Re’s lost over 20% this year Re Plunges 188 Paise To 66.19/$,

The Sharpest-Ever Fall In Absolute & Percentage Terms. Rattled By 1.3 Lakh Cr Food Bill, Stock Market Loses 2 Lakh Cr In A Day. And Gold Hits All-Time High 

Fear Of US Strike On Syria Roils Emerging Mkts

Mumbai:The rupee on Tuesday hit a record low of 66.30 before closing at 66.19, down 188 paise from Monday's close of 64.31, over concerns that the food security bill would throw government finances into disarray and fears of a US strike against Syria. 
    The rupee is emerging as a front-runner in a race to the bottom among emerging market currencies. In both absolute and percentage terms, Tuesday's drop is the highest ever. The rupee has fallen by around 20% 
since the beginning of the year. The only currency that has done worse is the South African rand which has fallen nearly 23%. Turkey's lira has dropped 14% while Brazil's real has fallen over 17%. The Chinese yuan has been the outlier, having gained nearly 2% in 2013. 
    Given the uncertainty over the rupee, gold, seen as a safe haven investment, soared to a new high of Rs 32,585/10 grams. Silver also rose, to a sixmonth high to retrace the Rs 56,000-per kg level. India faces risk of ratings downgrade, warn bankers 
Mumbai: The concerns over the food security bill and a possible US strike on Syria that caused the rupee to fall also dragged the sensex down 590 points to 17,968 on Tuesday. Bankers said with the government living beyond its means, India faced the risk of a downgrade by rating agencies. This would accelerate the outflow of foreign capital. 
    The general slowdown in the economy is also impacting the real estate market. Data released by National Housing Bank showed that property prices in 22 of the 26 cities covered, including Mumbai, Delhi, Bangalore and Chennai, have recorded a decline in prices during the quarter ended June as compared to the preceding quarter. 
    However, finance minister P Chidambaram said that the government would not exceed the fiscal deficit target projected for the year. He also said that the cabinet had approved infrastructure projects amounting to Rs 1,83,000 crore—including power projects. 
    "While the rising dollar is hurting all emerging markets, a lot of our pain is self-inflicted," said Ashish Vaidya, head of fixed income commodities and currency trading at UBS India. "The current crisis clearly threatens corporate balance sheets which usually have a reasonable line of overseas funding, which is going to take a hit," said Vaidya. He added that while depreciation leads to imported inflation, the food security bill will add to demand-led inflation as it will increase disposable income of the beneficiaries. 
    "The food security bill is expected to add to the fiscal burden. We believe crude oil has emerged as a key risk in the nearterm, which is not a good sign for the INR. Thus, the macroeconomic outlook has weakened and risks have clearly strengthened," said Sanjeev Zarbade, vice president, Kotak Securities. 
    "We estimate that the total cost of NFSB in its first full year could be Rs 1,17,000 crore, which amounts to an additional Rs 27,000 crore (0.25% of GDP) over the budgeted amount for FY14," said A Prasanna of ICICI Securities PD.

5 defaulters traded on NSEL without stock

Mumbai: Five of the nine defaulting members on the troubled commodity bourse NSEL did not have adequate commodity stocks in their warehouses even as they traded in hundreds of crores worth of contracts, which led to a crisis worth about Rs 5,600 crore.      NSEL said on Monday it is investigating the matter relating to Ark Imports, Lotus Refineries, N K Proteins, Vimladevi Agrotech and Yathuri Associates.      Similar investigations are expected to start on the other four defaulters: Loil Overseas Foods, NCS Sugars, Spin Cot Textiles and Tavishi Enterprises. These nine defaulting companies together owe about Rs 83 crore to NSEL investors, which they failed to pay last week.      In a related development, FMC chairman Ramesh Abhishek told the NSEL Investors Forum that the regulator was considering declaring the promoter of NSEL, Jignesh Shah, not fit and proper to operate exchanges.

Re hits record low of 64.54

Mumbai: The rupee closed below the 64-level for the first time on Wednesday with the currency ending the day at 64.04, 81 paise below its previous close of Rs 63.23 against the dollar. The British pound also created a new record closing above the 100 mark at 100.42 as against 99.03 on Tuesday. 

    With most bankers feeling that the 65-level may be taken anytime now, economists are now talking about the rupee touching 70. On Wednesday, Deutsche Bank said that the rupee could fall to 70 in around a month's time. On Tuesday, UBS had forecast the 70 level for the rupee this year. 
    The rupee fell to an intraday low of Rs 64.54 as the dollar strengthened ahead of the release of minutes of the US Federal Reserves July meeting. If the meeting reveals that a US recovery is seen to be underway by Fed committee members the rupee may fall further on expectation that the Fed may start to withdraw its monetary stimulus. 
    Dealers said that markets were confused over RBI measures to bring downlong-term rates through buyback of bonds even as it sought to keep rates high at the shorter end. 
    "The RBI took steps on Tuesday to contain longterm yields and ensure that credit flows were not unduly disrupted by the recent currency stabilization measures. Juggling currency and growth concerns at the same time is not easy and if not done carefully it risks sending mixed messages about policy intentions. That would neither help the currency or growth," said Leif Lybecker Esksen, chief economist for India & ASEAN, HSBC Global Research. 
    The day started on a positive note for the equity markets as bonds staged the best recovery in four years with yields falling by 50 basis points. However, the fall in the rupee spread panic in equity markets with indices closing lower.

NSEL to liquidate defaulters’ assets FMC Asks Exchange To Recover 83Cr Payment Dues From 9 Entities

Mumbai: The Forward Markets Commission (FMC), the regulator for the futures trading in commodities in the country, on Wednesday asked the crisis-ridden National Spot Exchange (NSEL) to take possession of the assets of all those nine defaulters to liquidate and recover the Rs 83 crore that they have jointly failed to pay to the exchange.      The nine defaulters now stand to lose some of their assets to auction for meeting their pay-in obligation to NSEL. These nine entities include Ark Imports, Loil Overseas, Lotus Refineries, N K Protiens, NCS Sugars, Spin Cot Textiles, Tavishi Enterprises, Vimladevi Agrotech and Yathuri Associates.      In its payout on Tuesday, compared to a total outstanding liability of Rs 174.7 crore, the exchange could pay to its investors only about Rs 92 crore. This was the first of its 30 such weekly payouts scheduled to take place every Tuesday till March 2014, and the total amount involved is close to Rs 5,600 crore. However, with the exchange defaulting nearly 50% of the amount in its first payout itself, investors are now skeptical about how much of the total liability the exchange will be able to meet.      In a letter to the NSEL board, FMC pointed out that under the rules of trading on the commodity bourse, the exchange should ask all the defaulters to hand over their "books, documents, papers, assets, cheque books and other documents, as may be specified by the exchange and the same should vest with the exchange for the benefit of the creditors". It instructed NSEL to move to liquidate all realizable assets of the defaulter members to meet their pay-in obligations, which in turn should be passed on to the investors who are to receive money from the exchange.      FMC told NSEL that the proceeds of commodities auctioned and money realized from the defaulter should be done in the shortest possible time. The money received by auctioning the assets of the defaulters should be deposited in the escrow account opened for this purpose. In turn this money should be paid to those who are to receive pay-ins from the exchange, but the same should be done with the approval of the regulator.      On Wednesday, NSEL investors who were to receive money from the exchange, received part of their money into their bank accounts. Each investor got about 1.64% of the total receivable after 5% of the net receivable being deducted as value added tax (VAT), one of the investors said. According to the earlier plan published by NSEL, each investor was to receive about 3% of their net receivable every week for the next 20 weeks, and then about 1.5% every week till March 2014. They are also entitled to get interest at the rate of 8% per annum for the delay in payment.  Govt won't take over NSEL board  New Delhi:The government is unlikely to take over the board of NSEL, arguing that it does not have the technical wherewithal to deal with the crisis. "Taking over the NSEL board is not a big issue but the problem is managing it since we do not have the expertise," atop source in the ministry of consumer affairs said. Government officials said the move was also not being pursued as the promoters would be able to get away without ensuring pay outs that add up to nearly Rs 5,600 crore. The ministry said it wanted the finance ministry and Sebi to take charge of the commodities market. TNN GETTING INTO A SPOT  May 2005 | NSEL is incorporated as a company  2006 & 2007 | Signs MoUs with various state governments  June 2007 | Receives govt exemption to launch contracts that allow delivery of goods after several days  Oct 2008 | Commences live trading, providing deliverybased spot trading in 52 commodities  March 2010 | Launches first contract under e-series that uses demat accounts for traders and investors  Apr-Aug 2012 | FMC seeks data, suspects norm violation July 31, 2013 | NSEL suspends trading in most contracts after a ministerial directive to change the structure of contracts; the move affects volumes and leads to a payment crisis  Aug 14 | NSEL seeks eight months to settle dues  Aug 19 | NSEL giving wrong info, says FMC as govt mulls stock audit  Aug 20 | NSEL defaults on dues; top brass, including its chief executive, is sacked  Aug 21 | FMC tells NSEL to take possession of the assets of nine defaulters who failed to pay the exchange an aggregate amount of Rs 83 crore

Economy stares at crisis as rupee suffers worst single-day fall of 142p At 63.13 To $, Worsens Fears About Growth And Inflation

Mumbai: Policymakers may still be in denial but the Indian economy is clearly staring at a crisis, with the rupee on Monday recording its sharpest drop ever in absolute terms to close at 63.13—1.42 paise down from its previous close against the dollar. 

    Economists are now forecasting an exchange rate of 65 in the short-term. The rush of capital out of India, which has triggered the fall, has raised the prospects of inflation, growth falling below 5% and higher interest rates. 
    The rupee fell nearly 2.25% in a day, making all imports that much more expensive. Stock prices too crashed on Monday. The sensex fell 291 points to 18,308. 
    The rupee's fall was the sharpest among all currencies as rising interest rates in the US pushed up the greenback against all emerging currencies. As a result, investment funds from the West are pulling money out of emerging markets and back into US treasuries. Besides the rupee, the Indonesian rupiah touched a four-year low, while the South African rand fell below 1%. 
    The RBI's fire-fighting measure of keeping rupee funds in short supply to rein in the dollar have not helped much but have caused immense collateral damage. 
    The yield on 10-year government bonds has risen past 9%. This has compelled banks to raise interest rates on deposits and loans. Consumers buy less and businesses pull back on investments as rates rise, dragging down growth. 
10-YR GILT YIELD AT 5-YR HIGH 
Yield on 10-year government security is taken as the best risk-free return possible. Banks and other lenders take this yield as the benchmark rate for fixing lending rates. Any major change in this rate impacts all rates, including housing, auto, consumer. It also pushes up FD rates. 
    Since May 24, the benchmark yield has risen by 2.11 percentage points to Monday's close of 9.22%. This is the highest 10-year yield in almost five years 
SENSEX DIVES 291 POINTS 
    Sensex lost another 291 points on Monday, taking the total loss in last two sessions to 1,060 points 
    Investors were left 3.2 lakh crore poorer with BSE's market cap now at 59.3 lakh crore 
    FIIs were net sellers of 680cr on Monday, adding to their 520cr net selling on Friday

Govt agencies didn’t act against NSEL Finmin, Consumer Affairs Min Had Informed Parliament About Probes In Dec 2012

New Delhi: The National Spot Exchange (NSEL) fiasco, which has led to a delay in the settlement of payment worth over Rs 5,500 crore, is turning out to be a multi-agency failure with even the finance ministry and the Reserve Bank of India (RBI), apart from the ministry of consumer affairs, failing to act against alleged irregularities.      In fact, both the finance and consumer affairs ministries had told Parliament last December that they were probing the issue.      In December 2012, Trinamool Congress's Rajya Sabha member Sukhendu Sekhar Roy had raised the issue of contravention of Forward Contracts (Regulation) Act or FCRA and also asked the government if there were "illegal NBFC (nonbanking finance company) transactions. In identical replies on December 3 and 6, junior minister for finance Namo Narain Meena and the consumer affairs ministry had said: "After analyzing the trading data submitted by NSEL, Forward Markets Commission (FMC)… had intimated the department regarding the non-compliance of certain stipulated conditions… for one-day duration forward contracts. FMC has found that the exchange allows trading on the exchange platform without verifying whether the seller has the stocks with him or not, thus in effect, allowing short sale by the members. FMC has also found that thecontracts traded on the exchange platform for which settlement period exceed 11 days are Non-Transferable Specific Delivery (NTSD) contracts, which is in violation of the provisions of FCRA."      On the issue of NFBCs, both ministers had said "the issue is being examined by FMC in consultation with the ministry of finance".      Between the two questions by Roy, consumer affairs minister K V Thomas told his party colleague Sai Prathap Annayyagari in the Lok Sabha on December 4 that NSEL's reply to a show-cause issued by his ministry and a compliance report were "under examination". On August 5, TOI had highlighted how the consumer affairs ministry slept over FMC's report.      Both the ministries are yet to publicly disclose the details of the action taken by them. Government sources told TOI that even RBI, which deals with the issue of NBFCs, was in the picture but the regulator could not be contacted for comments. In the past, RBI has, however, said it does not regulate all NBFCs but only a handful. Sources, however,said that in this case only a complaint about financing transactions was received and NSEL was not registered as an NBFC.      Even Sebi's role has come under the scanner given that the depositories — NSDL and CDSL — are regulated by it and were participating in e-series contracts related to gold and silver, which were suspended after the NSEL fiasco turned into a full-blown crisis. Sebi officials have maintained that they did not have to do anything with NSEL, which was regulated by the ministry of consumer affairs. REGULATORY LAPSES?  Consumer Affairs Ministry | Told Parliament it was examining NSEL related reports, did not act on FMC report for over 15 months  Finance Ministry | Told Parliament it was examining issues related to "illegal NBFC transactions"  Sebi | Depositories such as NSDL and CDSL, which were dealing with NSEL's e-gold and e-silver contracts, regulated by it  RBI | NBFC issue dealt by the regulator

Govt set to hike import duties, clear PSU $ bonds Bids To Bolster , Raise Inflows, Rein In Deficit

New Delhi: In an attempt to shore up the sliding rupee, the government on Monday unveiled a multi-pronged strategy to increase inflow of dollars and check outflows. The measures include a planned increase in import duty on several red-hot imports like gold and silver, allowing three public sector financial institutions to raise dollar funds through bonds, making NRI deposits more attractive and easing foreign loan norms. Taken together, these steps are expected to bridge the forex gap by $18 billion.      Through the measures announced on Monday, finance minister P Chidambaram is hoping to pare imports by $7 billion, while increasing dollar inflows by around $11 billion. This, he said, would help contain the current account deficit (CAD) at $70 billion or 3.7% of the gross domestic product, lower than last year's 4.8%. CAD has been blamed as the key factor behind the sharp volatility of the rupee against the US dollar.      CAD has widened as exports have remained sluggish, while gold and silver imports have spurted. India needs more dollar flows, through foreign investment, to fill the gap. BRIDGING FOREX GAP BY $18bn  Govt hopes to prune annual import bill by $7bn  MOVE | Compression in import of gold & silver via duty hikes IMPACT | Hopes to tame demand, save $4bn outflow  M | Compression in oil demand I | Govt looks to cut import bill by $1.5bn  M | Higher import duty on nonessential imports I | Lower demand expected to pare import bill by another $4bn  Announces measures expected to increase inflows by $11bn  M | PFC, IIFCL, IRFC to raise dollars in bonds with implicit govt guarantee I |Expected to mop up $4bn  M | Easing foreign loan norms I | MNC subsidiaries can tap dollar resources from parent  M | PSUs to tap dollar window I | $4bn can be raised in over- seas loans, trade finance. Will cut reliance on local currency market, reduce rupee volatility  Industrial output declined by 2.2% in June Exports rose 11.64% to $25.83bn in July; imports down 6.2% CPI inflation eased  to 9.64% in July from 9.87% in June Govt's renewed efforts fail to lift rupee      The slew of measures indicates the government's urgency to avert a possible crisis on the balance of payments front if the situation is left unchecked. "While we have a problem, there is no room for panic…I expect the volatility to decrease and also expect the rupee to stabilize (following the measures)," Chidambaram told a press conference. Although he did not elaborate on the products where customs duty is proposed to be increased, sources said some electronic goods top the list with measures expected to cut import of certain varieties of coal, crude palm oil and copper also on the anvil.      The urgency can be gauged from the government resorting to a quasi-sovereign bond issue by the Power Finance Corporation, Indian Railway Finance Corporation and India Infrastructure Finance Co Ltd. Such a bond issue was last used in 2001 when State Bank of India raised over $5 billion through the Indian Millennium Deposits in the aftermath of the dotcom bust and the 9/11 attacks. This time, SBI declined to be used as the vehicle to raise dollar debt.      The renewed effort from the government failed to lift the rupee. Despite the measures being announced first in Parliament in the afternoon, the rupee slid to 61.30 a dollar, a little short of last week's lifetime low of 61.80.      "These measures were in the pipeline. Despite that, the rupee seems to be under pressure. The rupee has been affected by growth worries on the domestic front and the quantitative easing tapering on the external front," said Moses Harding, executive director at Lakshmi Vilas Bank.      Most bankers and economists were unusually shy of commenting on the measures after RBI announced a clampdown recently.      "Till the structural issues are resolved the currency will behave in a similar pattern. That can be changed if we have more regular flow of FDI, which is the preferred form of foreign capital," said Devendra Kumar Pant, chief economist, India Ratings.