RBI directs oil cos to buy dollars from one PSU bank

Tuesday, Jul 9, 2013, 19:01 IST | Place: New Delhi | Agency: PTI The decision follows yesterday's meeting between RBI and oil firms to discuss measures to control volatility and high fluctuations in the exchange rate.

With rupee depreciating sharply against the US dollar, the Reserve Bank today ordered state- owned oil companies to purchase their dollar requirement from a single public sector bank so as to curb volatility in the currency. State oil refiners, who are the biggest buyers of US dollars, agreed to implement the RBI order with immediate effect, sources with direct knowledge of the development said. The companies were even willing to accept RBI selling dollars directly to them through a single window. RBI issued orders to Indian Oil, Hindustan Petroleum, Bharat Petroleum and Mangalore Refinery to stop seeking quotes from several banks for their USD 8-8.5 billion of monthly US dollar requirement. Oil firms seeking multiple quotes for their dollar requirement was felt to be one of the reasons adding to speculation on demand for the American currency and volatility in the local unit. RBI, sources said, asked oil firms to buy dollars from a single bank at their published reference rate. IOC, the nation's largest refiner, will buy their monthly requirement of USD 3.8-4 billion dollars from its official banker State Bank of India. Similarly, BPCL, HPCL and MRPL will buy their dollar requirement from a single bank. The decision follows yesterday's meeting between RBI and oil firms to discuss measures to control volatility and high fluctuations in the exchange rate. The central bank had last year suggested that refiners buy their dollar requirement from a single public sector bank to end speculation in rupee market caused by competitive quotes taken from multiple banks.

But the measure was never implemented as RBI did not give written order as sought by oil firms to end their practice of seeking competitive quotes.

Chidambaram to meet key US corporates to attract investment

Tuesday, Jul 9, 2013, 18:11 IST | Place: New Delhi | Agency: PTI The Minister, who left on a four-day long tour last night, will also hold bilateral talks with his US counterpart Treasury Secretary Jacob Lew.

- DNA Finance Minister P Chidambaram will be meeting officials of top American companies like Walmart, Boeing and Lockheed Martin during his US tour to sell India growth story and attract investments to combat the falling rupee. The Minister, who left on a four-day long tour last night, will also hold bilateral talks with his US counterpart Treasury Secretary Jacob Lew. Chidambaram's US programme include meetings with Walmart Asia CEO Scott Price, Boeing International President Sheperd W Hill, Lockheed Martin International CEO Pat Dewar, Microsoft's General Counsel and Executive Vice President (Legal and Corporate Affairs) Brad Smith, among others. His overseas visit comes at a time when the rupee has taken a beating and had touched all-time low of 61.21 to a dollar yesterday. The huge outflow of foreign funds to the tune of USD 7 billion alone in June following concerns over tapering of bond purchases by the US government is putting pressure on rupee. Chidambaram is reported to have held consultations with the Prime Minister Manmohan Singh and other senior economic advisors before leaving for the US. The government has been contemplating to raise foreign investment limits in various sectors, including defence, telecom and retail, and is likely to take a decision by monthend. "The Finance Minister is likely to discuss the issue of investment by US companies in India especially in infra sector, various policy measures taken by the Government to

boost investment in the country and tax related matters among others," according to a statement issued ahead of his visit. Chidambaram will also address the US-India Business Council (USIBC) Leadership Summit on July 11.

upee plunge keeps debt funds under leash as bond yield jumps
Tuesday, Jul 9, 2013, 18:08 IST | Place: Mumbai | Agency: PTI Between April 2 and July 8 this fiscal, the rupee has plummeted by 12.81%, and hit alltime low of 61.21 per cent yesterday. Returns from the debt funds in the mutual fund industry are likely to be subdued due to the hardening bond yields following the rupee plunge, according to industry experts. They, however, maintain that as the rupee stabilises, investor interest will come back to the debt market. Between April 2 and July 8 this fiscal, the rupee has plummeted by 12.81%, and hit alltime low of 61.21 per cent yesterday. "In the short-term, the returns from debt funds, especially gilt funds, will be impacted due to the hardening of the yields of government securities. However, when the rupee stabilises, which will help the Reserve Bank slash lending rates, will support higher returns," UTI Mutual Fund group president and head of fixed income Amandeep S Chopra told PTI today. The yield on 10-year benchmark bonds closed at 7.57 per cent on Monday as the rupee breached yet another psychological barrier of 61 to the dollar and touched all time low of 61.21 per dollar intra-day, before closing at 60.61 on RBI intervention. Chopra also said the volatility in the rupee and the bond markets are likely to subside in the next few quarters after which returns will be better from the gilt funds. He, further, said given the low inflation numbers, good monsoons and a credible fiscal consolidation plan, the RBI would start reducing rates as the rupee stabilises, which would have positive impact on the return.

Bond yields and return in debt funds move in opposite direction. As bond yield falls, return goes up and as it rises, the yield drops. IDBI MF chief executive officer Debashish Mallick also echoed similar sentiments. "There was an expectation that RBI will cut rates as inflation was coming down. However, fall in the rupee has complicated the matter for the central bank in rate cut front. "So, as the rupee regains strength, returns from debt funds will be better due to easing of monetary policy by RBI," Mallick said. He, however, said there is no outflow from these funds as of now due to hardening of the yield. "Return on fixed income products is policy rate-driven. So as the policy rates come down, returns will go up from these funds," Mallick said. However, another fixed income analyst with an investment firm said there is an apprehension in the market that the RBI may hike rates in the current environment of depreciating rupee, that adversely affects the current account deficit. "If these apprehensions come true, you will see further hardening of the G-Sec yield affecting the return," he said. Assets under management of debt funds constitute 75 per cent of the total assets of the mutual fund industry. As per experts, investors can opt for short-duration funds or liquid plus funds for higher return in the current environment than investing into long-term debt funds.

Sensex up 115 pts as Rupee bounces back from lows; bluechips rally
Tuesday, Jul 9, 2013, 12:55 IST | Place: Mumbai | Agency: IANS The 30-share index started the day's trade on a firm note at 19,446.30 and rose further to close 114.71 points, or 0.59 per cent higher at 19,439.48. Sensex had lost 171.05 points yesterday.

Tracking firm global cues, the BSE benchmark Sensex on Tuesday rose by nearly 115 points led by bluechips, including HDFC Bank and Sun Pharma, in step with a smart recovery in rupee.

Stock markets mirrored the currency's movement which bounced back from a record low of 61.21 after Sebi and Reserve Bank announced a slew of measures to curb speculative trade in currency derivatives, brokers said. The 30-share index started the day's trade on a firm note at 19,446.30 and rose further to close 114.71 points, or 0.59 per cent higher at 19,439.48. Sensex had lost 171.05 points yesterday. Profit booking at yesterday's low levels also boosted shares on the index, they added. The market remained bullish ahead of a meeting to be chaired by Prime Minister Manmohan Singh, where some major decisions to boost the manufacturing sector were expected. Similarly, the wide-based National Stock Exchange index Nifty gained 47.45 points, or 0.82 per cent, to close at 5,859.00. Also, SX40 index, the flagship index of MCX-SX, closed 62.75 points, or 0.54 per cent higher at 11,598.19. Also, a firming trend in the global markets on cheerful begining of earning quarter in the US further supported the market sentiment, brokers said. Out of the 30 BSE index components, 22 stocks ended with gains led by Sun Pharma rising 3.57 per cent to Rs 1,079.95. Market heavyweights Reliance Industries and Infosys rose by 0.58 per cent to Rs 873.35 and 0.97 per cent to Rs 2,495.70. After falling heavily yesterday, banking stocks recovered sharply as rupee rose to 60.12 against the dollar intraday today. Among the major gainers, HDFC Bank rose by 1.27 per cent to Rs 668.75 and ICICI Bank by 0.66 per cent to Rs 1,034.70. Sectorally, the consumer durable sector index gained the most by 1.93 per cent to 6,276.96, followed by power index by 1.86 per cent to 1,644.48.

ensex up 121 points in early trade on recovery in rupee, global cues

Tuesday, Jul 9, 2013, 10:46 IST | Place: Mumbai | Agency: PTI The wide-based National Stock Exchange index Nifty rose by 38.90 points, or 0.67 %, to trade higher at 5,850.45.

- DNA The BSE benchmark Sensex on Tuesday recovered by over 121 points in early trade on the back of fresh buying by participants triggered by a firming trend on other Asian bourses and recovery in the rupee. The 30-share index gained 121.53 points, or 0.63 %, to trade at 19,446.30, with all the sectoral indices led by realty, banking and capital goods rising up to 0.93 %. Sensex had lost 171.05 points on Monday. The wide-based National Stock Exchange index Nifty rose by 38.90 points, or 0.67 %, to trade higher at 5,850.45. Brokers said fresh buying by funds and retail investors, tracking a firming trend on other Asian bourses, following overnight gains in the US markets, supported the trading sentiment here. Besides, recovery in the rupee to 60.13 against the dollar also triggered buying activity, they said. In Asia, Hong Kong's Hang Seng index rose by 0.14 %, while Japan's Nikkei was up by 1.16 % in early trade. The US Dow Jones Industrial Average ended 0.59 % higher on Monday.