Companies & Sectors
Reliance Industries net up 4.4 percent but on lower turnover
In line with analysts' expectations, Reliance Industries on Friday said its consolidated net profit for the first quarter of this financial year was up 4.4 percent at Rs.6,222 crore (around $1 billion) from Rs.5,957 crore in the like quarter of last year.
 
On a stand-alone basis, where the entities held by the company are treated separately for accounting purposes and reflect more on the actual financial health of a parent company, the net profit for the period under review was up 11.8 percent at Rs.6,318 crore from Rs.5,649 in the year before.
 
But the company's turnover on a consolidated basis, which includes the accounting numbers of subsidiaries held by the company, declined 23 percent to Rs.83,064 crore from Rs.107,905 crore during the periods under review, the company said in a regulatory filing with the exchanges.
 
"Our financial performance reflects the benefits of integrated hydrocarbon chain activities in a benign oil price environment," chairman and managing director Mukesh Ambani said in a statement.
 
"The sharp increase in demand for transportation fuels helped us realize strong refining margins. Oil product demand globally is estimated to have grown at over 1.6 million units year-on-year, resulting in high refinery runs across all regions," he said in the statement.
 
"Our petrochemicals business recorded a strong quarterly performance supported by high operating rates and margin strength in the ethylene chain. In retail business, we have reached significant milestones over the past couple of years and continue the high growth trajectory."
 
Ahead of the announcement of the results, which came afte the closing bell at stock exchanges, the shares of Reliance Industries ended lower at Rs.1,025.05, despite having touched Rs.1,050, intra-day.
 
The company attributed the decline in revenue to a 43.3 percent year-on-year decline in benchmark (Brent) oil price.
 
Exports from its Indian operations were also lower by 44.9 percent at Rs.36,717 crore, as against Rs.66,600 crore in the corresponding period of the previous year due to lower product prices in line with lower crude oil prices.
 
Highlights of the results (stand-alone):
 
• Revenue decreased by 28.1 percent to Rs.71,412 crore ($11.2 billion)
 
• Exports decreased by 44.9 percent to Rs.36,717 crore ($5.8 billion)
 
• Profits before income tax increased by 16.2 percent to Rs.11,125 crore ($1.7 billion)
 
• Profit before tax increased by 14.3 percent to Rs.8,263 crore ($ 1.3 billion)
 
• Cash Profit increased by 13.7 percent to Rs.8,806 crore ($1.4 billion)
 
• Net Profit increased by 11.8 percent to record Rs.6,318 crore ($1.0 billion)
 
• Gross Refining Margin of $10.4/bbl for the quarter, highest in past six years 

User

Nifty, Sensex may try to rally – Weekly closing report
A dip in Nifty to 8,500 may attract buyers
 
We had mentioned in last week’s closing report that the Nifty, Sensex rally may pause and that Nifty’s medium term uptrend may continue as long as it manages to stay above 8,355. The Indian stock markets have been range-bound and the major indices have dipped a little, compared to last week’s closing values. On Friday, the movements of the major indices were as follows:
 
 
Over the week, on Monday, the stock market indices closed marginally in the red on the back of worries surrounding the monsoon progress, a likely troubled parliament session, and the upcoming monetary policy review.
 
On Tuesday, lower-than-expected first-quarter results and the logjam on the first day of Parliament's monsoon session dampened the sentiments in the Indian equity markets. Major results like Infosys, HDFC Bank, Sun Pharma and Hindustan Unilever released on Tuesday had the biggest impact on stock- or sector-specific indices. Investors were also anxious about the ability of the government to pass key bills like Goods and Services Tax (GST) and land bill during the monsoon session.
 
On Wednesday, investor's sentiments were buoyed after positive statements were made by the government, indicating political willingness to resolve the impasse on crucial legislations like the Goods and Services Tax (GST) and the land bill. The major indices improved by more than 1% on just the positive indications from the government.
 
On Thursday, political uncertainty continued. The logjam in parliament and anxiety surrounding a rate hike in the US subdued the Indian equity markets. Key economic data revealed a recovery in the US economy just before the FOMC (Federal Open Market Committee) meet on July 29, which will give further clues as to when the rate hike might take place there. With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India. On Friday, there were no negative macroeconomic cues, but the Parliament logjam on ethics in politics is continuing to cast a shadow over the market. India Vix closed at 15.46, down 0.40%. NSE turnover was at 81.03 crore.
 
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
 

User

Proposed new India Financial Code, likely to whittle RBI’s role in monetary policy
The Union government has proposed to strip the Reserve Bank Governor’s veto vote on India’s monetary policy
 
The government has released a draft version of the Indian Financial Code (IFC), which details various aspects of financial sector legislation including the monetary policy committee (MPC), public debt management, new regulatory architecture, among others. The key proposals on monetary policy are as follows:
 
(a) Composition of the MPC: As per the draft IFC, the MPC will comprise seven voting members, of whom three will be from the RBI (Reserve Bank of India Chairperson, RBI executive member, RBI employee) and four external members, who will be appointed by the central government for a term of four years. In addition, the government will also nominate a non-voting representative to attend all MPC meetings. This is in contrast to the Urjit Patel Committee (UPC), which had recommended a five-member MPC comprising three RBI members (majority) and two external members, who would be decided by the RBI Governor and Deputy Governor. Therefore, the draft IFC suggests that government-appointed members will be in the majority, a significant dilution of the RBI’s powers. It is to be noted that, in most countries, the government does not have representation in the MPC (except in Colombia, Guatemala and the Philippines). Among inflation-targeting countries, about half have no external members in their MPCs.
 
(b) Inflation Target: CPI inflation would be the inflation target. However, the draft IFC does not give a precise numerical target and instead states that the target CPI (and the inflation band) would be decided by the RBI and government every three years. The UPC had recommended a target of 6% by January 2016 and thereafter of 4% (+/- 2%). In line with this, the RBI and government had signed a monetary policy framework agreement in February 2015 (India: New Monetary policy framework formalised, March 2, 2015).
 
(c) Voting: Policy rates will be determined by a majority vote with one vote per member. In the event of a tie (when one person is absent; quorum is five), the RBI chair will have a second and casting vote. 
 
(d) Accountability: In the event of failure, the RBI will have to report to the central government explaining the reasons for inflation over/undershooting its target, the remedial actions and the time horizon within which the inflation target will be achieved. 
 
(e) Transparency: Similar to the UPC recommendations, the draft says that once every six months, the RBI will have to publish a report with its inflation forecast for the following 6-18 months. Additionally, the minutes of the MPC meetings will be published on the 14th day after the MPC meeting and a detailed transcript will be made available three years after the meeting. 
 
According to media reports, the Union government has proposed to strip the Reserve Bank Governor’s veto vote on India’s monetary policy. The government also proposed to grant itself the power to appoint four of the six members of the Monetary Policy Committee, whose remit will include decisions on setting interest rates to maintain inflation at the targeted level.
 
The revised draft of the Indian Financial Code, put out by the Union Finance Ministry for comments, proposes that the Reserve Bank “Chairperson” shall head the committee, with no reference to the Governor. It is not clear from the draft if a re-designation is planned. Under the revised draft, the non-government members of the committee are to be drawn from the Reserve Bank.
 
Nomura Securities, in its research note, has forecast the following implications of the change in government policy: At the outset, the draft IFC appears to have diluted the monetary policy framework that the Urjit Patel committee had recommended. While a lot will depend on the choice of MPC members, a clear majority for central government appointed members on the MPC is clearly a dilution of the RBI’s independence in executing monetary policy. Historically, governments tend to have a growth bias and hence, if implemented, this could lead to a more dovish outcome, even more so as the government will not be accountable in the event of failure to meet the inflation objective. For the RBI to be accountable without having a majority in the MPC could eventually compromise the efficacy and credibility of the central bank, and hence Nomura does not view this as a medium-term positive. This is a draft version and the government has invited public comments by 8 August 2015. Given that the monsoon session would be wrapping up by then, it is more likely that the final IFC will be taken up for discussion in the winter session of Parliament.

User

COMMENTS

MG Warrier

2 years ago

Coming soon after RBI had accepted the challenge to chase an inflation target, the move based on an FSLRC report, which contained half-baked and ‘cut & paste’ recommendations, is unfortunate. One still hopes, wiser counsel will prevail and the RBI Governor who is expected to evolve and implement monetary policy will not be 'disarmed'. Whether one calls it VETO or the right of the leader guiding his team, Governor, RBI should have the final say on how RBI conducts monetary policy.
That the whole move is in bad taste is confirmed by the proposal to re-designate Governor as Chairperson. The silver-lining is that as of now we have Dr Raghuram Rajan as Governor whose eminence will not be reduced by change of designation. RBI will withstand the pressures under his leadership.
In their hurry to show ‘results’, it seems the NDA government is rebottling UPA II’s wrong policies. In financial sector, such thoughtless measures may breed chaos.
M G Warrier, Mumbai

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)