Weekly Business Roundup - Inflation stokes fear equity marketsMarkets This Week

Following the announcement of disappointing inflation data, key market indices fell again on Friday to register biggest weekly fall of 2015. Inflation worries sent bond yields higher while a further rate cut by the RBI seems unlikely. The 30-scrip BSE Sensex closed at 28,503.30, a fall of 3.21 percent or 945.6 points from the previous weekly close (29,448.95 points). The 50-scrip CNX Nifty of the National Stock Exchange closed at 8,647.75 points, 3.24 percent or 290 points down from last week’s close (8,937.75).

Heavy selling pressure was seen in almost all sectors and all sector-based indices declined this week. Capital goods, banks, and the automobile sectors were the worst hit. The top gainers at the Nifty include Bharti (+ 15 percent), DLF (2.9 percent), NMDC (+ 2.4 percent), and Lupin (2.2 percent). The top losers at the index are Larsen & Tubro (-7.2 percent), IDFC (- 7.1 percent), Sesa Sterlite (- 6.6 percent).

The gold imports in the month of February rose to about INR 12,293 crore (approximately USD 1.98 billion). This is a growth from January imports that were pegged at about USD 1.55 billion. Despite a marginal rise in prices, silver coins also seemed to face some selling pressure this week.

Securities Appellate Tribunal Quashes DLF Ban

On Friday, 13 March, 2015, the Securities Appellate Tribunal (SAT) quashed an order by the Securities and Exchange Board of India (SEBI) banning DLF from raising funds from the capital market for three years. Earlier in October 2014, SEBI had banned the country’s largest property developer and six top DLF officials from accessing the capital market for fraudulent trade practices. SEBI’s injunction had come in the wake of DLF’s non-disclosure of certain transactions and litigation in its 2007 IPO document. The SAT deemed DLF’s infractions as “insignificant” and said that a grave “miscarriage of justice” had occurred. SEBI was admonished rather heavily for overregulation and failing to conduct thorough investigations.

The equity markets reacted positively to the decision. DLF share prices surged about 9.2 percent intraday on Friday to reach INR 162.60 a share before ending 5.74 percent higher at INR 157.50. DLF had lost its position in the CNX Nifty towards the end of February due to the SEBI ruling.

CPI Inflation Inches up to 5.37 percent

According to statistics released by the Central Statistics Office this week, India’s consumer price index- based inflation (CPI) rose to about 5.37 percent in February 2015. While this is a considerable drop from 7.88 percent in February 2014, it is a rise from 5.11 percent recorded in January 2015 despite the efforts made by the central bank to curb inflation. The Finance Minister’s CPI inflation target for the fiscal year 2015-16 is 6 percent. The RBI has been hawkish in its monetary policy in an effort to reduce the country’s inflation. Earlier this month, on the basis of favourable data, the central bank had cut the repo rate by 25 basis points taking it from 7.75 percent to 7.5 percent. A further cut, however, seems highly unlikely. India’s industrial output for January 2015, measured in terms of Index of Industrial Production (IIP), grew by a mere 2.6 percent.

SBI Holds Biggest Online Property Auction

State Bank of India decided to end the week with a big bang. The bank is holding India’s largest online auction of properties from 26 cities that are estimated to fetch about INR 1200 crore. A total of 350 properties that shall be up for sale include residential houses, factories, warehouses, commercial plots, and shops – real estate assets that have been seized by the bank due to bad debt. The bank expects to cut down its bad debts by at least INR 1000 crore following the sale. The auction is to be conducted across three different platforms – e-Procurement Technologies Ltd, Magicbricks.com, and C1 India Pvt. Ltd. The bank believes that the auction is a great buying opportunity for retail investors since all properties come at a 10 percent discount over prevailing market rates. These assets have been repossessed by the bank under the Security and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act. SBI has reduced its bad debts considerably in the past few quarters due to a targeted strategy.

Insurance Bill Passed in the Rajya Sabha

The Rajya Sabha or Upper House of Parliament passed the insurance bill on 12 March, 2015, allowing an increase in foreign investment in the insurance sector from 26 percent to 49 percent. The passage of the bill has cheered equity markets greatly. For almost 6 years now, the lawmakers of the country have been debating on whether to open up the sector to foreign fund. Global insurance companies with presence in India are likely to benefit greatly and it seems that the domestic insurance sector is set to draw over USD 3 billion investment from foreign entities. The bill also empowered the IRDA to address several concerns and provided basic pay security for insurance agents. The bill has been one of the greatest victories for the NaMo administration when it comes to getting a mandate on its reform measures.