Rupee Volatility Declines for Fourth Week on Economic Optimism

By Kartik Goyal - Sep 5, 2014

A gauge of expected swings in India’s rupee fell for a fourth week on optimism the nation’s improving economy will draw capital from abroad.
Gross domestic product increased 5.7 percent from a year earlier in the April-June period, the most since the first quarter of 2012, official data showed Aug. 29. Global funds have pumped more than $10 billion into the nation’s bonds and stocks this quarter, exchange data show.
“Higher foreign inflows into debt and equities, spurred by faster economic growth is supporting the rupee,” said Anish Vyas, a Mumbai-based currency analyst at Angel Broking Ltd. Gains in the dollar amid expectations that U.S. interest rates are set to rise will cap the rupee’s appreciation, he said.
Three-month implied volatility in the rupee, a measure of expected fluctuations used to price options, dropped 39 basis points from a week ago to 6.79 percent, according to data compiled by Bloomberg. It rose two basis points, or 0.02 percentage point, today.
In the spot market, the Indian currency rose 0.1 percent this week to 60.4350 per dollar as of 10:15 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. It fell 0.1 percent today. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, climbed today to the highest level since July 2013.
Three-month offshore non-deliverable forwards were little changed today at 61.34 per dollar and advanced 0.1 percent from Aug. 29. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.
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

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India Rupee Volatility Drops to One-Month Low on Risk Appetite

By Kartik Goyal - Sep 4, 2014

A gauge of expected swings in India’s rupee fell to a one-month low on signs growth in Asia’s third-biggest economy is picking up and as Russia agreed to a cease-fire with Ukraine.
Most Asian currencies gained on speculation the European Central Bank will announce quantitative easing measures at a meeting today, a move that may spur inflows to emerging markets, according to Andhra Bank Ltd. India’s $1.9 trillion economy expanded 5.7 percent in the April-June period, the most since the first quarter of 2012, official data showed Aug. 29.
“The theme of improving economic fundamentals attracting higher inflows remains intact for India and that is supporting the rupee,” said Vikas Babu, a foreign-exchange trader in Mumbai at state-run Andhra Bank. Developing-nation currencies are rising today on expectations ahead of the ECB, while there’s also an easing in geopolitical tensions, he said.
Three-month implied volatility in the rupee, a measure of expected exchange-rate swings used to price options, dropped five basis points to 6.80 percent as of 10:31 a.m. in Mumbai, according to data compiled by Bloomberg. That’s the lowest level since July 31. In the spot market, the currency was little changed at 60.4588 per dollar.
Three-month offshore non-deliverable forwards advanced 0.1 percent to 61.36 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.
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 Simon Harvey, Anil Varma

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India Bonds Advance as Growing Cash Supply Seen Boosting Demand

By Shikhar Balwani - Sep 3, 2014

India’s 10-year government bonds gained for a third day on speculation an increasing cash supply will drive demand for sovereign debt.
The nation’s lenders parked a net 225.6 billion rupees ($3.7 billion) via daily liquidity auctions at the Reserve Bank of India on Sept. 1, the most since October 2011, data compiled by Bloomberg show. They added another 201.85 billion rupees yesterday, signaling increased availability of funds. The growing cash supply is probably because of government spending at the beginning of the month, Harish Agrawal, a fixed-income trader at FirstRand Ltd. in Mumbai, said yesterday.
“Liquidity is abundant and that’s helping the bond markets,” said Sagar Shah, deputy vice-president for treasury at RBL Bank in Mumbai. “Continuous buying by foreign funds is boosting confidence.”
The yield on the 8.4 percent notes due July 2024 fell two basis points, or 0.02 percentage point, to 8.50 percent as of 10:06 a.m. in Mumbai, prices from the RBI’s trading system show. The yield has fallen six basis points this week to the lowest level since Aug. 20.
Overseas investors bought a net $2.8 billion of rupee corporate and government securities last month, exchange data show. That was the fourth straight month of inflows and boosted foreign holdings of Indian debt to a record $42 billion.
Standard Chartered Plc favors local-currency sovereign notes as India’s new government accelerates economic reforms amid expectations that inflation will ease, Chief Investment Strategist Steve Brice in Singapore said last week. Money managers at Amundi Asset Management and Union Investment Privatfonds also said last week that they consider Indian bonds attractive.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, were unchanged from yesterday at 8.45 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 Andrew Janes, Anil Varma

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India Recommends Canceling 172 Coal Mining Permits

By Pratap Patnaik and Rajesh Kumar Singh - Sep 2, 2014

India proposed canceling 172 unused permits to mine coal, while allowing 46 operational mines to keep working to address a Supreme Court ruling that struck down all coal-mine allocations made since 1993.
The government is prepared to auction off new licenses for the canceled mines, Attorney General Mukul Rohatgi said in his argument to court in New Delhi yesterday. The court said “it was leaving its options open” and set Sept. 9 for a final hearing.
The proposal would keep production of the fuel that powers more than 60 percent of India’s generation capacity going, while potentially jeopardizing several projects, including power plants, steel mills and aluminum smelters. Hindalco Industries Ltd. (HNDL) and Jindal Steel & Power Ltd. (JSP) may be the most affected, Morgan Stanley said after the court’s ruling last week.
“We should be careful of considering auctions as a solution for the natural-resources sector,” said Kameswara Rao, executive director for energy and utilities at PricewaterhouseCoopers LLP. “The sector is dominated by some large players, and an auction policy can discourage competition.”
Because the court ruled that all coal allocations were illegal, it wasn’t clear how the 46 mines could be given legal validity, Rao said.
Of the 46, 40 are already in operation and six are on the verge of starting. Rohatgi didn’t identify the 46 mines or their owners by name.

Additional Royalty

The government suggested the court impose an additional royalty of 295 rupees ($4.87) a metric ton for coal that has already been taken from the operational mines.
India’s coal ministry expects domestic production of 53 million tons in the year to March 2015 from captive coal blocks run by companies, including Hindalco, Jindal Steel, Reliance Power Ltd., CESC Ltd. (CESC) and Jaiprakash Associates Ltd., according to its website. That’s about 9 percent of the nation’s total annual production of the fuel.
Hindalco fell as much as 1.5 percent to 173.50 rupees as of 9:42 a.m. in Mumbai, while Jindal Steel declined 2.9 percent to 240.75 rupees.
“Irrespective of what the decision is, it will be in the interest of the nation,” Coal and Power Minister Piyush Goyal said Aug. 25, after the court’s ruling, adding the judgment will help the sector move on.
The allocations didn’t serve any common good, the court said in its 163-page ruling last week.
“The approach had been ad-hoc and casual,” the ruling said. “There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth.”

Unmet Demand

The coal ministry started allocating mines to companies for their own use after realizing monopoly miner Coal India Ltd. (COAL) was failing to keep pace with demand. The ministry awarded 218 coal permits from 1993 to 2011. Of those, 80 were later canceled for not meeting output targets.
Criticism of the procedure forced the previous government of Prime Minister Manmohan Singh in 2010 to amend laws and adopt an auction process. No auctions have actually occurred since the new policy was introduced.
India’s state auditor in 2012 found that allocating the mines to companies without an auction may have cost the government 1.86 trillion rupees, worth $33 billion at the time.
To contact the reporters on this story: Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net; Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Dick Schumacher, Abhay Singh

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India’s Nifty Futures Little Changed After Sensex’s Monthly Gain

By Santanu Chakraborty - Aug 31, 2014

Indian stock-index futures were little changed as valuations jumped after the benchmark equity gauges climbed for a seventh straight month.
SGX CNX Nifty Index (NIFTY) futures for September delivery fell less than 0.1 percent to 8,026.5 at 10:47 a.m. in Singapore. The underlying CNX Nifty Index on the National Stock Exchange of India Ltd. rose 0.2 percent to 7,954.35 on Aug. 28. The S&P BSE Sensex (SENSEX) gained 0.3 percent. Indian equity markets were closed on Aug. 29 for a holiday. The Bank of New York Mellon India ADR Index of U.S.-traded shares advanced 0.8 percent.
The Sensex capped its longest streak of monthly advances since 2007 in August, stretching its valuation to 15.5 times projected 12-month earnings, compared with a five-year average of 14.5 times. India’s gross domestic product increased 5.7 percent in the three months ended June from a year earlier, beating estimates, government data showed Aug. 29.
“The Reserve Bank of India may not cut rates this year as growth seems to be rebounding from the lows,” Rajendra Wadher, director at PRB Securities Ltd., said in a phone interview.
The quarterly growth accelerated from a 4.6 percent expansion in the three months to March and compared with a 5.5 percent median estimate in a survey of 48 analysts.
International investors bought a net $88 million of Indian stocks on Aug. 27, extending this year’s inflow to $13 billion, the most among eight Asian markets tracked by Bloomberg. The Sensex has jumped 26 percent this year and is the best performer among the world’s 10 biggest markets.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Phani Varahabhotla, Allen Wan

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