Economy
No sustainable turnaround in BoP for 6 months
Weak growth and poor flows, both equity and overseas borrowing by corporates, will keep up the pressure on balance of payments
 
India’s trade deficit narrowed to US$10.9bn in August (Nomura: US$8.5bn) from US$12.3bn in July due to strong exports. Exports rose 13% y-o-y (year-on-year) in August, following 11.6% growth in July, led by improving global demand. Even as global demand improved, weak domestic demand and the clampdown on gold imports kept imports under check, contracting by 0.7% y-o-y in August compared with a decline of 6.2% in July. Within imports, gold imports moderated sharply to US$0.65bn from US$2.2bn in July; non-oil imports contracted 10.4% y-o-y versus a decline of 5.3% in July; while oil imports rose sharply to 17.9% y-o-y from - 8%. Hence, higher oil imports (due to high oil prices) largely offset the benefit of lower gold imports and slowing domestic demand.
 
Even as the macro backdrop appears to be stabilizing, it is not expected that there will be a sustainable turnaround in trade deficit and balance of payments. Continuing concerns over the growth outlook, rising credit risks, deteriorating bank asset quality and worsening fiscal pressures suggest that risks remain skewed to the downside over the next six months. This is according to a research note by Nomura Financial Advisory.
 
According to Craig Chan, Nomura’s head of Asian FX strategy, the recent measures announced (on FCNR(B) deposits and the dollar swap window for oil companies) provide a near-term respite. But Nomura remains cautious on a sustained rally in the Indian rupee because of the continued negative fundamentals, mainly from weak growth.
 
Nomura’s research note adds that it would expect weak growth to result in a slowdown in growth-sensitive flows, both equity and overseas borrowing by corporates, which can offset inflows through other routes. Hence, it expects the balance-of-payment pressure to persist.

User

Sensex, Nifty may correct and then resume its upmove: Tuesday closing report
The current upmove may have more steam left. Nifty likely to hit 6,000 
 
The Sensex and the Nifty on Tuesday recorded the highest percentage gain since 27 May 2009 on massive short covering after the rupee sharply dipped again. The Reserve Bank of India (RBI) measures in the past week and the US jobs data falling short of estimates have helped too. The indices ended positive for the fourth consecutive session. The BSE 30-share Sensex, which opened higher at 19,448 hit an intra-day low of 19,445. By the end of the session, Sensex breached the 20,000 level to hit an intra-day high of 20,013 and closed at 19,997 (up 727 points or 3.77%). The NSE Nifty, which opened at 5,739 hit a low almost at the same level, but went to hit an intra-day high of 5,905 before closing at 5,897 (up 216 points or 3.81%). The National Stock Exchange (NSE) recorded a marginally higher volume of 70.79 crore shares.
 
All indices on the NSE closed in the positive. The top five gainers were Auto (5.98%); FMCG (5.38%); Infra (4.91%); Consumption (4.74%) and MNC (4.55%). Of the 50 stocks on the Nifty, 41 ended in the green. 
 
The top five gainers on Nifty were Tata Motors (9.82%); Bharti Airtel (8.37%); Ambuja Cements (7.66%); Hero MotoCorp (7.19%) and ACC (7.02%). The top five losers were NMDC (2.27%); BPCL (1.50%); Bank of Baroda (1.35%); Cairn (1.28%) and Dr Reddy (0.86%).
 
RBI on Friday said that it would allow non-residents to buy stocks of listed domestic companies through the foreign direct investment (FDI) route. The new rule would make it easier for foreign promoters, who were earlier able to raise their stakes only through separate processes such as open market offers, to buy shares in listed companies.
 
The government is also set to announce more steps over the next few days to curb non-essential imports, with expectations growing for a hike in subsidized diesel prices that would ease concerns about the government's finances.
 
India's merchandise exports posted double-digit growth in the month of August, while imports were "contained", Trade Secretary SR Rao said on Monday. As a result, the trade deficit fell to $10.91 billion in August from $12.27 billion in the previous month.
 
India’s rupee rose as much as 5.6% in the past four days, the biggest gain since at least 1973 according to the biggest gain in data compiled by Bloomberg.
 
The US indices closed in the green on Monday. Non-farm payrolls in the US climbed 169,000 in August, official data showed on Friday 6 September, less than the 180,000 median estimate of a Bloomberg survey.
 
Russia on Monday proposed to work with Damascus to put its chemical weapons under international control, a move that President Barack Obama said could be "potentially positive". Asian indices ended in the positive. Jakarta Composite, the top gainer, was up 3.98%.
 
China's industrial output grew at the fastest pace in 17 months in August, adding to signs of a rebound this quarter that include a pickup in export gains. Factory production rose 10.4% from a year earlier, the National Bureau of Statistics said in a statement in Beijing today. Retail sales rose 13.4% in August higher than 13.2% gain in the previous month.
 
In France, factory output slid for a third month in July, underscoring the government’s struggle to revive growth. Oil fell on speculation Russia’s plan to get Syria to surrender its chemical weapons will help avert a US strike.
 
European indices were trading in the green. The US Futures too were trading higher.
 

User

Corporate governance: ‘Transparency was all but missing’ in NSEL
The managing director went on record to say that NSEL has sufficient stocks in warehouses to cover the entire open exposure and in the event of any default, stocks will be sold to fulfill payment obligations. The hollowness of this claim is an open secret now.
 
“The Company’s philosophy on Corporate Governance envisages adherence to highest levels of transparency, accountability, trusteeship and ethical corporate citizenship in all areas of its operations and all interactions with its stakeholders” says Financial Technologies group corporate governance policy. The words like ‘Transparency’,’ Accountability’ ,’ Ethical corporate citizenship’ sound so unreal and utopian in context of what happened in National Spot Exchange(NSEL) which is a group company. Transparency was all but missing in the entire episode. The managing director went on record to say that NSEL has sufficient stocks in warehouses to cover the entire open exposure and in the event of any default, stocks will be sold to fulfill payment obligations. The hollowness of this claim is an open secret now. The first payment itself was a default. What about accountability? Dismiss some employees and accountability is over. No accountability for the man running the show behind the corporate veil. 
 
Now, look at the one of the most important pillars of corporate governance called independent directors. What were they doing? Should these directors have asked questions on at least the basis compliance processes being followed in the company? After all, corporate governance policy of FT group says,” Financial Technologies believes that the management is responsible to the Board of Directors and the Board of Directors is in turn responsible to the shareholders. And by having these accountabilities demarcated drives the Company both performances wise as well as in enhancing shareholders value”. What happened to the concept of independence and accountability? In fact, this is very weak area in the entire process of corporate governance. India lacks a pool of really independent directors and those act as being independent, are not welcomed by the company.
 
But Financial Technology is not just an example in isolation. There are several companies in India for whom corporate governance has become a cut and paste approach. It is just one more document in a series of documents that a company publishes. Nicely drafted words to show how the company cares about corporate governance policies. Look at Gitanjali Gem’s corporate governance policy which says that the corporate governance policy of company is based on following principles: (a) Satisfy the spirit of the law and not just the letter of the law; and (b) Be transparent and maintain a high degree of disclosure levels.
 
How can a company, claiming to satisfy the spirit of law, find that the main promoter of the company is banned by the capital market regulator for activities which are completely unlawful? Where is the implementation of the tall claim about its corporate governance policy? Is there any understanding about the claim that the company has made about its corporate governance policy? But who cares. After all this is a policy document which just needs to be added as a part of the document and what you need is just redrafting of the policy words to make your own policy as a company. To these words legal acceptability, a certificate of compliance on terms contained in clause 49 is required to be signed by the director and auditor/company secretary of the company.
 
Every listed company makes tall claims about taking care of shareholders interest and value, but the modus operandi of the company refutes this claim. FT group policy says “The main purpose of the Shareholder Grievance Committee is to look into shareholder and investor complaints and redress them in the best possible manner at the earliest”. But look at the way FT has dealt with shareholders in terms of clarifying their doubts. The shareholders have been suffering in the process of the entire crisis with the value of the company’s shares taking a big hit.
 
The corporate governance approach needs to change from a tick box approach and mere documentation. Basically, the new approach towards corporate governance should provide enough indication to the investors and potential investors if a company is found wanting in implementation of corporate governance policy. Inability to follow corporate governance practices should have provision for severe monetary penalty for independent directors and board of directors in general. Also, if there is any significant breach of corporate governance is found in one company, the independent director should not be allowed to act as independent director in other companies.
 

User

COMMENTS

nagesh kini

3 years ago

The concept of CG is only for the records.
Despite the worse of practices, I've yet to see any auditors qualify their reports!
Why only NSEL?

KAVIRAJ B PATIL

3 years ago

In any other country having good governance, the company's board would have been facing lawsuits and a trial lasting around 6 months. In our country, even one year from now, the duped investors will still be found running for their money.

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)