WTO rejects US complaint against India over alcohol

The World Trade Organization rejected on Monday a complaint brought by the US against India over duties on alcoholic beverages.

The US had claimed that the layers of custom duties imposed by India on wines and spirits were in breach of international trade rules. In the conclusion of its ruling, the WTO’s dispute panel said that the US has "failed to establish that the additional duty on alcoholic liquor is inconsistent" with India’s WTO commitments. The US had filed the complaint against India in May 2007, claiming that additional duties on alcoholic beverages were as high as 550% of the value of the product.

Its move came after similar action by the European Union earlier in November 2006. However, the EU dropped its complaint after India modified its legislation and cut some of the tariffs in July 2007. The US, however, maintained its claim. India’s 1.1-billion strong population and fast-growing middle class represent a potentially huge market for wine and spirits exporters.

India stocks seen at 13,000 by end 2008 - Credit Suisse

India’s main stock index may fall to a 10-month low of around 13,000 points by end-2008, as the central bank may raise interest rates to check inflation due to record oil prices, Credit Suisse said on Monday.

"The market is still not pricing in the much lower earnings growth being forecast by corporates and banks," Nilesh Jasani, head of research at the Indian unit of the Swiss bank told reporters at a briefing.

Indian stocks fell as much as 2.5 percent on Monday on top of a 5.1 percent decline last week and has shaved off a quarter of its value so far in 2008 as foreigners sold $4.8 billion worth of stocks amid concerns of rising inflation and slowing growth.

They bought $17.4 billion of stocks in 2007, pushing up the main index by 47 percent. It was at 15,191 points on Monday.

Uncertainty ahead of national elections will also weigh on the minds of investors, Jasani said.

While the government expects the economy to grow by around 8.5 percent in 2007/08, many research houses expect Asia’s third-biggest economy to expand at less than 8 percent as the impact of previous policy tightening starts to show.

Jasnani expects the rupee to remain weak in the current year, pressured by a widening current account deficit and expects inflation at 9-9.5 percent by September.

The Indian rupee has fallen more than 8 percent in this year, hitting a 13-month low of 43.21 last month, forcing policymakers to ease offshore borrowing regulations for local firms and the central bank to intervene in the currency market.

"Every 1 percent depreciation in the rupee accounts for a 15 percent rise in the deficit bill, so we assume the government will want the currency to stop depreciating some time," he said.

Why food prices are skyrocketing

The new week started on a mixed note in overseas markets following last Friday’s memorable spikes in oil and in gold. As we expected, some posturing did emerge over the weekend regarding the melt up in oil prices. The G-8 issued a joint statement yesterday, in which they pledged to address the demand side of the oil equation by reigning in consumption, pursuing alternate technologies and addressing carbon emissions.

The group also urged producing nations to ratchet up their output as soon as possible. Ali al-Naimi, Saudi Arabia’s oil minister also tried to put a blanket on the oil market’s flames by calling Friday’s rise of $11 "unjustified." Crude was trading down nearly $2 at last check - just under $137 per barrel. Adding to the (one can now say relatively small) decline in black gold were reports that Brent crude shipments were set for a rise in the coming month. The US dollar thus got a bit of breathing room and rose to 72.40 on the index.

New York spot bullion trading opened with a loss of $1.00 this morning, quoted at $901.20 as participants will certainly look at oil prices first, but will also be watching for the release of US economic figures as regards construction spending and manufacturing activity. This is an extremely heavy Fed-speak week, with everyone from Mr. Bernanke to assorted Fed Presidents and Governors out on the circuit. No question that audiences and market participants expect some mention of the Fed’s intended dollar strategy, the spike in oil prices, and the central bank’s plans to keep the economy out of a deep recession while it fights the inflation bugaboo.

Gold touched a high of near $910 overnight but the going might prove a bit tougher today if profit-takers cash in some very attractive chips in the oil pits. India’s’ gold imports declined by 54% last month, as prices soared. The world’s largest importer of the precious metal, imported 32 metric ton of gold in May as compared to 69 tons in same month last year, according to the Bombay Bullion Association.

Silver dropped a dime to open at $17.40 and platinum lost $30 at $2039. Palladium showed no change at $430 per ounce. Holding at, or closing above the $900 level remains gold’s first task at this juncture, as the trade is well aware that much of the Friday near $25 jump required sending ’thank you’ notes (primarily) to the oil trade. Support remains visible however, as oil is not (yet) melting down, the Dow might have a difficult day (mostly on Lehman’s $2.9 billion loss) and the dollar is not exhibiting the post-Bernanke spring in its step that we saw early last week.

Well, it looks like the beginnings of some regulatory intervention in the commodities markets are in the works after the various bubbles that have been popping up within them for the past five years have attracted public as well as official attention (and not of the admiring kind). Faith Bremner, over at Gannett News reported this weekend that:

" The Commodity Futures Trading Commission has announced plans to help stabilize rising food prices, but critics say it doesn’t go far enough to rein in Wall Street speculators who have contributed to a 183 percent increase in the cost of food, crude oil and metals over the past five years.

The CFTC initiative, unveiled June 3, calls for the agency to reconsider a 17-year-old decision to allow investment banks to purchase unlimited numbers of futures contracts for commodities like wheat, corn and soybeans. All other nonagricultural market traders have limits to protect the market from excessive speculation. Some market and agricultural experts say the unregulated banks are overwhelming the commodity markets with their stacks of cash and should also have limits.

Congress began regulating the commodity futures markets after World War I for two purposes. One was to help farmers, grain elevator operators and their customers – livestock and chicken producers, food manufacturers and the like – buy and sell futures contracts to protect themselves from sudden changes in prices. The other was to create a basis for spot market prices.

“There’s no question the increased number of investors in commodities markets have really increased volatility and driven up prices,” said Patrick Woodall, a senior policy analyst with Food and Water Watch, a consumer advocacy organization. “It’s being felt in grocery stores and at overseas ports.”

As part of its plan to stabilize commodity markets, the CFTC also announced it has been investigating a sudden run-up in the cotton futures markets during February and March.

The commodities markets have always had speculators. But the amount of money unregulated speculators put in the commodities markets has exploded, from $13 billion at the end of 2003 to $260 billion as of March, according to Mike Masters, a managing member of the hedge fund Masters Capital Management LLC.

It’s not just the amount of money they pour into the agriculture markets, it’s the way they pour it, Masters said. The large investment banks and their customers overwhelmingly treat the commodity markets as if they’re stock markets – they buy and hold their contracts for long periods of time rather than buy and sell frequently, Masters said. These investors hardly ever sell. In essence, investment banks are “hoarding” commodities, treating the futures market like a virtual warehouse and driving up prices, Masters said. For example, unregulated speculators are sitting on 1.1 billion bushels of wheat futures, Masters said. That’s enough wheat to supply every American with bread, pasta and baked goods for the next two years.

“The commodities futures markets were not designed for that strategy,” Masters said. “They’re designed for bona fide hedgers who consume and deliver their wares.”

Among the many reasons food prices are increasing - high energy prices, droughts in Australia, the weak U.S. dollar, and growing economies in China and India - futures speculation ranks at the top, Masters says.

“It’s very hurtful having institutions amplify price moves by significant amounts,” Masters said. “This is a societal issue, this is something people need to know about.”

Today will still likely be a day of sorting out last Friday’s events (for both the bulls and the bears) but the building anticipation of Mr. Bernanke’s speech tonight might take precedence with the trade before it turns prices decisively into one or another direction. Remain alert however, as intra-day surprises have become commonplace.

Crude Oil Effect: India markets plunge into red

Soaring crude oil prices and fears that the global economy is going into a recession plunged India’s stock markets on Monday into the red.

The benchmark Mumbai Stock Exchange index (Sensex) fell below 15,000 by 700 points thanks to heavy selling. When the markets closed, the Sensex was at 15,128.04, down by 444.14 points from its previous close. Similarly, the Nifty was down by 107.90 points at 4519.90.

The blue-chip stocks that fell the most were Reliance Industries by 4.2 per cent at Rs 2,147.55, Tata Steel by 4 per cent at Rs 793.25, SBI down 5 per cent at Rs 1,273.80, L&T 4 per cent at Rs 2,573, Infosys Technologies 2.1 per cent at 1,943 and ACC 5 per cent at Rs 596 and ICICI Bank 4.5 per cent at Rs 734.

Marketmen said inflationary concerns due to rising fuel prices, which touched all time high of $139.12 a barrel on Friday, sparked the downfall in stocks.

Weakening trends in global stock markets and an increase in US unemployment rate also dampened the trading sentiments here. In the US, Dow Jones Industrial Average plunged 3.13 per cent while the tech-heavy Nasdaq composite fell 2.96 per cent.

Asian markets were also in negative zone. Singapore shares were trading about 2 per cent down while Japan’s Nikkei-225 index fell more than 2 per cent in early trade

DT target may be revised to Rs 3,92,000 cr

Upbeat over 36 per cent growth in direct tax collections last fiscal, the Government on Monday said budget estimate under this head will be revised upwards “substantially” from around Rs 3,65,000 crore for 2008-09.

Talking to reporters, Finance Minister P Chidambaram indicated that budget estimate for direct tax collections may be increased to over Rs 3,92,000 crore for this fiscal.

“The estimate will no longer be Rs 3,65,000 crore. The CBDT will meet over the next couple of days and increase the estimate upwards,” Chidambaram said after inaugurating two-day annual conference of Chief Commissioners of Income Tax here.

“Even if you take a 25 per cent increase over last year’s collection of over Rs 3,14,468 crore, the budget estimates must be revised upward very sharply,” he said. Twenty five per cent growth over the last year’s collection will push the estimate of direct tax collection to over Rs 3,92,000 crore.

When asked what is the rationale of being so upbeat on direct tax collection despite fear of slowdown in economic growth, Chidambaram reiterated that “every estimate says that Economy will still grow at 8.5 per cent this fiscal”.

Referring to non-compliance of TDS rules by the some ministries, he said, “We are not happy with TDS deductions in the Defence Ministry and Railways Ministry. We are taking steps to sensitise the authorised deductors in the government sector to comply with law and improve the TDS.” Steps are being taken to work with the Ministries of Defence and Railways. So, we are confident there would be significant improvement in 2008-09, he said.

On prosecution of tax evaders, he said directions have been issued that if during a search or survey a person is found that he has stopped filing returns for the past three years or has never filed a return, “invariably such a case will be taken for prosecution”.

Indian brokerages widen offering to lure millionaires

Indian brokerages are competing with banks to offer wealth management services to the nation’s burgeoning millionaires in a growing economy as a volatile stock market makes revenues from broking operations unstable.

So far, wealth management in India mainly included equity-linked portfolio management services and mutual funds but now the definition has widened to include estate planning, private equity, arts, among others.

India’s new millionaires, with high disposable income, want advanced financial advisory services and brokerages see this as an opportunity to diversify their revenue stream and hedge themselves from volatile equity markets.

"With the complexities in the financial market going up, its difficult for individuals to manage their own portfolios," said C.J. George, Managing Director of Geojit Financial Services Ltd.

Geojit has announced plans to enter the wealth management business which also includes rivals such as Motilal Oswal Financial Services, Kotak Securities and Edelweiss Capital.

The noveau-riche, unlike their predecessors who bought gold as a safe-haven investment, are open to more advanced assets such as private equity, real estate, arts and structured products.

"We see people want to move away from pure broking services to a broad range of wealth management," said Rashesh Shah, chairman, Edelweiss, adding people were happy with only equities when the stock markets were moving up.

Many financially well-off Indians have a habit of having a personal investment advisor and their brokers double up for the role, he said.

Broking companies, facing an income crunch because of increase competition, may seek to allay some woes through wealth management services.

Severe competition in retail broking may force some companies to offer steep discounts on commissions, which may squeeze their earnings, said Sanjay Aggarwal, national industries director (financial services), KPMG.

New services such as wealth management will help leverage the acquisition cost and maximise revenues, he added.

COMPETITION FROM BANKS

India has over 100,000 people having a net worth of over $1 million and the size is expanding by a fifth every year, said V. Vaidyanathan, executive director, ICICI Bank adding the revenue opportunity is 40-50 billion rupees for the industry.

India, along with Hong Kong, Indonesia, Singapore and South Korea are homes for half of the 10 fastest growing markets for high networth individuals, according to KPMG.

Global firms such as HSBC, BNP Paribas, UBS, Citigroup, Standard Chartered and Societe Generale have been expanding their wealth management services in India.

Indian banks such as ICICI Bank, Axis Bank and Yes Bank have also jumped into the fray to boost their fee income.

Financial services group ASK sold its brokerage business to JM Financial Services to focus on wealth management and launch private equity funds.

Edelweiss plans to boost its wealth management business and would set up 100 offices across India from the present 40, Shah said.

BSNL slashes STD rates of cellular services up to 50%

State-run telecom major BSNL on Monday announced a 40-50 per cent reduction in STD charges of cellular services under various plans.

It also announced to slash the call charges of landline services by 50 per cent.

Under the landline services, STD rates have been reduced from Rs 2.40 to 1.20 paise per minute to all networks in general and ’sulabh’ plan.

"The intra-circle call charges, to BSNL network and inter circle (STD) call charges to all the networks, has also been reduced by 50 per cent," BSNL CMD Kuldeep Goyal said.

Roaming charges under prepaid and postpaid services have also been revised.

Earlier this year, private telecom operators like Airtel and Vodafone had reduced their STD and roaming charges.