Stocks
Nifty, Sensex struggling to rally – Weekly closing report
We had mentioned in last week’s closing report that Nifty, Sensex might rally a bit. The major indices went through ups and downs through the week to make small gains at Friday’s close over the previous week. The weekly trends of the major indices of the Indian stock markets are given in the table below:
 
 
On Monday, healthy buying was observed in interest rate sensitive stocks like banks, auto and capital goods. In addition, investors' risk appetite was increased after a dismal US non-farm payrolls data reduced the potential for a June rate hike there. The US data for last month showed that the economy created 160,000 jobs, against 215,000 in March. A US rate hike could potentially lead to a pull-back of foreign funds from emerging economies like India. However, there was a catch in the strong rally. NSE turnover was only at 66.39 crore and hence the rally was on thin volumes.
 
Home prices have touched record high levels but a faster rise in disposable income has made house purchasing the most affordable ever, housing loan major HDFC has said in a report. According to latest data compiled by HDFC, the average property value of housing units have risen to an all-time high of over Rs50 lakh this year, while the annual income of an average homebuyer has also grown to record levels of over Rs12 lakh. A sharper increase in income levels compared to housing prices has brought down the affordability ratio to 4.1, making this the lowest in India's history and below the previous all-time low score of 4.3 posted in the year 2004. The ratio stood at 4.4 in 2015. A lower ratio indicates that house purchase has become more affordable now. The report said improved affordability has largely been driven by rising disposable income and affordable interest rates on home loans. The affordability ratio stood at a high of 22 in 1995, signifying that an average home buyer needed to pay 22 times of his/her annual income to purchase a house. HDFC shares closed at Rs1,204.00, up 3.12% on the BSE.
 
Negative global cues, coupled with profit booking, subdued the Indian equity markets on Tuesday. Consequently, the key indices of the Indian equity markets traded flat -- marginally in the green in the morning. With value buying in capital goods, healthcare and bank stocks lifting prices, by afternoon, the major indices closed with small gains. The BSE market breadth was marginally tilted in favour of the bears -- with 1,315 declines and 1,298 advances.
 
The government on Wednesday announced amendments to the DTAA (Double Taxation Avoidance Agreement) with Mauritius as a result of which the key Indian indices plunged on Wednesday at the open. The amended DTAA has increased the potential of a massive outflow of foreign funds from the equity markets since Mauritius is a major source of such foreign investments. Consequently, the key indices of the Indian equity markets closed the day's trade in the red, although the market made a spirited recovery in the first two hours. The BSE market breadth was skewed in favour of the bears -- with 1,454 declines and 1,114 advances.
 
Parliamentary approval for key economic legislation and value buying, buoyed the Indian equity markets on Thursday. Consequently, the key indices of the Indian equity markets traded in the green since morning, went down for a while and closed strongly. The BSE market breadth was tilted in favour of the bulls - with 1,545 advances and 960 declines. The Rajya Sabha on Wednesday had passed the Insolvency and Bankruptcy Code 2016, which is seen as a key reform that will encourage entrepreneurship.
 
India's factory output growth turned flat in March after rising during the month before, even as the annual retail inflation for April rose to 5.39% from 4.83% in March, official data showed on Thursday. The factory output for February, based on the index of industrial production, which had turned positive at 2%, after two straight months of decline, rose negligibly by 0.1% in March, as per data released by the Central Statistics Office. As regards annual retail inflation, based on consumer price index, the rise came after two straight months of decline. The inflation rates for the preceding three months were 4.83% for March, 5.26% for February and 5.69% for January. At the same time, the annual food inflation rose sharply to 6.32% from 5.21%. This apart, the annual retail inflation in the rural economy was relatively higher at 6.09%, against 4.68% in the urban areas. Worryingly for industry, the index for manufacturing, which has the maximum weight in the overall index, actually fell by 1.2% in the month under review. While the index for mining also fell, albeit marginally by 0.1%, that for electricity grew by a robust 11.3%.
 
Disappointing macro-economic data, along with profit booking, dragged the Indian equity markets lower on Friday. Consequently, the key indices closed the day's trade deeply in the red.

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RBI's large borrower framework unlikely to hurt banks
The Reserve Bank of India (RBI) is planning to put in place risk recognition measures that could lead to banks charging higher interest rates on borrowings beyond permissible limits. This, the central bank feels will limit the banking sector’s exposure to highly leveraged corporates. However, since the investment cycle is weak, this move by the RBI will not impact banks or corporates in the short-to-medium term, says a research note.
 
Religare Capital Markets Ltd, in its report says, "We note that higher risk weights and standard asset provisioning is applicable only if a borrower raises more than 50% of the credit limit set in the previous year. This is mainly to check excess leverage or borrowings by corporates. In the absence of a strong bond market, these corporates will have no choice but to borrow from the banking system. Thus, the impact of credit growth will be limited."
 
In a release, the RBI says, "...absence of an overarching ceiling on total bank borrowing by a corporate entity from the banking system has resulted in banks collectively having very high exposures to some of the large corporates”. 
 
The central bank's proposal is part of a discussion paper released by RBI in March 2015, on evolving a framework to manage risks arising from the credit exposure of the banking system to a single large corporate. The paper had focussed on the need to encourage sources of funding other than bank credit for the corporate sector to finance growth. Specifically, it proposed ways to encourage large corporates with borrowings from the banking system above a cut-off level to tap the market for their working capital and term loan needs. 
 
Religare says, the RBI's analysis of 77,000 borrowers with a credit limit of over Rs1 crore points to a build-up of high concentration credit risk at the system level. Risks are quite high in power, infrastructure, housing and steel, as several corporates from these sectors are excessively leveraged.
 
According to RBI, there are two ways to address the risk, one to impose a hard monetary ceiling or second put in place prudential measures to recognise and provide for risks. The central bank feels that the second option is preferable because sudden imposition of a hard ceiling is not prudent as it can destabilise the credit market (given that alternate channels are not well developed), hamper credit growth and adversely impact the business cycle.
 
Any borrower with aggregate fund base credit limits (ASCL) of over Rs25,000 crore, Rs15,000 crore and Rs10,000 crore at any time during FY18, FY19 and FY20 or beyond are considered large borrowers. These borrowers will have a normal permissible lending limit (NPLL) of 50% of ASCL in any given year, the RBI says in its framework.
 
As per the framework, incremental exposure will carry higher provision and risk weight. It says, any incremental exposure to large borrowers in excess of NPLL will carry a standard asset provision of 3% (as against 0.4% currently) and an additional risk weight of 75% over and above the applicable risk weight. To compensate for the additional provisioning and risk weighted assets, the RBI says it will provide specific exemptions enabling banks to charge a differentiated interest rate to such borrowers.

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ASJAD NAIYAR

1 year ago

What is single window system?

India unveils new, modern intellectual property protection
India has unveiled a new National Intellectual Property Rights Policy to safeguard commercial interests arising from creativity -- like music, books, industrial drawings, software and even drugs and pharmaceuticals.
 
The country, in the process, also wants to meet global obligation towards protecting innovation, while also placing it at the core of industrial progress. The new policy will serve as a vision document to ensure synergies between the statute and institutional mechanisms.
 
"When there're new inventions, when there is growth in trade, commerce, industry, an intellectual property rights regime must be there for protection," Finance Minister Arun Jaitley said on Friday, a day after the cabinet gave its nod to the proposal.
 
"We have a robust trademark law in place that deals with commercial identity of products. The one underlying principle is a person should sell products under his own identity and name -- stealing identity should not be possible," Jaitley added.
 
"If you steal somebody's identity and piggy-back on it, it's called commercial theft," he said, but assured intervention when needed. 
 
"We need this so that medicine costs don't get affected. Patents may give rise to a monopolistic situation. Hence a balancing act is needed."
 
He said unlike earlier where copyright was accorded to only books and publications, the recast regime will cover films, music and industrial drawings. A host of laws will also be streamlined -- on semi-conductors, designs, geographical indications, trademarks and patents.
 
A strong regime on the subject was among India's commitment to the World Trade Organization under the Trade Related Intellectual Property Rights (Trips) agreement. At the same time the new policy also has flexibilities to protect its developmental concerns, an official statement said.
 
On one hand it seeks to foster creativity and promote entrepreneurship. On the other, it wants to enhance access to healthcare, food security and environmental protection, among other sectors of vital social, economic and technological importance, the statement added.
 
"These objectives are sought to be achieved through detailed action points," the statement said.
 
"The action by different ministries and departments shall be monitored by the Department of Industrial Policy and Promotion, which shall be the nodal department to coordinate, guide and oversee implementation and future development of intellectual property in India."
 
Jaitley also said that by 2017, the time taken for trademark registrations, "which takes very long, sometimes years", would come down to one month.
 
Protection of intellectual property has been an assurance which Prime Minister Narendra Modi has been giving to the global investor. "I am personally convinced and want to assure you that India is committed to protect Intellectual Property Rights of all innovators and entrepreneurs."
 
Noted expert on intellectual property rights, Pravin Anand of law firm Anand and Anand told IANS that he was pleased to see a huge change in India's approach in this area in the past two years. "One of the most powerful things being done in 50 years is on intellectual property rights."
 
The new policy lays down seven objectives:
 
- Create public awareness about the economic, social and cultural benefits
 
- Stimulate Indians to generate material for intellectual property protection
 
- Have strong, effective laws, balance the individual and national interests
 
- Have a modern and service-oriented administration
 
- Create value from protected innovations through commercialisation
 
- Strengthen enforcement and adjudicatory mechanisms
 
- Promote capacity building through human resources, institutions training and research.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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