Inflation still high, no room for monetary stimulus: RBI

Notwithstanding expectations of interest rate cut by the RBI in its quarterly monetary policy on 29th January on back of declining inflation, RBI governor D Subbarao said, “Inflation has come down, (it is) still high”

Lucknow: Ahead of its third quarterly policy, the Reserve Bank of India (RBI) has said that inflation was still high and there was no room for fiscal or monetary stimulus to boost growth in slowing economy, reports PTI.


“When growth is slowing down you can stimulate the economy either by monetary easing or by fiscal stimulus, but both monetary and fiscal side have no room for stimulus. So that is the big concern,” RBI governor D Subbarao said while addressing Indian Institute of Management (IIM) students on Tuesday evening in the capital of north Indian state Uttar Pradesh.


Notwithstanding expectations of interest rate cut by the RBI in its quarterly monetary policy on 29th January on back of declining inflation, Subbarao said, “Inflation has come down, (it is) still high”.


Although inflation, based on movement in wholesale prices, touched the three-year low of 7.18% in December, retail inflation continued to remain in double digit at 10.56%. It only indicates that easing Wholesale Price Index (WPI) was not providing any relief to the consumers from spiralling prices.


The WPI inflation at 7.18% was also much above the central bank’s comfort level of 4%-5%. The inflation has not declined to the expected levels despite tight monetary stance pursued by the RBI to check price rise.


With industrial output contracting by 0.1% in November, the industry has stepped up its demand for interest rate cut by the RBI in its forthcoming policy.


The economic growth, which slipped to nine-year low of 6.5% in 2011-12, is expected to decline further to 5.7%-5.9% in the current fiscal.


Kingfisher fails to provide details on financing revival plan

Kingfisher CEO met DGCA but again failed to provide any details on its funding or about any commitment by the airline’s parent company, UB Group, on financing the carrier’s revival plan

New Delhi: Vijay Mallya’s grounded Kingfisher Airlines on Wednesday made another attempt to convince Director General of Civil Aviation (DGCA) on its revival plans, but failed to provide any details on its funding which the aviation regulator wanted, reports PTI.


Kingfisher CEO Sanjay Agarwal met DGCA Arun Mishra for 45 minutes to apprise him of the prevailing scenario facing the airline, but sources said he gave no information about any commitment by the airline’s parent company, UB Group, on financing the revival plan.


The sources said Agarwal told the regulator that the airline would be ready to resume operations from the Summer Schedule, which begins in April.


The Kingfisher chief said the airline has not received no-objection certificates from any of the airport operators, including the Airports Authority of India (AAI), though he claimed that some of the oil companies and aircraft leasing companies have given it a go-ahead.


Today’s meeting comes days ahead of a crucial meeting of a consortium of bankers that have lent over Rs7,500 crore to the now defunct airline.


The consortium has been refusing to lend any more money to the airline till the promoters bring in more funds. The airline suspended operations on 11th October last year and its operating licence lapsed on 31st December.


In the recent past, civil aviation ministry officials had made it clear that they were not satisfied by Kingfisher’s plans to invest Rs650 crore as it might not guarantee efficient and reliable services.


“The revival plan, which was submitted by the airline, had lot of issues regarding lenders and staff payment which we felt may not lead to reliable services,” a senior officer had said, adding it had no provision for payment to airport operators.


Salaries and allowances of the staff have also been pending for over eight months now, while the airline owes money to airport operators, oil companies and other vendors.


HSBC’s Russia Equity & Asia Pacific (Ex-Japan) Dividend Yield Fund: Two more foreign schemes

HSBC MF plans to launch two foreign schemes. Moneylife has shown in the past that these schemes offer no clear edge when it comes to diversification

At a time when foreign institutional investors are flooding the Indian market and Indian equity mutual fund investors are withdrawing their investments, HSBC Mutual Fund plans to launch two global schemes—HSBC Russia Equity Fund and HSBC Asia Pacific (Ex Japan) Dividend Yield Fund, hoping Indian investors would be willing to put their money in foreign equity. Both these schemes will invest in the units of schemes of HSBC Global Investment Funds. HSBC Russia Equity Fund will invest in the units of HSBC Global Investment Funds (HGIF) Russia Equity Fund and the other scheme will invest in the scheme of HSBC Global Investment Funds (HGIF) Asia Pacific Ex-Japan Equity High Dividend Fund.

We have repeatedly written about global schemes earlier which have had a lacklustre performance in the past. At present, we have 36 global funds; of which as many as 21 of these were launched during 2007 and 2008—the period when foreign funds had become a fad. When they were launched, Moneylife had pointed out that these funds were marketing gimmicks. Our advice was to stay away from these funds.

In a recent analysis, we showed that out of 22 global schemes that were launched prior to January 2009, just four outperformed the BSE 200. (Read: Global Funds: Lacklustre performance) In fact in the last one-year period ended December 2012 when the BSE 200 returned 30.80%, just two global schemes managed to do better.

Funds that put your money in other countries don’t necessarily offer much diversification. In fact, markets around the world have been moving in sync. Some of these schemes have been highly correlated with the Sensex.

The new schemes would essentially invest in schemes that are managed by the fund managers of HSBC Global Investment Funds. Neither of the two foreign schemes have a long-term track record. HSBC Global Investment Funds-Russia Equity was launched in December 2007. According to data available on Bloomberg, over the last three years it delivered a return of -2.01%. Over the last one year the scheme returned 7.71%. The performance of the scheme will be benchmarked to the MSCI Russia Index. HSBC Global Investment Funds-Asia Pacific ex-Japan Equity High Dividend is a relatively new scheme, being launched in March 2011. Over the last one year the scheme delivered a return of 17.66%. The performance of this scheme will be benchmarked to MSCI AC Asia Pacific ex-Japan.

The fund management of HSBC Mutual Fund in India has not done too well. Schemes of HSBC Mutual Fund have regularly come up in our performance analysis of equity schemes for all the wrong reasons. Some of its schemes have performed poorly in the last few years.


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