Singapore Overtaking Mumbai for India Futures: Chart of the Day

By Santanu Chakraborty - Sep 21, 2014

Singapore is overtaking Mumbai as the biggest market for Indian stock-index futures, a sign of foreign investors’ growing influence over equities in the world’s second-most populous nation.
The CHART OF THE DAY shows open interest, or the number of outstanding contracts, for CNX Nifty Index futures on the Singapore Exchange Ltd. climbed 55 percent during the past four years to about 345,000. That compares with a 60 percent decline for similar contracts traded on the National Stock Exchange of India Ltd., according to data compiled by Bloomberg. Singapore is luring foreign investors with longer hours and lower trading costs, Kotak Institutional Equities said in a report this month.
International money managers have bought more than $14 billion of Indian shares this year, helping fuel a 29 percent rally in the Nifty index. Much of the gains have come since Prime Minister Narendra Modi’s landslide election victory in May, with investors betting the new premier will boost growth in Asia’s third-largest economy.
“New offshore investors have started nibbling at India,” said A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte in Singapore, which has $450 million in Indian stocks. “Already-invested guys are also increasing exposure on optimism the new administration will boost growth.”
Divya Malik Lahiri, an NSE spokeswoman in Mumbai, declined to comment.
“NSE and SGX have been in long-term partnership to develop the global Nifty franchise,” the Singapore Exchange wrote by e-mail. “SGX provides a convenient access point for offshore investors seeking exposure to Indian equity and complements the already deep liquid equity and derivatives markets in India.”
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 Ravil Shirodkar

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Rio Tinto Sees China, India Driving Demand Growth for Diamonds

By Aibing Guo and David Stringer - Sep 20, 2014

Surging demand for diamonds in China and India may see the two countries match the size of market in the U.S., the biggest consumer, by 2020.
“We will see strong growth in India as soon as the country gets its house in order with the new government,” Jean-Marc Lieberherr, managing director of Rio Tinto Group (RIO)’s diamonds unit, said in an interview. “With China, policy is moving more toward encouraging domestic consumption rather than infrastructure and that’s going to have a positive impact.”
The middle class in China and India, the world’s fastest growing jewelry market, may double by 2015 compared with 2010, boosting demand for diamonds, according to WWW International Diamond Consultants Ltd. Global demand will probably rise 4 percent to 4.5 percent this year with U.S. consumption increasing as much as 6 percent, according to De Beers, the biggest producer.
China and India, where about 21 million marriages take place each year, may account for half of the growth in diamond demand in the five years from 2013, WWW International said in a January 2013 presentation.
Rio Tinto may bring its Bunder diamond project in central India’s Madhya Pradesh state into production as early as 2019, Lieberherr said. The Bunder deposit, found in 2004, was the first diamond discovery in India in about 40 years and is one of only four new diamond mines likely to enter production in the next decade, according to the world’s second-biggest miner.
Total spending by Rio Tinto on projects and expansions across its commodities is expected to be $8 billion in 2015, less than half its outlay in 2012, as it lowers costs amid a decline in commodity prices, the London-based producer said last month.
Rio opted in June 2013 to retain its diamond unit after failing to find a buyer and deciding not to pursue an initial public offering.
“We like diamonds, we think the fundamentals are very, very strong,” Lieberherr said at a Sept. 18 press conference in Hong Kong.
To contact the reporters on this story: David Stringer in Melbourne at dstringer3@bloomberg.net; Aibing Guo in Hong Kong at aguo10@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Andrew Hobbs, Indranil Ghosh

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Coal India Said to Cut Auctions to Meet Power Demand

By Rajesh Kumar Singh and Debjit Chakraborty - Sep 18, 2014

Coal India Ltd. (COAL) has cut the amount of the fuel it’s selling at competitive auctions to bolster supplies to power stations to meet demand, said people familiar with the matter.
The government has asked the state-run monopoly to cut the quantity auctioned to increase coal supplies at power plants, which fetch the company almost half the price of open sales. Spot electronic auction sales in the two months to Aug. 31 dropped 70 percent to 2.52 million metric tons from the same period a year ago, according to two people, who asked not to be identified as the information isn’t public.
Greater supplies to utilities are critical to Prime Minister Narendra Modi’s goal of accelerating economic growth and providing round-the-clock electricity to every household in the country. The revenue loss from lower auction sales may prompt the company to raise prices, said Giriraj Daga at Mumbai-based Nirmal Bang Equities Pvt.
“Everyone is betting on a price hike,” he said. “Even a 50 rupees-a-ton increase will give Coal India the delta to offset lower e-auction sales.”
A.K. Dubey, Coal India’s chairman, and Marketing Director B.K. Saxena couldn’t be reached at their office phones.
Kolkata-based Coal India sells a part of its output through auctions to customers that don’t have long-term purchase contracts. These sales, which account for about 10 percent of its production, contributed 40 percent to the miner’s earnings before interest, tax, depreciation and amortization in the year to March 31, 2013.

Supply Bottlenecks

A surge in economic activity has led to higher demand for the fuel, exacerbating supply bottlenecks caused by heavy rains at some mines and slow railway transport. The national peak shortage in August expanded to 6 percent from an average 3.5 percent in July, according to the Power Ministry.
Coal India has been asked to halve e-auction sales in the year that began April 1 from 58 million tons in the previous period to reduce shortages at power plants, Coal and Power Minister Piyush Goyal told lawmakers in parliament on Aug. 6.
While fewer stocks for auctions is leading to a spike in prices, it may not be enough to compensate for the lower volume being sold, said Viresh Oberoi, managing director of Mjunction Services Ltd., which auctions the commodity.
“There’s a definite risk of a hit to the company’s profitability,” said Prasad Baji, an analyst at Edelweiss Financial Services Ltd. (EDEL) in Mumbai. “There’s some room to increase prices, but pressure to keep power prices in check may deter such plans.”
Maintaining Coal India’s profitability is crucial to the success of a planned 10 percent share sale by the government, said Daga. India, which owns 89.65 percent in the miner, approved a share-sale plan for the company on Sept. 10.
“A price increase will immediately call for re-rating of the stock and this will fetch higher returns for the government during the share sale,” Daga said.
To contact the reporters on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net; Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net
To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Abhay Singh, Indranil Ghosh

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Xi to Meet Modi for Dinner as Economy Tops Agenda

By Bibhudatta Pradhan - Sep 16, 2014

Chinese President Xi Jinping heads to India today as the world’s two most populous countries look to bolster economic ties and resolve a long-running border dispute.
Prime Minister Narendra Modi will receive Xi this afternoon in the western state of Gujarat, which he ran before taking office in May. The leaders will share a private meal along a riverfront in the state’s former capital of Ahmedabad and also hold talks in New Delhi tomorrow.
“It’s a very significant visit as leaders of Asia’s two BRIC countries want to create more economic momentum in the bilateral relationship,” Rajiv Biswas, IHS Global Insight’s Asia-Pacific chief economist, said by phone from Singapore. “Modi is trying to improve India’s exports to China to reduce the trade deficit, and also to boost Chinese investment flows into the country in infrastructure and urban development.”
Modi is seeking Chinese support for his moves to revive Asia’s third-biggest economy while deterring it from asserting control over disputed land along the border. He met Japanese leader Shinzo Abe in Tokyo earlier this month and will visit President Barack Obama at the White House two weeks from now.
Modi told Chinese journalists yesterday that the two countries “can create a better tomorrow for all of mankind.” More than a third of the world’s people can have better lives if India and China boost economic cooperation, he said, according to an Indian government statement. The BRIC grouping, also comprising Russia and Brazil, will grow faster in 2014 than the global average, according to data compiled by Bloomberg.

Investment, Trade

China is India’s largest commercial partner, and also accounts for its biggest trade deficit. While bilateral commerce exceeded $68.5 billion last year, India posted a trade shortfall of $34.4 billion on imports of Chinese-made heavy machinery, telecom equipment and home appliances, according to data compiled by Bloomberg.
India is seeking greater market access in China and will probably sign an agreement for China to set up industrial parks, Indian Trade Minister Nirmala Sitharaman told reporters in New Delhi on Sept. 10. Xi will also announce investments in India’s railways, the Press Trust of India reported.
In the 14 years through June, China was India’s 28th largest source of foreign direct investment with inflows worth $411 million, or 0.18 percent of the total, government data show. Japan was fourth and the U.S. was fifth.

‘Territorial Mindset’

Tensions have simmered in the past few years over claims to disputed territory on their mountainous border. In campaign speeches earlier this year, Modi warned China to drop its “mindset of expansion.”
India accuses China of occupying 38,000 square kilometers (15,000 square miles) in Jammu and Kashmir, while Beijing lays claim to 90,000 square kilometers of land in the Indian state of Arunachal Pradesh.
Chinese incursions have occurred in the area this month, PTI reported, and the countries have seen sporadic border clashes over five decades. They fought a war in 1962 and China opposes the Dalai Lama, Tibet’s spiritual leader, who campaigns for Tibetan autonomy and human rights while in exile in India.
“Regarding the border issue, the Chinese stance has always been consistent and clear,” Chinese Foreign Ministry spokesman Hong Lei said in a briefing in Beijing yesterday. “The Sino-Indian borders have been peaceful for a long while and the border issue hasn’t affected the development of the Sino-Indian relations. We hope both countries can keep it up to maintain this healthy momentum.”

Sea Exploration

China also warned that it would oppose any Indian agreements with Vietnam to explore for oil and gas in disputed areas of the South China Sea, Times of India reported, citing Hong.
India will discuss “all substantive issues of interests” including the border dispute, India’s Foreign Ministry Spokesman Syed Akbaruddin, said in New Delhi on Sept. 15. Investment in smart city projects, railways and cooperation on nuclear energy will probably be included, he said.
Xi’s first visit to India as head of state follows Modi’s visit to Japan, which has its own territorial dispute with China. Abe pledged a sweeping upgrade of economic and security ties with India, offering 50 billion yen ($480 million) in infrastructure loans and pledging 3.5 trillion yen of public and private investment and financing over five years.

Candlelight Meal

The meeting between Modi and Xi is “unlikely to result in meaningful progress towards any bilateral strategic partnership,” Arvind Ramakrishnan, head of India at U.K.-based risk adviser Maplecroft, said in an e-mail. “Modi is far more inclined to cultivate strategic ties with Japan and the U.S. in order to make India a counter-balance against Chinese influence in the Asian region.”
Still, the countries have links going beyond 145 B.C., with China exporting silk to India in exchange for pearls and coral. Modi, who turns 64 today, is India’s first prime minister born after independence in 1947. Xi, 61, is China’s first leader born after the 1949 revolution.
Xi and Modi will walk along a river and share a candlelight dinner that will feature more than 100 dishes, Xinhua reported. Performances during the meal will feature traditional Indian dancing and automated lions, it said.
India can benefit from China’s strength in creation of infrastructure and development of the manufacturing sector, while India’s strength in software can help Chinese companies become more efficient and competitive, Modi said yesterday.
“India and China are bound by history and connected by culture,” he told reporters in New Delhi. “The arithmetic and chemistry of our relations convinced me that together we can script history and create a better tomorrow for all of mankind.”
To contact the reporter on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Jeanette Rodrigues, Dick Schumacher

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India CPI Holds Near 8%, Output Slows Before RBI Decision

By Jeanette Rodrigues - Sep 12, 2014

Indian retail inflation held near 8 percent while growth in factory output slowed more than economists had estimated before the central bank reviews one of Asia’s highest interest rates.
Consumer prices rose 7.8 percent in August from a year earlier, compared with 7.96 percent in July, the Statistics Ministry said in New Delhi today. The median of 37 estimates in a Bloomberg survey had been for a 7.83 percent increase. Industrial production rose 0.5 percent in July, compared with 1.8 percent predicted in a separate survey and a revised 3.94 percent gain in June.
The $1.9 trillion economy will benefit if the Reserve Bank of India cools inflation, Governor Raghuram Rajan said last month after keeping interest rates unchanged for a third straight meeting. The RBI is battling Asia’s strongest price pressures, which are damping investment essential for Prime Minister Narendra Modi to meet tax revenue targets.
“Both data sets clearly signal that the RBI is headed for an extended pause,” said Rupa Rege-Nitsure, a Mumbai-based economist at Bank of Baroda. “The government has to address the problem of food inflation on a war footing, otherwise we will not see any material change here.”
Food and beverage prices rose 9.16 percent year-on-year, led by a 24 percent surge in fruits and 15 percent in vegetables. Fuel costs climbed 4.15 percent, today’s data showed.

RBI Targets

The central bank is within reach of its goal of capping the inflation rate at 8 percent by January 2015, while there are upside risks to the 6 percent target by January 2016, according to an Aug. 21 RBI report. Growth concerns are broadly balanced, it said. The monetary authority is scheduled to review borrowing costs on Sept. 30.
The rupee strengthened 0.5 percent to 60.66 per dollar in Mumbai before the data were released, the S&P BSE Sensex index of stocks gained 0.2 percent and the yield on the benchmark 10-year sovereign bond fell to 8.50 percent from 8.51 percent.
A dip in crude oil prices and a pick-up in monsoon rainfall, which has the potential to raise farm output, may help contain inflation only in the short-term, Upasna Bhardwaj, an economist at ING Vysya Bank Ltd. in Mumbai, said by phone before the data. The government needs to rein in subsidies instead of counting on taxes to meet its budget deficit target of 4.1 percent of gross domestic product, a seven-year low, she said.
The economy expanded 5.7 percent in the quarter through June 30 from a year earlier, the fastest pace since 2012. GDP will grow 5.6 percent in the fiscal year through March 2015 and 6.5 percent in the following 12 months, according to Goldman Sachs Group Inc.
Goldman has scrapped its rate-increase forecast, Mumbai-based economist Tushar Poddar wrote in a Sept. 9 report. “We now expect the policy repo rate to stay at 8 percent for a protracted period of time -– through 2014 and 2015.”
The U.S. bank had earlier expected a 50-basis-point increase in the benchmark repurchase rate this year followed by a reduction of the same magnitude in the second half of 2015.
To contact the reporter on this story: Jeanette Rodrigues in New Delhi at jrodrigues26@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan, Dick Schumacher

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India’s Rupee Heads for Weekly Loss on U.S. Rate-Rise Prospects

By Shikhar Balwani - Sep 12, 2014

India’s rupee headed for the biggest weekly drop in six on concern an improving U.S. economy will spur the Federal Reserve to raise interest rates sooner than planned, reducing the allure of emerging-market assets.
Fed officials led by Chair Janet Yellen next meet Sept. 16-17. The dollar has rallied in the past four weeks as U.S. economic reports boosted speculation the central bank will act on borrowing costs sooner than estimated while continuing to pare its record bond purchases. India will release data on consumer prices and industrial production later today.
“Asian currencies, including the rupee, have been weighed down by the overall strength seen in the dollar,” Naveen Raghuvanshi, a Mumbai-based currency trader at DCB Bank Ltd., said by phone. “Investors in India will keenly watch the inflation and factory output numbers for cues.”
The rupee declined 0.9 percent this week, the most since the period ended Aug. 1, to 60.9800 per dollar as of 9:49 a.m. in Mumbai, prices from local banks compiled by Bloomberg show. The currency, which fell 0.1 percent today, touched 61.0350 on Sept. 10, the weakest level since Aug. 14.
India’s government bonds gained this week, with the yield on the benchmark 8.4 percent sovereign notes due July 2024 dropping two basis points, or 0.02 percentage point, to 8.51 percent, according to the central bank’s trading system. The rate was unchanged today.
One-month implied volatility in the rupee, a measure of expected exchange-rate swings used to price options, jumped 99 basis points from Sept. 5 to 7.04 percent, according to data compiled by Bloomberg. Three-month offshore non-deliverable forwards dropped 1.3 percent to 61.92 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 little changed this week at 8.47 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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Singapore Air India Venture Said to Miss October Start

By Anurag Kotoky - Sep 10, 2014

Singapore Airlines Ltd. (SIA)’s India venture is set to miss a target of starting operations in October because more regulatory approvals are needed, a government official with direct knowledge of the situation said.
Getting all certifications for Vistara, as the airline is called, would require a further two or three months, said the person, who asked not to be identified as the information isn’t public. Singapore Air owns 49 percent of the carrier with Indian conglomerate Tata Sons Ltd. owning the rest.
Vistara, which has a preliminary approval from the Indian government, needs to conduct the so-called proving flight before it gets the air-worthiness certificate and the final signoff from the government, the person said. Vistara is getting its first Airbus Group NV (AIR) A320 aircraft this month, and plans to expand fleet size to 20 in five years, the company said Aug. 11.
“Vistara is working very closely with the regulators to ensure all requisite requirements and processes are being complied with,” Rashmi Soni, a spokeswoman for Vistara, said in an e-mailed response to questions. She declined to comment on the start date.
Nicholas Ionides, a spokesman for Singapore Air, directed queries to Vistara. Sanjay Singh, a vice president for public affairs at Tata-SIA Airlines Ltd., directed queries to Vistara spokeswoman. Uday Moray, a spokesman at India’s civil aviation ministry did not respond to two calls to his mobile phone.
Singapore Air and Mumbai-based Tata are starting the full-service carrier to tap travel demand among India’s more than 1.2 billion people. India eased foreign investment rules in 2012, enabling foreign carriers to invest in local airlines after almost two decades.
To contact the reporter on this story: Anurag Kotoky in New Delhi at akotoky@bloomberg.net
To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net Subramaniam Sharma

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