Chidambaram and Modi are sparring over growth figures. Who is correct?

The finance minister says the BJP Prime Ministerial nominee's claim that economic growth rate during the tenure of the Atal Behari Vajpayee government was 8.4% a year on average. Calling Modi's claim a 'fake encounter' with facts, Chidambaram says the average annual growth for the six-year NDA period stood at 6% and that for the last five years at 5.9%. Obviously one of the two is wrong. Is it Chidambaram or Modi? Do share your views with us.

Oberoi Realty share sale begins, stock falls 3%

Oberoi Realty is trading lower by 3% at Rs 164 on NSE after the real estate firm’s share sale programme for diluting 3.49% of the promoter’s stake commenced today at bourses.

The company’s CMD and promoter Vikas Oberoi will sell 11.4 million shares at Rs 158 per share through stock exchanges to meet market regulator Sebi's guidelines on minimum public share holding norm, Oberoi Realty said in a regulatory filing.

As on June 30, 2013, the promoters had 78.49% in the company and they need to pare their stake to 75% for meeting Sebi guideline on minimum 25% public shareholding for private sector listed companies.

The stock hit high of Rs 165 and low of Rs 163 so far. A combined around 20,000 shares change hands on the counter in early morning deals on NSE and BSE.

RBI assures Street on liquidity management

The Reserve Bank of India (RBI) on Wednesday assured the market it was closely monitoring liquidity conditions. It added it would take appropriate action, including open market operations, to ensure adequate liquidity was available to support the flow of credit to productive sectors of the economy.

Experts said the statement would result in government bond yields falling further on Thursday.

Beginning with the mid-quarter review of monetary policy on Friday, RBI began a calibrated unwinding of the exceptional measures announced since July to restore normalcy to financial flows. Currently, RBI is injecting about Rs 1.5 lakh crore into the system on a daily basis, through the liquidity adjustment facility, the export credit refinance facility and the marginal standing facility.

However, despite this, liquidity conditions have been tightening, as shown by the hardening of yields in the government securities market, owing to uncertainty on the government’s borrowing programme for the second half of 2013-14 and the prospective effects of banks’ half-yearly account closure. The seasonal pick-up in credit demand, the festive-season-related demand for currency and the sluggish deposit growth have also contributed to the tight liquidity.

On Wednesday, the yield on the 10-year 7.16 per cent benchmark government bond closed at 8.79 per cent, compared with its previous close of 8.84 per cent. Experts said the RBI’s assurance was necessary, as two government bond auctions were scheduled for this week.

On Monday, a government bond auction for a notified Rs 15,000 crore devolved partially on primary dealers to the tune of Rs 4,030 crore. On Friday, RBI would auction government bonds for a notified Rs 14,000 crore.

PM-Sharif meet to focus on trade

While the situation on the Line of Control in Jammu and Kashmir will definitely be discussed when Prime Minister Manmohan Singh meets his Pakistani counterpart, Nawaz Sharif, in New York on the sidelines of the United Nations General Assembly, it was emphasised by high-level sources on Wednesday that progress on trade would be made, as there is a concrete agenda to be followed for that.

The sources, who spoke on the condition of confidentiality, said that a significant step forward in exporting electricity to Pakistan could happen as early as next week. It had been held up, they claimed, not for political reasons but because the Pakistani side was evaluating its technical and commercial viability. However, it is believed that process is close to conclusion, and Pakistan may express formal interest in cross-border electricity trade, sending a delegation on the subject, within a week. Sharif and Singh are likely to meet on Sunday.

In another significant development, the Nuclear Power Corporation of India Limited, or NPCIL, will likely move forward within a few days on evaluating the terms of a possible contract with nuclear supplier Westinghouse. A limited exploratory agreement might be in place between the two companies, according to the highly-placed sources, before Singh meets US President Barack Obama on Friday. This is in spite of concerns expressed domestically that US companies, including Westinghouse, wish to dilute the nuclear liability legislation passed by the Parliament beyond recognition.

A lack of progress in transforming the US-India civil nuclear agreement of 2008 into real projects on the ground is often cited as a major cause for a chill in bilateral relations. However, officials close to the prime minister strongly denied that the United States had any ground for disappointment, and suggested that such claims may just be an American negotiating tactic.

Singh will also make a pitch for more US investment in India. Although the recent diplomatic coolness between India and the US has been driven in large part by the souring of US business on the India story, officials insisted that the outreach was not unusual. Reporters were told that a ramped-up pitch for investment will be the one consistent theme of all major upcoming foreign visits, including to China. The PM is scheduled to meet a group of US CEOs in New York City later this week.

Risk of a sovereign downgrade increases after SBI downgrade by Moody's

The risk of a sovereign downgrade risk has only become exacerbated after international rating agency Moody’s downgraded State Bank of India’s senior debt and local currency deposit to ‘Baa3’, and now has a negative outlook. The market is viewing this as a proxy for the sovereign rating. The State Bank of India and group entities account for 25 per cent of the country’s banking system. Currency strategists say that despite the recent euphoria after the Fed’s “no taper” decision, India is far from the comfort zone.

The stress is not only in the banking system, India Ratings and Research in a report has said that the default rate of corporate finance issuers in the country has risen to 4.5 per cent in FY13 from 3.5 per cent and 0.3 per cent in the previous two years. What this implies is that the RBI’s move to ease liquidity conditions will have little bearing on the current financial condition of borrowers and their ability to repay loans. Scotia Bank’s currency strategist Sacha Tihanyi says that this should remind the market of the risk to the sovereign of a credit rating downgrade, as Standard & Poor’s currently has the country’s BBB– investment grade rating on a negative outlook (other major agencies have it on stable).