The Securities and Exchange Board of India (SEBI) on Monday tightened guidelines for credit rating agencies, by standardising the definition of defaults by bond issuers, and the formula for computing default rates.

Also, the capital market regulator has made it mandatory for rating agencies to publish information about the historical default rates of their rating categories and whether the default rates of these categories have changed over time. Such a move will help investors evaluate the performance of the rating agency as well as understand the historical performance of each category.

SEBI has defined default as non-payment of interest or principal amount in full on the pre-agreed date. “A CRA (credit rating agency) shall recognise default at the first instance of delay in servicing of interest or principal on the rated debt instrument,” the SEBI circular said.

Senior officials at rating firms said the new SEBI rules would make it easier for investors to compare the ratings by different firms. “There is no point if one firm keeps saying that our default rates are the lowest, and some other firm claims to be better just because their definition of default is different from ours,” said Roopa Kudva, managing director and chief executive of Crisil.

In order to improve transparency, the raters will have to maintain records of the rating committee, including voting details and notes of dissent, for a period of five years. “Overall, the SEBI proposals will boost confidence of investors in the rating process, and makes the ratings comparable,” said Naresh Thakkar, managing director, ICRA.

To avoid potential conflict of interest, a rating agency will now have to ensure that its analysts do not participate in any kind of marketing and business development, including negotiations of fees with the issuer whose securities are being rated. Also, the employees involved in the credit rating process and their dependants cannot own shares of the issuer.

The new rules make it mandatory for a rating agency to disclose the general nature of its compensation arrangements with the issuers. It will also have to disclose the details of any relationship it has with the issuer whose securities are being rated and any of its associate of such issuer and the CRA or its subsidiaries.

It will have to give the break-up of its revenues from the rating and non-rating businesses, and the names of the rated issuers who along with their associates contribute 10% or more of its total revenue.

While rating structured finance products, the rating agency or its subsidiaries have been barred from providing consultancy or advisory services regarding the design of the structured finance instrument. The rating agency will have disclose at least once in every six months, the details and the performance of the rated pool.

By global standards, the structured finance market in India is very small. According to a study by ICRA, the Indian structured finance (SF) market in financial year 2009-10 was Rs 42,600 crore, down 22% from the previous year.
Source: The Economic Times

India’s state-run trading company MMTC Ltd (MMTC.BO: Quote, Profile, Research) has asked the government to lower taxes on imported raw gold to help the company’s upcoming refinery, Business Standard newspaper reported on Friday.
“In the current duty structure, processing will not be viable,” the report quoted MMTC Chairman Sanjiv Batra as saying.

“We met commerce ministry officials… some favourable decision is expected soon.”

In the 2010/11 budget, the basic customs duty on gold ore and concentrate imports was changed to a flat 140 rupees ($3.15) per 10 grammes from 2 percent on value earlier.

The excise duty on refined gold made from such ores or concentrates was set at 280 rupees per 10 grammes from 8 percent duty on value earlier.

MMTC is building a refinery in northern Haryana state with Switzerland’s Pamp S.A. to make gold medallions, the report said.
Source: Reuters India

NSE has deferred its decision to introduce futures and options (F&O) trading in Gold ETF from Friday after the commodity market regulator Forward Markets Commission (FMC) raised an objection over regulatory purview.

“In view of the concerns raised by another regulator, the exchange (NSE) in consultation with Securities and Exchange Board of India has deferred the launch (of futures and options on Gold Exchange Traded Fund) till further notice,” NSE said in a circular on Thursday. NSE officials refused to give further details.

B C Khatua, Chairman, FMC, said, “We have written a letter to SEBI over legal issues including our concern over who will take the responsibility of regulating such a product (F&O in Gold BeES).”

NSE was scheduled to launch F&O in Gold BeES, the ETF promoted by Benchmark Asset Management Company, from Friday.

A Benchmark official said NSE had directly consulted the market regulator SEBI and it was not aware of what exactly had gone wrong. Despite being in existence for four years, the volumes traded in the seven listed ETFs have not been anything to write home about. While options trading in commodity-based contracts are banned under Section 19 of FCRA (Forward Contracts Regulation Act), gold futures are currently traded on the commodity exchange and are regulated by the FMC.

The Government has been considering the Forward Contracts (Regulation) Amendment Bill for the last four years to introduce options trading in commodity-based products. The passage of the Bill would have also enhanced the power of the FMC which at present functions as a department under the Ministry of Consumer Affairs, Food and Public Distribution.

According to an analyst, regulation of proposed futures on Gold BeES ETFs should come under the purview of the FMC and not SEBI, since the contract duration of the BeES Gold ETFs futures is more than 11 days (the minimum stipulated days for the contract to come under the ambit of forward contract) and the very underlying of the contract is a commodity that is gold.
Source: www.moneycontrol.com

India is expected to produce the highest number of new multinational companies (MNCs), overtaking China as the emerging world’s largest such source. Over 2,200 Indian companies are likely to open operations outside the country over the next 15 years, says a new report by PricewaterhouseCoopers (PwC) on emerging MNCs.

The report says the number of companies from emerging markets choosing to set up operations abroad has increased in the past five years, partly due to the rapid pace of globalisation and the revolution in information and communication technologies. This trend is expected to continue over the next 15 years, as new MNCs from emerging economies rise in prominence on the global economic stage.

Indian and Chinese companies would lead the way in seeking new markets abroad, who will be joined by companies from Singapore, Russia, Malaysia and South Korea, who will continue to produce a large number of new MNCs.

Jairaj Purandare, India Leader for Markets and Industries, PwC, said: “It is encouraging to know that India will replace China as the largest source of new multinationals in the emerging world from 2018 onwards. The key drivers for this are the relative increase in both investment intensity and openness that the Indian economy offers.”

PwC used econometric techniques to project the number of new MNCs that would arise from a representative sample of 15 emerging economies over the next 15 years. The countries were: Argentina, Brazil, Chile, China, Hungary, India, Malaysia, Mexico, Poland, Romania, Russia, Singapore, South Korea, Ukraine and Vietnam.
Source: Business Standard

A significant chunk of the foreign money that has poured into Indian shares in 2010, has been through exchange traded funds (ETFs), officials at foreign broking houses say.

Overseas investors have net bought a little over $6 billion of Indian shares this calendar. This is significantly higher than the $2.7 billion pumped in during the corresponding period in 2007, a year that saw record foreign inflows of $18 billion.

Exchange-traded funds that invest across emerging markets, and some that invest specifically in India, witnessed huge interest in 2009, as investors cut exposure to developed markets following the global recession. Almost $5 billion of the total $17.45 billion inflows into India in 2009 were through the ETF route, according to Bloomberg.

Global investors remain enthusiastic about emerging markets even now, as the Euro zone is facing sovereign debt problems, while the US is beset with problems ranging from potential deflation to swelling government debt.

In India, a good chunk of foreign money has come in through ETFs like the Luxembourg-based DBX Tracker, the France based Lyxor International Asset Management, US-based Vanguard and the iShares MSCI Emerging Market Fund.

“One could say that investment patterns are changing,” said the head-research at a foreign brokerage. “Many investors are no longer keen on stock-picking or paying money managers. So the approach has become more benchmark- based rather than a India-specific view,” he told ET. He, however, cautioned that the risk in such trend lies in that a certain trigger may see the money move out as fast.

The International Monetary Fund (IMF) calculates that China will grow at 10% and India at 7.7%. Overall, emerging markets are expected to grow at an average of 6%. In contrast, the IMF projects a 2.7% economic growth for the US, 1% for Eurozone and 1.8% for Japan.

While China is slated to grow at a faster pace than India, there is a segment of investors which believes that China is fast moving into bubble territory. As such India, which outperformed China in 2010 so far, is emerging as a favoured destination. “There are a lot of concerns about China, and India is viewed as a relatively more attractive destination,” says Bharat Iyer, ED and head-India equities at JP Morgan.

“The choice of ETFs is also influenced by the ability to invest large sums quickly and helps them stay close to the benchmark in an volatile environment,” he added. Fund managers however believe that fresh flows are not driving up stock prices the way they did till a few months back. That is because much of the liquidity being sucked up by share offerings from capital-starved companies.

Among some of the new emerging market ETFs, the EGS Dow Jones Emerging Markets Titans, which is a stock market index made up of a sample of 100 Emerging Market companies, is up 6.3% in the past three months.

Top country allocations include: China, 23%; Brazil, 25.5%; Russia, 13.8%; and India, 12.6%. Similarly, GlobalShares FTSE Emerging Markets Fund which tracks the performance of the FTSE Emerging Markets Index, is up 4.9% in the last three months. Top country allocations include: Brazil, 19.2%; Hong Kong, 18%; India, 11%; South Africa, 10.1%; and Taiwan, 10%.
Source: The Economic Times

The Union Budget for 2010-11 was cleared on Thursday, with Parliament passing the Finance Bill after amendments to provide marginal direct and indirect tax concessions to sectors such as healthcare and construction.

Finance minister Pranab Mukherjee, replying to the debate on the Bill, turned down demands from the Opposition to roll back indirect tax hikes for crude oil and related products—announced when he presented the Budget on 26 February—saying they were crucial to keep fiscal deficit under check.

“As was expected, there are minimal changes to the Finance Bill in the course of its passage into the Finance Act,” said Dinesh Kanabar, deputy chief executive and chairman, tax, KPMG.

The amended Bill extended direct tax benefits for building hospitals with at least 100 beds to the whole country due to “the pressing need for more hospitals”. Earlier, the benefits were not available to hospitals built in metros such as New Delhi and Mumbai.
“This is a welcome move and a very positive development for the healthcare industry. It will contribute to the creation of much-needed infrastructure in the country,” said Shivinder Mohan Singh, managing director, Fortis Healthcare Ltd.

Mukherjee announced a debt relief package of Rs241.33 crore for coffee growers.

To retain tax neutrality when a company is converted into a limited liability partnership, the amended Bill proposed tax exemption for the transfer of shares during the conversion.

Housing projects, which come up as a part of Central and state governments’ slum-development scheme, would qualify for investment-linked deduction, Mukherjee said.

Other tax proposals from the Budget, which saw the construction and aviation industries lobby for a revision, were retained or partially rolled back.

Mukherjee marginally lowered the effective rate of tax relating to service tax provisions that were extended to the construction sector in the Budget.

Service tax on air travel was retained, but the tax levied will not be on a percentage basis. The maximum tax on domestic air tickets would be limited to Rs100 and, in case of international air travel, the tax would be capped at Rs500.

Paper, tobacco and drugs were some sectors that got marginal concessions in indirect taxes. In the case of export of iron ore lumps, export duty was enhanced by five percentage points to 15%.

The increase in export duty will not have a significant impact on the industry as 90% of iron ore exports consist of iron ore fines, said a steel analyst, who did not want to be named. The increase may be more of a revenue enhancement measure than a serious attempt to restrict iron ore exports, the analyst said.
Source: livemint.com

Gold hit one-week highs on Monday while euro-denominated gold prices briefly hit an all-time high in early Asian trade as Greece’s debt woes highlighted bullion’s appeal as a safe haven.

Greece’s finance minister said on Sunday that aid will arrive in time to avert the euro zone’s first sovereign debt default as signs grew that a 45 billion euro ($60.49 billion) rescue would have to be bigger.

Asian equities markets were up on Monday after U.S. stocks closed at 19-month highs the previous business day, while oil prices extended gains from the previous session when strong U.S. economic figures raised new hopes that the economic recovery is on course. But the euro remained wobbly against the dollar.

Until investors have a clear idea of exactly how much money Greece will receive from the European Union and the IMF — and when — uncertainty stemming from its growing fiscal despair will weigh on global markets.

“Gold is benefiting from both investors’ preference for a safe haven and to some extent recovery in risk appetite,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.

As platinum group metals remain steady on industrial as well as jewelry demand on expectations for a global economic recovery, precious markets overall appear to have more upside than other commodities, Emori said.

Spot gold inched up 0.2 percent to $1,158.50 per ounce as of 0213 GMT, after hitting a one-week high of 1,159.73 per ounce earlier. It was at $1,155.90 per ounce in New York late on Friday.

U.S. gold futures for June delivery rose 0.5 percent at $1,159.20 per ounce, compared to $1,153.70 an ounce on the COMEX division of the NYMEX.

Euro-priced gold hit a record high of 867.05 euros an ounce in early Asian trade on Monday as Greece’s debt problems drew investor interest in bullion as a haven from financial risk.

Gold gained 1.6 percent last week, recovering from a sell-off after U.S. regulators charged major commodities player Goldman Sachs Group Inc (GS.N) with fraud.

The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1,140.128 metric tones as of April 23, unchanged from the previous business day.

Spot palladium was up 0.5 percent at $565.50 per ounce, just below a 2-year high of $569.00 hit last week. Spot platinum was up 0.4 percent at $1,746.50 per ounce, also just below a 20-month high of $1,751.50 hit last week.
Source: Reuters

The life insurance industry recorded 68 per cent increase to Rs 25,399 crore in new business premium collected in March 2010 compared to Rs15,090 crore in the corresponding month in 2009.

Insurers witnessed a spurt in business during the last month of the financial year — with contributions over 23 per cent of the total collection in 2009-10 — as individuals opted to purchase covers to avail tax benefits.

Private players registered a whopping 47 per cent growth in the new business premium while state-owned Life Insurance Corporation of India (LIC) posted 83 per cent increase in new business income in March.

“Last quarter contribute to 40 per cent of sales. But March experienced the maximum inflow,” said a senior executive of a life insurance company.

SBI Life has pipped ICICI Prudential to become the largest private sector insurer in terms of new business premium. SBI Life recorded 71 per cent increase in new business premium collection to Rs 1,775 crore as against Rs 1,038 crore March 2009. ICICI Prudential recorded 53 per cent increase to Rs 1,362 crore in March 2010 against Rs 887 crore in the corresponding month a year ago.

In 2009-10, SBI collected premium of Rs 7,041 crore from the sale of new policies, while ICICI Prudential recorded 7 per cent decline in new business collections to Rs 6,334 crore. Insurers sold 10.55 million new policies with LIC bagging 8.52 million and private companies 2.03 million. Group premium contributed 51 per cent for the month with SBI and ICICI Prudential making large contributions. LIC increased its market share by 4 per cent in total premium collection from 2009. At the end of March 2010, LIC holds 65 per cent market share in terms of new business income collection with the private sector contributing the remaining 35 per cent share last fiscal.
Source: Business Standard

Infrastructure major GMR Group and Schulich School of Business of York University in Toronto, Canada, have entered into an understanding to develop a Schulich campus in Hyderabad.

Under the agreement, Schulich will develop the learning environment and academic infrastructure while GMR will provide the land and physical campus. The campus will represent a substantial, long-term capital investment in “bricks and mortar” to provide a state-of-the-art setting for students, faculty, staff and executives, GMR stated in a press release here on Thursday.

Schulich, which is a public, non-profit institution, will initially offer its two-year MBA programme to 120 students at the Hyderabad campus, along with executive education programmes. Subject to approval under the Foreign Educational Institutions Bill currently before the Indian Parliament and final approvals by the Boards of York University and the GMR Group, admissions would commence no later than 2013, the release said.

“GMR will bring its world-class infrastructure development skills to the table, while the Schulich School of Business will bring its expertise as one of the world’s top-rated MBA programmes and executive education providers,” said V Raghunathan, chief executive officer of GMR Varalakshmi Foundation, the group’s corporate social responsibility arm.

“The GMR campus of the Schulich School of Business will be a mirror image of Schulich’s Toronto campus, with first-rate facilities, international faculty, and an internationally-focused curriculum,” Schulich Dean Dr Dezsö J. Horváth, stated. “We will attract the best and the brightest students from India and abroad and prepare them for global careers in India and elsewhere in the world,” he added

The GMR Group has interests in airports, energy, highways and urban infrastructure. It operates Hyderabad and Delhi international airports.
Source: Business Standard

Gold prices moved up in an otherwise lacklustre bullion market here today on fresh demand amid higher advices in New York.

Silver too edged up owing to mild industrial support. Standard gold (99.5 purity) finished higher by Rs 10 per ten grams to end at Rs 16,760 from overnight closing level of Rs 16,750.

Pure gold (99.9 purity) also gained by a similar margin to Rs 16,845 per ten grams as against Rs 16,835 yesterday.

Silver ready (.999 fineness) looked up by Rs 10 per kilo to settle at Rs 28,350 from Rs 28,340.

In New York, gold for June delivery rose by 70 cents to $1,160.30 an ounce in the Comex division of the NYMEX.

Silver for May delivery also gained by 2 cents to $18.43 an ounce.
Source: The Economic Times