Indian Rupee Advances on Speculation Exporters Selling Dollars

India’s rupee rose, snapping two days of losses, on speculation the nation’s exporters are taking advantage of its recent decline to convert foreign-exchange earnings into the currency.

he partially convertible rupee rose in early deals on Wednesday on expectations that oil refiners may slow their dollar purchases after world prices retreated from their peaks.

* At 9:19 a.m., the rupee was at 42.88/89 per dollar, stronger than Tuesday’s close of 42.96/97. It hit a 13-month low of 43.21 last week.

* Oil, India’s biggest import, traded around $129 a barrel after hitting a record high of $135 last week. Refiners are the biggest buyers of dollars with their demand tending to peak towards the end of each month.

* Foreigners made net sales of almost $770 million of stocks over the five sessions to Monday, taking their net sales in 2008 to about $3.5 billion.

* Asian stocks fell on Wednesday as a cloudy U.S. economic outlook and lingering inflation fears left investors skittish, despite a drop in oil prices below $129 a barrel.

The rupee gained 0.2 percent to 42.87 versus the dollar as of 9:03 a.m. in Mumbai, according to data compiled by Bloomberg.

SEBI sets Rs 25 cr ceiling for cos to participate in SME exchange

Market regulator SEBI has proposed a maximum post-issue capital of Rs 25 crore for companies to be eligible to participate in the proposed SME (Small and Medium Enterprises) exchange.It has recommended a minimum investment size of Rs 5 lakh in order to have only well informed and financially sound investors at the time of the IPO.

“To facilitate retail participation in SMEs for investors having high-risk appetite, specific allocation through mutual funds may be permitted,” said a SEBI discussion paper on developing a market for SMEs.For the secondary market too SEBI has prescribed a minimum trading lot worth Rs 5 lakh so that smaller retail investors are not drawn in.

The regulator has also proposed only approved merchant bankers for exclusively catering to the needs of the SME companies during the IPO.Merchant bankers/underwriters to the issue may also have to compulsorily act as market makers for the company. The existing DIP Guidelines….“may be completely relaxed for SMEs,” said SEBI.

According to the existing DIP guidelines, an issuer company is required to have net tangible assets of at least Rs 3 crore in each of the preceding three years and a track record of distributable profits for at least three out of the immediately preceding five years.“The trading system in the proposed exchange for SMEs can be order-driven or quote-driven while the settlement may either rolling settlement, trade-for-trade, or call auction basis,” said SEBI.

“The IPO process should be through electronic applications only, eliminating all cost associated with paper printing and processing.”The SEBI Board had, last year, given the go-ahead for setting up an SME exchange. The Chairman of the Board had at that time, said that several exchanges and financial institutions, including NSE and BSE, had shown interest in establishing such an entity.

An SME trading platform, however, would not be new in the country.

Over the Counter Exchange of India (OTCEI) set up in 1989, BSE’s Indo Next in 2005 and the regional stock exchanges which were created to facilitate SMEs to access the capital markets easily, and at a lower cost, did not live up to expectations.

SMEs should have flexible norms to raise capital at affordable cost, said an expert adding they cannot be burdened by huge listings costs and stringent listing requirements as evident from previous efforts at creating such platforms.

Exchanges for the growth/new economy/small and medium companies have been provided for by other nations too. Alternative Investment Market of London Stock Exchange, the Growth Enterprises Market of Hong Kong Stock Exchange and MOTHERS of Japan are examples of trading platforms set up to serve such companies.

Niraj Cements IPO subscribed 17% on day 1

The initial public offer (IPO) of engineering and construction firm Niraj Cements Structurals got subscribed 17 per cent on the first day of its offer today.

The issue received bids for over 5.52 lakh shares against 32.50 lakh shares on offer, latest data available on the National Stock Exchange show. The price band of the issue has been fixed between Rs 175- Rs 190. The issue would close on May 30.

The issue comprises a reservation of 3.25 lakh shares for eligible employees and net issue to the public of 29.25 lakh equity shares.

The company would use the issue proceeds to fund its capital equipment requirement, and also meeting working capital needs. Allbank Finance is acting as the book running lead manager to the issue. - PTI

FII holdings down to 3-yr low; promoters' share rises: Citi

Showing a bearish outlook for Indian stocks, the overseas investors’ holding in the domestic firms has fallen to a three-year low, even as promoters here are rapidly raising their stakes, a study said on Tuesday.

According to a shareholding analysis by global financial services major Citigroup’s equity research arm, foreign holdings in the top 500 firms listed on the BSE stood at 17.8 per cent in the first three months this year almost same as in June 2005.

FII holdings have fallen by nearly two percentage points in the January-March period from December quarter last year. The foreign holdings include ownership through financial institutions and by way of subscription to Indian firms’ American Depository R eceipts and Global Depository Receipts.

According to Citigroup Equity Research Analyst, Mr Aditya Narain, "Foreign institutional investors (FIIs) have been the top sellers in the correction, bucking the trend of rising foreign ownership leading to market performance’’. Even as the drop in pub lic holding was a continuation of the downward trend since March 2001, fall in FII ownership was sharpest over the same period,’’ he said in the report.

The entire foreign portfolio in the BSE 500 stood at $265 billion in the quarter ended March 31, 2008, compared with $292 billion in the December 2007 quarter and shows a definite bias towards large-caps, the report stated.

In contrast, the promoter share of the BSE-500 companies has risen to 58.2 per cent at the end of March quarter, an increase of over two percentage points from the previous quarter, the report revealed, adding that the promoter holding are at the their h ighest level in 32 quarters. - PT

Rise in fuel may lead to Jet hiking fares

With high global crude prices hitting bottomlines of airlines, Jet Airways chief Mr Naresh Goyal sid on Tuesday said the industry, including his own carrier, would have to raise fares to stay away from a crisis.

"The aviation industry has to raise the fares as and when the hikes come. I am not in a business where I should only look for capacity. At the end of the day, I will have to work to give profits to my shareholders,"’ he said here.

Crude prices have been on a record run lately and touched $135 a barrel, immensely increasing the cost of jet fuel (ATF).

Mr Goyal was speaking after taking static delivery of a brand new Airbus A-330-200 at the Berlin Airshow ILA, which started today.

Jet Airways has placed orders for a total of 10 A-330-200 to operate on long-haul routes. To questions regarding acquisition of the world’s largest airliner A-380, Mr Goyal said: "At the moment, we are not ready but we are studying the proposal."

He said Jet Airways was "seriously studying" Airbus Industrie’s A-350 XWB (Extra Wide Body) aircraft whose deliveries would begin from 2013. "We don’t place orders just for the sake of it. For us, frequency is important."

The A-350 XWB are a medium capacity long range aircraft. A-350-800 would carry 270 passengers, while A-350-900 would be able to accommodate 314 and A-350-1000 would have a capacity of 350.

Mr Goyal said though Jet had a "good amount of market share, but that does not mean we have room for complacency." - PTI Related Stories: Air fares go up on turbine fuel price rise

SEBI tightens ODI disclosure norms

Tightening the disclosure norms on offshore derivative instruments (ODIs), market regulator SEBI on Tuesday asked Foreign Institutional Investors FIIs to give an undertaking that these investment tools are not issued to non-resident and resident Indians, who otherwise do not need the FII route.

FIIs and their agents would have to state that "we undertake that we/our associates have not issued/subscribed/ purchased any of the ODIs directly to/from non-resident Indians/resident Indians," SEBI said in a circular.

FIIs and their agents have been allowed to issue ODIs such as participatory notes against underlying securities to those entities that are not registered with SEBI.

"The circular regarding the undertaking is nothing new as SEBI just wants to track how much money is coming from FIIs and from Indian investors separately. It is basically tightening of the norms of disclosure," said Mr D K Aggarwal, director of a domest ic brokerage SMC Global.

Now, he noted, it would be binding on the FIIs to disclose their offshore derivatives investment to the NRIs. NRIs are allowed to invest in the offshore derivatives directly, and they need not come through FII route, he added.

The matter of undertaking by FIIs that they are not issuing ODI to NRIs or resident Indians came into limelight after Securities Appellate Tribunal recently ruled against the SEBI order in the Goldman Sachs’ case.

In the Goldman Sachs case, SAT reversed the SEBI order that imposed a penalty of Rs 1 crore on a Mauritius-based arm of the investment banker for not submitting the information about issuance of ODI in a prescribed format with requisite declarations. - P TI

JPMorgan Lowers Forecasts for Indian Rupee, Predicts Decline

JPMorgan Chase & Co. lowered its forecasts for the Indian rupee, predicting the currency will decline this year as rising crude oil prices double the nation’s current-account deficit.

The rupee, the second-worst performer this year among the 10 most-active currencies in Asia excluding the yen, will weaken almost 5 percent to 45 against the dollar by the end of the year, versus an earlier forecast of 40, the third-largest U.S. bank said in a research note dated yesterday. Slowing capital flows and exporters holding back foreign exchange earned abroad will fuel the currency’s decline, according to JPMorgan.

``Deteriorating balance of payments dynamics led us to reassess our view,’’ wrote JPMorgan’s strategists Siddharth Mathur and Vikas Agarwal. ``We were optimistic of a reversal in the rupee later in the year, driven by a revival of global risk appetite and return of stability to the credit markets. We no longer anticipate rupee strength in the second half of 2008.’’

The rupee fell 0.5 percent to 42.9575 today in Mumbai, according to data compiled by Bloomberg. It may slide to 44 by the end of June, compared with a previous estimate of 42, Singapore- based Mathur and Mumbai-based Agarwal said, confirming the contents of the report.

Goldman Sachs Group Inc. lowered its forecasts on May 23, saying the rupee will drop to 44.10 a dollar in six months, compared with its earlier prediction of 40.30.

The advance in crude oil will almost double the nation’s import bill to $100 billion in the financial year ending March 2009, from $55 billion last year, according to JPMorgan. That will more than double the shortfall in India’s current account, a broad measure of trade and investment flows.

Oil Doubles

India depends on imports to meet three-quarters of its annual energy needs. Oil futures on the New York Mercantile Exchange touched an all-time high of $135.09 a barrel last week after doubling in the past 12 months.

The local currency may also fall as money managers abroad reduce their holdings of the nation’s assets, JPMorgan said. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, has slumped almost 20 percent this year following a 47 percent rally in 2007, Bloomberg data show.

``The outlook for Indian equities remains uncertain as country-specific headwinds are increasing,’’ Mathur and Agarwal said. ``Slowing earnings growth and still weak appetite for risky assets suggests continued weak equity flow for now.’’

Global funds have sold $3 billion more of local stocks than they bought this year through May 26, according to the Securities & Exchange Board of India. They bought a net $17.2 billion of stocks in 2007, a record, helping the rupee complete its best year in at least 34 years.

``The path of local equities remains the most important indicator to watch,’’ the analysts said. ``A return of net flows of $1.5 billion to $2 billion every month might be necessary to reinforce the waning rupee-bullish sentiment.’’