies, commodity futures, corporate bonds, and so on,” the FSLRC set up under the chairmanship of Justice BN Srikrishna, had said.
However, this will be a long process as this will require repealing Forward Contract Regulation Act and bringing amendment in SEBI Act.



Amit Bhargava

4 years ago

FMC under an allegedly corrupt and Investor Hostile SEBI? Another joke on investors.

Crisis brings a real chance for reform. Really?
Despite the tanking of the rupee and the lower GDP numbers, the Indian government is doing more of the same. It is trying to pass a controversial food subsidies program that could cost about $21 billion a year. The reason for the generosity is simple. Elections are coming
Markets rallied sharply this week. US President Obama took the novel decision to actually ask the people’s elected representatives whether he should order an act of war against another country. This decision postponed the ultimate decision for a week, but I doubt that it will change the outcome much. Punishing rulers we consider evil (and who are not acting directly in our strategic interest), is considered not only an American prerogative but also its historical duty. However, although missile strikes on Assad’s military assets may seem morally satisfying, it will not have a great affect the ultimate outcome.  In the same way, the better purchasing managers’ index (PMI) numbers out of China and Europe might delay market problems, but will not change their course. 
They might even make it worse. The promise or perhaps the illusion of better economic times over the past two months has allowed politicians to perpetrate more denial. Central bankers’ unorthodox policies seemed to solve the most difficult questions for our leaders. 
With the economy seeming to be always on the cusp of growth, any real reform was not on the agenda. The problem is that central bankers have recently realized two points. First, according to recent research, the policy known as quantitative easing has very limited effects on the real economy. Second, the unintended consequences they have guessed at are for emerging markets quite real. Central bankers have compounded the error by insisting that their policies actually strengthen the economy instead of admitting the possibility of an error. Therefore, politicians in several countries have continued former failed policies in the name of political expediency.
One reason for the rally was the manufacturing numbers out of China. HSBC China PMI index came in at 50.1 ending three months of numbers below 50, which indicate a contraction. This sounds like good news, but a closer examination of the official numbers reveals something more disturbing, more of the same. While the large state owned firms’ index rose to 51.8, the smaller businesses posted their 17th successive month of contracting activity with a reading of 49.2.
Chinese leaders have been espousing a major change of policy. They want to stop pouring money into large, inefficient, money losing and often insolvent state owned businesses. Instead, they want to encourage more consumption by consumers and small businesses. This policy, although economically necessary, is politically unpopular, because many of the local leaders of the Communist Party depend on the state owned business for patronage and power. So, it appears that China is still encouraging economic policies that will add to its massive debt mountain, while stressing businesses that rely on the shadow banking system the most fragile aspect of its financial system.
Italy was another country that has an encouraging PMI. It rose from 50.4 last month to 51.3 building on a trend over the last three months. However, an improving economy has just allowed its government to continue to be irresponsible for reasons of political expediency. The prior technocratic government of Mario Monti introduced an unpopular property tax on first homes to meet fiscal targets. Italy’s sovereign debt is one of highest in the world. It was recently abolished by his successor Enrico Letta against the advice of the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD). He got rid of the tax to save his fragile coalition. Abolishing the tax was part of the policy of his coalition partner, headed by the recently convicted Silvio Berlusconi. The tax was important because it is more difficult to dodge, which addresses Italy’s notoriously poor record on revenue collection.
India was one country that definitely did not have good economic numbers this week. Nevertheless, despite the tanking of the rupee and the lower GDP numbers, the government is doing more of the same. It is trying to pass a controversial food subsidies program that could cost about $21 billion a year. The reason for the generosity is simple. Elections are coming.
Instead of repeating past mistakes, it could actually try to make its laws more appropriate for a growing economy. Included in the long list are structural reforms such as insurance industry liberalization, disinvestment of state-controlled enterprises, lifting limits on foreign participation, allowing foreign investment in the private pension industry and reducing. The list is long and has been repeated often over the past 10 years. The question is it too late to make these reforms.
One commentator, I read recently, suggested that it was. According to this savant, it is best to make reform during good time, because it lessens the cost. True, but as we have seen in numerous countries, even countries that have the potential of major economic meltdowns, the impetus for reform is not there as long as the future looks bright. It reminds one of Citigroup former CEO’s, Chuck Prince, famous quote in July of 2007 on the eve of the meltdown that "As long as the music is playing, you've got to get up and dance." 
However, the music does stop and arguably, it has stopped in a number of countries. Rather than a lost chance, the crisis brings a real chance for reform. Prime Minister Manmohan Singh could never have reformed the Indian economy without the threat of collapse. The Securities Act of 1933 and the Securities Exchange Act of 1934 established the model for securities regulation around the world. They were passed only after the market crashed in the depth of the Great Depression. However, sadly these things will only happen when denial is no longer possible. Until then play on, “Give (them) excess of it; that surfeiting, The appetite may sicken, and so die.”
(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first-hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages.)


Nifty, Sensex in an uptrend: Weekly Market Report

The indices will move up as long as the rupee remains stable, but the gains in Nifty above 5,700 may be limited

Raghuram Rajan the new governor of Reserve Bank of India (RBI) announced his plans for strengthening the battered rupee. This helped markets close positive for the second consecutive week. The Sensex rose 650 points (or 3.49%) to close this week at 19,270 while the Nifty settled at 5,680, rose 209 points (or 3.81%).


The BSE 30-share Sensex closed positive on Monday, ignoring negative news of the GDP growing a mere 4.4% in Q1, the slowest growth since the January-March quarter of 2009. The HSBC Manufacturing PMI, sank to 48.5 in August from 50.1 in July, the lowest reading since March 2009.


On Tuesday, Sensex broke the trend of four days of consecutive gains and ended in the negative, on the rising fears about a potential US military strike on Syria, which may lead to steep rise in the crude oil prices. The rupee reached closer to its all time low of Rs68.80 per US dollar.


Sensex rose on Wednesday despite news of the HSBC Services PMI slipping to 47.6 in August, the weakest since April 2009, from 47.9 in July as new business dried up. Next day, steps taken by RBI to stabilize the currency and the measures to reassure investors by the new governor of RBI helped the market to close positive for the second consecutive session. The positive move continued on Friday when Sensex closed above 19,000.

The top two gainers among the other indices on the NSE were Bank Nifty (10%) and Finance (8%) while top two losers were IT sector (2%) and Media (1%).


Among the Nifty-50 stocks, the top five gainers were BHEL (20%), I C I C I Bank (19%), IndusInd Bank (16%), ONGC (16%) and Jaiprakash Associates (15%) while the top five losers were Sesa Goa (7%), Tata Power (7%), Hero MotoCorp (6%), Infosys (2%) and H C L Technologies (2%).


Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors were:


Top ML sectors


Worst ML sectors


Oil & Gas






Consumer Products








Software & IT Services


Financial Services






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