Goldman Sachs downgrades India to underweight on FII outflow

According to Goldman Sachs, investment case for India has turned less favourable because recovery in growth recovery looks elusive and the economy is more vulnerable


Investment banking and securities company Goldman Sachs has downgraded its rating on India to 'underweight' due to increased risk of foreign institutional flow reversal from equities market and sluggish growth outlook as the key reasons. 


Sunil Koul, analyst, Goldman Sachs in a note said, "Very little foreign selling has occurred in Indian equities relative to the massive foreign inflows over the past few years."


Foreign institutional investors (FIIs) have been net buyers in Indian stocks worth Rs66,000 crore ($12.5 billion) so far in 2013 after pumping in about $25 billion in 2012. But, these investors have sold shares worth Rs6,086 crore in July. The more severe sell-off has been in debt, where FIIs offloaded Rs12,037.60 crore worth of bonds.


“Recent activity data has been sluggish with no signs of a pickup in investment demand. The external funding environment has also become challenging causing Reserve Bank of India (RBI) to tighten liquidity,” Koul added.


Goldman Sachs said the investment case for India has turned less favourable because recovery in growth recovery looks elusive and the economy is more vulnerable.


The investment bank also cut its 12-month Nifty target to 6,200 and said it does not rule out further downgrades if the rupee weakens further.



RTI Judgement Series: Application under RTI Act must be dealt under the same Act
PIO rejected a request for information under the RTI Act asking the appellant to seek the same under different Act. This contention was rejected by the CIC. This is the 146th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC), while allowing a complaint, directed the Public Information Officer (PIO) of Debts Recovery Tribunal under the Ministry of Financial Services at Pune to provide complete information sought under the Right to Information (RTI) Act. The PIO while denying to furnish the information had asked the appellant to apply under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBI Act) for inspection and to obtain the required information.
While giving this judgement on 20 September 2011, Shailesh Gandhi, the then Central Information Commissioner said, “A citizen should be able to decide on the method most convenient and expedient by which she would obtain information. If the PIO has received a request for information under the RTI Act, the information shall be provided to the applicant as per the provisions of the RTI Act and any denial of the same must be in accordance with Sections 8 and 9 of the RTI Act only.”
Pune resident Madhav Balwant Karmarkar, on 24 March 2010, sought information about Board meetings, cases, summons and notices issued by the DRT, Pune between 21st and 23rd December 2009 from the PIO. Here is the information he sought under the Right to Information (RTI) Act...
1. The daily board for the days 21 December 2009 to 23 December 2009.
2. The cases which were kept for hearing on 21 December 2009 to 23 December 2009 transferred to for hearing before DRT - II, Mumbai before when the charge was kept by in- charge Registrar, DRAT, Mumbai.
3. The number of cases which were on the Board of 21 December 2009 to 23 December 2009 but adjourned to dates subsequent to 21 December 2009, but not before 28 December 20098.
4. Number of cases from the Boards dated 21 December 2009 to 23 December 2009 transferred to DRT - II, Mumbai for hearing since charge was kept with DRT - II, Mumbai by in- charge, DRAT, Mumbai.
5. The number of summons issued for hearing on 21 December 2009 to 23 December 2009 for hearing before DRT - II, Mumbai with whom was charge was kept of DRT, Pune.
6. Order received from in- Charge Registrar, DRAT, Mumbai for DRT - II, Mumbai to attend Pune for hearings on 21 December 2009 to 23 December 2009.
7. Application of the party concerned for holding the hearing before DRT - II, Mumbai on 23 December 2009 vis-à-vis sanction of the said application.
8. The application of the party concerned for taking the matter on board on 21 December 2009 which matter was filed on 21 December 2009 itself.
9. The list of objections raised on the above concerned matter before it was registered.
10. Whether notice of hearing on 21 December 2009 of the interim application to be heard by in- charge DRT, Pune was served. 
11. The authorisation issued by the Central Government in the name of PO, DRT, Pune authorizing hearing of the subject matter by another DRT i.e. DRT - II, Mumbai on 23 December 2009.
12. The orders issued by competent authority to delegate powers to a person other than the Registrar, DRT, Pune for issuance of notice dated 21 December 2009 for hearing the matter before DRT, Mumbai on 23 December 2009 when order of keeping charge with DRT, Mumbai was not issued at all on 21 December 2009 and when DRAT, Mumbai was on casual leave and that the letter of sanction of casual leave was issued by in- charge Registrar, DRAT, Mumbai with alleged oral instructions of Chairperson, DRAT, Mumbai.
13. The request/ application made by DRT, Pune for keeping charge with DRT, Mumbai prior to his proceeding on casual leave though casual leave is not a leave and is considered as duty.
14. Orders of competent authority in DRT, Pune permitting an employee to take the records and papers in the matter to DRT, Mumbai on 23 December 2009.
15. Date of return of papers and records by DRT - II, Mumbai to DRT, Pune.
16. Orders of transfer of matter to DRT, Mumbai with whom charge was kept vis-à-vis application of party for such transfer.
17. The reasons recorded for transfer of and hearing of solitary case by DRT - II, Mumbai sent/transferred by DRT, Pune that too for interim matter.
18. The oral instructions given by DRT, Pune for issuing notice for taking up the interim matter to DRT, Mumbai for hearing since DRT, Pune had left the HQ and gone to Kolhapur on casual leave or to DRAT, Mumbai who was also on casual leave.
19. This information seeker be also granted satisfactory inspection of all the relevant files in the matter on a convenient day with intimation in eight days in advance, and be permitted to take copies of the documents found necessary during inspection.  
In his reply, the PIO stated, "Given that there were three Boards in DRT, it was not clear in relation to which Daily Board was information required. Further, since DRT was a court, there was already a provision in law for taking inspection, asking certified copies, etc. The requisite information could be obtained by following due process of law. The Appellant was requested to apply under the RDDBI Act for inspection and to obtain the required information."
Dissatisfied with the PIO's reply, Karmakar on 20 April 2010 filed a complaint before the Commission under Section 18 of the RTI Act. However, the CIC, vide its letter dated 30 June 2010, advised him to file a first appeal before the concerned public authority. 
Karmarkar filed his first appeal before the First Appellate Authority. The order of the FAA was not enclosed. However, on perusal of the documents, the CIC said it appeared that the first appeal was returned by the FAA vide letter dated 8 September 2010 due to procedural inadequacies.
Karmarkar then approached the CIC with his second appeal.
During the hearing on 15 September 2011, Mr Gandhi, the then CIC, noted that the PIO denied the information on the basis that information must be sought under the DRT Rules. The PIO relied on the decision of the Commission in Ajay vs CPIO, Debts Recovery Tribunal (CIC/SM/A/2009/000990+1506 dated 5 May 2010) in support of his contention. 
However, Karmarkar contended that as per the DRT Rules, only litigants can obtain information and since he was not a litigant in the relevant matter, he would not be able to obtain the information. He relied on the Commission's decision in RS Misra vs CPIO, Supreme Court of India (CIC/SM/A/2011/000237/SG/12351 dated 11 May 2011) in support of his argument. 
The PIO stated that even non-litigants can obtain information under the DRT Rules.
The Bench then decided to reserve its order.
During the next hearing on 20 September 2011, the Bench noted that based on the contentions of the parties, the main issue which arises for determination was where there were methods of obtaining information from a public authority in existence before the RTI Act and can a citizen insist on obtaining the information under the RTI Act.
Mr Gandhi said, "The right to information is a fundamental right of the citizens of India. Section 3 of the RTI Act lays down that subject to the provisions of the RTI Act, all citizens shall have the right to information. The RTI Act is premised on disclosure being the norm, and refusal, the exception. Further, Section 22 of the RTI Act expressly provides that the provisions of the RTI Act shall have effect notwithstanding anything inconsistent therewith contained in the Official Secrets Act, 1923, and any other law for the time being in force or in any instrument having effect by virtue of any law other than the RTI Act."
"In other words, where there is any inconsistency in a law as regards furnishing of information, such law shall be superseded by the RTI Act," he said.
The Bench said, given this, two scenarios may be envisaged:
1. An earlier law/ rule whose provisions pertain to furnishing of information and is consistent with the RTI Act: 
Since there is no inconsistency between the law/ rule and the provisions of the RTI Act, the citizen is at liberty to choose whether she will seek information in accordance with the said law/ rule or under the RTI Act. If the PIO has received a request for information under the RTI Act, the information shall be provided to the citizen as per the provisions of the RTI Act and any denial of the same must be in accordance with Sections 8 and 9 of the RTI Act only; and
2. An earlier law/ rule whose provisions pertain to furnishing of information but is inconsistent with the RTI Act: 
Where there is inconsistency between the law/ rule and the RTI Act in terms of access to information, then Section 22 of the RTI Act shall override the said law/ rule and the PIO would be required to furnish the information as per the RTI Act only.
"Therefore," Mr Gandhi said, "The DRT Rules as well as the RTI Act coexist and, it is for the citizen to determine which route she would prefer for obtaining the information. The right to information available to the citizens under the RTI Act cannot be denied where such citizen chooses to exercise such right, as has been done by the PIO in the instant case."
The Bench said it noted that the PIO has rejected the request for information under the RTI Act without taking recourse to Sections 8 and 9 of the RTI Act, which is clearly against the statutory mandate. Moreover, it is pertinent to mention that the RTI Act, at no place, stipulates that in the event there is consistency between an earlier law/rule and the RTI Act, the citizen shall have to seek information under the former. In the absence of such a provision, there is no requirement to read in such an interpretation to the RTI Act.
The Bench said, it would like to mention certain decisions of the Supreme Court in CIT vs A Raman & Co [1968] 67 ITR 11 (SC), which was upheld in CIT vs Calcutta Discount Co Ltd. [1973] 91 ITR 8 (SC) and subsequently in UOI vs Azadi Bachao Andolan [2003] 263 ITR 706 (SC), where Justice Shah had observed as follows: 
"… Avoiding of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income Tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may be lawfully circumvented..." (Emphasis Added)
"Therefore," Mr Gandhi said, "even when the state may lose revenue, the Supreme Court has ruled that an individual tax payer has the liberty to arrange her commercial affairs in order to reduce her tax liability, so long as such arrangement is within the operation of tax legislation(s). Drawing an analogy, it certainly stands to reason that a citizen should be able to decide on the method most convenient and expedient by which she would obtain information."
"In view of the reasons enumerated above, the decision cited by the PIO in Ajay vs CPIO, Debts Recovery Tribunal (CIC/SM/A/2009/000990+1506 dated 5 May 2010) is per incuriam inasmuch as it was rendered in ignorance of a rule having the force of law laid down by the Supreme Court and by reading in an interpretation to the RTI Act which was hitherto not stipulated by the Parliament. Given the same, the said decision is not binding on this Bench. It is also important to mention that no legal basis has been given by the Information Commissioner for arriving at his conclusion," Mr Gandhi said.
While allowing the appeal, the Bench directed the PIO to provide the complete information as per records to Karmarkar before 20 October 2011, subject to the provisions of the RTI Act.  
Decision No. CIC/SM/A/2010/001646/SG/14708
Appeal No. CIC/SM/A/2010/001646/SG
Appellant                                   :   Madhav Balwant Karmarkar, 
                                                          Pune - 411038  
Respondent                                :   KR Joshi,
                                                          PIO & Section Officer, 
                                                          Debts Recovery Tribunal,
                                                          Ministry of Financial Services, 
                                                          PMT Commercial Building - 1,
                                                          Shankarsheth Road, Swargate,
                                                          Pune - 411042


MCX at all-time low; FT at 8-year low on NSEL worries

MCX at all-time low; FT at 8-year low as National Spot Exchange suspended trading and merging of settlement cycles of all one-day forward contracts, except e-series as per the order from the government

Financial Technologies Ltd (FT) shares tumbled over 62% on Thursday to Rs182, while Multi Commodity Exchange Of India Ltd (MCX) hit its lower circuit at Rs212.05 in morning trading on the BSE as National Spot Exchange Ltd (NSEL) suspended trading and merging of settlement cycles of all one-day forward contracts, except e-series following an order from the Department of Consumer Affairs (DCA).


Financial Technologies opened at Rs487.40 from yesterday's closing of Rs541.55 and tumbled to Rs182 in the morning trading due to selling pressure. This is the 52-week low for the stock. At 12.25pm, Financial Technologies was trading 59.4% down at Rs220 on the BSE, while the benchmark Sensex was flat at 19,406.7.


Similarly, MCX opened at Rs623.95 from Wednesday closing of Rs640 and hit its lower circuit of Rs512.05 at 10.45am. MCX is sister concern of NSEL. For MCX, the topmost commodity exchange in the country, this is its all-time low. Its 52-week high was Rs1,617 reached on 13 November 2012.


Financial Technologies ended Thursday 64.6% down at Rs191.75 on the BSE while the benchmark Sensex closed the day marginally down at 19,317. This is the lowest in past eight year for the company. On 25 January 2005, Financial Technologies closed at Rs170.85.


In a regulatory filing, Financial Technologies, the promoter of both MCX and NSEL, said, "Pursuant to the applicable Clauses of the Listing Agreement, please be informed that National Spot Exchange received a letter from DCA for which NSEL has issued a press note and the contents of the same are self-explanatory."


In its release, NSEL said, "Pursuant to directions issued by the DCA vide letter dated 12 July 2013, the Exchange had given an undertaking to the government and simultaneously, with a view to ensure orderly performance of the markets, introduced T+10 contracts with Trade for Trade settlements. Despite this, there is a loss of trading interest in the market due to underlying uncertainties, which has led to trade in-equilibrium."


"Under these circumstances and also in view of the grave emergency that has emerged in the market and in order to safeguard interests of all participants and market in general and pursuant to Bye-laws and Rules, the relevant authority is satisfied that continuation of trade in one day forward contracts, other than e-series contracts, is not in the interests of market," NSEL said.


NSEL said it decided that...

i. Trading in all contracts, except e-series contracts, stands suspended until further notice.

ii. Notwithstanding anything contained in the Byelaws or any contract, it has been decided to merge the delivery and settlement of all pending contracts with effect from today and to defer it for a period of 15 days and consequently, the positions outstanding in the contracts will be settled by way of delivery and payment after expiry of 15 days.

iii. A revised settlement calendar will be announced for contracts due for settlement after such 15 days period.


NSEL, however, clarified that trading, settlement and physical delivery pertaining to e-series contracts like e-gold, e-silver will continue as usual.


Last month, food and consumer affairs minister KV Thomas had said that the government would soon take action against Financial Technologies promoted NSEL for violating certain rules while offering commodity contracts.


Last year in October, the ministry had issued a show-cause notice to NSEL after it found violation of some conditions set by the government for operating the exchange.


Spot exchanges, including NSEL, were allowed to offer one-day duration forward contract under Section 27 of Forward Contract Regulation (FCR) Act, subject to conditions, like the member of exchange would not resort to 'short sale' and outstanding positions at the end of trading day would result in delivery.


However, commodity regulator Forward Markets Commission (FMC) found that the exchange allowed trading on its platform without verifying whether the seller had stocks, in effect allowing short sales by members.


Short selling is the sale of commodities that one does not own at the time of a contract with the hope of buying them at a lower price before the delivery time. If the delivery period exceeds 11 days, it is called a futures trade.


The FMC also found that the contracts traded on the exchange for which the settlement period exceeded 11 days were non-transferable specific delivery contracts (NTSD), which was in violation of provisions of Forward Contract Regulation Act (FCRA).


There are three national spot exchanges in India. NSEL and NCDEX Spot Exchange started operating since 2008. National Agriculture Produce Marketing Company of India Limited (National APMC) was granted license by the Gujarat government to set up electronic spot exchange with three commodities cotton, castor and cumin.



A Kumar

3 years ago

It is a well known fact that SEBI had not given permission to MCX-SX to begin Stock trading despite it being a well established Multi-commodity Exchange, and it was only after court intervention that it was allowed.
The recent events of NSEL problems also seem to be taken very lightly by regulators despite the significance it has for the future of commodity trading in India.
Confidence once broken can take years to build. It is necessary to restore sanctity of both NSEL and MCX immediately if long term damage is not to be sustained.

arun adalja

3 years ago

it is found that lot of irregularities at nsel and there is no control from regulatories so anything can happen.just wait and watch nothing else.


3 years ago

It stands to reason. As there is no productive demand for commodities, the only way out id for India to sell its crown jewels. But, even China is not taking. So? A return to Sen-Sonia-Manmohanomics. Print currency notes, stoke corruption and hand over a "Scorched Earth" to whoever succeeds this nightmare

arun adalja

3 years ago

exchange or sebi can stop the trading when something extra ordinary thing happens?is it possible or not?do they really monitor the market activities minute to minute or not?why sebi wants to probe now when investors lost the money?everytime they wakes up when damage is already done.

Ramesh Poapt

3 years ago

Sir,we would like further details in the matter regarding the prospects of the 2 shares now in the short/medium/long term, to safeguard investors interest, ie-should the investors should get out of the2 shares or hold on or buy at decline

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