Rupee Has Weekly Gain as India Eases Bond Cap for Foreigners

By Kartik Goyal - Jul 25, 2014

India’s rupee completed a weekly gain on optimism the nation will attract more capital as limits on inward investment in government debt and the insurance business are relaxed.
The Reserve Bank of India this week increased the cap for foreign institutional investors by $5 billion and said additional purchases must be in notes maturing in at least three years. Finance Minister Arun Jaitley said yesterday the cabinet approved a budget proposal of allowing 49 percent foreign direct investment in the insurance industry.
“The decisions to raise the FII debt limit and taking the process of FDI insurance forward are clearly positive for the rupee,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, outside New Delhi. “There are inflows happening but the month-end dollar demand from oil importers is limiting rupee gains.”
The currency rose 0.3 percent this week to 60.1050 per dollar at the close in Mumbai, the first gain since the five days ended July 4, according to prices from local banks compiled by Bloomberg. It was unchanged from yesterday.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 24 basis points, or 0.24 percentage point, to 5.58 percent, according to data compiled by Bloomberg. It dropped 94 basis points from a week ago.
Three-month offshore non-deliverable forwards on the rupee were little changed at 60.78 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the greenback.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Jeanette Rodrigues

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Indian Bonds Head for Biggest Weekly Gain in More Than a Month

By Shikhar Balwani - Jul 25, 2014

India’s 10-year bonds headed for their biggest weekly advance in more than a month on optimism a revision of caps on debt purchases by foreigners will boost inflows and a pickup in rains will restrain food prices.
India raised the limit on the amount of government bonds that overseas investors can buy by $5 billion to $25 billion this week. The move is a catalyst for local bonds and the rupee in a “yield-hungry” world, according to BNP Paribas SA. The nation simultaneously cut the quota meant only for long-term investors such as sovereign wealth funds to $5 billion from $10 billion, thus keeping the overall limit for foreign investment in sovereign notes unchanged at $30 billion.
“The raising of foreign limits, recent progress of the monsoons and the easing of inflation in June are all positive factors for the bond markets,” Sujoy Kumar Das, head of fixed income at Religare Invesco Asset Management Co. in Mumbai, said by phone. “It’s been a good week and we expect yields to remain soft, given India’s improving macroeconomic indicators.”
The yield on the 8.83 percent notes due November 2023 slid 12 basis points, or 0.12 percentage point, from July 18 to 8.66 percent as of 10:20 a.m. in Mumbai, according to the central bank’s trading system. That’s the biggest weekly decline since the period ended June 6. The rate was little changed today.
The shortfall in the June-September monsoon, which accounts for more than 70 percent of India’s annual rainfall, was 24 percent of the 50-year average, the weather bureau said yesterday. That compares with a 43 percent deficit on July 11. The revival has eased concern that deficient rainfall will hurt farm output and boost food prices, which make up about half of India’s consumer-inflation basket.
The nation plans to sell 140 billion rupees ($2.3 billion) of bonds at an auction today, including 70 billion rupees of new 10-year debt. The Reserve Bank of India will also conduct seven-and 14-day repurchase auctions today.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, rose one basis point this week and today to 8.42 percent, data compiled by Bloomberg show.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Robin Ganguly

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Cotton Crop in India Set for Record as Oilseeds Shunned

By Pratik Parija - Jul 24, 2014

Cotton production in India, the world’s second-largest grower, is set to climb to an all-time high as delays in monsoon rains prompt farmers to switch from soybeans and peanuts, the nation’s biggest cotton trader said.
The harvest is poised to expand as much as 2.6 percent to 40 million bales of 170 kilograms (375 pounds) each in the year starting Oct. 1, according to B.K. Mishra, chairman of the Cotton Corp. of India. While the area is increasing from 11.7 million hectares (28.9 million acres), the harvest will be delayed by the worst start to the monsoon since 2009, he said. Cotton Corp. buys the crop at government-set minimum prices.
Futures have dropped for 11 straight weeks in New York, capping the longest slump in 55 years, on concern that global inventories are climbing as demand slows from China, the largest user. A higher crop in India, the top shipper after the U.S., may curb any rally in prices that fell 20 percent in 2014.
“The time for crops like soybeans and peanuts has passed so farmers will look at cotton as the last resort,” said Prerana Desai, research head at Kotak Commodity Services Ltd. in Mumbai. “Planting can catch up and we’ll definitely end up seeing higher acreage. Whether we’ll have another record crop or not we have to wait and see.”
Futures on ICE Futures U.S. tumbled 15 percent in June, the most since May 2012, and traded at 67.73 cents a pound today. Prices reached a two-year high of 97.35 cents on March 26. The contract for July delivery on the Multi Commodity Exchange of India Ltd. fell 0.3 percent to 18,400 rupees ($306) per bale today, extending losses this year to 7.2 percent.

Chinese Demand

India will struggle to boost exports as demand from China, the biggest buyer of Indian cotton, remains weak and U.S. supplies are rising, Desai said. Shipments are seen at 11.4 million bales in 2013-2014, the Cotton Advisory Board says.
“Unless and until prices in India fall to dramatically low levels, exports will remain subdued next year,” she said.
Seeding of crops from cotton to soybeans and rice was delayed in June by a 43 percent deficit in monsoon rain, which accounts for more than 70 percent of India’s annual precipitation. The shortage narrowed to 25 percent yesterday, accelerating planting, according to the India Meteorological Department.
While traders in India are predicting an increase in cotton output in 2014-2015, UBS AG expects the delay in planting in key growing areas to reduce production.

‘Lost Ground’

“At this point it’s very difficult for farmers to make up for the lost ground,” Wayne Gordon, a commodities analyst at UBS in Singapore, said by phone. “Even in the most optimistic scenario they are likely to miss out about 1.5 million hectares to 2 million hectares. And if rain continues to be a problem it could be even worse than that.”
Farmers seeded cotton on 5.6 million hectares by July 18, 44 percent less than the 10.05 million hectares in the same period a year earlier, according to the Agriculture Ministry.
The rain delays over most parts of India and the deficit are prompting growers to switch to cotton as it consumes less water, Cotton Corp.’s Mishra said by phone from Mumbai July 18.
“Sowing will pick up now,” said K.R. Kranthi, director at the state-run Central Institute for Cotton Research. “If it hadn’t rained by now, that would have been a major concern. There could be a fall of 5 to 10 percent in area because of delayed rains. Still, there is no need for any panic.”
Crop picking will be delayed by 20 days to 30 days in the northern Indian states of Punjab and Haryana and may be about 45 days late in the biggest producing states of Gujarat and Maharashtra, Mishra said.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net Thomas Kutty Abraham

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India’s Rupee Rises as Monsoon Revival Tempers Inflation Concern

By Kartik Goyal - Jul 23, 2014

India’s rupee strengthened the most in more than a week as a pickup in seasonal rainfall tempered concern inflation will accelerate.
The deficit in the June-September monsoon, which accounts for more than 70 percent of India’s annual rainfall, has narrowed to 27 percent of the 50-year average, the weather department said yesterday. The gap was 43 percent on July 11. Gains in India’s consumer-price index slowed to 7.31 percent in June, the least since the gauge was introduced in January 2012.
The rupee climbed 0.1 percent to 60.1875 per dollar as of 10:30 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. That’s the biggest gain since July 11. The yield on the 8.83 percent sovereign notes due November 2023 was little changed at 8.69 percent, according to the Reserve Bank of India’s trading system. That’s the lowest since July 4.
“A revival in monsoon rains would be seen as a positive,” said Anindya Banerjee, a currency analyst at Kotak Securities Ltd. in Mumbai. “The rupee is likely to remain range-bound as the RBI seeks to keep the currency stable.”
The rupee also gained amid increased capital inflows, said Banerjee. Global investors have pumped more than $4 billion into the nation’s bonds and stocks this month as Prime Minister Narendra Modi’s government unveiled plans to narrow the budget deficit and allow more foreign investment in industries.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 27 basis points, or 0.27 percentage point, to 5.97 percent in Mumbai, according to data compiled by Bloomberg.
Three-month offshore non-deliverable forwards on the rupee rose 0.1 percent to 60.94 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the greenback.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Anil Varma, Robin Ganguly

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China’s Xiaomi Targets India in Smartphone Sales Push

By Bianca Vázquez Toness - Jul 21, 2014

In just four years, Xiaomi Corp. has evolved from startup to outselling Apple Inc. in China by offering inexpensive devices packed with high-end features. Now it’s targeting India.
After using social media to tap the Chinese diaspora in markets including Singapore, Xiaomi is teaming with Flipkart.com to sell its Mi3 phone starting today for 13,999 rupees ($232). The partnership with India’s biggest e-commerce operator is a break from Xiaomi’s usual strategy of selling phones solely through its own website.
The push into India is part of Chief Executive Officer Lei Jun’s drive to deliver a fivefold boost in sales to 100 million units next year and challenge Samsung Electronics Co. and Apple globally. Beijing-based Xiaomi is entering a market where Samsung and Indian makers account for 60 percent of sales, wireless carriers don’t subsidize the costs of devices, and the pool of Chinese speakers familiar with its products is smaller.
“No one knows Xiaomi in India,” said Katyayan Gupta, a technology analyst at Forrester Research Inc. in New Delhi. “I don’t even know their phones. They’ll have a lot of education to do. It will help them to tie up with a trusted brand in India.”
Xiaomi is starting sales in 10 new markets including Brazil and Russia. While the company started its own websites in Singapore and Taiwan, India has proved more difficult because its infrastructure for delivering packages and collecting payments is underdeveloped.

$10 Billion Valuation

“Building an e-commerce effort in India is a lofty effort, not something we would be able to do quickly,” Hugo Barra, vice president of Xiaomi, said in a phone interview.
Xiaomi also is partnering with local e-commerce operators for its expansion to the Philippines and Indonesia, Barra said.
The Mi3, which sells for less than a third of the price for an iPhone 5s, still sports high-end specifications with a full high-definition screen, 13-megapixel camera and a Qualcomm Inc. Snapdragon processor.
Xiaomi’s success in selling smartphones in China, where it was No. 3 in the first quarter according to researcher Canalys, has seen its valuation surge. Xiaomi said last August that a fundraising round valued it at $10 billion.
Xiaomi, now the No. 6 producer globally, has no plans for an initial public offering within five years, Lei said in September. The company shipped about 10 million smartphones in the first quarter, according to IDC.

Micromax, Karbonn

Xiaomi’s strategy may help it gain exposure in India’s smartphone market, which is growing faster than China’s. About 250 million smartphones will be sold in India this year, according to Brad Rees, chief executive officer of Mediacells, a London-based marketing company.
Samsung accounted for 35 percent of India’s smartphone sales in the March quarter, while homegrown brands Micromax Informatics Ltd. had 15 percent and Karbonn Mobiles held 10 percent, according to researcher IDC.
Nearly 80 percent of smartphones purchased in India cost less than $200, according to IDC. Cost matters in India as the phones are bought upfront, unlike in the U.S. where they are typically sold with a service contract.
Flipkart’s experience with smartphones was a key reason behind Xiaomi’s decision, according to Barra.
The Indian company partnered with Motorola Mobility to exclusively sell the Moto smartphone series in India, with 1 million of the phones sold in five months, Flipkart Chief Executive Officer Sachin Bansal said.

More Models

“Motorola is a known brand, people here know what Motorola is, so buying those devices online would be easier,” said Anshul Gupta, an analyst with Gartner Inc. “Initially, it’s going to be a challenge for Xiaomi.”
The company hired Manu Jain, the co-founder of clothing e-commerce site Jabong, to run the India operations, and it plans to increase workers at the business to about 20, including staff to run two service centers, by the end of the year.
Xiaomi will contract other companies for a further 34 service centers and hire software developers to build applications focused on Indian users. Barra declined to say how much the company is investing in India.
After starting with the Mi3, Xiaomi will offer the Redmi 1S at 6,999 rupees and the Redmi note for 9,999 rupees, according to its Indian website. Even at those prices, Xiaomi will have its work cut out to win sales in the world’s second-most populous nation.
“Xiaomi is really a new company, people are not aware of the brand, so there will be some hesitation,” Gartner’s Gupta said. “This is a very competitive market.”
To contact the reporter on this story: Bianca Vázquez Toness in New Delhi at btoness@bloomberg.net
To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner

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India’s 10-Year Bonds, Rupee Advance as Rain Deficit Narrows

By Shikhar Balwani - Jul 21, 2014

India’s 10-year bonds advanced and the rupee gained as a pickup in monsoon rains eased concern inflation will accelerate.
The shortfall in the June-September monsoon, which accounts for more than 70 percent of India’s annual precipitation, was 34 percent of the 50-year average, the weather department said July 18. That compares with 43 percent on July 11. A weak start to the monsoon has delayed the planting of some crops, threatening to push up food costs that account for about half of the consumer-price index.
“Some optimism is creeping into the markets on account of the improvement in rains,” Killol Pandya, a Mumbai-based senior fixed-income fund manager at LIC Nomura Mutual Fund Asset Management Co., said by phone. “Still, that isn’t a game-changer and we need to keep an eye on the geopolitical risks being fueled by conflicts in other parts of the world.”
The yield on India’s sovereign notes due November 2023 fell two basis points, or 0.02 percentage point, to 8.75 percent as of 10:21 a.m. in Mumbai, according to the Reserve Bank of India’s trading system.
The rupee rose 0.1 percent to 60.2050 per dollar, its first gain in six days. It capped its biggest weekly loss in a month on July 18 as the prospects of higher U.S. interest rates and conflicts in the Middle East and Ukraine hurt demand for riskier assets.
One-month implied volatility in the rupee, a gauge of expected swings used to price options, rose five basis points, or 0.05 percentage point, to 6.57 percent, data compiled by Bloomberg show. Three-month offshore non-deliverable forwards gained 0.1 percent to 60.98 per dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, were unchanged at 8.41 percent, data compiled by Bloomberg show.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Robin Ganguly, Anil Varma

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.