Stocks
Nifty, Sensex trendless – Wednesday closing report
We had mentioned in Tuesday’s closing report that Nifty, Sensex were still on course to head higher. The major indices of the Indian stock markets were positive in the morning but closed with minor losses on Wednesday. 
 
 
Uncertain global situation, profit booking and a weak rupee depressed the Indian equity markets on Wednesday, as selling was witnessed in automobile, capital goods and FMCG (fast moving consumer goods) stocks. The BSE market breadth was skewed in favour of the bears -- with 1,597 declines and 988 advances. Initially, the key indices opened positive as investors believed that Britain's upcoming referendum on whether or not to stay on in the European Union would go in favour of staying with EU.
 
India's cabinet on Wednesday cleared the base price for the country's largest spectrum auction to date, expected to fetch around $85 billion at the approved reserve price, address the menace of mobile phone call drops and give a push to 4G data communications. The approval was given at a meeting of the cabinet chaired by Prime Minister Narendra Modi. But a decision on spectrum usage charges, which has evoked strong opinions from stakeholders, has been deferred and the matter referred again to the telecom watchdog. "This will be the largest auction to date," Jaitley said in a press briefing later. He said since the recommendations on spectrum usage charges from the attorney general's office and the Telecom Commission came later, it was felt that the matter be referred to the watchdog once again. "The appetite for India's telecom sector is very big," Communications and IT Minister Ravi Shankar Prasad, who also briefed the media, said, when asked if such a large auction will evoke the kind of interest which the government is hoping for. More than 2,300 MHz of airwaves will be on the block for telecom operators in seven bands -- 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz. Based on their pan-India reserve price the mop up can be as much as $83 billion against $17-billion the last time. With the public having forgotten the Supreme Court cases on old spectrum allocations, the government is moving on with industry growth.
 
The US dollar decreased against most major currencies on Tuesday as investors were digesting Federal Reserve Janet Yellen's remarks during her semi-annual testimony. In her testimony before the US Senate Banking Committee on Tuesday, Yellen reiterated the cautious approach to raising interest rates that the central bank signalled last week after its policy meeting. She said that the central bank expected interest rates to "remain low" for some time, in view of the weak global economy and sluggish productivity growth.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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COMMENTS

ashish.suresh

11 months ago

Today's spot nifty close is 8270 levels, moving inline with the expectations..

ashish.suresh

11 months ago

I think there is a chance of Nifty touching 8350-8360 levels by Friday..

India telecom regulator floats consultation paper on Internet Telephony
At a time when calls through Skype, Viber and Whatsapp are gaining popularity with every passing day, the Indian telecom watchdog on Wednesday issued a consultation paper on Internet Telephony seeking stakeholders' opinions on various matters ranging from additional entry fee, call termination charges to quality of service parameters.
 
In the consultation paper, the Telecom Regulatory Authority of India (TRAI) requested the stakeholders to furnish their comments by July 21 and counter comments by August 4.
 
"What should be the additional entry fee, performance bank guarantee and financial bank guarantee for Internet service providers (ISP) if they are also allowed to provide unrestricted Internet Telephony?" the consultation paper asked.
 
The telecom service providers (TSP) have been asking the regulator for a long time to bring the Internet Telephony service providers or the over-the-top (OTT) players under the ambit of the law.
 
The TSPs had been seeking a level playing field between themselves and OTT apps which ride on their networks. But the OTT players offer cheaper rates as they do not have to pay any of the regulatory levies.
 
The consultation paper asked: "Whether accessing the telecom services of a TSP by the subscriber through public Internet can be construed as extension of fixed line or mobile services of the TSP?"
 
There were two major categories for voice transmission over internet protocol (IP) networks based on the type of IP network used. When voice is transmitted over public Internet, it is termed as Internet Telephony. Similarly when voice is transmitted over managed IP networks, it is termed as Voice over IP (VoIP).
 
Internet Telephony can be deemed to be a subset of voice over IP, in the sense that, when voice is carried over a IP network it can be termed as Voice over IP. And if the IP network in this case is the public Internet then it can be called Internet telephony.
 
The paper also sought views on call termination charges. "What should be the termination charge when call is terminating into Internet telephony network? What should be the termination charge for the calls originated from Internet Telephony Network and terminated into the wire-line and wireless Network?"
 
"How to ensure that users of International Internet Telephony calls pay applicable International termination charges?"
 
The paper also covered security issues. It asked: "Is it possible to provide location information to the police station when the subscriber is making Internet telephony call to emergency number? If yes, how? In case it is not possible to provide emergency services through Internet Telephony, whether informing limitation of Internet Telephony calls in advance to the consumers will be sufficient?"
 
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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REXIT – An Alternate View
Discipline is not a natural trait amongst Indians. We do not like to be constrained by boundaries. We want to retain the freedom, for instance, to tell the Reserve Bank of India (RBI) Governor to reduce interest rates, even if we cannot distinguish cash reserve ratio (CRR) from euro currency. Heavens forbid if he chooses to ignore such a command.
 
One of the major criticisms against Dr Raghuram Rajan, the incumbent Governor of RBI has been his stubborn refusal to lower interest rates. While interest rates today are lower by 150 basis points (bps) compared to the time he took over, business and industry had always clamoured for lower interest rates. What Dr Rajan has done is to take away the personal element by introducing a data based, structured framework for determining interest rates. In a sense, fixing interest rates has become predictable and stable. As he has always maintained, business wants predictability more than low interest rates. 
 
RBI has been given a target to achieve, by the government – 4% inflation plus or minus 2% (range of 2% to 6%). How does one expect a reduction in interest rates, if inflation is currently touching 6%? As long as inflation is high, RBI needs to fight it ruthlessly. 
 
Some of us may remember Paul Volcker, the former chairman of US Fed, increasing the federal funds rate to as high as 20% in the late 70s and early 80s, in order to kill the monster of inflation forever. Growth in the US plummeted and even turned negative during that period. Since then, however, the US has never faced inflationary pressures. A short-term pain was essential for long-term gain.
 
Volcker was also called terrible names due to the impact of his anti- inflationary measures on growth rate. Today, he is a revered figure. Human beings are too concerned with the immediate future, without being concerned about the long-term negative impact of their actions or wishes. 
 
There are two other factors that are keeping interest rates high in India. The extent of non-performing assets (NPAs) in public sector banks (PSBs) implies that these lenders can no longer carry out their basic function of financing. Constituting 70% of the banking sector, this places a significant constraint on the overall lending ability of the Indian banking industry. Resolution of NPAs is critical to get the banking sector moving again and reducing interest rates. Dr Rajan has initiated the process to clean up banking balance sheets once and for all so that banks can commence their business without the overhang of bad debts.
 
Interest rates on government’s savings schemes are stubbornly high. About 8% plus tax-free returns are available on provident fund (PF) and other schemes of the government of India. Some of them have tax saving features too. That places a limit on reduction of interest rates by the RBI.
 
Supporters of the current government, miffed with the RBI, would do well to remember that fighting inflation is good politics, besides being good economics. Historically, hardly any government has lost elections due to lower growth rate; plenty of them have had to vacate office due to spiralling prices. 
 
There are many reasons why Dr Rajan is exceptional. I will speak about one of the least mentioned. His voice has been a consistently sane voice in an otherwise loud cacophony of meaningless clatter. Growth in the world over in the last few decades has been debt-induced. The crisis in 2008 was based on too much debt. Dr Rajan has been warning us, unsuccessfully it seems, against this debt-induced growth.
This has been his consistent stand over the years. 
 
He has also advocated coordinated efforts on the part of central bankers. Actions of one central bank have an impact on other economies also. We were witness in 2013 to the turmoil in emerging market economies, as a consequence of a slightly hawkish statement by Janet Yellen, ironically at the time Dr Rajan took charge as Governor of the RBI. Conflicting monetary policies of different central banks will render them ineffective. He has been exhorting central banks to take a global view and not be exclusively fixated only on their own countries. Not surprisingly, earlier this year, he was adjudged the best Central Banker in the world by the Financial Times group.
 
Not many people display the courage to consistently speak against popular beliefs of the time. To have the grasp of economic issues like Dr Rajan and the integrity to be true to those beliefs is a rare quality. Sadly, such qualities are not appreciated in this country. Despite the fact RBI as an institution will survive Rajan’s exit (Rexit), I am not sure it is a good idea to lose him. 
 
(Sunil Mahajan, a financial consultant and teacher, has over three decades experience in the corporate sector, consultancy and academics.)
 

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COMMENTS

J SUDHARSHAN

11 months ago

Hats off to Mr. Raghuram Rajan. Its great to read such an thought nice article thanks Sunil and ML

Ramesh Poapt

11 months ago

very well said, sunil/ML!

MG Warrier

11 months ago

Excellent analysis. People need to come out and speak out like this. The media is full of 'professionals' with constituency interests. Moneylife is doing a great service by allowing people with different views to express their views.

R Varadarajan

11 months ago

A well presented article. Well ! Discipline is the most disliked word among politicians in the country. Unfortunately, Dr Rajan failed to realise this.

Kumar Swamy

11 months ago

WPI is negative, small and medium industries are hurting because of high interest rates, their revenues are declining. Retirees want higher returns on their retirement funds, bank FDs, irrespective of inflation. So how can you balance all
these if one is adamant of sticking to a particular point of view. RBI governor needs to be more flexible, particularly given we are living in very interesting times - near-zero to negative interest rates in western countries and Japan.

vijay b joshi

11 months ago

Congratulations! for bringing transparency to a common man.
Congratulations! for bringing transparency to a common man.
How can we start a mass protest by millions of Indians to stop Rexit?

Gupta

11 months ago

Very well written. So true and alas, so sad!
The first line of this article is the fundamental problem of India, irrespective of what problem you discuss.

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