Forex reserves decline by $10.5 billion in September: RBI

“The forex reserves stood at $304.8 billion as at end-March 2011. It increased to the peak level of $322 billion as at end-August 2011. Thereafter, it came down to $311.5 billion at the end of September 2011”, the RBI said in its report on management of foreign exchange reserves

Mumbai: India’s foreign exchange reserves declined by as much as $10.5 billion in the one month ending September 2011 mainly due to the impact of the central bank’s policy to intervene in the currency market to contain volatility, reports PTI.

“The (forex) reserves stood at $304.8 billion as at end-March 2011. It increased to the peak level of $322 billion as at end-August 2011. Thereafter, it came down to $311.5 billion at the end of September 2011”, the Reserve Bank of India (RBI) said in its report on management of foreign exchange reserves.

The movements in the Foreign Currency Assets (FCA), the report said, “occur mainly on purchases and sales of foreign exchange by the RBI in the foreign exchange market in India, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the central government and the effects of revaluation of assets”.

On the net basis, during the six-month period ending September 2011, foreign exchange reserves went up by $6.7 billion to $311.5 billion.

The decision of the RBI to intervene in the foreign exchange market to arrest the declining value of rupee too led to decline in forex reserves.

The value of the India currency which had declined to over Rs53 to a dollar has now stabilised at below Rs50.

The revaluation refers to the impact of exchange rate movement of international currencies vis-a-vis the US dollar on the country’s foreign exchange reserves.

Although both US dollar and euro are intervention currencies, the Foreign Currency Assets (FCA) are maintained in several major currencies like US dollar, Euro, Pound Sterling, Japanese Yen but expressed in US dollars.

Reflecting deterioration in the adequacy of forex reserves, the report further said that at the end of September 2011, the import cover provided by the reserves, “declined to 8.5 months from 9.6 months at end-March 2011.” 

Also, it added, the ratio of short-term debt to the foreign exchange reserves which was 21.3% at end-March 2011 increased to 23% at end-September 2011.

The ratio of volatile capital flows (defined to include cumulative portfolio inflows and short-term debt) to the reserves increased from 67.3% as at end-March 2011 to 68.3% as at end-September 2011, it added.

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ONGC stake sale on 1st March; floor price fixed at Rs290 a share

The Centre on Tuesday decided to offload 5% stake in ONGC on 1st March through auction route at a floor price of Rs290 a share that could fetch the exchequer about Rs12,000-Rs13,000 crore. The floor price for the sale has been fixed at Rs290 per share

New Delhi: Running against time to meet the Rs40,000 crore disinvestment target, the Centre on Tuesday decided to offload 5% stake in ONGC on 1st March through auction route at a floor price of Rs290 a share that could fetch the exchequer about Rs12,000-Rs13,000 crore, reports PTI.

“The ONGC stake sale through the auction route (will take place) in couple of days,” oil minister Jaipal Reddy told reporters after a meeting of the Empowered Group of Ministers (EGoM) which was chaired by finance minister Pranab Mukherjee.

“The floor price for the sale has been fixed at Rs290 per share,” ONGC said in a late night filing to NSE. The floor price, the minimum price for selling a share, is over 2% higher than ONGC’s closing price of Rs283.05 on NSE and Rs283.55 on BSE.

The auction will be between 9.15 am and 3.30 pm.

The government owns 74.14% stake in ONGC and proposes to offload 427.77 million shares or 5% equity. The sale may fetch the hard-pressed government about Rs12,000-Rs13,000 crore this fiscal.

The shares would be sold to institutional as well as retail investors on the “price priority” basis.

Six brokers including Citigroup Global Markets India, Morgan Stanley India Company and DSP Merrill Lynch will manage the share sale.

The auction route or “offer for sale of shares by promoters” involves very little paperwork and the whole process can be done within one trading day.

Capital market regulator Securities and Exchange Board of India (SEBI) had issued norms allowing promoters to sell stake by way of auction, through a separate window on BSE and the NSE, which has to be completed within a day.

This is the second disinvestment this fiscal, after mopping up Rs1,145 crore through stake sale in Power Finance Corporation. The government envisages to raise Rs40,000 crore through disinvestments this fiscal.

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Don’t outsource due diligence of distributors: SEBI to MFs/AMCs

SEBI on Tuesday asked mutual funds and asset management companies (AMCs) not to delegate due diligence activities of distributors to any agency as it is their “sole responsibility” to carry out the process

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) on Tuesday asked mutual funds and asset management companies (AMCs) not to delegate due diligence activities of distributors to any agency as it is their “sole responsibility” to carry out the process, reports PTI.

In a notification, SEBI said, “It is hereby clarified that the due diligence of distributors is solely the responsibility of mutual funds/AMCs. This responsibility shall not be delegated to any agency”.

However, it added, “mutual funds/AMCs may take assistance of an agency of repute while carrying out due diligence process of distributors”.

It further said that in order to avoid conflict of interest, AMCs will have to appoint a separate fund manager for each separate fund unless the investment objectives and assets allocations are the same and the portfolio is replicated across all the funds managed by the fund manager.

Noting that perfect replication of portfolio between the mutual fund scheme and schemes/products under other permissible activities of AMC may not be achieved at all times, SEBI said, “it has been decided that the replication of minimum 70% of portfolio value shall be considered as adequate for the purpose of said compliance...” 

That is subject to ensuring “AMC has in place a written policy for trade allocation and it ensures at all points of time that the fund manager shall not take directionally opposite positions in the schemes managed by him”.

Also, an AMC will have to disclose on its websites the returns for all the schemes on a monthly basis.

“This circular is issued...to protect the interests of investors in securities and to promote the development of, and to regulate the securities market”.

Further, in another circular, SEBI asked AMCs to disclose all details of debt and money market securities transacted in its schemes portfolio on their websites and forward the same to Association of Mutual Funds in India (AMFI) for consolidation and dissemination.

“These disclosures shall be made settlement date wise on daily basis with a time lag of 30 days,” it said.

Mutual funds will have to advertise details of pay out of dividends and impact of distribution taxes and money market schemes or cash and liquid schemes, SEBI said.

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