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India opens stock market to foreign investors

1 JAN, 2012, 05.19PM IST, AFP

NEW DELHI: India announced on Sunday that it would open up its stock market to individual foreign investors for the first time, in a major economic reform designed to boost overseas investment. The Indian economy has grown strongly over the last 15 years and many foreign investors have been keen to enter the market in a fast-developing country of 1.2 billion people. However recent financial data has been disappointing, with the main Sensex index for the Mumbai market recording a 25 percent plunge in 2011 and many analysts predicting more falls in 2012. The government said in a statement that it had taken the move "in order to widen the class of investors, attract more foreign funds, and reduce market volatility and to deepen the Indian capital market." It said the reforms would be put into operation by January 15. Previously, foreign investors were only allowed to invest in the stock market via mutual funds or institutional schemes.

Indian equities can deliver 15-20% returns in 2012: Kotak Institutional Equities
16 JAN, 2012, 01.53PM IST, REUTERS

Indian equities can deliver 15-20 percent returns in 2012 if governance and macroeconomic factors improve, as valuations are supportive and earnings appear to be reasonably resilient, Kotak Institutional Equities says. Implementation of a goods and services tax may also help investor confidence, given "perceived 'policy inaction' at a time of a deteriorating fiscal situation, weak BOP (balance of payments) and an economic slowdown," Kotak said in a report. Fitch said on Dec. 22 that it expected the government to miss its rescheduled April 1 target date to implement a GST. Kotak also added Maruti Suzuki to its Top 10 list, replacing Hindustan Unilever. For its model portfolio, the brokerage retained a combination of high-quality stocks like retail-focused private banks and companies involved in the consumer, pharma and technology sectors.

Inflation to fall to 6-7 pc by March end, says FM


PTI Jan 16, 2012, 01.59PM IST

NEW DELHI: Encouraged by a sharp dip in December inflation, Finance Minister Pranab Mukherjee today said the declining rate of price rise indicates improvement in macro-economic parameters and projected March-end numbers at 6-7 per cent. Headline inflation, as measured by Wholesale Price Index (WPI), fell to a two-year low of 7.47 per cent in December 2011, from 9.11 per cent in the previous month.

Growth prospects weaken, aggressive rate cuts seen


20 JAN, 2012, 10.25AM IST, REUTERS

BANGALORE: Economy will grow at its slowest pace in two years this fiscal year, as tight monetary policy and a logjam in government policy making stifles investment, a Reuters poll showed. Growth estimates for Asia's third largest economy in the current fiscal have been cut four times in a row and it is now expected to expand at an annual rate of 7 percent in the year ending March, according to the poll of more than 20 economists. Just three months ago, economists had predicted gross domestic product would grow by 7.6 percent in the same period. "Policy is the main reason for the deceleration in growth," said Sonal Verma, economist at Nomura, adding that both central bank interest rate hikes and the paralysis in government decision-making has harmed investment. For the quarter ended September last year, the economy grew at 6.9 percent, its weakest pace in more than two years. The Reserve Bank of India's (RBI) aggressive policy tightening since March 2010, to fight stubbornly high inflation, has steadily reduced investment activity and is now threatening to squeeze growth to levels last seen during the financial crisis in 2008-2009. India's government is also saddled with a cartload of legislation it is not able to pass, owing to opposition from rival political parties and indifference from its own coalition partners. Prominent among them is a bill to increase the permissible limit of foreign direct investment in the retail sector. Foreign fund inflows, a major driver of Indian stocks, dried up in 2011 with net outflows in excess of $450 million, from record inflows of more than $29 billion in 2010. As a result, the BSE Sensex fell by almost 25 percent in 2011 making it among the world's worst performers. In the same period, the rupee lost about 19 percent of its value against the U.S. dollar owing to the capital flight from the economy. While the rupee is expected to gain only slightly this year, the benchmark index will recover most of its losses according to strategists polled by Reuters in December. "The key is really to kick start the investment cycle. Government decision making has to improve for the economy to register growth above current levels," added Verma. While inflation in India, as measured by the wholesale price index, slowed to 7.47 percent in December, economists have forecast prices to rise by an average 8.7 percent this fiscal, before slowing to 6.5 percent in the year ending March 2013. That is slightly lower than the respective 2012 and 2013 forecasts for 8.8 percent and 6.9 percent in the October survey. "Although the headline inflation number for December looks pretty rosy, the core inflation number, which is what the RBI monitors, is not showing a substantial decline despite such aggressive monetary stance," said Upasna Bhardwaj, economist at ING Vysya Bank. "Unless we see core inflation clearly dropping, we don't think the RBI will change its monetary policy stance right now." The RBI is expected to hold rates steady at 8.5 percent this quarter before cutting its benchmark repo rate by 100 basis points this year, beginning with a 50 basis point reduction in the second quarter. The lack of a durable solution to the euro zone sovereign debt crisis is weighing on sentiment, say economists. The European Union is India's largest trading partner and accounted for trade in goods and services worth over 60 billion euros in 2010, according to data from the European Commission.

CRR cut to ease liquidity, promote growth: Pranab Mukherjee


PTI Jan 24, 2012, 06.38PM IST

NEW DELHI/DEHRA DUN: The Reserve Bank's decision to unlock Rs 32,000 crore by reducing the Cash Reserve Ratio (CRR) by 0.5 percentage points will ease the liquidity situation and promote growth without fuelling inflation, Finance Minister Pranab Mukherjee said today. "(RBI's) announcement should help to address the money market liquidity, which had tightened in the past 2-3 months... while balancing the downside risk on growth and deceleration in moderation of inflation," he told reporters.

RBI says revised CRR for banks to be effective from January 28


24 JAN, 2012, 06.39PM IST, REUTERS

MUMBAI: The Reserve Bank of India said the revised cash reserve ratio (CRR) for scheduled commercial banks will be effective from the fortnight starting January 28. The RBI cut CRR, the share of deposits banks must hold with the central bank, by 50 basis points to 5.50 percent on Tuesday to ease tight liquidity, signaling a policy shift towards reviving growth after nearly two years of fighting inflation. With core inflation still stubbornly high, the Reserve Bank of India, as expected, left its policy repo rate unchanged at 8.50 percent for the second consecutive review.

SEBI eases investment norms for insurers, mutual funds


ET Bureau Jan 29, 2012, 12.02AM IST

MUMBAI: Securities and Exchange Board of India (SEBI) has relaxed investment norms for insurance companies and mutual funds in preferential share allotments by companies. The securities market regulator has done away with a rule that prevents these institutional investors from subscribing to preferential shares by companies, whose shares they have sold in the six months to the date of the issue.

India needs better transparency, governance: E&Y survey


29 JAN, 2012, 04.57PM IST, PTI

NEW DELHI: India remains a good destination for investments but it needs to strengthen governance and transparency to become more attractive for foreign investors, says an Ernst & Young survey. The survey of over 500 foreign investors by global consultancy E&Y showed that India needs to focus on improving its current state of infrastructure and governance. "More than three-fourth of the respondents surveyed mentioned that improving infrastructure is critical to enhancing attractiveness, while 60 per cent emphasised need for better governance and transparency," the report said. Notwithstanding the global economic uncertainties, E&Y said that foreign investors see India as an attractive investment option. The findings come against the backdrop of slowing economic growth and concerns about sluggish investments in the country. Majority of the E&Y survey respondents said that they remain convinced about India's prospects and plan to strengthen their operations in the country. "Two-thirds of the respondents are planning to implement projects in India in the near to short term," the report said. The overall number of FDI projects rose 25 per cent to 864 (worth $50.813 billion) in 11 months to November 2011, up from 691 projects (valued at $44.874 billion) in 2010. "India's domestic demand-driven growth model is acting as a catalyst for attracting foreign investments into the country," E&Y India Country Managing Partner Rajiv Memani said. Although the ongoing global uncertainty may have prompted global investors to become more cautious, India's inherent advantages and proven resilience to counter-act macroeconomic challenges generally outweighs these concerns," Memani noted.