March is seasonally a positive month for the trade balance and hence, the latest data show a significant deterioration in India’s trade deficit
India’s trade deficit widened to a larger-than-expected $10.5 billion in March from $8.1 billion in February, on weak exports and a sharp rebound bunched-up payments in oil and gold imports due to easing of restrictions. Imports, excluding oil and gold, remained weak, indicating sluggish domestic demand.
March is seasonally a positive month for the trade balance and hence, the latest data show a significant deterioration, said Nomura in a research note.
It said, "The first quarter of 2014 current account is tracking -0.5% of GDP versus a mild surplus last month, but better than -0.8% in Q4 2013. We expect the current account deficit to widen to 2.3% of GDP in FY15 versus 1.8% in FY14 as a result of the easing of gold import restrictions and better domestic demand. That said, we expect net capital inflows to easily finance this deficit".
During March, India’s export growth continued to contract at -3.2% from 3.7% in February, while import growth rebounded sharply to -2.1% from 7.1%.
A sharper-than-expected jump in imports, mainly of oil and gold, was the main reason. Oil imports rose 17.7% from -3.1%, perhaps due to bunched up payments because of recent Indian rupee-US dollar appreciation. Gold imports rose to around $2.8billion from $1.4 billion in February, likely due to easing of some restrictions on gold imports. Excluding oil and gold, imports contracted by 11.0% following a 10.5% drop in January, suggesting that domestic demand remains very weak, Nomura said.
"As gold restrictions are relaxed further and growth starts to rise during the latter half of FY15 (year ending March 2015)," Nomura said, "we expect the current account deficit to widen to around 2.3% of GDP in FY15, larger than in FY14, but still within the sustainable range. With growth bottoming out and our expectations of a gradual improvement in the macro-economic environment after the elections, we expect net capital inflows to be more than sufficient to finance the current account deficit."
"We expect the Reserve Bank of India (RBI) to continue to proactively build its defence against any external shocks by accumulating FX reserves and discouraging short-term debt flows. In line with this view, our Asia FX strategists see scope for strong Indian rupee performance over the medium term, and forecast US dollar/Indian rupee at 59.5 by end-2014 and 57.5 by end-2015," the note added.
Birla Power Solutions has submitted a proposal to Bombay High Court offering to repay money to its creditors of past eight years. However the Yash Birla group company will not pay interest to its fixed deposit holders
The debt-ridden Yash Birla Group unit Birla Power Solutions Ltd (BPSL) has proposed to refund money it collected over eight years ago from investors for its corporate fixed deposit (FD) scheme. However according to the proposal submitted before the Bombay High Court, the company would pay only the principal amount over next three years without any interest.
According to a report in Mumbai Mirror, promoters of BPSL intend to raise funds through family and friends and also through internal accruals by reviving the company and launching some cutting edge products in the portable genset sector. BPSL promised to clear all dues within a span of eight years as per its proposal submitted to HC.
Quoting advocate Niteen Pradhan, the counsel for BPSL, the report says, “We have also presented a payment proposal to the court. We intend to revive the company while making payments over a period of time”.
Earlier in February, Yash Birla’s wife Avantika and her maternal uncle Narayan Baheti met officials form the Economic Offence Wing (EOW) and assured them that, the Group would arrange money to repay its depositors.
According to reports from Moneycontrol.com, Yash Birla Group had sold its old South Mumbai property to Nahar Group for around Rs250 crore recently.
As per the Mumbai Mirror report, BPSL has also hired the services of an independent financial consultant, Devendra Jain, who deals in revival of stressed companies.
BPCL owes Rs329 crore to its unsecured creditors and lenders, and wants them to sacrifice 40% of their principal amount as it assures repayment over next three years. The company offered to convert 40% of Rs58 crore into equity to banks and financial institutions, who are on a verge to declaring BPSL debt as a non-performing asset (NPA). The company told the newspaper that dues owed to the income tax and other government departments will be paid over two years and dues to employees would be cleared in 12 months.
BPSL is being probed by EOW of Mumbai Police for defaulting in repaying its deposit holders. A criminal case has been registered under the Maharashtra Protection of Interests of Depositors' (MPID) Act. Its former managing director, PVR Murthy has been arrested. While the EOW is proceeding with freezing BPSL's assets, the company has moved Bombay High Court challenging the case and gave the proposal to repay its all creditors in eight years.
Moneylife earlier wrote about, Company Law Board asks Zenith Birla to pay dues of FD holders by 21st April. The Company Law Board (CLB) passed orders against Yash Birla Group’s other companies Zenith Birla India, Birla Power Solution, Birla Shloka Edutech, Birla Cotsyn directing it to pay its depositors under section 58A (9) of the Companies Act, 1956. Even after passing orders by CLB, several investors still have not received their money back from Yash Birla Group of companies. While several depositors who got their principle amount from the corporate FD, they did not get interest amount yet.
In February, income tax (I-T) officials questioned Yash Birla as part of the investigation into alleged tax evasion involving his companies, says a report from the Times of India. In January, the I-T department raided premises belonging to Birla and found several undeclared foreign accounts with a balance of crores of rupees, the report added.
Yash Birla is known for its lavish lifestyle and Page3 parties instead of his business moves, which shows the careless attitude of the Group. People had invested in his companies on goodwill of ‘Birla Family’.
Moneylife earlier reported, “Yash Birla Group companies in deep trouble?” We found that, Yash Birla Group companies have been struggling with many issues like liquidity crunch, non-payment of loans, negative cash flows etc. Its most of the companies are giving negative returns to the investors and its share prices are not even in double digits. The promoter’s stake in Birla Power Solutions is only 1.08% and in Zenith Birla India its 7.34%. It shows that the promoter himself lost faith in his company.
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Nifty to be subdued for a few days before making its next move
The Indian market opened Friday weak, following a huge decline in the US market yesterday, and traded in the negative for the entire session.
The BSE 30-share Sensex opened at 22,642 while the NSE 50-share Nifty opened at 6,758. Both Sensex and Nifty hit their respective low at the beginning of the noon session at 22,527 and 6,743, respectively. After this they tried edging higher. At the end of the session the benchmark hit their day’s high at 22,679 and 6,789. Sensex closed at 22,629 (down 86 points or 0.38%), while Nifty closed at 6,776 (down 20 points or 0.30%). The NSE recorded a lower volume of 98.47 crore shares.
The stock market will be closed on Monday, 14 April 2014, on account of Dr Babasaheb Ambedkar Jayanti.
The Indian government will unveil industrial production data for February 2014 later in the day after market hours. India's merchandise exports fell 3.15% at $29.57 billion in March 2014 over March 2013, data released by Ministry of Commerce and Industry today. Imports declined 2.11% at $40.08 billion in March 2014 over March 2013. The trade deficit widened to $10.50 billion in March 2014, from $10.4 billion in March 2013.
After market hours, industrial production data were released. Industrial production again slipped into negative territory and contracted 1.9% in February 2014 due to poor performance in manufacturing, especially capital goods. Factory output as measured by the index of industrial production (IIP) showed a decline of 0.1% during the 11-month period from April to February, compared with growth of 0.9% in the corresponding period a year earlier.
Reserve Bank of India (RBI) governor Raghuram Rajan on Thursday said in a media interview in Washington that India is prepared for potential financial fallout if the US Federal Reserve increases interest rates before April 2015. The Fed is "mostly" right in how it is managing monetary policy, Rajan said during a panel discussion at George Washington University, adding the central bank needs to improve communications because the measures it's taking now will affect what emerging markets do in the future. Still, he said he doesn't expect a US rate increase by April 2015.
Back home software stocks namely, TCS, Wipro, Infosys, in the Sensex 30 pack closed in the positive. According Nomura, software stocks will see strong start to the year with likely first half annual contract value growth of 15% or above.
Jaiprakash Power was among the gainers in ‘A’ group on the BSE (up 7.17%) after it was reported that major repair work at Vishnuprayag is complete and the plant should restart shortly in next 48 hours. Last June thanks to heavy rains, excessive silt, boulders and other materials in the Alakananda river the barrage operations and power generation, of its 400-MW Vishnuprayag hydropower plant was shut down. After rallying yesterday Adani Enterprises was the lead loser in the ‘A’ group on BSE.
US indices closed deeply in the red on Thursday. A government report on Thursday showed the fewest number of Americans filed applications for unemployment benefits last week, pointing to more progress in the labour market.
Except for Jakarta Composite (1.07%) all the other Asian indices closed in the negative. Nikkei 225 (2.38%) was the top loser.
A report today showed Chinese consumer prices rose 2.4% in March from a year earlier, after gaining 2% in February. The nation's producer price index retreated 2.3% following the previous month's 2% drop.
European indices were trading in the red. US Futures were trading lower.