Weak domestic fundamentals such as record current account deficit and high inflation concerns too put pressure on the rupee, dealers said
The Indian rupee on Thursday plunged by a whopping 130 paisa to hit lifetime low of 59.93 against the US dollar in the early trade on the Interbank Foreign Exchange on strong demand for the American currency from banks and importers. The rupee hit an all-time low of 59.97 per dollar in the spot market while it struck 60.17 in the futures segment.
Besides, the dollar's strength against major currencies overseas on comments by Federal Reserve chairman Ben Bernanke that the central bank may scale back its monetary stimulus programme later this year weighed on the domestic unit, dealers said.
However, according to Credit Suisse, the statement from Federal Open Market Committee (FOMC), and chairman Bernanke's press conference were more hawkish than expected. "The FOMC seems simultaneously anxious to start slowing the pace of its asset purchases and reluctant to tighten policy too early or too quickly. Market participants seem much more attuned to the new news of 'tapered purchases' than the old news of a large Fed balance sheet," it said in a note.
Raghuram Rajan, chief economic advisor to the finance ministry, tried to calm the markets while admitting that the government had limited resources and the reasons for the fall in domestic currency were more global than local.
Speaking with reporters, he said, "We have a range of instruments. We can call on them as and when needed. We will not flag them. The ministry of finance, Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) are watching developments closely and would take action appropriate. We should not let ourselves to be led by the market into directions we do not want to go".
The domestic currency had earlier hits its all-time intra-day low of Rs58.98 on 11th June. The rupee had gained 7 paisa to close at Rs58.70 against the dollar in the previous session on the back of recovery in stocks and fresh dollar selling by exporters.
Kuntal Sur, director, KPMG in India, said, "The rupee has been under pressure since last month and has lost around 10% during this period on the back of heavy foreign currency outflows as foreign investors withdrew heavily from debt market and also from equity market. The ballooning current account deficit (CAD) and cloudy outlook of reforms have added to the local currency's woes. Outlook of the currency is expected to remain weak till the structural measures are taken to improve CAD and improvements of sentiments foreign investors".
Montek Singh Ahluwalia, deputy chairman of Planning Commission, however expressed surprise over market reaction to the Fed's statement. He said, "Currencies in all emerging nations are being impacted. For Indian rupee, the CAD is also responsible for large depreciation and it is up to RBI to decide on intervening in the currency market."
According to dealers, weak domestic fundamentals such as record current account deficit and high inflation concerns too put pressure on the rupee.
In a report, Mecklai Financial said, "60.00 should be a psychological level for the rupee wherein RBI may step in and ensure that it does not depreciate to a large extent from hereon. The rupee has been on a depreciation mode ever since it hit an high of 53.67 in this year."
Meanwhile, as an aftereffect, the BSE benchmark Sensex also closed below the 19,000 level, plunging 526 points, or 2.7%, to 18,719.3.
Moneylife Foundation has been receiving complaints from its members that they are not receiving their fixed deposit maturity amounts from two Yash Birla Group companies namely Zenith Birla (India) and Birla Power Solutions. Is there financial trouble brewing in the group?
The economic slowdown and its impact on corporate performance is now beginning to hurt investors who have trusted their money to unsecured fixed deposits of a clutch of companies. Investors are writing to us to complain that they are not getting back their maturity proceeds from two Yash Birla Group companies, Zenith Birla (India) and Birla Power Solutions.
The Yash Birla Group of companies has been struggling, if the share price is anything to go by. As you will see from the table below, none of the Yash Birla Group companies are quoting at double digits. Out of the eight companies, all but one gave negative returns since 1 March 2013. Is there trouble for the group that the shareholders do not know about?
The table below shows the stock price performance of all the Yash Birla Group companies:
Recently, the Chennai-based Apollo Hospitals called off its joint venture with the Yash Birla Group, citing delays in obtaining approvals. Interestingly, fixed deposits-related issues plagued Zenith Birla (India) and Birla Power Solutions. The latter had problems paying its tax dues as well.
According to the annual report, Birla Power Solutions not only did not issue fixed deposit receipts but the auditors also discovered there was a shortfall in liquid assets too. More pertinently, the auditors also discovered tax arrears with respect to dividend distribution tax and sales tax. However, the company admitted that the financial crunch made it more difficult to bridge the shortfall and pay taxes. It said, “The company could not pay the dividend distribution tax of Rs261.54 lakh and the arrears of sales tax due of Rs23.64 lakh due to severe financial crunch. The company will pay these dues as soon as the financial position improves.” Similarly, it could not bridge shortfall of Rs9.31 lakh due to poor economy.
The auditor stated in the company’s 2012 annual report: “We have to state that the company has invested Rs283.55 lakh out of the amount of Rs292.86 lakh, in liquid assets. Further there has been delay of some days in obtaining the said assets. There has also been a small delay in issue in Fixed Deposit Receipts to the extent of Rs105.98 lakh during January and February 2012 consequent to the change in the registrar of the company.”
Birla Power Solutions has fixed deposits to the tune of Rs57.92 crore as of 31 March 2012. The company too claims that there are no unpaid deposits. Another company, Birla Cotsyn, has Rs5.61 crore of fixed deposits with no unclaimed fixed deposits.
Similarly, Zenith Birla (India) too had troubles with issuing fixed deposit receipts. Last year’s annual report of Zenith Birla (India) reveals something that has relevance to fixed deposit holders of the company. Apparently, the company had failed to issue fixed deposit receipts to the extent of Rs78.16 lakh, as discovered by auditors, last year in January and February. The auditors stated: “In respect of compliance by the company with the provisions of Sections 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975, with regard to the deposits accepted from the public, we have to state that there has been a small delay in issue of Fixed Deposit Receipts to the extent of Rs78.16 lakh during January and February 2012 consequent to the change in the registrar of the company.”
The company defended its position by stating that the delay was due to changing its registrar. The statement said: “The company had changed its registrar to the Fixed Deposit scheme from Link Intime India Private Limited (Link Intime) to Adroit Corporate Services Private Limited (Adroit) in the month of January 2012. The company thought it prudent to change the registrar due to better services and upgraded software used by Adroit as compared to Link Intime. As Adroit had to set up the Fixed Deposit system post shifting of the records from Link Intime, there had been a small delay in issue of Fixed Deposit Receipt.” As of 31 March 2012, Zenith Birla has fixed deposits of Rs33.19 crore, but claims that it has not defaulted on them.
Moneylife sent an email to the Yash Birla companies for their responses. Till the time of writing the story, we have not received any answers from them. We will incorporate their answers as and when we receive them.
Instead of going into the complaint of Wing Commander (retd) CR Mohan Raj, about a forged power of attorney, the finance ministry just forwarded a mindless reply it received from SEBI to Rajya Sabha MP Rajeev Chandrasekhar
About nine months back Moneylife wrote an article about the harrowing tale of a 78-year old veteran from the Air Force, whose life savings was wiped out at Motilal Oswal Securities by using a forged power of attorney (PoA).
Motilal Oswal, which preaches “highest ethical practices”, stuck to its stand of blaming its customer and keeping completely mum on the allegation that it had forged the PoA.
Rajeev Chandrasekhar, a member of Rajya Sabha, who is also a member of the Standing Committee on Finance, took up retired Wing Commander (Wg Cdr) Raj's complaint with the ministry of finance (MoF). The reaction from the government is a shocker. Mr Chandrashekar has received a letter from Namo Narain Meena, minister of state, MOF, asking Mr Raj “to follow the procedure laid down by SEBI for redressal of his grievances”!
In effect, both the regulator and the MoF are happy to wash their hands off this investor’s grievance and to push them into tedious and unfair arbitration (especially for an ill, senior citizen) without exceptions or application of mind. Is it any wonder that millions of investors have exited the capital market and prefer to invest in gold? But let’s return to this war that Wg Cdr Raj is fighting at the fag end of his life.
The Securities and Exchange Board of India (SEBI), to whom Wg Cdr Raj has sent innumerable letters and reminders, knows for a fact that he has a ruling from a District Consumer Redressal Forum against MOSL regarding the forged Power of Attorney (PoA). The Forum asked him to take up the issue of getting his money back at the appropriate capital market platform. It is this that Motilal Oswal Securities is holding on to, knowing fully well that the 78-year old man will find it difficult to go through another battle. Shockingly, the MoF has chosen to behave like a post office, even when an MP and standing committee member has raised this sordid issue. This disregard for elected representatives, especially those who are not a part of the ruling government, is a hallmark of the past nine years under the United Progressive Alliance (UPA) government. Moneylife has written in the past about how letters from retired Union Secretaries like EAS Sarma, specifically addressed to SEBI chairman UK Sinha, were dumped into the automated redressal system called SCORES leading to a similarly mindless response to him.
In this case too, SEBI, which is mandated by law to protect investors, made no attempt to contact Wg Cdr Raj again, but simply accepted the submissions made by Central Depository Services (CDSL) and Motilal Oswal Securities, without even looking at the correspondence exchanged between the 78-year old and the market regulator. The Air Force veteran had been sending numbered reminders to SEBI, such as “POA forged or not- matter pending with SEBI since 7th July 11-Reminder 18”.
The minister’s letter claims that Sushmita Sethi, assistant manager at the market intermediaries regulation and supervision department -IV at SEBI had responded to Wg Cdr Raj asking him to follow the procedure prescribed for redressal of grievances.
Wg Cdr Raj, who can barely speak because his larynx had to be removed due to cancer, terms this reply from SEBI as false. In an email, he said, “What is the advice she gave on forged PoAs, which is my grievance? I have been addressing her in repeated mails for nearly two years to redress my grievance about sale by forged PoAs. She is making no mention of forged PoAs and is avoiding this main issue to protect the broker. And yet she claims she advised me.”
As mentioned by Wg Cdr Raj in the Moneylife article earlier, despite having a court judgement stating the PoA was forged, SEBI chose to consider the reply of CDSL in which they were provided an entirely different PoA given to them by MOSL.
Neither CDSL nor SEBI found it odd and weird that anyone would sign two PoAs on the same day for the same purpose. Clearly, SEBI is hell-bent on protecting the broker Motilal Oswal. The question is, why?
Turnover of Rs200 crore?
But that is not all. While ignoring Wg Cdr Raj's claim, SEBI is bending over backwards for Motilal Oswal Securities in other aspects too. Suddenly, the MoF letter mentions that the 78-year old ran up a turnover of a whopping Rs200 crore with the broker and that he had accepted this fact in an email to the brokerage. The email is not attached in the correspondence.
Strangely, even Motilal Oswal, chairman of MOSL never mentioned this figure of trading turnover in his conversations with Moneylife. In fact, Mr Oswal had sent a team to Bengaluru to talk to Wg Cdr Raj, but the official walked away when he made it clear that the Air Force veteran intended to record the conversation. In a dispute of this size, where the investor is unable to speak, this simple precaution for his protection apparently frightened off the brokerage. But SEBI and the MoF are uninterested in these facts. Indeed, insisting on the recording looked prudent with hindsight since Motilal Oswal Securities seems to be coming out with new ‘facts’.
According to the letter from the minister, Motilal Oswal Securities has apparently claimed to SEBI that Wg Cdr Raj admitted to running up this turnover. The investor says this is the first time that he has even heard about this amount. He does not recollect sending an email to MOSL, acknowledging the same and the broker has neither mentioned this quantum in the three trials in consumer courts nor in any of their correspondence. Wg Cdr Raj also says that he had never applied for a margin account through which all the transaction took place.
He said, “I never opened any margin account with MOSL. I only opened a demat (DP) account. All the stocks sold off by MOSL were only from this DP account and not from any margin account as she (Ms Sethi) claims.”
Clearly, Motilal Oswal is hiding behind the facts and spinning new ones and SEBI and ministry of finance cannot be bothered about it. Precisely, anticipating this kind of dubious action and behaviour from the brokerage, Moneylife had specifically advised Wg Cdr Raj to record the conversation when Mr Oswal, personally sent some people to Bengaluru to speak with the 78-year old. Our sense was that since he cannot speak and there would be the danger of attributing consent to issues when he has not said or meant it during the meeting, especially when we are dealing with a company that was alleged to have forged a PoA.
Gross misuse of PoA by brokerages was a common problem during the last bull market. At Moneylife, we have reported many such cases since 2006 and SEBI finally decided to address the PoA problem in 2009-10. What SEBI could not care less is that the grievance redressal mechanism is so poor and fraught with delays that the investor gets harassed even more in the bargain. The brokers get away scot free or with a minor punishment, and it is not long before they get back to their malpractices. This is one of the main reasons why the investor population is dwindling. Probably, Wg Cdr Raj, a war veteran, sees the world differently. He has decided to fight. Now if only SEBI and MoF were a little unbiased and proactive about this case, rather than batting for a dubious broker, he would have won this battle too by now.
Additional Reporting by Yogesh Sapkale and Jason Monteiro
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