Monthly Archives: May 2015

Oh Boy!!!!!!!!! Its not just my boss or my colleague’s boss shouting on bills.

Most of us wishing to do MBA’s with major in finance feel embarrassed to talk about the behaviour of our Finance Dept. Damn!!!!!!!!!! they just don’t clear the bills. Some time my boss would become their guy and argue us on bills.

But my god Union Finance ministry is no different. It is busy issuing circulars regarding the limit. AK Bhattacharya in BS has a nice article about the whole story.

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Analysis of GDP Numbers- Time is running by

Good Analysis -BS

The estimates of gross domestic product, or GDP, for the fourth quarter of 2014-15 and the provisional estimates for the whole year were published last Friday. The full-year headline numbers did not look too surprising; was assessed to have grown by 7.3 per cent over 2013-14, a marginal downward revision from the 7.4 per cent projected in the advance estimates in February. That would seem to broadly reinforce the perception that the is in slow-and-steady recovery mode; growth is up just slightly from the 6.9 per cent recorded in 2013-14. The absolute values of the growth numbers are, of course, still difficult to interpret because the back series is yet to be published. Until this happens, it is not easy to say whether the economy is doing well or badly relative to its past performance.

However, going beneath the aggregates, there are considerable reasons for concern. There seems to be a worrying decline in quarterly growth in gross value added, or GVA. In the July-September quarter, it grew 8.4 per cent; in October-December, 6.8 per cent; and in January-March, 6.1 per cent. Some of this may be because of a in government expenditure due to fiscal constraints. But the trend should nevertheless serve as a wake-up call about the fragility of the recovery. Indeed investment numbers suggest fragility, too. Gross fixed capital formation, or GFCF, as a percentage of GDP, which measures enhancement of productive capacity, has actually been on a decline. It was 31.9 per cent in 2012-13, 30.7 per cent in 2013-14 and 30 per cent in 2014-15. This is a big negative for long-term growth. This pattern is entirely consistent with indicators like and bank credit. The ongoing debate over the government’s first-year performance is highlighting the persistent reluctance among companies to increase capacity and it is incumbent on the government to diagnose the problem and offer quick solutions. One important reason is likely to be the lack of progress on reactivating infrastructure investment, notwithstanding administrative and financial actions. But, whatever the reason, if the investment cycle does not turn up, reviving and sustaining growth will be extremely difficult.

Looking at sectoral performance in terms of GVA, agriculture virtually stagnated, growing by 0.2 per cent. The very uneven performance of the monsoon in 2014 is probably the cause – and possibly the weather disruptions in early 2015. In fact, there was a decline in in agriculture in the January-March quarter. Given the forecast of an indifferent monsoon this year as well, there is going to be enormous pressure on the government to provide short-term income transfers to agriculture. This makes it all the more important that a structural reform blueprint for agriculture is laid out quickly. As regards manufacturing, the estimates show the sector as having grown by over seven per cent during 2014-15. High levels of growth for manufacturing are a significant unresolved issue with the new data series and it must be addressed as quickly as possible. The bottom line is that in the absence of a reform push in areas like agriculture and infrastructure, growth will remain range-bound. Comfortable macroeconomic conditions and the political mandate of the government provide the best possible circumstances for such a push. Time is slipping away.

Bond Market expect a Rate Cut

Around this time of the Monetory Policy cycle a lot of analyst and bankers and journalist and who not- Everyone start forcasting and presenting wishlist. But this one is still analysis. Bond market yield is going down as if market has already adjusted for impending rate cut. Below is the BS article.

The bond market is factoring in a by the Reserve Bank of India (RBI) during Tuesday’s monetary policy review. And, is also hoping for a dovish outlook.

If it happens, this would lead to a further fall in yields. Banks will then book profits on their treasury portfolio and companies, going slow with fund raising plans through bonds, will hit the market with issuances.

Data issued earlier this month for April showed Consumer Price Index-based eased to 4.86 per cent, the lowest in four months.

The yield on the 10-year benchmark bond ended at 7.87 per cent on Wednesday, compared with the previous close of 7.89 per cent, while the new 10-year bond ended stable at 7.67 per cent. The new bond was auctioned last Friday.

“The new 10-year bond yield, trading below 7.7 per cent, indicates the market is partially pricing in a rate cut,” said R Sivakumar, head of fixed income at Axis Mutual Fund.

The yield on the 10-year benchmark bond had risen to 7.99 per cent on May 7.

The repo rate, at which banks borrow from the central bank, was kept unchanged at 7.5 per cent at RBI’s earlier review, on April 7.

“Unless yields fall sharply, the treasury portfolio will not help banks by much. What might help will be a dovish guidance of RBI’s monetary policy,” said the head of  treasury of a large state-run bank. According to the official, if resorts to a rate cut of 25 basis points (bps) and the guidance is not dovish, the fall in yields will be limited to about five bps.

This month, bond issuances by companies have slowed; some had decided to postpone theirs. These issuers might tap the market after a rate cut by RBI.

“Issuers are currently not comfortable with the bids they have been getting for their bond offerings. As the monetary policy review is nearing and there is an expectation of a rate cut, most are waiting. But, besides a rate cut, it is also a function of liquidity and foreign investors have not been buying aggressively in the recent past, due to a global bond selloff. Traders are looking for guidance of the monetary policy and liquidity improvement steps in the monetary policy,” said K P Jeewan, head of fixed income, Karvy Stock Broking.

Currently an AAA-rated company is able to raise two to three bond issues at coupon rates of 8.35-8.4 per cent.

Somehow it funny people clamouring, Gov Rajan has previous rates tweaks in the middle of cycle, rather than on Monetary Policy Review dates.

Delhi Air Quality

The air quality in Delhi is going from bad to worse. But this also becomes  political hot potato. Sample this Delhi air quality got worse over the last 10 years. But media never questioned it: Prakash Javadekar.  This does not take you  anywhere. And when a New York Times report writes this big report, it surely becomes the foriegn power bringing down India. Once Pollution from DTC buses was menance, and CNG drastically brought it down. We need some radical steps of that order to control the pollution in Delhi.

China easing capital controls to internationalize Yuan

The SDR, an accounting unit usually deployed in bailout packages, would deliver few direct benefits to China’s 1.3 billion people. 

ET Article

This is going to defining theme for next decade as far as international finance is concerned.

Given the out sized influence US exerts because of USD being international currency. Recent slowdown notwithstanding, China has the potential for the International Currency:

Though lot needs to be done regarding depth and openness of financial markets.