Economy
Regulations on a new tax regime, foreign portfolio investors and new bankruptcy code will transform India’s finance market
Global credit rating agency Moody's Investors Service on Monday said the three recent regulatory changes made by India will have transformative implications for its structured finance market.
 
"The changes will improve returns to investors, promote foreign investment, and improve the resolution process in the event of default, thereby strengthening creditor rights," Vincent Tordo, an analyst with Moody's, was quoted as saying in a statement.
 
"Specifically, the measureas are a new tax regime that will lift post-tax investment returns from securitisation trusts; changes in regard to foreign portfolio investors (FPIs) that will encourage foreign investment and changes to deal structures; and a new bankruptcy code that will reinforce creditors' rights," Tordo said.
 
Moody's conclusions were contained in a just-released report on India's securitisation market, "New Regulations Pave Way for Market's Transformation; Improved Creditor Rights".
 
"Together, these three changes will help -- as indicated -- further develop India's structured finance market, and allow securitisation to play a bigger role as a source of funding in the economy, an objective promoted by the government," said Tordo.
 
According to Moody's, the new tax rule will increase post-tax returns from investments in pass through certificates (PTCs). The issue volume of PTCs have fallen due to lower demand from bank investors put off by current lower returns.
 
The participation of foreign investors through the new FPI rules will help the Indian market evolve so that it becomes more in line with global practices; for example, encouraging it to evolve away from structures with single tranches and single investors into those with multiple tranches and multiple investors.
 
The bankruptcy code, once implemented, will over time strengthen the legal framework of India's credit markets by significantly increasing the bargaining power of creditors against debtors in the resolution of distressed assets, Moody's said.
 
The code will also provide greater clarity on the insolvency process, a key aspect of the risk analysis of securitisation transactions, Moody's said.
 
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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India eases foreign equity norms for defence, aviation, retail
Putting its economic liberalisation agenda on the fast track, India on Monday relaxed its foreign equity norms further, notably in defence, aviation, pharmaceuticals and retailing, with automatic approval rather than a case-based route as the preferred model.
 
In aviation, extant policy allowed up to 49% foreign equity in scheduled airlines under the automatic route. Now, while the cap has been raised to 100%, up to 49% would be under automatic and beyond that will be under the government approval routes, officials said.
 
Then in pharmaceuticals, both greenfield and brownfield projects could get 100% foreign capital, but with an automatic route for the former and government route for the latter. Now, brownfield projects, too, will come under automatic route for up to 74%.
 
In defence manufacturing, the 49% norm under automatic approval will continue. But while looking at the proposals that call for investment beyond 49%, a condition that they will bring with them access to "state-of-the-art" technology has been done away with.
 
"The Union Government has radically liberalized the foreign direct investment regime today, with the objective of providing major impetus to employment and job creation," an official statement said.
 
"The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi. This is the second major reform after the last radical changes announced in November 2015. Now most of the sectors would be under automatic approval route, except a small negative list," it said.
 
"With these changes, India is now the most open economy in the world for foreign investment."
 
Commerce and Industry Minister Nirmala Sitharaman told reporters later that the steps taken on Monday were in line with the idea of making India a preferred destination for industry with a focus on employment. She said investments shall be encouraged so that more jobs can be created.
 
"We've made sure foreign equity inflows are given a clear direction with the objective of 'Make in India'. Our focus clearly is on creating jobs and ensuring that India becomes a manufacturing hub," the minister added.
 
Other Highlights:
 
- Foreign equity of 100% under government approval for trading in processed foods, including via e-commerce, in respect of products manufactured in India.
 
- Foreign equity of 100% under automatic route in broadcast service industry, including direct-to-home, mobile TV, head-end in the sky and cable networks.
 
- Equity cap on private security agencies tweaked to permit up to 49% under automatic route, as opposed to government nod, and up to 74% under government route, which was not permitted at all earlier.
 
- The requirement of local sourcing relaxed for three years and some sops in this regard for five years for foreign equity in single-brand retailing, for products having state-of-art and cutting edge technologies.
 
The decision on single brand retailing should particularly help US-based Apple which has its own stores globally but sells through other retail chains in India due to sourcing restrictions.
 
"Today’s amendments to the foreign direct investment policy are meant to liberalise and simplify the policy so as to provide ease of doing business in the country leading to larger inflows, contributing to growth of investment, incomes and employment," the statement said.
 
In the past two years the Narendra Modi Government has made major policy reforms in the area of foreign direct investment in areas such as defence, construction, insurance, pension, single-brand retailing, plantations and aviation.
 
As a result, official data suggests, India attracted $55.46 billion worth of foreign investment in 2015-16, against $36.04 billion during the financial year 2013-14. "This is the highest ever foreign direct investment inflow for any particular financial year," the statement said.
 
"However, it is felt the country has potential to attract far more foreign investment, which can be achieved by further liberalising and simplifying the foreign investment regime. India today has been rated as Number One FDI investment destination by several international agencies."
 
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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Nifty, Sensex headed higher – Monday closing report
We had mentioned in Friday’s closing report that Nifty, Sensex were trendless. The major indices of the Indian stock markets rallied on Monday and closed nearly 1% higher than Friday’s close. The trends of the major indices in the course of Monday’s trading are given in the table below:
 
 
Higher global markets and a healthy rise in global crude oil prices, and the strong trend in US premarket futures lifted the key equity indices on Monday. The markets opened low prompted by news of Reserve Bank of India (RBI) Governor Raghurram Rajan formally declining a second term. However, healthy buying in automobile, IT (information technology) and capital goods stocks helped pare initial losses.  There are major upcoming global event risks such as referendum in Britain on whether or not to stay as a part of the European Union (EU). Further, investors have been concerned about the US Federal Reserve Chairwoman Janet Yellen's testimony to the US Congress. Value buying after the initial downslide lifted prices. Besides, higher Asian and European markets buoyed domestic key indices. 
 
In addition, an appreciation in rupee's value after it fell to a low of 67.70 restored investors' risk taking appetite. The Indian rupee opened on a weak note as investors reacted to the news on Rajan's exit. It touched a low of 67.70 against a US dollar, but sales by exporters and sovereign intervention pushed it back below 67.40 levels on spot.
 
IT and pharma sector stocks traded firm on continuous buying support, while banking stocks also traded with sideways to firm sentiments.
 
India, on Monday, announced major reforms in its foreign equity norms, notably in aviation, pharmaceuticals and food processing sectors, further opening the doors for the inflow of enhanced overseas capital. The announcement was made in a statement issued by the Prime Minister's Office with an eye on creating more jobs, improving infrastructure and making the investment climate in the country more conducive for attracting foreign investment and technology. These decisions were taken at a high-level meeting here on Monday, chaired by Prime Minister Narendra Modi.
 
Healthcare providers in India are expected to spend $1.2 billion on information technology (IT) products and services this year -- an increase of 3.4% over 2015 -- a report said on Monday.
“Healthcare spending is expected to reach $339 million in 2016, growing 5.2% over 2015,” said Moutusi Sau, principal research analyst at a global market research firm Gartner.  IT services, which includes consulting, software support, implementation, hardware, IT outsourcing (ITO) and business process outsourcing (BPO), will continue to be the largest overall spending category within the healthcare providers sector. “The BPO sub-segment will record the fastest growth rate of 15.4% over 2015. ITO will be the largest sub-segment in IT services recording a 7.5% increase in 2016 to reach $107 million in 2016,” Sau added. The S & P BSE Information Technology Index on the BSE closed at 11,549.64, up 2.00%.
 
The global credit rating and research arm of the Fitch Group does not see much of an impact on India's larger policy profile following the exit of Reserve Bank of Governor Raghurram Rajan from September and said the successor, though, will inherit a "solid" base. "From a rating perspective, policies are more important than personalities. In the past years, significant policy changes have been set in motion in India not in the least by governor Rajan," said Thomas Rookmaaker, Director in Fitch's Asia-Pacific Sovereigns Group. "Problems associated with both high inflation and weak bank balance sheets have been recognised, and policy makers are doing something about it -- including through the set-up of new policy frameworks," Rookmaaker said in a statement. This, he said, implied support for such policies beyond the governor in RBI and government. "The next governor seems to inherit a solid basis in this regard, providing him or her with good opportunity to continue to pursue relatively low consumer price inflation and strengthened bank balance sheets." The software market will grow 6% in 2016 to reach $106 million, up from $100 million in 2015. Infrastructure will grow 4.5% in 2016 to reach $43 million.
 
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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