Rate cuts may be delayed with RBI focus on rupee: Barclays

New Delhi: With the Reserve Bank's policy focus geared towards supporting the rupee, the central bank may delay easing rates to between December and April 2014, a Barclays report says.

According to the global brokerage firm, the RBI is likely to remain focused on supporting the rupee, which has depreciated by more than 13 percent since May and crossed the psychological level of 62 against the dollar last week.

"As such, while the focus is on the INR, we think monetary policy calibration will eventually be biased towards further easing, rather than tightening. However, we think further policy easing will likely be delayed," Barclays said in a research note.

The financial services major believes key policy rates would be eased by as much as 75 basis points in this fiscal but it would be a "delayed" affair.

"We still expect 75 bp of repo rate cuts, but now we expect them to take place between December 2013 and April 2014, rather than our initial expectation of September -December 2013," Barclays said.

The industry has been demanding a cut in key policy rate to boost economic activities. Industrial output contracted for the second consecutive month in June.

Moreover, inflation rose for the second consecutive month and shot up to 5.79 percent in July, driven largely by double-digit rise in prices of food articles, including vegetables and onions.

The RBI, in its First Quarter Review of Monetary Policy on July 30, left all key interest rates unchanged.

The repo rate, at which the RBI lends to the system, was kept at 7.25 percent and the cash reserve ratio, the amount of deposits banks park with it, was unchanged at 4 percent.

The RBI is scheduled to hold its next mid?quarter review of policy on September 18.

FDI inflow up by 12% to $1.65 bn in July

 
New Delhi: Foreign Direct Investment (FDI) into India grew by 12 percent year-on-year to USD 1.65 billion in July, highest since April.

In July 2012, the country had received FDI worth USD 1.47 billion.

In April, the first month of the current financial year, the inflows stood at USD 2.32 billion, according to the data of the Department of Industrial Policy and Promotion (DIPP).

During the April-July period, FDI has grown by 20 percent to USD 7.05 billion, from USD 5.90 billion in the same period last fiscal, the data said.

The sectors that received large inflows during the first four months of the 2013-14 fiscal include services (USD 1.02 billion), pharmaceuticals (USD 1 billion), automobile industry (USD 637 million) and construction (USD 359 million).

The maximum FDI during the period came from Singapore (USD 2.21 billion), followed by Mauritius (USD 1.85 billion), the Netherlands (USD 520 million), Germany (USD 518 million), and the US (USD 371 million).

A DIPP official said that the recent steps announced by the government would further help in attracting FDI inflows and improving the investment environment.

The government has liberalised FDI policy in as many as 12 sectors which include telecom, tea and petroleum and natural gas.

FDI inflows in 2012-13 aggregated USD 22.42 billion, a decline from USD 36.50 billion in 2011-12.

India is estimated to require about USD 1 trillion between 2012-13 and 2016-17, the 12th Five Year Plan period, to fund infrastructure growth covering sectors such as ports, airports and highways.

Overall, an increase in FDI will help support the rupee, which depreciated to a record low of 68.8 against the US dollar on August 28. It has strengthened since then to 63 level.

Gold falls below $1,300 as Fed stimulus decision looms

Singapore: Gold extended losses into a third session on Wednesday, falling over 1 percent to trade below USD 1,300 an ounce, with investors expecting the US Federal Reserve to announce a reduction in its bullion-friendly stimulus measures.

The Fed is expected to begin its long retreat from ultra-easy monetary policy by announcing a small reduction to its USD 85 billion monthly bond purchases following a two-day policy meeting that ends on Wednesday. Many expect a USD 10 billion cut.

Spot gold had fallen 1.2 percent to USD 1,293.69 an ounce by 0217 GMT, bringing the year's losses to 23 percent. It had earlier dropped to USD 1,291.34 - its lowest since August 8.

"It all dependent now on the FOMC," said a precious metals trader in Hong Kong, referring to the Federal Open Market Committee. "It depends on what the language is going to be on their stimulus and what sort of tapering they pursue."

"Gold is still technically under pressure and will probably struggle to go above USD 1,350 again."

Traders said prices would find their next support level at USD 1,270- USD 1,280 an ounce.

Gold, often seen as a hedge against inflation and a slowing economy, benefited when central banks around the world launched stimulus measures to support their economies. The metal hit an all-time high of about $1,920 an ounce in 2011.

But this year several analysts have cut their forecasts for gold prices in anticipation of the US central bank curbing its stimulus measures. Goldman Sachs expects prices to drop to USD 1,050 by the end of next year.

PHYSICAL DEMAND

Due to the volatility in prices, physical demand has failed to pick up rapidly in key consumers India and China. Expectations that prices could fall further once the Fed announces a cut in stimulus have also restrained purchases.

Shanghai gold futures fell 2 percent on Wednesday.

Top gold consumer India increased its import duty on gold jewellery to 15 percent from 10 percent, setting it higher than the duty on raw gold in a move to protect the domestic jewellery industry.

The Indian central bank and finance ministry have taken several steps this year to curb bullion imports in an effort to reduce the country's record trade deficit.

Silver and palladium dropped about 1.6 percent, while platinum fell nearly 1 percent.

We need to look beyond gloom & doom: Mukesh Ambani

Mumbai: Sounding confident that the economy will overcome the current crisis, Reliance industry chairman Mukesh Ambani on Tuesday said there is a need to look beyond the gloom and doom.

"India should look beyond the gloom and doom," Ambani said at the Giants International 41st anniversary celebrations and awards function here tonight.

He was addressing as the chief guest at the function.

Stating that India needs a positive and inclusive mindset, Ambani expressed confidence that despite all the negativity India will become a major power.

"I have realised that by focusing on obstacles, you don't reach your goals. Instead focus on your goals to overcome obstacles," he said.

After going through a financial turmoil for almost a year, greenshoots have appeared in the economy of late, giving a hope of recovery.

After contracting for two straight months, industrial production entered the positive zone in July, recording a growth of 2.6 per cent on account of improved performance of manufacturing and power sectors.

The IIP data revealed that out of the 22 industry groups in the manufacturing sector, as many as 11 posted positive growth rates in July.

Besides, snapping a nine-month streak of decline, domestic passenger car sales also grew by 15.37 per cent to 1,33,486 units in August this year, compared to 1,15,705 units in the same month last year.

BSE Sensex edges higher; IT stocks lead

The BSE Sensex rose on Tuesday, led by gains in technology stocks including Tata Consultancy Services which rose tracking weakness in the rupee and as recent underperformance of the sector made short-term valuations attractive.
Tata Consultancy Services Ltd (TCS.NS) provisionally rose 2.2 percent, Infosys Ltd (INFY.NS) gained 0.8 percent, while Wipro Ltd (WIPR.NS) surged 4.9 percent.
The Sensex rose 0.34 percent, while the broader Nifty ended 0.18 percent higher after slipping below its 200-day moving average for a brief period earlier in the day.