India Inc inks 393 PE deals totalling $9.67 bn in Jan-Nov

 
Indian companies signed as many as 393 private equity deals totalling $9.67 billion in the January-November period of this year, registering an increase of 36.38 per cent over the corresponding period a year ago, says a report.

According to global assurance, tax and advisory firm Grant Thornton, in the January-November period of last year, corporate India had signed 380 private equity deals amounting to $7.09 billion.

Meanwhile, November saw 32 deals amounting to $708 million, which was almost double in value terms over last year when there were 35 transactions worth $388 million.

"The year-to-date deal value in 2013 increased by 36 per cent as compared to year-to-date November 2012 values," the report said, adding that "PE activity in November 2013 were largely driven by the pharmaceutical sector."

KKR's investment of $200 million in Gland Pharma Ltd was termed as the deal of the month.

Other major private equity deals of November include Baring Private Equity's $131.61 million investment in Hexaware Technologies; International Finance Corporation's $125 million investment in Yes Bank and Sequoia Capital and Info Edge's $37 million investment in Zomato Media.

According to the report, the top five PE deals accounted for 73 per cent of the total PE deal values.

A sector-wise analysis shows that IT&ITeS attracted deals worth $243 million that amounted to 34 per cent of the total deal pie, followed by Pharma ($201 million, 28 per cent); Banking and financial ($154 million, 22 per cent); Power & energy ($44 million, 6 per cent) and real estate ($40 million, 6 per cent).

BSE Sensex extends losses on rate hike fears

 
The BSE Sensex fell further in early trade on Monday, the fifth straight session of losses, due to sustained selling by funds on fears of a rate hike by the Reserve Bank of India (RBI), amid a weak trend in other Asian markets.

Stocks of banking, FMCG, power, oil and gas and auto sectors were the major losers that pulled down the Sensex.

The 30-share index of the Bombay Stock Exchange fell by 36.56 points, or 0.18 per cent, to 20,679.02.

It had lost 611.03 points in the previous four sessions.

The National Stock Exchange index Nifty fell 15.00 points, or 0.24 per cent, to 6,153.40.

Brokers said persistent selling by funds on fears of a rate hike by the central bank in its mid-quarter review of monetary policy on December 18 and a weak trend in the Asian region on speculation that the Federal Reserve will announce a cut in stimulus at its policy meeting this week, mainly dampened the trading sentiment on Dalal Street.

Among other Asian markets, Hong Kong's Hang Seng traded lower by 0.16 per cent and Japan's Nikkei fell 0.65 per cent in early trade.

The US Dow Jones Industrial Average, however, ended 0.10 per cent higher on Friday.

RBI policy review, Federal Reserve meetings to set market trend this week

 
The market has already reacted badly to fears of a rate hike and on concerns that US Federal Reserve will reduce its quantitative easing - its $85 billion per month bond buying programme. The coming week will reveal if the fears were justified and the market will respond accordingly.

The Reserve Bank of India's (RBI) meeting on monetary policy will be held on Wednesday (December 18) and the two-day policy meeting of the US Federal Open Market Committee (FOMC) on Tuesday and Wednesday (December 17-18).

The RBI meeting in turn is likely to be influenced by the wholesale price index (WPI) inflation data for November, which the government will announce on Monday. WPI inflation was 7 per cent in October.

In any case the consumer price index (CPI) inflation for November, already announced, has the market expecting the RBI to hike the repo rate (the rate at which it lends to banks) by 25 basis points, raising it to 8 per cent from 7.75 per cent at present.

Overall CPI inflation for November stood at 11.24 per cent compared to 10.17 per cent in October. Within this, food inflation was 14.72 per cent. The announcement, after market hours last Thursday, led to the BSE Sensex falling 210 points on Friday, erasing all the gains made during the week. Overall, across the week, the Sensex lost 281 points.

The market thus is already expecting the RBI to hike rates to curb food inflation. Whether it will actually reduce food inflation is questionable, but certainly a rate hike will help protect the Indian rupee which is highly vulnerable to even a small outflow of foreign currency.

Indeed, Finance Minister P. Chidambaram, speaking on Saturday at a function to commemorate 20 years of the National Stock Exchange (NSE), voiced his concern at the exaggerated impact FII buying and selling has on the Indian market, since there is nothing to counter-balance this.

As India has hardly any foreign exposure in its bond markets, the reduction of quantitative easing - or tapering off as it is widely called - will not have any direct impact on it. But it will certainly lead to negative sentiment. If indeed the Fed decides on tapering off at its forthcoming meeting, there is a high possibility of FII funds moving out, which will lead to the market becoming volatile. Tapering can slow down the flow of money into our markets and exert pressure on the Indian currency as well.

The continuing policy paralysis of the government has been one of the dampeners for the economy. This has resulted in slowing down of investment. A reform-oriented and progressive government after the general elections scheduled for May 2014 will help reverse this situation. Equally if the government fails on this count, the impact will be negative.

GDP growth of 4.5 to 5 per cent is not enough for investors. The only way out is to grow at 7 to 9 per cent. For this, reforms are essential which will lead to investments and job creation.

The private sector is not willing to make investments as it is not confident about the government's policies. In the recent past, the biggest problem has been the reversal of government policies, especially relating to taxation. Irrational and unexpected tax demands have seen investors, especially foreign investors, shying away from doing business with India.

Until business confidence returns and the investment scenario improves, the markets will remain volatile.

Wholesale inflation inches up to 7% in Oct, highest in FY14

Wholesale inflation in October inched up to 7 per cent, the highest in the current financial year, on costlier food items, including vegetables.

The inflation measured on the wholesale price index (WPI) was 6.46 per cent in September and 7.32 per cent in the October last year.

According to the government data released on Thursday, rate of price rise in food articles segment was at 18.19 per cent in October.

WPI inflation is on the rise since April this year.

While inflation in the vegetable segment stood at 78.38 per cent in October, the rate of price rise in onion continued to remain high at 278.21 per cent.

Protein rich items like egg, meat and fish became dearer by 17.47 per cent in October as against 13.37 per cent in the previous month.

While there was slight moderation in prices of cereals and rice, wheat became dearer in October. The inflation in wheat was at 7.88 per cent last month as against 5.9 per cent in September.

The data further revealed that inflation in the manufactured products has inched up to 2.5 per cent versus 2.03 per cent in September.

The Reserve Bank of India had increased its key rate (repo rate) twice in its last two monetary policy reviews with an aim to check high inflation, but seems to be struggling on the front.

Government data released earlier this week shows retail inflation in October increased to 10.1 per cent, the highest in the past seven months.

The WPI data released by the Department of Industrial Policy and Promotion (DIPP) further revealed that inflation in the primary articles segment also inched up to 14.68 per cent in October from 13.54 per cent in the previous month.

Inflation in fuel and power segment, at the wholesale level, too, was marginally up at 10.33 per cent.

Build up inflation rate in the financial year so far was 6 per cent compared to a build up rate of 4.66 per cent in the corresponding period of the previous year, the release said.

Meanwhile, the WPI inflation for the month of August has been revised upwards to 6.99 per cent from the earlier estimated at 6.1 per cent.

Inflation to moderate to 5%, says P Chidambaram

 
Finance Minister P Chidambaram has expressed hope that rate of price rise will ease to below 5 per cent following steps taken by the government and the Reserve Bank of India (RBI).

"Several steps, including increase in the policy rate, have been taken and we hope that the WPI-based inflation rate will moderate to a level below 5 per cent," he said at the second South Asian Diaspora Convention in Singapore.

The CPI inflation, measured by movement in the retail prices of food items, soared to a seven-month high of 10.09 per cent in October. The wholesale price-based inflation, too, shot up to 8-month high of 7 per cent in the same month.

The government has taken several measures, including supplying wheat in those location where prices have been high. So far it has offloaded 500,000 tonne wheat to contain prices.

Meanwhile, RBI has raised policy rate by 0.25 per cent in the its October monetary policy review to contain inflation.

Noting that retail inflation has been more intractable, Chidambaram said both the WPI and the CPI are being driven by food inflation.

"The weights of food items in the two indices are 24.3 per cent and 46.2 per cent, respectively. It may surprise you that there is reasonable stability in the prices of major commodities such as wheat and rice," he said, adding that sugar prices have actually fallen by about Rs 6 per kg.

However, the finance minister said, prices of fruit, vegetables, meat, milk and eggs are elevated and are driving the inflation rate.

Chidambaram had earlier said that "both RBI and the government are trying number of measures to cool inflation... We are looking at various suggestion that we have got. I am open to suggestion but I am afraid that there is no easy answers to cool retail inflation."