Indian Bonds Post Weekly Decline as Underwriters Buy Unsold Debt

By Shikhar Balwani and Soumya Gupta - Aug 1, 2014

India’s 10-year sovereign bonds capped a weekly loss after underwriters bought unsold debt at an auction, signaling investors sought higher yields.
Primary dealers picked up 29.64 billion rupees ($485 million), or about a third of the 8.4 percent 2024 notes offered by the government at today’s sale. They purchased 4.82 billion rupees, or about a sixth of the 8.27 percent 2020 securities auctioned. That suggested there’s bidding at high levels and the government isn’t comfortable borrowing at those costs, according to FirstRand Ltd.
The yield on the notes due July 2024 climbed 13 basis points, or 0.13 percentage point, this week and three basis points today to 8.52 percent in Mumbai, according to the central bank’s trading system. The rate on the 8.83 percent bonds due November 2023, the previous 10-year benchmark, jumped eight basis points this week to 8.76 percent.
“The size of the 10-year auction, at 90 billion rupees, was higher than the usual 70 billion rupees we have seen on offer,” Harish Agarwal, a fixed-income trader at FirstRand in Mumbai, said by phone. “Markets are also cautious ahead of the monetary policy.”
This was the second issuance of the 2024 securities by the government. It first sold 70 billion rupees of the notes on July 25 with the coupon set at 8.4 percent. BSE Ltd. will introduce interest-rate futures based on these securities, the stock exchange said in a statement yesterday.
The Reserve Bank of India will probably keep its benchmark repurchase rate unchanged at 8 percent at an Aug. 5 policy meeting, according to 33 of 34 economists surveyed by Bloomberg.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, slid four basis points from July 25 to 8.38 percent, data compiled by Bloomberg show. They were little changed today.
To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; Soumya Gupta in Mumbai at sgupta329@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Thomas Kutty Abraham

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India’s Sensex Drops for Second Day With Rupee on Global Selloff

By Rajhkumar K Shaaw - Aug 1, 2014

Indian stocks fell for a second day, with the benchmark index set to end two weeks of gains, amid a global equity selloff and on concern local share prices have exceeded the outlook for profit.
Software maker Tech Mahindra Ltd. tumbled the most since May after its first-quarter profit missed estimates. DLF Ltd. (DLFU), India’s biggest developer, retreated for a second day after its earnings dropped 29 percent. Larsen & Toubro Ltd. (LT) slid for a fifth day, the longest losing streak in three months. The rupee weakened for a second day.
The S&P BSE Sensex (SENSEX) retreated 0.5 percent to 25,762.91 at 10:16 a.m. in Mumbai, taking this week’s loss to 1.4 percent. The gauge gained 1.9 percent in July, a sixth monthly advance and the longest run of gains since the eight months through January 2007. The MSCI Asia Pacific Index fell today, extending a global selloff amid weaker-than-forecast corporate earnings in the U.S. and fresh concerns over credit markets.
“Global cues are not supportive,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by telephone from Kerala. “Some of the stocks had moved up really sharply and earnings have yet to catch up. That is a bit of a concern for investors.”
The Sensex has increased 22 percent this year, the best performer among the world’s 10 biggest markets, and is valued at 15.4 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s multiple of 11.
The Standard & Poor’s 500 Index slumped 2 percent yesterday, while the Dow Jones Industrial Average dropped 1.9 percent to erase the year’s gains as Exxon Mobil Corp. to Micron Technology Inc. tumbled amid weaker earnings.
In India, nine of the 16 Sensex companies that have posted results so far for the June quarter have exceeded or matched forecasts. About 60 percent of companies beat or matched profit estimates in the March quarter, compared with 73 percent three months earlier.
The rupee weakened 0.5 percent to 60.8662 per dollar as improvement in the U.S. economy boosted the dollar and a debt default in Argentina stoked concerns that fund inflows into emerging markets may slow.
Foreigners sold $45.9 million of Indian stocks on July 28, the first net outflow in 10 days. That pared this year’s purchases to $12.1 billion, still the most among eight Asian markets tracked by Bloomberg.
Bharat Heavy Electricals Ltd. (BHEL) may report today that net income fell 29 percent from a year earlier in the three months ended June to 3.28 billion rupees ($54.2 million), according to the median estimate of 35 analysts in a Bloomberg survey. The shares slid 0.6 percent.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar, Matthew Oakley

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Rupee Falls Most in a Week on Importers’ Dollar Purchases, Fed

By Kartik Goyal - Jul 30, 2014

India’s rupee declined the most in more than a week on speculation importers stepped up dollar purchases to pay month-end bills.
The local currency weakened after the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose to an eight-week high yesterday. The Federal Reserve will scale back its monthly bond purchases to $25 billion from $35 billion at its two-day meeting ending today, according to economists surveyed by Bloomberg, keeping it on track to ending the program late this year.
“Month-end dollar demand from oil importers is impacting the rupee,” said Naveen Raghuvanshi, a Mumbai-based currency trader at DCB Bank Ltd. “The rupee also weakened on account of dollar strength ahead of the Fed policy review.”
The currency depreciated 0.1 percent to 60.1850 per dollar as of 9:46 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. That’s the biggest drop since July 18.
Three-month offshore non-deliverable forwards on the rupee fell 0.2 percent to 60.87 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 19 basis points, or 0.19 percentage point, to 5.49 percent, according to data compiled by Bloomberg.
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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Kerry Keeps Pledge to Visit India to Spur Ties With Modi

By Terry Atlas - Jul 28, 2014

The U.S. is stepping up diplomatic engagement with India before a high-stakes visit to Washington in late September by new Prime Minister Narendra Modi.
Secretary of State John Kerry departs today for New Delhi, where he will be joined by Commerce Secretary Penny Pritzker for “strategic dialogue” meetings intended to identify topics for bilateral attention. Kerry is signaling the Obama administration’s priority on strengthening U.S.-India ties by keeping his commitment to make the trip even as he tries to deal long-distance with the war over Gaza in the Mideast.
The two Cabinet members will be the most senior U.S. officials to visit since Modi’s May election, in which he promised major policy changes to overcome slowing economic growth and spur trade and investment. They will be followed by Defense Secretary Chuck Hagel and by officials who will prepare for the meeting between Modi and President Barack Obama.
The effort is overdue, said Frank Wisner, a former U.S. ambassador to India. He said that trade, intellectual property and other disputes have eroded confidence on both sides since Obama, in a November 2010 address to the Indian Parliament, envisioned U.S.-India ties becoming “one of the defining partnerships of the 21st century.”
“Since 2010, the high-water mark of President Obama’s trip, the relationship has been on hold,” Wisner, an international affairs adviser at Squire Patton Boggs LLP in Washington, told a Senate panel this month. “If anything, I would say it’s atrophied and requires attention.”

Strained Relations

U.S.-India relations hit a low point at the end of last year after an Indian diplomat was arrested in New York, strip-searched and charged with visa fraud for allegedly underpaying her babysitter.
Also complicating the relationship is Modi’s past conflict with the U.S., which denied him a visa in 2005. The move concerned his alleged role in 2002 Hindu-Muslim riots that killed about 1,000 people, mostly Muslims, in the state of Gujarat where he was chief minister. Modi has denied the accusations repeatedly, and a Supreme Court-appointed panel found no evidence he gave orders that prevented assistance from reaching the victims.
“He is not likely to let lingering resentment” over the visa issue undermine cooperation in areas that will advance his national priorities, according to Vikram Singh, a former Pentagon official who’s now vice president for national security and international policy at the Center for American Progress in Washington.

Amway Executive

The most recent impediments have been alleged U.S. electronic eavesdropping on Modi’s political party and the jailing of Amway Corp.’s India unit chief executive William Pinckney on a consumer fraud complaint. He was released on bail after two months following U.S. pressure in advance of Kerry’s visit. The Ada, Michigan-based company has disputed the basis for the charges.
Kerry said yesterday that the Obama administration wants to create greater opportunities for U.S. and Indian businesses as well as to expand cooperation on investment, climate change and security issues.
“This is a potentially transformative moment in our partnership with India, and we’re determined to deliver on the strategic and historic opportunities that we can create together,” Kerry said, speaking at the Center for American Progress, which is initiating an “India 2020” research program.
U.S. officials say both nations can benefit from expanded trade. Annual two-way trade in goods and services reached almost $100 billion in 2013, up 61 percent from 2009 and a fivefold increase since 2000, according to U.S. Assistant Secretary of State Nisha Desai Biswal, the State Department’s top official for South Asia.

Facing ‘Impediments’

Kerry said the U.S. goal is to see trade expand to $500 billion a year -- by a date he didn’t specify -- and, “whatever impediments we may face along the way, we need to always be mindful of the opportunities and the bigger picture.”
“It is completely in our mutual interest to address those obstacles that kind of raise their head here and there” and to remember that “a lot bigger opportunities come from more robust ties,” Kerry said.
India was the 18th-largest goods export market for the U.S. in 2013, totaling $21.9 billion, down 1 percent from 2012 but up more than fourfold from 2003, according to the Office of the U.S. Trade Representative. India was the U.S.’s 10th-largest supplier of goods imports in 2013, totaling $41.8 billion in 2013, up 3.2 percent from 2012, and up more than threefold from 2003.

Indian Priorities

The Modi government has identified as its priorities infrastructure, manufacturing, modernizing the military, energy security, attracting more foreign investment and expanding access to skills training and education.
“Our private sector is eager to be a catalyst in India’s economic revitalization,” Kerry said. “American companies lead in exactly the key sectors where India wants to grow.”
Before the strategic dialogue, Pritzker is scheduled to meet with Indian business leaders in Mumbai.
U.S. priorities include expanding defense cooperation, easing business conditions, eliminating barriers to U.S. companies’ participation in nuclear-power projects, and greater coordination in addressing Asia security matters from Afghanistan to China.

Treaty Hurdles

Hurdles include disputes involving protectionism, retroactive taxation, intellectual-property safeguards, and nuclear-power liability. Kerry and Indian External Affairs Minister Sushma Swaraj may discuss whether negotiations on a bilateral investment treaty -- pending for five years and stalled since last year -- could be completed before the Modi-Obama summit.
The distance between the two sides on that treaty may “remain too great to bridge in the near term,” according to Singh, the former U.S. official.
How much the economic relationship advances will depend on whether Modi carries though with his reform agenda, said Ashley Tellis, senior associate in the South Asia program at the Carnegie Endowment for International Peace in Washington.
“To the degree that the Modi government moves with ambition, there will be greater opportunity for American companies,” Tellis said.
Hanging over the bilateral discussions is the July 31 deadline for World Trade Organization talks, which are at risk of collapse because of India’s questioning of measures accepted by the previous government.
Defense Secretary Hagel is due to lead a delegation to the Indian capital in early August to discuss expanding defense ties. India is now the U.S.’s largest foreign defense market, importing $1.9 billion of U.S. weapons last year, according to IHS Jane’s, a defense and security analysis company.
To contact the reporter on this story: Terry Atlas in Washington at tatlas@bloomberg.net
To contact the editors responsible for this story: John Walcott at jwalcott9@bloomberg.net Larry Liebert, Justin Blum

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