Foreigners dump emerging market debt but buy Indian debt

Bond yields of emerging markets have jumped by 150 basis points on the back of a huge sell-off from foreign investors. But they continue to pour money into Indian debt


The last few weeks have witnessed one of the worst sell-offs in emerging market debt since the financial crisis of 2008, foreigners dumped emerging market debt for a variety of reasons. But in an interesting case of decoupling, foreigners continued to pour money into the Indian debt market. 
As oil prices tumbled, debt of emerging market countries, whose economies and finances are most dependent on oil exports, began underperforming. Crude oil dropped 48% since June, to about $55 a barrel, squeezing exporters from Venezuela to Russia and Nigeria. Venezuelan sovereign US dollar debt fell by more than 10% in November, pushing yields to over 20%. Russia’s U.S. dollar debt was down 2.6%. Ukraine’s government bonds slid 10% in November. However, there has been no impact on Indian debt and foreign investors were net buyers. In fact, thank to rapidly declining inflation, yields too have dropped significantly from the highs seen last year.
To control attract inflow and stem the outflows, the Central Bank of Brazil raised the benchmark interest rate by half a point to 11.75% on December 3 amid high inflation, low economic growth and a falling currency. Central Bank of Russia hiked its benchmark one-week repo rate from 10.5% to 17%, effective December 16.
In fact, the yield spread between high grade emerging markets and US AAA-rated corporate debt has jumped, almost doubling in less than three weeks to the highest level since mid-2012. A few analysts suspect some signs of trouble in certain emerging markets.
The EM bond market has also been under selling pressure based on the stand taken by the US Federal Reserve, that they may increase rates sooner than expected, even though they stressed patience. The Fed is possibly laying the ground for its first interest rate increase since 2006, threatening to reverse the capital inflows into developing nations.

Foreigners had panicked about a rate hike and its impact on emerging markets in the middle of 2013, when over two months they had sold off Rs44,000 crore of Indian debt. But once the government appointed Raghuram Rajan as the RBI governor and the rupee stabilised, they have been net buyers all through.


India seems to be immune from such worries of a rate hike this time. In fact, with easing inflation, the Reserve Bank is expected to cut interest rates from the prevailing 8%. Foreign investors purchased nearly Rs1.53 lakh crore of Indian debt over the past one year. Indian mutual funds, over the same period have purchased Rs6.21 lakh crore of Indian debt.
The Indian 10-year benchmark yield which was trading above 9% in April 2014, is now trading a little over a 100 basis point lower at around 7.93%.


Bombay HC rejects Railways proposal to levy cess for medical services

Samir Zaveri, who had filed the PIL, told the court that annual income of the suburban Railways was Rs1,824 crore, while expenditure was Rs1,624 leaving a balance of Rs200 crore as surplus


The Bombay High Court has rejected the proposal of Central and Western Railways to levy cess on Mumbai suburban commuters for funding emergency medical centres at stations. The HC said it is the statutory obligation of the authorities under the Constitution to provide such service. 
Suresh Kumar, Railway Counsel, informed a bench headed by Justice Abhay Oka that the authorities were proposing to levy a cess on monthly season ticket holders for such services. 
The Bench, while hearing a petition filed by railway and RTI activist Samir Zaveri, rejected the proposal saying that the Railways were under the obligation to provide emergency medical services free of cost to the commuters. Even the Constitution gave a right to the citizens to enjoy the right to safety, the bench ruled. 
While the Railways pleaded that their expenditure exceeded income and hence a levy was proposed, the petitioner, Zaveri, who himself lost both his legs in an accident, argued that suburban Railways were making a profit. 
Zaveri said he had learnt through an RTI that the annual income of the suburban Railways was to the tune of Rs1,824 crore, while the expenditure was Rs1,624 leaving a balance of Rs200 crore as surplus. 
The court also ordered the Railways to provide Emergency Medical Rooms at all the stations as soon as possible. 
The Railways informed that at big stations, where the accidents have numbered more than 100 in the recent months, emergency medical rooms would be set up in three months and at other stations they would come up in the next six months. 
The bench, however, asked the Railways to provide such services at the earliest. 
The court directed the Maharashtra Government to provide cardiac care unit to the ambulances stationed at the railway stations to carry accident victims to hospitals in emergency. 
"In keeping with the court orders, the Railways have to provide at their own cost an emergency medical room equipped with a bed, doctor and a nurse at every station and also keep ambulance as stand by to shift injured to hospitals in case of accidents," said the bench.
After a trauma centre was set up at Dadar railway station on the orders of the court, the HC in March 2013 ordered the Railways to consider setting up such rooms at other major stations — Churchgate, Mumbai Central, Bandra, Andheri, Borivli, Vasai, Palghar, Kurla, Thane, Dombivli, Kalyan, Karjat, Wadala, Vashi and Panvel — which had seen over a 100 accidents in the previous year. 
Hundreds of people die every year on city's suburban railway system after falling from overcrowded trains and crossing the tracks, the PIL said and sought medical facilities for accident victims in the "golden hour" (within one hour of the accident).
According to railway police statistics, about 3,600 people die and over 4,000 are injured every year, with activists blaming overcrowding and the lackadaisical attitude of railway authorities for the mishaps. 
Moneylife Foundation has set up the Samir Zaveri Railway Helpline that provides email assistance to all commuters. 




2 years ago

Great Work (Seva to society)

Narendra Doshi

2 years ago

Dear Samir,
Well deserved act acomplished. I am sure your continuous zeal will ensure implementation in the not too distant.Kudos once again.


2 years ago

My heartfelt gratitude and appreciation for your PIL and rest of the services provided by you Shri Samir.

Virendra Jain

Legal Amendments: Fixing Things or Adding to the Mess?

With amendments to the Companies Act 2013, the present government seems to be moving quickly to address past mistakes in legislation. But has it done a thorough job?


One area where the Modi government seems to be moving swiftly and silently is to fix bad laws that were written by the UPA over the past decade. The new Companies Act, 2013, to replace the Companies Act 1956, was hurriedly pushed through parliament in the last few months of UPA government, despite serious concerns about its broad sweep, onerous reporting requirements and draconian provisions. (Check out Moneylife Cover Story, 19 September 2013, New Companies Bill & SEBI Ordinance: Hope, Hype & Horror).


The managing director of a blue-chip company told me that the government had received seven lakh representations from companies, chambers of commerce and professionals about hardship it would cause. Every one of them was ignored and the Act was hurriedly passed.


The NDA, after it swept to power, has been quietly making changes through hurried notifications. So, a little after a year the Companies Act, 2013, was passed, the Lok Sabha, on 17th December, has passed the Companies (Amendment) Bill, 2014. Getting the Bill cleared by the Rajya Sabha will be more difficult but not because members will be more diligent in examining the Bill in greater detail.


The amendment, among other things, seeks to address the confidentiality and privacy concerns of businesses. The previous Act required certain board resolutions to be filed with the RoC (registrar of companies); public inspection of such documents will now be prohibited. However, industry wanted the government to scrap the filing requirement itself which hasn’t happened. What I am concerned with is the lack of any public discussion while amending a key Act, especially since the government seems to be listening only to the concerns of big industry houses and chambers of commerce and not to investors, depositors or small businesses, running private limited companies.


The amended Act prescribes specific punishment for raising deposits in violation of the provisions of the new Act. This will stop many dubious companies raising deposits in the garb of hybrid bonds and debentures without being subject to any regulation. But it still does not address the problem of MCA’s failure to act decisively to redress complaints.


Thousands of depositors have filed complaints with the CLB (company law board) against companies like Elder Pharma, Birla Power Solutions, Neesa Leisure, Plethico Pharma, Ind Swift, Micro Technologies India, Ankur Drugs, Asian Electronics and the Ansal group, for failure to pay interest or refund matured deposits. There is no response. What happens to these cases? What happens in future to such cases, if the new law is not used in the interests of the depositors?



Anil S Desai

8 months ago

For all these companies, this is new channel for corruption and money laundering.
Modi Govt. talking so much against corruption seems to be doing nothing to get get the hard earned money back to depositors.

Vinod Joshi

8 months ago

Apart from the points from Mr. Girme's, there is total apathy from bureaucrats and police to move the things at faster pace. I believe there is a racket in bureaucracy who purposely supporting these purporators. Of course our FM did nothing about it after making so many complaints.

Nikhil S Girme

10 months ago

New Deposits Act 2013 or 2014..what difference does it make to Sr citizens who are waiting for their money from fraudulent companies like Unitech, Jaiprakash, Neesa, Phadnis, Tricom India, Bilcare Ltd,Plethico, is exactly one year since this article was published but I cant control myself but get very angry that the govt has done something which they are still not aware deposits Act instead of strenghtening the position of depositors have further diluted the law...All the above companies promoters must be made stripped, their faces blackened and hanged in front of the public..And on top of this Arun Jaitley who himself is now under corruption charges also should be taken to task..PMO is only interested majorly in handshaking all over the world and giving same old boring speeches but no action...We have written , mailed, twittered atleast 100 times to PMO, FMO but no response besides lipservice...When will the govt swign in action on these companies....? Very very frustrating ...We have one of the worst law makers with no accountability..From last 9 mths we are meeting Gujarat Inspector General of Police to register a simple complaint against an already arrested IAS office cum promoter of Neesa for non repayment of deposits to the tune of 60 Cr...but nobody wants to move...Pls Ms Dalal can you get things moving ?

Vaibhav Dhoka

2 years ago

Indian law's contradicts its own intentions.

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