Gold demand dipped across countryMarkets This Week

Most Indian stocks recorded a fall this week and benchmark indices dropped for a third consecutive week – the longest slump in the past five months. During the last week of March, the 30-scrip BSE Sensex dropped about 2.83 percent (802.44 points) to close at 27,458.64 points. The 50-stock CNX Nifty index also closed in the red at 8,341.40 points – a drop of 2.67 percent (229.5 points) over its last weekly close. Last week the BSE Sensex closed at 28,261.08 points while the CNX Nifty ended at 8,570.90 points. The best performing stocks of the BSE Sensex were Hindalco, Mahindra & Mahindra, Gail India, and Larsen & Toubro. Meanwhile, among the top losers at the BSE Sensex this week were Wipro, HDFC, Coal India, BHEL, and SBI. Among the Nifty 50, the top gainers this week were BPCL, Lupin, and Mahindra & Mahindra while top losers were PNB, Bank of Baroda, and Wipro. Nifty’s decline beneath the 8,300 level brought back fears that the Bull Run might have ended prematurely. Experts, however, are ambivalent over the predictions. While some indicate that a further correction is likely, yet others believe that this is the right time to create a long-term portfolio of stocks with robust financials.

Gold buying slowed down across the country, even as demand for the bullion dipped across Asian markets this week. Despite a seven-day rally through Thursday, demand for gold dipped on Friday with a hike in prices. Retailers are now looking at Akshaya Tritaya (on 21 April 2015) for a spike in buying. The Hindu community of India invests heavily in gold on Akshaya Tritiya day every year. The rupee snapped the losing spree of Wednesday and Thursday by recovering 26 paise on Friday to close at 62.41 per dollar.

Indigo All Set for an IPO

With domestic air travel growing at an unprecedented pace, low-cost carrier Indigo is all set for a stock listing, news reports say. India’s biggest airline (in terms of market share) was set up in the year 2006 by Mr. Rakesh S Gangwal (former Chairman and CEO of US Airways Group) and Rahul Bhatia (of InterGlobe Enterprises, a travel and hospitality company). Ever since Indigo has gone from success to success, even as major rivals Kingfisher Airlines and SpiceJet gradually fell apart. The IPO is likely to take the airline to further heights and an attempt to cash in on the surging demand for air travel.

Indigo expects to raise USD 300 million – 400 million out of this IPO, news reports confirm. It is likely that the listing will be handled by Kotak Investment Banking, Citigroup, J.P. Morgan Chase, and Morgan Stanley. Apart from these financial institutions as lead managers, UBS and Barclays are also likely to be involved in the listing process. Indigo will file its red prospectus by the end of May, news reports said this week. The timing of the IPO launch, however, seems uncertain given the weak response the recent listings have elicited.

PM Urges Well-off Citizens to Surrender Subsidy

On Friday, Prime Minister, Narendra Modi urged citizens who can afford to buy LPG at market prices to voluntarily give up on their subsidy. This will enable the government to provide poor and low income households a much needed relief on LPG prices. “Over 2.8 lakh consumers have (already) surrendered LPG subsidy, resulting in a saving of INR 100 crore. This amount can be utilised for the welfare of poor”, said the PM. He also committed that within the next four years, about a crore households in the country would be provided with piped cooking gas connections. Currently, about 2.7 lakh households in the country have this facility. Irrespective of party divide, many political leaders of India are known to support NaMo in his LPG subsidy policy. The PM also vowed to reduce India’s dependence on energy imports by at least 10 percent within the next seven years.

RBI Moves to Tighten Bank Exposure Norms

India’s Central bank, the Reserve Bank of India (RBI) has plans to tighten the guidelines for large exposure (LE) of banks. The RBI intends to cap the exposure of banks to 25 percent of their Tier-I capital. With the capping of banks’ large exposures, large borrowers (usually corporate entities) will be forced to raise at least a portion of their monetary needs directly from the markets instead of completely relying on the banks. The International Monetary Fund (IMF) also seems to endorse RBI’s move. It said, “The default of a borrower or a group of connected borrowers can cause a serious loss to a banking group. The current large exposure limit is a maximum of 55 per cent of a banking group’s capital”. The RBI’s new Large Exposures (LE) framework outlines these norms and shall be fully applicable by the start of 2019.

India’s Forex Reserves at an All-time High

Data released by the Reserve Bank of India this week reveals that India’s foreign exchange reserves rose to an all-time high in the week ended 20 March. The forex reserves stood at about USD 339.99 billion, a gain of USD 4.26 billion coming mainly out of an appreciation of core currency assets. Foreign currency assets in the forex reserves are affected by the appreciation and depreciation of currencies other than the USD (such as the euro, pound, yen etc.) The dollar’s depreciation against these may have caused the change. Gold reserves, however, remained at USD 19.837 billion – no change over the previous week.